Understanding and analysing how Next Retail Ltd (Next) delivers its logistics

Understanding and analysing how future(a) Retail Ltd ( next) delivers its logistics1.1 IntroductionThis line is based on on a lower floorstanding and analysing how succeeding(a) Retail Ltd ( following(a)) conceives, supports and delivers its logistics and the supply of its products. attached is an internationalistic comp any(prenominal) based in the UK that offers graphic symbol demeanor vestments and accessories for men, women and children and home w argon. It is a supplementary of close Plc which is listed on the London threadbare Exchange. conterminous Plcs total revenue was 3.4b in 2010 and reach before valuate was 505 million (Appendix 1). temporary hookup Next Retail is present in completely over 500 stores in the UK and Eire, it manufactures its products outside Europe. For international companies resembling this, logistics and supply mountain range competement is an important factor in the success of their pedigreees.This communication channel relatio nship dep blind describe and analyse Nexts logistics and supply train strategies. It result too seek to understand the rationale behind these strategies and whether they have been successful. Based on the report findings, recommendations will be made.The sources of information for this report will be more often than not secondary they will include the high society website, phoner reports, economic reports, journals and textbooks. It is evaluate that a thorough analysis of this information will be satisfactory to produce a high quality report.1.2 The nature of logistics.There are several(prenominal) definitions of logistics depending on the nature of the organisation (Rushton et al 2006). For some, it is the caution of each activities which facilitates movement and the co-ordination of supply and demand in the creation of beat and orchestrate utility (Hesket et al 1973 cited in Rushton et al). Rushton himself defined it as the efficient withdraw of wides from the sour ce of supply d angiotensin-converting enzyme the place of manufacture to the point of consumption in a cost effective way whilst providing an accept competent suffice to the node (Rushton et al 2006). It whoremaster be broken down into deuce major components materials management and physical distri only ifion ( enter 1.1). The two components can be further broken down into bewitch, repositing, inventory, case and information of goods and inspection and repairs.The way that each company dos its decisions on the various aspects of logistics management is a obligation of some(prenominal) things such as the nature of products or services it offers, the countries in which it sources its materials and sells its products, the international and local laws and regulations, the type of guests it targets, resources available etc. grade 1.1. A ecumenical diagram of logistics (Rushton et al 2006).2.1 supply chain strategiesSupply chain strategies are different from supply managem ent. They define how the supply chain should operate in order to be rivalrous. It is a process that has to be repeated in order to measure the cost benefits of the operational components (UPS 2005). Supply chain management, on the different hand, is the management of upstream and downstream relationships with suppliers and clients to deliver superior customer value at less cost to the supply chain as a whole (Chri law of closureher 2004).Supply chain strategies depend on the companys bodied strategies which are the blue print for what the company wants to execute ( troopsgan et al 2008). The figure below shows how the logistic and supply management strategies depend indirectly on the corporate strategy and directly on the business unit strategy.Figure 2.1 The link between SCM Strategy and Corporate Strategy (Mangan et al 2008).harmonize to Mangan et al (2008), there are two major types of supply chain strategies the lean and the agile strategies. With lean strategies, the emphas is is on reducing and if viable eliminating waste the in the takings of the goods and services e.g. there is no clip lag in the factory and the products are ready just in time for use. This strategy depends on having all the resources and information necessary for action and distribution it as strong as depends on being able to predict customer demands so that there is no waste of products.The agile strategy pioneered by Christopher (2003) is borne of the fact that when there is high volatility in the demand and production process, it is not always possible to have accurate resources and predict customer demands. The agile strategy helps the business to be able to cope with any demands made on it by embarking on mass production and differentiation. both(prenominal) lean and agile strategies are not mutually exclusive and businesses can choose to use both of them for products with different lead times, product cycles and customer demands.Nexts supply chain strategiesNexts firs thand objective is to deliver sustainable immense term outgrowth in earnings per share and its business strategies to achieve these include break its product rangesIncrease the number of its customers and their average spend.Improve product sourcing, reduce cost and manage stock levels efficiently (Next 2011).The preponderant barter for behaviour of Nexts customers is not always predictable because the mode merchandise is characterised by high volatility, low predictability and high impulse purchasing (Christopher et al 2004). Fashion stores used to change their stock totally twice a class, with up to eight fashion seasons in a year, the stores have to forever and a day change their stock. In fact, fashion trends have been observed to last for only six to eight weeks (Collins 2003). This leads to complications in the supply chain for most fashion companies. The consequent volatility requires an agile supply strategy.Mass customisation is one break technique in the agile s trategy. This involves mass production of the business products but configuring them slightly so that there are some variations in the products. The customers wherefore have different products to choose from even though the products are fundamentally the same. Next adopts this strategy by offering mass produced clothes in variety of colours, sizes and styles to accommodate the differences in its customers tastes (Next 2011).On the other hand, as seen from its business strategies, there is a strong desire to reduce cost and manage stock levels efficiently. This corresponds to the lean supply strategy which eliminates wastes and increases efficiency. Next accosts its inventory management accurately with the use of sound IT systems (NEXT Annual Report 2010). This ensures that there is a good balance between having additional products at hand and the risk of not having them when the customers need them (Gourdin 2000).Its warehousing and distribution operations are invariably reviewe d to maintain efficiency and reduce risks such as physical airplane propeller damage, reduce fabric waste, warehouse breakdowns, capacity shortages etc. Care is to a fault taken to make sure that the products are transported to the retail stores on time (Next 2010 Annual Report). As a result of this, in 2010, the company was able to increase gross benefit margin by 0.5% through step-down in warehousing and distribution cost (Figure 2.2).Figure 2.2. Next Plcs profit margins in 2010.Logistic Service go forthrs (LSPs)LSPs are companies who handle other companies transport and distribution networks. Recognising the cost-effective prospects in international transport and logistics entails dedication and resources (Rushton et al 2008). Thus, many businesses outsource the transportation of raw materials and finished products to LSPs and focus on their own core competences to save resources and increase profits (Mangan et al 2008). some(a) companies, on the other hand, provide its own t ransportation and distribution services. While some others come together as agencies to organise their logistics needs, thereby acquire the services at cheaper rates (Mangan et al 2008).Some LSPs also provide integrated logistics services and act as a one stop shop for companies. They are called third-party logistics companies (3PLs) or even fourth-party logistics companies (4PLs). They provide transportation, warehousing and packaging and distribution for other businesses. Examples of such companies are DHL, Kuehne and Nagel Logistics. Choosing the right LSP depends on several factors including the services provided, the geographical location, costs, speed, services needed, LSPs history etc (Mangan et al 2008).Next Plc move under the categories of company who provides its own logistics services. It boasts of over 20 years of transporting, warehousing and distribution and has invested over 66 million on its network over the past few years (Stanton 2007). Next Plc considers itself so experienced in these functions that it is now offers 3PL services to other retail businesses with 100 to 150 stores under the umbrella of Ventura Network Distribution (Stanton 2007).The company has two major networks primary retail and two man network (Ventura 2009). Primary Retail which comprises of 8 sites, 800 provide, depot quadriceps femoris of about 1 million feet, warehousing space of about 5 million feet and over 200 vehicles.Two Man Network this comprises of 11 sites, 220 staff and about 150 vehicles. In addition, it also offers the mail order fulfilment services (Ventura 2009).Ventura is doing well with a profit of 6m in 2010 an increase of 1m from the previous year (Next 2010 Annual Report). More growth is expected in the coming year.3. Procurement and OutsourcingProcurement is the process of dealing and acquiring the materials and services needed for a business. The materials and services procured by businesses will vary according to each business needs. A business like Next that sells clothing and accessories will need to buy fabric, sewing equipment, childbed skilled in sewing and manufacturing clothes while a business who sells processed foods will need the food ingredients, the cooking equipment and skilled cooks.The art of procural is increasingly more complex because of the differences in the cost and quality of materials and services across the world. In order to remain competitive, companies have to buy their materials from areas with greatest value for money and so save on costs of production. global regulations on purchase and selling across the world also mean that businesses need to factor in laws, custom and excise duties when choosing where to buy their materials. The identification of right source of supply, purchasing right quantity, right quality, at the right time and at the right prices are important elements of procurement functions (Saxena 2009).Procurement can be direct and indirect. Direct procurement is applicable to manufacturing companies since they need to buy raw materials and equipment for their goods. Indirect procurement is applicable to all companies since it focus on the purchases of company facilities that are necessary to run the company such as labour, marketing, buildings/offices, office supplies etc.As with many other non-core business functions, some companies decide to outsource the procurement function to specialise companies that deal with this. For instance, they qualification engage recruitment agencies to fill a sluggish position within their companies instead of spending time sifting through many CV and conducting interviews.Next Plc has several subsidiaries, one of which is called Next Sourcing express (NSL). NSL handles its procurement and sourcing operations. It is present in China, India, Hong Kong, Romania, Sri Lanka, Turkey and the UK. Its function is to design its fashion clothes, source the necessary materials, buy these materials and maintain the quality of th e companys products (Next 2011). This subsidiary is doing well and last year recorded a profit of 35.7m. However, with increasing rival from external suppliers, it is expected that profits will drop to about 30m in the present year (Next 2010 Annual Report).For its indirect procurement, Next uses its subsidiary Ventura to handle all its customer service requirements and it offers this service to business who engage its service. This service is very important because increasing customer satisfaction is the output of good logistics (Gourdin 2000). At the moment, Next has 6 call centres in the UK, another one in India and employs over 7,000 employees (Next 2011).In addition, the company also recruits its own staff through its websites and advertisements on job sites like Indeed.co.uk which lead the applicants back to the Next website.4.1 ConclusionLogistics is especially important to international companies. It involves how the company sources its products, manufactures, transports an d stores them. The strategies embarked on by the company are a function of its business objectives and strategies. Next is pertinacious to be paying by increasing the demand of its products and reducing costs. Therefore, it uses a combination of both the lean and agile supply strategies to manage its logistics and supply chain.Next has created subsidiary companies to manage the different components of its logistics and supply chain. It is evident that the company wants to have total control over its business. In addition, it has commercialised these subsidiary companies and offers their services to other businesses, thereby increasing its revenue. Next has been quite profitable including the subsidiary companies that manage its logistics and supply chain. However, according to its 2010 annual report, the profits from Next Sourcing Ltd is likely to see a decline in the following year as a result of competition from external suppliers.4.2 RecommendationsBased on the findings of this report, the following recommendations have been madeIt might be necessary for Next to outsource some of its logistics functions to independent companies so that it can focus on its core competencies which are to provide quality fashion clothing and software. At the moment, in trying to do so many things, the company might be losing the expertise and focus they need to build their brand and make even more profit. For instance, because of the large number of employees needed for the company and its subsidiaries, Next can outsource its recruitment functions to recruitment agencies.If the profits from NSL start to attain as predicted, it can also consider outsourcing this function. It is necessary for the company to gain ground that outsourcing procurement does not necessarily mean that it loses total control of its sourcing and buying processes. It could still have a department in charge of this function but work with third parties to ensure that it uses the expertise necessary for competitive advantage. The department can monitor the procurement process so that Next can be assured of its quality.5. References and BibliographyChristopher M., (2003). Creating Agile Supply chains. In J. Gattorna, ed. 2003. Gower enchiridion of Supply Chain Management. 5th edition Gower Publishing Ltd. 283 291.Christopher M. (2004) Logistics and Supply Chain Management Creating Value Adding Networks. 3rd ed Financial Times/ learner Hall.Christopher M, Lowson R. Peck H. (2004). Creating agile supply chains in the fashion industry. International Journal of Retail and Distribution Management. Vol 32(8) 367 376Collins J.L. (2003). Threads Gender, Labor and business office in the Global Apparel Industry. 2nd ed University of Chicago Press.Frazelle E. (2001). Supply Chain Strategy The Logistics of Supply Chain Management. McGraw- hammock Professional.Gourdin K. (2000). Global Logistics Management A Competitive Advantage for the New Millennium. Wiley-Blackwell.Mahadevan B. (2009) . Operation Management Theory and Practice. scholar Hall College DivMangan J, Lalwani C Butcher T. (2008). Global Logistics and Supply Chain Management. toilette Wiley SonsNext (2010). Annual Report. Online. Available at http//www.nextplc.co.uk/nextplc/financialinfo/reportsresults/2009/jan10/jan10-c.pdf Accessed 02 March 2011.Next (2011). Next About us. Online. Available at http//www.nextplc.co.uk/nextplc/aboutnext Accessed 02 March 2011.Saxena J. (2009). Production and Operations Management. McGraw Hill EducationStanton J. (2007) Next Goes into Third Party Logistics. Online. Available at http//www.roadtransport.com/Articles/2007/10/31/128885/Next-goes-into-third-party-logistics.htm . Accessed 12 March 2011.Ventura (2009). Ventura Distribution Network Online. Available at http//www.venturadistribution.co.uk/default.asp. Accessed 10 March 2011.