[pic] University of Huddersfield Course : BA (Hons) Global Business and Logistics Management Subject Title: Logistics Management Course number:SHT4012 Assignment: Logistics Operations within the UK and Hong Kong Home Grocery Delivery Student Name: Lam Pik Kee, Pekky (Student ID#1078762) Table of Contents: 1. Introduction……………………………………………………………………………………………. P. 1 2. Background and Mission of PARKnshop & Ocado………………………………. P. 1 3. Different Approaches of Logistics Strategies & Operation Management………………………………………………………………………………………………. P. 2 4. Information Technology for Logistics Operations ………………… …………….. ……………………………………………………………P. 5 5. Key Difficulties …………………………………………………………………………………….. …P. 6 6. Conclusion……………………………………………………………………………………………………. P. 8 1. Introduction This written report would underline all factors that directly /indirectly affected to Ocado ,UK and Parnshop,HK to fulfill the achievements during the entire home grocery delivery logistics operation process. Moreover, heaps of logistics strategies, IT solution would be founded in this report, at last; it will also discuss the key difficulties in maintaining a high level of customer service at optimal cost. . Background of PARKnshop shop & Ocado 2. 1 PARKnshop Background Parknshop is the leading supermarket chain and multi formats retail in Hong Kong, who operates more than 230 outlets in Hong Kong and also accounts for over 40% of the packaged food market, which is equivalent of 250,000 containers per year and offer on-line shopping and home delivery service. Their mission is “To be the family first choice for Food Shopping” [pic]Parknshop Group Industry: |Retailing | |Founded /Headquarter |1973 / Hong Kong | |Area Served: |Hong Kong, Mainland China and Macau | 2. 2 Ocado Background Ocado is a British Internet retailer specializing in groceries wholly focused on the home delivery of high-quality food, drink and household goods. The company has centralized warehouse based and picking model in CFC, online delivery without any physical shops.
Their mission is “Great Value, Great Service, Great Choice and Great Way to Shop” [pic] Ocado Group |Industry: |Internet retail | |Founded /Headquarter |2002 / Hatfield,Hertfordshire, United Kingdom | P1 3. Different approaches of Logistics Strategies & Operation Management After research, Ocado and Parknshop have some difference approaches for their operation management activities and success supply chain, sustained the continuous development for the entire group.
A strategies consists of those plans or patterns of actions that integrate an organization’s primary goals, policies and activities into a coherent whole (Patrik Jonsson Logistics Strategy P. 19) 3. 1 Ocado -Logistics Operation Management and Strategies In Sept,2002, Ocado currently operate a 295,000 sq ft, the Fulfilment Centre (CFC) in Hatfield which is largest and highly automated. In Jan 2003 it centralized all warehousing operation and running all the customer majority of orders are relayed from CFC 1 to spokes for ultimate outward delivery to customer. This is a centralized DC and all of products are receive and delivery from this CFC. 5% of inbound goods are delivered direct from producers to CFC1, whiles 15% are delivered from the waitrose supply chain, at full capacity CFC1 will be able to stock up to 40,000 grocery SKU. Delivery area expanded to over 70% of UK household in 2011. All of the order will be order by CFC which simplified the order processing and lower operation cost. This is better control over the products, reduce overall stock holding, reduce inventory cost and the groceries are handled less, preserving quality, processes minimize product touch points and maintain the correct product temperature as well.
The CFC also supported by 9 regional delivery spoke around the country which is decentralized warehouse, located closer to customers, this is lower inbound logistics cost and transport cost to customers from the spoke. Hub and spoke system adopted, acquired a new spoke in Bristol which opened in March,2011. which is 9 spokes support Ocado’s internet store with shorter delivery lead time and more responsive and able to offer free delivery service for some dedicated time slots. [pic](Ocado-Centralized Distribution Model )
P. 2 In warehouse, using Distribution Centre-based picking approach and around giant network of forklifts scuttle round, conveyor belts crunch, robots replenish shelves and monorails at packing stations, The people using Pick-to-Light concept and pack groceries into green crates, called totes. Orders information transmitted to radio frequency wrist mounts worn by the pickers as they push blue trolleys along the aisles. The wrist device tells the pickers what and how much to pick.
Operators are assigned to specific pick zones and each location equipped with a light and readout display, operators scans the incoming tote. Lights for location requiring pick are illuminated and pick quantity is displayed, operator picks items and presses lighted button to confirm picks. The Finger attached scanners let the pickers scan the products and picked from the totes on the shelves. The pick-to-light system is helps Ocado most efficient, timely and accuracy order picking while minimal training required and compared to other paper based picking solution.
It is a visual method, the system is more intuitive than printed orders, and it has around 20-50% pick efficiency over than Pick-to-Paper. The monorail’s job is to collect the orders that have been picked form each floor into containers-the trolley totes are loaded into specific pigeon-hole like slots. Each person’s order will now sit in one container. Staff will scans the items from each container’s totes and which customer it belongs to and packed in color-coded bags depending on whether the goods that have been ordered are frozen, chilled or ambient.
This helps the delivery person locate an order and finally turn fork-lifted on to little Mercedes Vans for direct delivery. Ocado using own fleet of bespoke van, each delivery van replaces multiple car journeys every single day, by saving the customers a trip to a super market. It helps groceries to reduce the number of cars on the road each day, developed 5th generation of van, which increases payload by 10% to improve delivery performance and they equipped satellite navigation, a CCTV ”SmartDrive” camera to ensure the product reaches the customer in right locations and in proper condition.
On time delivery is enhance company reputation and reliability. The automatic material equipment is enhancing the efficiency of pick and pack and transit operation in whole supply chain. Ocado using Vendor Managed Inventory (VMI) for the management of home grocery delivery logistics operation. It monitors an inventory levels. Capturing and transmitting sales data through EDI is crucial to ensure the efficiency of VMI operations and opening up the communication channels. P. 3 3. PARKnshop-Logistics Operation Management and Strategies In 1990, ParknShop was operating all distribution activities from a single high-rise facility in Fo Tan, which is 500,000 sq ft, and designed and handle 100,000 cases per day in peaks season and it is mainly operate a slower-moving goods. In 1992, expanded the ambient distribution capacity and rented 200,000 sq ft of space in the new Hong Kong International Distribution Centre(HIDC) facility in Kwai Chung. The space at HIDC contains two sections, one for fruit and vegetable which need temperature and one for general products.
It is acting as the decentralized DC and for fast-moving goods, HIDC is nearby in HK international Ocean Terminal therefore enjoys much spin-off benefit and especially a much improve road network and fast for replenishment, located closer to shops and suppliers are more responsive and short delivery lead time , enables JIT operations too. In 1992, they built facility for frozen and fresh pigs cutting facility in Sheng Shui, The location in here benefit for allowed pigs from Mainland China to HK as live and close to border can reduce transport and operation cost for in bound logistics.
In 1995, 10,000 sq ft facility in Ap Lei Chau for the distribution of live freshwater and seawater fish which is fish imported in Hong Kong. Parknshop using the store based picking and Pick-to-Paper for online order and home delivery, The worker by manual picking operation for the on-line order received through Electronic Data Interchange(EDI) . Before taking on line order should be select the delivery district and area first, all on line products was picked from 4 Superstore in stead of picked from their DC. Where are located in Jardine Hill, North Point, Yuen Long and Hung Hom.
The purpose can achieve flexible and fast lead time for home delivery The warehouse staff to pick up the order per customer on line order list. They are follow the manifest list start of picking operation and using bar code scanning of sales orders. Afterwards, the orders will roll through roll cage into own fleet for home delivery. This is a traditionally Pick –to –Paper method and let worker handle in easily. They adopt cross-docking for local suppliers as a fast track access to the docks and return and meet the just in time strategy, suppliers will not hold any stocks for all cross docking tems which is eliminated the storage level of inventory and cost effective in warehouse. As a result, it managed to reduce the inventory from local suppliers from 4 weeks to less than 2 days in the whole supply chain. In 1995,Parknshop standardized the size of pallets used for deliveries by suppliers and 14 different size became one improving delivery times enormously. which is eliminated the need for manual unloading at the docks and fast track for transportation. P4 Parknshop was fully computerized, employed a proprietary system from Reteck and automated operation in 2007.
Their orders can be sent electronically to suppliers and invoices can be received by Electronically Data Exchange (EDI)Besides, using Vendor Managed Inventory (VMI) to process of planning implement and controlling the operation of the supply chain. It was enable the stock record for every store to be captured on the computer and for replenishment orders to be automated, it helps reduce the inventory level , keep safety stock and its opening up the communication channels and develop mutually beneficial partnerships along the supply chain . . Information Technology for Logistics Operations On line home grocery delivery makes Information Technology become important and complex, co-operates and communicates with suppliers and customer. Successful adopt IT system to lead entire organization smoothly in order to time saving, enhance operational efficiency and effectiveness, shorten production, material lead time and able streamlining communications channels and improving customer service management . (Pope J Transport Economics Pg. 147) 4. 1 Ocado IT System & Advantage
Ocado current IT systems are predominantly bespoke and developed in-house by Ocado’s IT team, much of the machinery employed in the CFC is also bespoke. Proprietary intellectual property is integral to the functionality of all aspects of its operations. The CFC is capable of managing and sorting over 20,500 grocery lines and organizing 100,000 deliveries per week. Where IT ensure deliveries arrive at the right address, right time with right contents. Proprietary IP allow for 95% of product availability on the website range for next delivery and 99% availability for next week delivery.
It offers the widest range of delivery slots of any online retailer. Tight and reliable delivery windows allow customers to save time compared to visiting a store. On time delivery and minimal products substitution builds consumer loyalty and increases willingness to shop online. Satellite navigation, each bespoke van fitted with a CCTV , SmartDrive camera system to enable complex route delivery into right location and in proper condition and achieve the customer satisfaction.
P. 5 User friendly interface, the website, launched IPad, Andriod apps and IPhone apps are more convenience and allow flexibility for customer easier to navigate at any time at any where. At last, Pick-to-Light system, Radio frequency wrist mounts and finger-attached scanners is one of the most efficient and timely order picking method are help to reduce human error and enhance the efficiency and accuracy in warehouse operation. 4. 2 PARKnshop IT System & Advantage
To explore the opportunities to improve their supply chains, Parknshop deployed Retek software, an Oracle-bases suite of applications that provides solutions in the areas of merchandising, warehouse data, distribution management, demand forecasting, sales auditing , customer order management and various order functions important for the smooth running of retail business . They adopted Vendor Managed Inventory (VMI) for all Parknshop stores. It monitors an inventory levels. Capturing and transmitting sales data through EDI is crucial to ensure the efficiency of VMI operations and opening up the communication channels.
Just in time (JIT) inventory systems have reduced inventory cost and warehouse expenses, while also improving order fulfillment time. Bar –code is scanned by the cashier at point of sale, the information is transmitted via the store server to a centralized computer , when the number of units on the shelf falls below a pre-set level, a purchase order is automatically sent to the supplier which in turn are delivered to the particular store to re-stock the shelves, this is succeeded keep the inventory stock, increase profitability, benefit the logistics operation and satisfaction for customer need. . Key Difficulties Customer service is a series of activities designed to enhance the level and meet the customer satisfaction, In terms of home grocery deliveries, customer most concerns the best quality and optimal cost of product and on time delivery. A: Routing schedule planning Both Ocado and Parknshop are serious of facing the develop the daily routing schedule , the home groceries order in various and different basis in daily therefore design a more flexible and efficiency routing schedule to utilize the truck load and transportation cost to maintain the profit, it is a big challenge.
P. 6 Besides, more deliveries per route planning may increase the cost , less deliveries or caused by traffic congestion, which means higher risk for miss the on time delivery promise. Different time window (am or pm), peak season demand change also put the routing schedule more complicated and difficult to manage. B: Inventory stock forecasting Ocado on liner grocery product is cover UK by CFC only and their inventory forecast is under country base , it is impossible 100% product available on shell .
Parknshop inventory control under forecast individual shop basic which is support on line and retail shop but the on line inventory figure and real time retail shop inventory figure may have different of the time gap. It will occurs out of stock in the retail store but available in on-line service. However, over forecasting will increase the inventory cost and under forecast will be out of stock , it is serious impact the customer satisfaction and suppliers or organization are difficult to planning the inventory stock forecasting in the supply chain.
C: High Cost of Land In HK, the geography is small , the rents are high, warehouse costs and warehouse labor are proportionately high, this cost profile mean that HK distributors need to be efficient at stock and warehouse management. Besides, most of the shops are located in building which were not designed to handle goods efficiently, very few have a loading dock and in basements or above ground rather than street level. Land costs have made distribution activities difficult to operate.
Different rents in different area at Parknshop store which is occurs different range of the product price, customer may suffer high product price for this situation. D: Limited Data Enablement Ocado’s IT system is limited data enablement the device only had a limited degree of wireless data enablement, required a device could function for up to 16 hours a day on the road and able to withstand a range on weather conditions, Drives would constantly plugging and unplugging the device from the delivery truck while carrying groceries and extremely durable and tough device. he solution was using cost more to activate the device, in additional, failure was coming at a high price, devices not functioning on the road meant missed deliveries, potentially defrosted food and failed to customer satisfaction. The severe difficulties pressure on the home grocery deliveries industry which is impact a higher logistic operation cost and may not reach the customer satisfaction. P. 7 6 Conclusion
Hong Kong a small geographic compare with UK and many supermarket around, HK buying behavior is enjoy buying grocery product more frequently in small order at supermarket instead of on line and also as its a part of their entertainment. However, UK people would through on line to bulk buying their grocery product for weekly purpose. No matter how, home grocery delivery is reducing time spent on grocery shopping allows consumers greater flexibility and releases precious time for other activities. P. 8 Reference
Partik Jonsson , 2008 “Logistics & Supply Chain Management” McGraw-Hill Education Berkshire Pope. Jeff. 2005-“Transport Economics” Vineyard Pushing Pty Ltd Australia Christopjer Martin, 2005 “Logistics and Supply Chain Management” 3rd Edition Pearson Education Limited. Great Britain Journal Artiles: Joh Mash (2001) “Chain of Demand-A. W. Watson grows sales while cutting stockpiles” Sphere 18-Retail P. 30,31,32 Christine Corns , 2011, Materials “Logistics Management” Lecture Notes “Parknshop company overview” Available at :< http://www1. parknshop. com/wedshop>