Developing Supply Chain to Deliver WOW Essay

Zappos.com is a esotericly held online retailer with an extensive growth phratry mainly including apparel, footwear, sinkbags, and watches. Headquartered in Nevada, it primarily operates in the US with about 1,300 employees and tax revenues climb to $635M in 2008. Thanks to its strength in offering an outstanding node shopping experience and strong corporate stopping points and values link up to guest dish up, it was the largest online shoe retailer in 2008, with a positive step-up outlook. However, in the face of voltage economic d confessturn, its underlying insufficiencies in egress chain management and operations whitethorn pose a panic to the caller-ups long term breadability.Nevertheless, the opportunity of possible international elaboration may well be exploited to improve sales and diffuse the business, but such(prenominal)(prenominal) finality still needs critical military rank and feasibility assessment in whether Zappos can sustain its focus on outs tanding node service levels in such scenario. The online-retail industry in which Zappos operates is one in which the rivalry among existing competitors is high, as it is competing with both click-n-brick stores the likes of Amazon, as well as handed-down retail stores such as Footwear Inc which too take a shit a strong focus on the shoe segment. However, the threat of new entrants is very low as a result of the high initial working capitalization required for the start of business. at that place are a large number of buyers in the market place. However, high determine sensitivity and low switching exist strengthen the buyers position continuing to attract such nodes becomes one of the main challenges for Zappos during a likely scenario of economic downturn. Zappos provide need to adopt strategies such as importing directly from foreign suppliers, committing to 5 day pitch shot done ground shipping as opposed to adjacent-day air shipping, offering its own secret label, and distending its cater by Zappos initiative.Company Value drawstring trouble AnalysisExternal AnalysisPorters 5 ForcesThe followers is an evaluation of the external forces acting upon Zappos operations and their possible impact in the immediate and future performance of the companion Degree of Rivalry gamey While Zappos is a pioneer player in the online retail segment, in practice it is not that competing with other online retailers, but with brick-and-mortar stores in the traditional retail sector which have substantial experience in the market. many a(prenominal) other players offer similar products to those carried by Zappos. talk scathe Power of Buyers talk over to HIGH Given the many alternatives in the market, the switching cost for a client to other retailers is very low. Consumers are becoming increasingly price-conscious, and with the nice potential for differentiation in the non-fashion elite segment, the client can good discern other similar product opti ons, forcing retailers to offer lower price to remain warring.Threat of New Entrants MODERATE TO LOW The barriers to entry in the industry are extremely high, based on the large capital investment required. However the online retail business is still on its growth stages, which may attract new players and investors looking to capture potential markets. Bargaining Power of Suppliers LOW Competition for both contact / importer suppliers and direct manufacturers is severe and well completed at that placefore, the market itself drives the power of the many suppliers down. As discussed, thither are many alternatives in the market such that no individual(a) supplier is dominant. Threat of Substitutes LOW in that respect are no veer products available for most of the products which Zappos may offer to the public, so such threat is unlikely.SWOT AnalysisStrengths Customer-Oriented Culture and Services Zappos has strong company subtlety and values, which have a large influence o n all aspects of the business, including the total chain. Zappos is always looking for new ways to WOW every customer and always treat every employee like family. The employees consider Zappos a entertainment place to work. In addition, Zappos commitment to customer service satisfaction is distinctly demonstrated by their value propositions and represents their core differentiation outline. These are free people shipping, guaranteed 5 day providey (WOWing the customer, where 49% of customers will receive their product inwardly 2 days), a 365 day return policy and 24/7 customer service. Unique Products and change The core products that Zappos offers are designed to be distinctly different from the traditional shoes available in brick-and mortar stores. Zappos provides customizable product models and extensive product information to customers. For example, Zappos site has a detailed discussion of gait that helps customers to determine which type of shoe is curb for them.Weakn esses Presence Limited to Online Market Although there are many online shoppers at present and the number is still growing, Zappos is unable to reach the majority of retail shoppers by totally having the online outlet post. Relatively Low Profit Margin The revenue of Zappos in 2008 is $635 million, but the company policy on product returns makes up 35% of gross sales. This is definitely crippling Zappos profits. High Dependency on UPS Until 2008, Zappos has only one call center in Las Vegas and one dissemination center in Shepherdsville, Kentucky. The dissemination center is less than 30 proceeding from the UPS hub in Louisville. This will make Zappos reverty highly dependent on UPS.Opportunities Rapid Growth of Online Shopping Online buying has grown consistently form after year the opportunity lies in capturing new online customers and retaining them. Technology Innovation In 2008, Zappos added more(prenominal) automation to its warehouse operations by put in a robo tic system in which robots picked up shelves that contained the items to be picked, and brought the shelves to the workers. These new robots concede Zappos to ship a pair of shoes in as curt as eight minutes. Technology advances will allow Zappos to increase the depicted object and efficiency of its statistical distribution centers, without having to build new centers. Build strategic Alliances with complementary Retailers Zappos could build synergies with similar-size online retailers which offer complementary products in an effort to broaden its customer base and target audience.Threats Economic Downturn Customers will become more price-conscious in difficult economic times, which will ultimately drive Zappos system in order to remain competitive in such scenario. rivalrous Rivalry While Zappos is one of the pioneer players additionalized in shoe-retailing, the fashion is for open up brick-and-mortar companies to start offering their products online, which may generate additional competitive pressures. Possible Security Breach for Online Retailer Zappos moldiness address possible security breaches to its servers.Problem StatementBased upon the previous analysis, Zappos faces two major problems which may be detrimental to the companys long-term success. Our convey here is to synthesize them in order to formulate a serial of testimonys that the company could implement to solve the mentioned problems.Problem 1 Supply Chain ManagementThe first problem that the company faces within its organization is related to supply chain management. We have identified three different sub-issues within this topic in which Zappos has room for improvement Imports from upstandingsalers as an intermediary amidst Zappos and the manufacturers Due to the highly uncertain demand in the sector, having a wholesaler between Zappos and the gulls that manufactures the product is a strategic problem for the company. When Zappos places an order, it is relying on the lin e of descent that the wholesaler keeps in order to fulfill its need of supply. Furthermore, Zappos may find it difficult to secure its supply as the company grows, having no suppress over wholesaler import decisions. This is curiously critical in a sector with unstable demand faced with global economic uncertainty.Zappos must devise supply chain-related strategies which provide the company with more tractability in terms of profit margins in order to deal with more price-conscious customers in the future. Delivery to Zappos distribution centers from suppliers The company faces a problem in copulation to inefficiency of partially loaded trucks arriving to unload to Zappos pedigree facilities. As the case highlights, portentous numbers of partially loaded trucks (LTL) arrive to unload products generating un needed traffic in the distribution center, subsequently slowing down the unloading process. Theres a need for Zappos to address this issue, ultimately affecting its whole o perations efficiency.Inventory Management At this point, the company uses manual scanners to register incoming and outgoing stock from its distribution center. This may twist to inventory inaccuracies due to the high probability of human error to bechance in the handling of the incoming and outgoing merchandise. It is of the utmost importance for Zappos to have accurate inventory information, not only in terms of its supply chain management, but also in maintaining customer service levels because of the potential of having inaccurate information on the website such that a customer may order a product which is actually out of stock.Problem 2 Growing the businessThroughout the case it is been said that the company plans to expand. It is possible to grow the business in a national scale as well as internationally. The following issues need to be addressed by Zappos when evaluating company expansion determining strategic locations for new facilities to store its inventory and ligh t upon a good balance between supplier allow for times and bestowy times to the final customer. In addition, the company faces the decision of whether to continue having its distribution centralized in Kentucky. Moreover, Zappos needs to evaluate whether or not it is still feasible to use UPS ground shipping in the long-term. The company would also face a problem not only when trying to maintain its customer service levels and an efficient make unnecessaryy, but also when trying to get new employees to share its corporate culture.RecommendationsStart trade Directly from Foreign Manufacturers Zappos should begin underdeveloped direct relationships with foreign manufacturers, especially with Chinese suppliers, starting by importing some products directly, instead of acquire from North American wholesalers. This schema has the following benefits * Cost nest egg from purchasing the same products at lower prices, providing the company with more pricing flexibility at dealing with cost-conscious consumers in a difficult economy. * Distribution channel efficiency is increased by eliminating middlemen in the supply chain. In this sense, there is no need for products to be shipped from foreign suppliers to a wholesale distributer and from there to Zappos Zappos can receive the product directly at their distribution center, reducing freight costs across the value chain as well as lead times. * A closer relationship with manufacturers qualification enable Zappos to obtain information regarding inventory levels, product availability, and order view and timing. It is worth noting that even in cases where Zappos is still purchasing from a wholesaler (who in-turn imports from the manufacturer), the wholesaler can request the manufacturer to verbalize directly to the Zappos distribution center, earning the lead time and cost benefits.Opt for Ground Shipping as Opposed to Next Day Air Shipping Given the jeopardize of failing to meet the next day delivery standards because of external factors, Zappos should only guarantee 5-day delivery. In this manner, the company will consistently overdeliver, with 99% of customers receiving their orders within 4 days. This strategy not only makes sense from a cost perspective, but it also goes hand-in-hand with Zappos culture of outstanding customer service. However, the option of next day air delivery should be made available to the customer for a premium rate. Sign a Contract with a Selected hauling Company Specialized in Consolidation In order to diminish LTL shipments to its distribution centers and mitigate the economic inefficiencies that LTL implies, Zappos should sign a contract with a major transportation and logistics company specialized in consolidation in order to handle Zappos order pick-ups from some of its remaining local suppliers, optimizing freight capacity and delivering such products to the distribution center.This contract strategy would only be possible to implement in areas with hi gh supplier concentration such as Southern California and Ontario. It is granted that such a strategy would require a long and difficult negotiation process between suppliers, the logistics company and Zappos however, economies of scale benefits could be obtained from the large volumes to be handled and the cost savings distributed across the industry value chain. Search for Additional Partners and Expand Powered by Zappos Powered by Zappos partners act as distributors of the products carried by Zappos. In this sense, finding new partners will generate additional revenues from both the fees of developing and running distributor websites and operations and from an expanded market base deriving from multiple websites offering Zappos products. Offer its own Zappos Private Label Zappos could expand the business by offering its own clannish label private labels offer the advantage of not purchasing from a third-party wholesaler which in itself is making a profit from the merchandise, al lowing for more flexibility in terms of pricing and profit margins.Overall, by commercializing its own brand, Zappos can offer its private label merchandise at lower prices than the industry standards, while maintaining its profit margin. This strategy would be effective at dealing with price springlike customers in uncertain economic times. It must be noted that to achieve this, however, the company would need to develop internal design capabilities and source its private label through selected manufactures which meet their needs. In order to achieve the terminal supplier prices, supplier relationships would need to be developed through established contracts which may include exclusivity agreements. Based on the large volumes that Zappos handles through its established customer base, the strategy could also earn benefits from economies of scale and increased brand awareness.Do not Expand Internationally in the Short-Term The grand capital investment required and the risk of affe cting customer service levels makes international expansion undesirable in the short run. The companys financial base must be strengthened further onwards pursuing such expansion, maintaining the focus on customer service that the company has been known for. Customer service is core to company values and culture and hence cannot be compromised by any strategic decision. International expansion must be accompanied by the same training standards, staffing levels and warmth for customer service at company call centers and order delivery must meet Zappos promise. This last factor could pose a special challenge, given that Zappos would be relying on couriers operating in different countries which may introduce a factor of uncertainty beyond Zappos control as to what levels of delivery performance can be met.Invest in an automatic rifle Scanning System for Inventory Control In an environment where such accurate inventory information is required, the current manual scanning of goods m ove into and leaving the distribution center is inadequate. Errors in inventory control will inevitably have a negative effect on customer satisfaction in that the system may allow a customer to purchase a product that is in fact out of stock. A system which automatically scans incoming and exiting products (magnetic doorways or similar) guarantees inventory accuracy and goes hand-in hand with the core values of the company, making it a worthwhile and even necessary investment.Limitations* The capacity of the existing distribution center in Kentucky is unknown therefore we are assuming that the current infrastructure will be comely to sustain the operations of the company to meet an increasing demand and market share in the short-term.* Suppliers which have their own fleet might be reluctant to agree to let Zappos do order pick-ups and deliver their products however, our recommendation assumes that the suppliers are flexible in this sense.* A break-up of the companys practicable c osts would be required in order to make better-informed strategy recommendations. The performed analysis is based on purely qualitative information. 1 . 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