Business Logistics Assignment: Analysing Bunning’s Retail Service Quality
Question
Task:
Develop a business logistics assignment analysing the Bunnings Warehouse’s retail service quality. The students should perform comprehensive research on the selected retailer to find out more information about the company’s logistics’ performance in this field.
Answer
Executive Summary
Based on the strategic positioning and management of supply chain and logistics in Bunnings Warehouse; this business logistics assignment has undergone extensive secondary studies regarding problems, retail supply chain system, information flowing, competitive advantages, procurement of the existing supply network within. This study has also done a critical analysis of the location strategies and consumer responses of Bunning Warehouse effectively for understanding different operations that could be implemented for better services in the future. Additionally, this study has also discussed influence of current COVID-19 pandemic on the business and future supply process with changing consumer responses that could force change in the current logistics management.
Introduction
Logistics and supply network form a significant part in the functioning of any organisation. This involves acquiring goods and delivering them to the end-users from the source of derivation to the source of usage. The functions of logistics involve a pattern on “traffic and transportation” and it deals with the shipping, receiving, export and import, inventory management, warehousing, purchasing, customer service and production planning. Companies are increasingly collaborating with suppliers and logistics firms to deliver the products to the customer in a faster and more efficient manner. This assignment will study the retail service logistics for Bunnings Warehouse, which is a household hardware chain in Australia. Wesfarmers owns the firm since 1994 and brothers Robert and Arthur Bunning initially founded the company. The company is headquartered in Hawthorn East, Victoria, Australia (Grimmer, 2017). The scope of this report on business logistics assignment is to understanding the different functions of logistics and also finding out how it is important for a company so that all their operational functions can go on steadily and without any issue.
The gaps in the supply network of the company along with the stocking system structure will be discussed in this assignment. The core competence and the procurement activities along with the logistics services of Bunnings Warehouse will be discovered. This research on business logistics assignment is aimed at finding out the logistics performance of the company. This will help the company to understand its logistics and supply chain management in a better manner and they can fulfil the gaps to achieve a competitive advantage and an increased market share.
Analysis
1. The gaps/problems/issues/challenges faced by Bunnings Warehouse and its supply chain
Certain issues arise in the retail and supply chain of every organisation including Bunnings Warehouse. The increasing demands of the customers and the need for faster delivery have led to issues and problems for the supply chain of Bunnings Warehouse, which is the main concern of this business logistics assignment. The company offers household development and out-of-doors existing goods to the people in New Zealand and Australia along with supplying the same to project builders, the housing industry and commercial tradespeople. As the company deals with mostly supply operations, it is essential to have seamless service operations for gaining a larger share in the market (Fernie and Sparks, 2018). However, it is also stated in this business logistics assignment that the company is facing the issue of increased costs throughout its supply chain. The prices for the raw materials and other operations are increasing due to the rising inflation rate. However, to retain the customers, the company cannot increase their selling prices. This has reduced the profit margins for the company. The COVID-19 pandemic has also affected the global economy thereby reducing the orders and purchases of the company (Barbosa-Póvoa et al., 2018). Bunnings Warehouse is also facing challenges in keeping up with technological changes and advancements. Technical glitches and issues also lead to issues and delays in the supply chain for the company.
2. Explanation of Bunnings Warehouse’s retail supply chain structure; location and layout of the store(s) or retail outlet(s); products/services offered and other areas
The key element of the end supply chain for Bunnings is their import process as it helps them to gain a wide range of products at the lowest prices. The company also follows the Shipping Platform Standards to ensure the safety of the members involved in the process along with efficient unload of the stock so that lowest costs are achieved. The company examined in the segments of business logistics assignment has a strong network of locations for catering to the needs of commercial and retail customers across all regional and metropolitan locations. Bunnings have various outlets and warehouses. The warehouses and the retail stores of Bunning Trade Centre are located in various location of Australia including Tuggerah, Rockhampton, Unanderra, Bayswater and Townsville. The Bunnings Trade Centre is in the format of the specialised DIFOT and it has the lowest cost of the prices. Moreover, the company is also expanding its supply chain along with opening new stores to enhance the digital engagement of the customers (Yoo and Seo, 2017).
Figure 1: Supply chain structure of Bunnings Warehouse
(Source: Yoo and Seo, 2017)
The company supports local products as well as suppliers as much as possible. They have a huge network of stores and they source products globally to satisfy the needs of the consumers. The company ensures that the employees visit the external suppliers to acquire the best and most innovative products to sell to the customers. They also source products from Trade Fairs in Australia as well as the global market. Apart from that, the supply partners of the company also trade through the E-commerce segment and all the products are fully bar-coded so that proper tracking can be done.
3. The core competence of Bunnings Warehouse in the competitive market
The Home Improvement market in Australia grew by 3 per cent in 2016 as compared to the previous year. The research on business logistics assignment signifies that the total market share was around $45 billion and the per capita spending was around $200. The reasons for the growth of the market include the increasing demand, new and innovative products, focused channel strategies, branding and positioning, excellent supply chains, visual merchandising, improved store dynamics, advanced technology use and many others (roymorgan, 2020). The demand in the housing market has increased over the last three years and is expected to gain a CAGR of 3 per cent. The retailers in the Home Improvement market have a market share of around 18 per cent. Bunnings Warehouse has various competitors in the market, among which Boral and Fletcher Building are the two strongest competitors for the company. The EBIT percentage to sales of Bunnings in 2016 was 11.5 per cent and for Boral, it was 6.6 per cent (hardwarejournal.com.au, 2016).
Figure 2: Competitors of Bunnings
(Source: hardwarejournal.com.au, 2016)
On the other hand, the revenue for Bunnings, Boral and Fletcher Building were $8006 million, $3297 million and $3276 million respectively. However, COVID-19 pandemic is expected to influence this industry negatively. Considering the records of 2020-21 in this section of business logistics assignment, the income for the Home Improvement manufacturing is predictable to decay by 3.3 per cent and the demands will be limited. The profitability of the industry is also affected over the last five years due to the intensified price competition in the market (ibisworld, 2020).
4. Discuss how ‘Information Flows’ in the retail supply chain of Bunnings Warehouse within this business logistics assignment?
The need to share accurate information promptly is very important in a retail supply chain as it aids in connecting the different stages in the supply chain along with coordinate the action and enhances the overall performance of the firm. Using advanced technology helps in the stream of data in the supply network of Bunnings Warehouse and this helps in sharing information very quickly and efficiently. To enhance the “Information Flow” in the company, it has incorporated many technologies such as DBMS (Record Administration Schemes), ERP (Enterprise Resource Planning (ERP) and other Web-Based technologies in the different phases of the supply process (Ayers and Odegaard, 2017). The Information Flow is enabled with IT as it has many benefits for the organisation. A lot of information is contained in the supply chain of an organisation, which includes product data, bills of materials, descriptions, inventory levels, pricing, customer and order information, scheduling of shipping and delivering, information about suppliers and distributors, financial information and many others. The information flow in the supply chain of Bunnings Warehouse is bidirectional and it has helped in making the supply chain more effective and transparent.
Figure 3: Information Flow in the supply network process
(Source: Kembro et al., 2017)
The prime reason for Bunnings Warehouse to become the market leader in Australia and NZ was its highly efficient and effective supply chain (Kembro et al., 2017). The firm focuses on the “logistics of distribution” so enhance the retail experience of the customers. The company also invests heavily to reduce the delivery time of the products along with improving the “last mile delivery” experience for the customers.
5. Procurement activities and logistics services
Procurement activities and logistics form an important part of any organisation including Bunnings Warehouse. Procurement activities and logistics services include the sources of materials that are required for producing new products. Furthermore, it has been seen in this business logistics assignment that this section of the supply chain emphasises on the purchase of raw materials, auxiliary supplies, replacement parts, operating supplies and other items as these are all required for the manufacturing process to work (Rejeb et al., 2018). The activities also include handling the storage, organisation and shipment of the raw materials to the warehouse. Procurement and logistics are interlinked with each other as the company wants to have a proper flow in the supply chain. It also ensures that the manufacturing costs of the company do not exceed the allocated budget. The procurement activities for Bunnings Warehouse are depicted in Figure 4.
Figure 4: Procurement Activities of Bunnings Warehouse
(Source: Rejeb et al., 2018)
Herein business logistics assignment, a logistics service, on the other hand, is demarcated as “the procurement, manufacturing, and allocating of resources and goods in the correct amounts to a consumer or to the retailers” (Iastremska, 2018). Bunnings Warehouse has incorporated the procurement activities and logistics services in its supply chain to gain the benefits and enhance the supply chain management system for the company.
6. Transportation, warehousing and distribution of goods
Transportation refers to the transport of the goods to one place to another until it is delivered to the end-users. It is evident in the business logistics assignment that Bunnings Warehouse is the market leader in its industry and therefore always experiences high demand and supply. However, the COVID-19 pandemic has put a halt in its activities. To state generally, the company faces high demand from the consumers and therefore it must be effective in managing their supply chain. The Bunnings Warehouse has implemented advanced technologies and software in its operations to manage the inventory and deliver them on the promised date (Johnson et al., 2016). The WMS (Warehouse Management System) is incorporated in the logistics operations as it helps the employees to keep a track of the package and get real-time updates. This has increased the visibility and tracking of the package and the company can manage their supply chain more effectively. Transportation could be considered as a significant part in the development and functioning of the logistics chain. Without proper transportation facilities, the company cannot deliver the goods to the end-users (Lambert and Enz, 2017). Given the advancement in technology, it has become important for companies to implement them in their transportation and other operations. Autonomous driving, electric vehicles and real-time tracking have helped in reducing the cost of the operation for the company and refining the excellence of services.
Additionally, warehousing involves both inbound and outbound functions of the supply chain such as packing and shipping. The operations in warehousing add value to the overall function of the supply chain as it is responsible for delivering the right products at the right time (Richards, 2017). The items are stored at the warehouses before they are shipped to the destination. Besides, the distribution of goods in the logistics and stocking network involves an extensive variety of operations. In this stage, the final goods are distributed to the end-users.
7. What is the relationship between Bunnings Warehouse location strategies and its customers?
Being in the right location is the key to effectively managing the supply chain for an organisation. The wrong location can lead to lesser access to customers, difficulty in transportation and storage of the goods. The warehouses of Bunnings are spread across the country and hence this has increased flexibility of the operations. The warehouses are located in both metropolitan and regional locations. The location has helped in attracting more customers and increasing the sales volume for the company (Dey et al., 2016). Proper location strategies also have a major role in determining the overall profitability of the company. Location strategy is defined as the plan that helps in determining the optimal location for setting up the warehouse of a company as per the objectives and needs. It is also aligned with the overall corporate strategy of Bunning Warehouse.
The company has easy accessibility to all the raw materials and transportation facilities along with a proper supply of raw materials. The customers have easy access to visit retail stores and purchase the goods from Bunnings (Singh et al., 2018). Different factors have a role in determining the location strategy for Bunnings Warehouse and these are mentioned in the next section of business logistics assignment -
Facilities- This factor determines the kind of space needed by the company in terms of its short and long-term goals.
Feasibility- This assesses the operating costs for the company.
Logistics- The transportation options are determined here and the costs for the prospective warehousing and manufacturing facilities.
Labour- It helps in determining whether the workforce of the company is comfortable with the site.
Community and site- It is necessary to ensure that the surrounding community is not affected negatively due to the functioning of the organisation.
Environmental regulation- It is essential for Bunnings Warehouse to consider the environmental impact of its operations.
Discussion
Discussion of the challenges that might affect the operations of Bunning Warehouse operations
The literature build on the case scenario of business logistics assignment has identified the different challenges that can be faced in the logistics chain and product stock organisation of a company. One of the crucial challenges that Bunnings Warehouse can encounter is increasing operating costs and reduced profit margins. The prices of the raw materials, fuel, freight, energy and others are increasing. This will increase the overall operating cost for the company and affect profitability. Apart from this, the increasing labour rates, new technology and new regulations also will lead to the rise in the prices. Furthermore, the main aspect of supply chain management is offering the best quality of services to consumers (Bae et al., 2015). However, the uncertainty of demand and supply along with the changing needs of the consumers can pose a threat to the company in terms of their brand reputation and value. A lack of proper market research leads to wrong or inefficient use of the resources or unable to cater to the needs of the customers. Hence, Bunnings Warehouse must conduct proper market research periodically to ensure that they are up to date with all the demands and preferences of the consumers and the scope in the market. Apart from that, another potential risk for the company can be planning and managing risks. It is necessary to periodically update the risk mitigation strategies to ensure that the company stays aware of any changes in operations or government laws and policies. The workforce also poses a threat to the efficiency of the operations (Stoltz et al., 2017). The company needs to focus on recruiting effective and efficient employees in its supply chain and logistics management to ensure that the operations do not lag anything.
8. Discussion on Omnichannel or multichannel, whichever applies to the selected retail chain structure
According to the research on business logistics assignment, Omnichannel supply chain structure refers to the supply chain where the customers are more in charge of controlling their order and how it reaches them. This helps in enhancing the experience of the customers. The customers can also control the shipping and delivery of their order as per their needs and convenience (Kembro et al., 2018). In the Omnichannel supply chain, all the platforms and channels are considered that might be used by customers in their buying journey. On the other hand, a multichannel supply chain is where the customers get multiple options for purchasing their products. For example, customers can either purchase the product from the brick and mortar store or place their orders online. However, these supply chains are separate from each other. Each chain has its department, transportation and warehouse (Mena et al., 2016).
Bunnings Warehouse has a multichannel supply chain in its retail chain structure. Customers can purchase their products both online or from the physical stores of the organisation. It has helped the company to reach out to a larger audience and increase their sales and revenue over the years. Along with this, the perception of the consumers has also increased providing them with a seamless buying experience. This has run to gaining a large number of faithful clienteles for the brand. Through the multichannel supply chain, the company can distribute its risks and does not have to depend on a single sales channel. However, this channel noted in the business logistics assignment has certain limitations as well (Marchet et al., 2018). The issues in the supply chain such as high costs of materials and labour are due to the multichannel supply chain of Bunnings Warehouse. As this has more number of suppliers, they need more warehouses, staff and shipping costs. Furthermore, nowadays customers prefer shopping online due to the convenience and low costs. This can affect the in-store purchases negatively as consumers might stop visiting the physical stores (Yrjölä et al., 2018).
9. Discussion on the role of ICT (Information and Communication Technology) in the selected retailer’s merchandise management
Information and Communication Technology is defined as the technological system that leads to the gaining, dispensation, transformation and delivery of data in an organisation or system. It influences how individuals work, communicate or spend their time. It also affects the growth of companies and economies. Additionally, merchandise management mentions to the procedure through which a retailer decides the items that are needed by the consumers and the time in which they need to fulfil these needs, where to display the items to maximise the sales in the stores and the pricing strategies for them to gain maximum profits. Using ICT in merchandise management will help in efficient merchandise planning and communicating with all the people involved (Apiyo and Kiarie, 2018). The use of the ICT will aid in collecting the required information and transmitting them accurately along with analysing the trends in the sales. ICT also helps in avoiding stock-out situations and spot the merchandise and the inventory needed. Apart from that, all the operations can be properly integrated so that the merchandise is easily available in the store as well as online.
10. Discuss the current/recommended CSR activities in selected retail business towards sustainable development
Bunnings Warehouse has emphasised on its CSR activities and achieve sustainability in its operations. The focus for the company is to make their operations “socially responsible and environmentally aware and economically viable.” The company has focused on various factors to achieve sustainability and incorporate CSR activities such as water, energy, waste, responsible souring and product stewardship. The argument outlined in the business logistics assignment signifies that the company is trying to reduce their energy use so that greenhouse gas emissions can be eliminated. Using renewable energy through solar photovoltaic (PV) for lighting and other operations. The LED lighting has been used along with installing solar PV systems. The main uses of water for the company are toilet facilities, air-conditioning, kitchen and irrigation of the nurseries. The company have committed to reducing the use of water along with recycling it. This will help in the reduction of the amount of pollution in the environment and community. The company does not use plastic shopping bags but instead encourages the customers to bring their shopping bags. They have also committed to making their packaging sustainable by 2025 (Bunnings Warehouse, 2020).
Apart from that, the company can focus on improving the quality of living among the population by increasing the job opportunities for the locals. Bunnings also focus on sourcing policies, trading terms, training, education and supplier codes of conduct. Therefore, the responsible and ethical sourcing helps the company to ensure that their operations are legal and sustainable along with providing fair treatment and working conditions to all the employees.
11. Discuss and compare the selected retailer’s supply chain, its return and refund policy, its consumers, its suppliers, and its financial performance before and after COVID-19 outbreak
The company has started operating after the lockdown due to the COVID-19 outbreak. However, Bunnings suffered major losses in its operations due to the lockdown and the sales are suffering until now. The outbreak has reduced the number of customers visiting the stores. The online sales have also reduced although the company is encouraging the customers and clients to make their purchases online for the safety of everyone. However, the supply chain of the company has suffered and the operations were disrupted due to transport restrictions and other factors. This has led the company to receive the products much later than the actual schedule. The company nevertheless maintained its return and refund policy for retaining the customers (inqld.com.au, 2020). As most of the sales are now done online, it has become essential for the company to improve its e-commerce segment. The return policy is the same where the consumers can return the item and get a full refund for it. The manufacturing function of the company drastically suffered due to lockdown and the need for physical distancing. Apart from that, the company also failed to acquire the raw materials on time along with procurement challenges. The company also experienced a positive financial performance as the sales during the COVID-19 crisis rose as consumers were buying in bulk.
As per the investigation carried on this business logistics assignment, it was seen that the initial growth in the sales was 19.2% and during the second half of the particular financial year it came down to 5.8%. In this company the work abilities of the office has seen the increase of 27.8% in the sales growth and it happened in between the months of January to May. In the online platforms the sales was 68.7 percent in the second half of the financial year and during the Covid-19 pandemic outbreak it rapidly went up as the customers preferred buying things online rather than going out and shopping. It was also seen that the total sales in the online platforms went up to 60% and in cash it was calculated to be $1.9 billion. Bunnings was able to make a growth in their commercial markets which is wide spread all across in Australia and the various trade markets of Australia but it was also seen that Bunnings spent $20 million for the additional cleanings and security provided the situation and Bunning has forecasted that in the second half of the year 2020 the financial cost will be $70 million during all the restrictions they have been facing in Australia and New Zealand. This is the reason they are relying most on their online platforms for this moment which is turning to be beneficial for them.
12. Discuss the consumers’ panic during the current pandemic which resulted in ‘quantity assurance’ more than ‘quality assurance’ practices
During the pandemic, it was observed that the consumers were stocking up on goods irrespective of the quality of the goods. They wanted more ‘quantity assurance’ rather than ‘quality assurance’. The consumers understood that the coronavirus pandemic could go on for a significant amount of time during which they can miss the essentials due to the stop in the manufacturing units. Therefore, the consumers started to buy many things in bulk so avoid scarcity including Home Improvement products (Arafat et al., 2020). During the peak of the COVID-19 crisis, the company faced huge queues outside the store, which kept on increasing. The sales surged up as the consumers wanted more quantity than quality. In the beginning, the customers purchase protective equipment such as masks and face shields and cleaning and sanitizers (afr.com, 2020). Then the demand increased for home and office suppliers and finally for the home improvement products. The company managed to keep its supply chain upright by sourcing the suppliers in time and selling them to the consumers.
Recommendations
13. Provide recommendations on how best possible solutions can be incorporated into the selected retailer to overcome the current and prevent the potential risks/problems/issues.
The various challenges can be resolved by enhancing customer service and improving the quality and quantity of the goods. Every customer has different needs and therefore it is necessary to understand their wants and accordingly cater to them. Improving the cost control will help Bunnings to execute their plans better along with monitoring the costs constantly (Birasnav et al., 2015). This can be done by increasing the efficiency of the warehouse. Developing appropriate risk mitigation plans is also another way to overcome the current and potential challenges and gain stability in the market. Bunnings must also focus on building a strong and cordial relationship with its external suppliers to increase the efficiency of the operations and gain better outcomes (Costantino et al., 2015). Lastly, hiring efficient and experienced personnel will help in carrying out functions in a better manner and enhancing the satisfaction of the customers.
Conclusion
As a conclusion it can be said herein business logistics assignment that the assignment has focused on the area of different aspects of the company Bunnings Warehouse and their logistics and supply chain management. Various matter were found in this report but the interesting finding was amid the COVID-19 pandemic their sales growth was seen through the online platforms and which is a positive area apart from all the challenges they have been facing in the market. Here the attitude and buying patterns of their customers were also seen and recommendations has been made for overcoming the potential risks and other challenges that they might face in the market of Australia and New Zealand.
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