Operation Brilliance - David Jones Ltd - Case Study Example

Document Revision Control EXECUTIVE SUMMARY David Jones Limited is an upscale department store currently operating in 38 stores Australian wide and employs around 7200 staff. Its total equity by end of 2013 was AUD 801 million. In August 2014 South African based retail group Woolworths took over the ownership of David Jones by implying a market capitalisation of $2.15 billion. The new management team analysed the current strategy and operations in the company and identified the major issues in regards to the logistics and stock handling processes and procedures. This report will analyse the current way of processing stock starting from receiving stock at loading dock to merchandising on the selling floor. It argues that the current processes and procedures in place are not efficient and productive. This report identifies the major issues with the current system and provides a range of alternative options that can be implemented in all 38 David Jones locations as a consistent method. The three considered alternatives are: Centralising the whole operation in logistics department at each store, this will include receiving, unpacking, sorting stock according to the departments, security tagging stock and transferring floor ready stock to the departments for merchandising. The second considered option is to demand the suppliers to supply the stock in floor ready state as being security tagged. The third option is to allocate staff in each department to undertake the task of making stock floor ready. This report will argue in details that there are certain advantages and issues with each option. It recommends that the first option of centralising the whole process in logistics department is the most feasible, productive and cost efficient option. This option is referred to as Brilliance project. The major costs associated with Brilliance project are providing specific equipment, tools and setting up certain working stations, training logistics staff and increasing logistic labour hours spent. In conclusion this report recommends that before final nationwide rollout of the Brilliance project it should be run in selected pilot stores in order to monitor the operations, processes and procedures, identify any possible flaws to provide feedback to the project management team to adjust the project accordingly. Contents EXECUTIVE SUMMARY 3 1 PROJECT NEED 6 1.1 SERVICE DELIVERY REQUIREMENTS 6 1.2 ALIGNMENT WITH PROGRAM PLAN 6 1.3 PROJECT OBJECTIVES 7 1.4 CRITICAL SUCCESS FACTORS (CSF’S) 7 1.5 ORGANISATIONAL CHANGE 8 2 OPTIONS ANALYSIS 8 2.1 OPTIONS CONSIDERED 8 2.2 OPTIONS EVALUATION CRITERIA 9 2.3 OPTIONS DEVELOPMENT 10 2.4 OPTIONS EVALUATION 10 2.5 RECOMMENDED OPTION 10 3 PROJECT DEFINITION 12 3.1 SCOPE DESCRIPTION 12 3.2 CONSTRAINTS AND DEPENDENCIES 12 3.3 SCOPE MANAGEMENT 12 3.4 PROJECT DELIVERABLES 12 3.5 PROJECT KPI’S 13 4 PROJECT APPROACH 14 4.1 PROJECT MANAGEMENT STRATEGY 14 PROJECT STRUCTURE 14 PROJECT GOVERNANCE FRAMEWORK 14 PROJECT REPORTING STRUCTURE 14 4.2 PROCUREMENT STRATEGY 14 4.3 COMMUNICATION AND STAKEHOLDER MANAGEMENT STRATEGY 15 5 BUDGET, PROGRAM AND RISK 16 5.1 TIMING / PROJECT READINESS 16 5.2 BUDGET/COST ANALYSIS AND FUNDING STRATEGY 16 5.3 RISK ANALYSIS AND MANAGEMENT STRATEGY 16 5.4 PROJECT QUALITY MANAGEMENT STRATEGY 16 5.5 PROJECT COMPLETION STRATEGY 16 5.6 BENEFITS REALISATION PLAN 16 6 REFERENCES 17 APPENDIX A 19 A.1 PROJECT RISK REGISTER 20 A.2 BENEFITS REALISATION PLAN 21 LIST OF TABLES Table 2‑1 | Project options 9 Table 2‑2 | Table 2 footer example – linked to contents 10 LIST OF FIGURES 1 PROJECT NEED It suffices to state that the existing logistics in the departmental store are inefficient in the handling of stock from its reception, storage and ultimate merchandising on the floor. The Brilliance Project intends to transform the existing stock handling procedures and processes so as to attain the required standards that will guarantee profitability on the part of the acquiring company, Woolworths. Some of the recommended transforms encompass centralising the logistics operations in all the departmental stores. The project also intends to issue a requirement to the suppliers that requires them to avail the stock in a floor-ready state to eliminate the additional costs associated with handling the stock on the floor. Moreover, the project intends to hire staff that will be responsible for making the stock floor-ready. 1.1 SERVICE DELIVERY REQUIREMENTS Apparently, most developed supply chains adopt centralised distribution as a dominant strategy in the handling of stock. In order to adopt the strategy, it is proper for the company to regard the warehouses of the departmental stores as individual participants of the supply chain. It is evident that the supply chain in the centralised distribution will reduce the major cost drivers in warehousing and supply chain management. Apparently, the centralised approach will reduce the number of executors and orders associated with the distribution channel (Životić & Radovanović, 2013). Consequently, there will be a reduction in the transportation costs since large quantities of goods will flow in and out of the centralised warehoused as opposed to the decentralised counterpart. The strategy will also reduce the labour and manipulation services as a result of the elimination of certain redundant positions that existed in the other decentralised stores. Furthermore, the company will realise a reduction in the administration costs associated with the processing of orders since the centralised store will require less administrators than the decentralised one. It is also appropriate for the company to implement reverse logistics in the gathering of returns from the central warehouse. 1.2 ALIGNMENT WITH PROGRAM PLAN The alignment of the Brilliance Project with the strategic plans of the business begins with the communication of the strategy to all the departments of the organisation. Subsequently, it is the prime responsibility of the programme management team to communicate the Brilliance Project to all the staffs of the 38 departmental stores. The team should heighten the significance of implementing the project as a business strategy that intends to guarantee competitive advantage on the part of the company. Towards attaining the objective, the transformation of the measures, policies and culture of the organisation is imperative. The transformation will play a pivotal role in aligning the project with the business strategies thus averting change resistance and guaranteeing the successful implementation of the project (Jamieson & Morris, 2005). The second step entails analysing the value of the Brilliance Project on the overall performance of the company (Garfein, 2007). Apparently, the efficiency and cost-reduction merits of the project are paramount to the success of the company. Since improving the efficiency and returns of the organisation is in tandem with the initial objectives, it is proper to heighten the significance of the project to the success of the company. The project implementation strategy is the other critical aspect of the alignment endeavour (Brache, 2002). The project will implement the Brilliance Project at distinct levels to measure its performance in relation to the anticipated performance. Apparently, integrating the project management leadership, competencies and skills in the context of the organisation is detrimental to the success of the project. 1.3 PROJECT OBJECTIVES The objectives of the project include To analyse the performance of the current stock handling process vis-a-vis the proposed centralised distribution. To identify the major issues associated with the decentralised distribution system. To determine the advantages of using the centralised distribution system. To determine the cost-effectiveness associated with stocking floor-ready goods. To analyse the effectiveness of allocating staff to make the goods floor-ready towards reducing the costs and increasing the profitability of the organisation. 1.4 CRITICAL SUCCESS FACTORS (CSF’S) The commitment of the top management officials towards the implementation of the project suffices to be the first critical success factor in the project implementation process. Apparently, committed managers will communicate the significance of the project to the other employees of the departmental change thus influencing them to adopt the proposed change. However, the failure of the executives of the stores to support the project is an indicator of resistance to the project. The other CSFs encompass the skills of the consultant and the reliability of the schedule. It is evident that professional consultants will provide proper guidance during the project implementation phase. Furthermore, a reliable schedule provides ample preparation and adjustment time for the integration of the existing employees in the centralised system (Ab Talib & Abdul Hamid, 2014). It is also important to observe that budget reliability is a critical factor in any change implementation process. Therefore, the availability of sufficient funds to facilitate the smooth implementation of the Brilliance Project is an outright indicator of the success of the project. The skills of the project implementation team suffice to be the other pertinent CSF. It is apparent that a project implementation team that consists of incompetent professionals may impact negatively on the success of the project. The compatibility of the programme with legacy systems is a must for the project. Moreover, the adoption of reverse logistics also necessitates the availability of skilled employees that will guarantee the timely availability of floor-ready stock for merchandise. The application of current information technology such as the ERP is the other CSF in the programme. The ERP will play a pivotal role in providing information regarding the amount of floor-ready stock and the company sales (Koh, Gunasekaran & Goodman, 2011). The collaboration exhibited by the partners of the departmental store is the other CSF. It entails common goals and priorities of the partners. Moreover, partner trust, consistency of the data standards and relational change management are the other factors that will influence the success of the project. The customer-supplier relationship and the organisation-supplier relationship also influence the success of the centralised distribution system. The suppliers should accept to avail the products to the centralised warehouse rather than in the decentralised warehouses as was the case under the decentralised distribution system. 1.5 ORGANISATIONAL CHANGE It is evident that the successful implementation of the centralised distribution system will lower the costs associated with handling stock as a result of the elimination of redundant jobs performed in the other decentralised stores. The other benefits associated with the change encompass the enhancement of customer value and satisfaction through the timely availability of goods from a centralised store. The ultimate result of the change is the guarantee of competitive advantage on the part of the company (Burger, 2007). However, it is necessary for the implementation team to take into account Kotter’s eight traps associated with change implementation. For instance, the team should not be too confident that all the employees of the organisation will accept the transformation of the distribution system from a decentralised one to the centralised warehouse. The team should address the challenges associated with the change such as the fear of eliminating certain positions that may give rise to change resistance. Therefore, the team should utilise the best approach in creating a sense of urgency. The project team will also play the role of the guiding coalition that will steer the project to its completion. However, all the top, middle and lower managers should also form part of the guiding coalition since they will create the sense of urgency to the other employees of the departmental stores. The creation of the guiding coalition should consider the influence, expertise, credibility and leadership of the members. Team members that have influence are in a position of reaching large number of individuals to convince them to accept the change. The project implementation team should also state a precise vision statement that the guiding coalition will communicate to the other employees in the organisation. Furthermore, effective communication strategies are paramount to the communication of the vision to the individuals in the departmental stores. Next, it will be appropriate to eliminate all the barriers that may impede the successful implementation of the project (Kotter, 1995). One of the options entail convincing influential individuals to accept the change so as to guarantee its acceptability in the entire organisation. It is also important that the project should exhibit a short-term success to convince the other individuals of its long-term success. Moreover, the implementation team should strive to root the new system in the organisation to enable the employees to learn to carry out their operations from a centralised location. 2 OPTIONS ANALYSIS 2.1 OPTIONS CONSIDERED Rather than centralising the stock-handling procedures and processes of the 38 departmental stores, the other options encompass requiring suppliers to avail floor-ready goods. The third option of the report concerns the allocation of staffs in all the departments to be responsible for making the products floor-ready. Table template/structure below Centralising the distribution channel Demanding floor-ready goods Allocating departmental staffs to handle the goods Project strategy aligned with business strategy Yes No No Project portfolio management Efficient Efficient Efficient Project Management Office Efficient Efficient Efficient Management Efficient Efficient Efficient Customer satisfaction Guaranteed Partial Partial Competencies and capabilities of internal assets Appropriate Appropriate Appropriate Project management leadership and skills Excellent Excellent Excellent Project management methodologies and processes Effective Effective Effective Evaluation of core competencies against competition The core competencies are appropriate for the existing competition The core competencies are appropriate for the existing competition The core competencies are appropriate for the existing competition Business results, value and metrics Positive results and values Positive results and values Positive results and values Organisational culture Market Market Market Table 2‑1 | Project options 2.2 OPTIONS EVALUATION CRITERIA Text and a table structure/template below Centralising the distribution channel Demanding floor-ready goods Allocating departmental staffs to handle the goods Long-run cost/value High Low Low Short-term and mid-term returns Low High High Environmental impact Low High High Financial requirements High Low Low Risk management High low Low Reliability High Low Low Table 2‑2 | Table 2 footer example – linked to contents 2.3 OPTIONS DEVELOPMENT The strategic development and analysis of the options necessitated the comparison of the different views regarding the proposed options for the improvement of the performance of the departmental stores. The project implementation team will utilise cognitive mapping and interviews to obtain the different views regarding the options. Aggregating the individual cognitive maps will result in the formulation of group maps that will facilitate negotiations regarding the values of the project, options portfolio and key strategic issues. The main problem of the organisation will form the basis of the negotiations with particular considerations to the political, process and affective dynamics of the options (Rosenhead, 1989). 2.4 OPTIONS EVALUATION The process of evaluating the options necessitates the determination of the ability of the available options to meet the objectives of the project in relation to the cost, quality and time. The evaluation process also encompasses an analysis of the risks associated with the implementation of each of the options. In order to determine the most feasible option, the project development team will determine the extent of coverage of the project’s scope on the part of each of the recommended options. It is also imperative to evaluate the impact of each of the options to the different stakeholders in the evaluation process. The cost and time estimates will also bear critical significance to the project in terms of winning the support of the suppliers and other stakeholders. Therefore, the evaluation process entails the initiation processes that require the clarification and justification of the project. It also entails an analysis of the needs of the stakeholders and the designation of the requirements of the different users. Moreover, the project implementation team will also clarify the shared objectives of the project (UTS, 2015). 2.5 RECOMMENDED OPTION Following the evaluation of the three options of the project, the centralisation of the processes of the departmental store proved to be the most viable option. The decision emanated from the numerous advantages associated with the adoption of the centralised distribution system. The elimination of the allocation of staff to make goods floor-ready for merchandise and demanding the supply of floor-ready goods options emanated from the fact that they encouraged the use of the traditional decentralised system. However, it is evident that the decentralised system is responsible for the poor performance of the company since each store developed its effective distribution strategies without considering the impact of the strategy on the other distribution centres. However, the centralised distribution system will encompass making decisions from a central position to suit the interests of the entire distribution system. It also leads to global customisation besides minimising the overall costs of the system. The option also provides an allowance for the use of coordinated strategies. 3 PROJECT DEFINITION 3.1 SCOPE DESCRIPTION The project targets to identify the most appropriate option of improving the performance of the departmental store. The available options encompass the adoption of a centralised distribution system and allocating individuals to make the products floor-ready in all the distribution centres. The third option entails demanding for the supply of floor-ready goods. The deliverables of the project encompass guaranteed competitive advantage on the part of the acquiring company, increased customer satisfaction and reduction of costs incurred initially in the management of the decentralised distribution system. The other deliverables include the utility of coordinated strategies and global optimisation. The major tasks associated with the project encompass communicating the significance of the project to convince all the stakeholders and centralising all the resources of the organisation during the final implementation phase. The other tasks include the management of the project to ascertain that it meets the anticipated scope and convincing the employees and suppliers about the significance of the project. The project timeframe is a one-month shift from the decentralised system to the centralised one. 3.2 CONSTRAINTS AND DEPENDENCIES Change resistance emanating from the suppliers and some of the employees suffices to be the major constraint that may impede the successful implementation of the project. Additional funds required to transport the goods from the decentralised stores to the centralised ones within the one-month time frame suffices to be the other challenge that the project encounters. Some of the project dependencies encompass the subordinate members of the organisation that rely on the decision of their leaders/managers. 3.3 SCOPE MANAGEMENT The project development and implementation team will be responsible for the short-term management of the scope of the project. However, the long-term management of the project will be a responsibility of the managers and supervisors. They will ensure a continuous monitoring and assessment of the performance of the Brilliance Project vis-à-vis the target objectives of the project. 3.4 PROJECT DELIVERABLES As mentioned earlier, the major deliverable of the project encompass the attainment of competitive advantage on the part of the organisation. Secondly, making centralised decisions will ensure that the decisions are for the best interest of the company as opposed to the decentralised system. The company will also realise a reduction in the costs associated with running the business. The strategy may also guarantee global optimisation emanating from the centralised operations and decision-making. The successful implementation of the project will result in benefits that are approximately equal to the traditional system under the worst case scenario. The utility of coordinated strategies is the other deliverable of the project. 3.5 PROJECT KPI’S The key performance indicators of the project encompass the schedule of the project, the project completion estimates and the current development backlog. The labour costs and the current allocation of resources are the other performance indicators for the project. 4 PROJECT APPROACH 4.1 PROJECT MANAGEMENT STRATEGY PROJECT STRUCTURE The chart below shows the process structure of the project. PROJECT GOVERNANCE FRAMEWORK As shown in the project structure above, the project governance framework consists of the executive committee at the top of the hierarchy. The steering committee and the project director oversee the functional and technical team leaders that manage the whole phases of the project. PROJECT REPORTING STRUCTURE From the chart above, it is evident that the team members report to the functional and technical team leaders that also report to the project manager and the project office. At the top of the hierarchy is the executive committee. Consequently, the project manager and the project office report to the executive and steering committee and the project director. 4.2 PROCUREMENT STRATEGY The inputs of the procurement strategy encompass the business unit data, the market/economic data and the corporate financial data. The business unit data includes the strategic plan, the budget and the capital project. The economic data consists of the economic forecasts, the international trends, supplier behaviour and the existing market trends. Finally, financial data entails the earnings estimates, tax, cash flow projections, capital costs and growth estimates. The spend forecast data, the operations and the impact of the budget are the outputs of the procurement strategy (Webiner, 2013). 4.3 COMMUNICATION AND STAKEHOLDER MANAGEMENT STRATEGY The communication will focus on communicating the objectives of the project to all the stakeholders of the organisation. As a matter of fact, the project team will communicate the significance of the project to the survival and competitive advantage of the company. The budget is the other pertinent aspect of the communication strategy (IPA, 2006). It is proper for the implementation team to understand the costs of the project. The management of the stakeholders necessitates understanding what the stakeholders want and their anticipated efforts towards attaining their objectives. The interest base and the power base of the stakeholders will be essential in their management. Apparently, there exists a stakeholder network that influences their opinions and networks. Therefore, the best stakeholder management strategy entails utilising the network to influence the opinions and action of the stakeholders (Ackermann & Eden, 2011). 5 BUDGET, PROGRAM AND RISK 5.1 TIMING / PROJECT READINESS The project will run for one month. All the phases of the change process starting from developing the sense of urgency to the actual implementation of the project should take place within the period. At the end of the one month period, the goods in the decentralised stores will be available in the centralised store. 5.2 BUDGET/COST ANALYSIS AND FUNDING STRATEGY The successful completion of the project requires approximately AUD 12,000,000. The budget estimates includes the cost of managing the project and constructing a centralised warehouse that will accommodate the supplied merchandise from the 38 stores across Australia. Woolworths Ltd will fund the project to its completion. 5.3 RISK ANALYSIS AND MANAGEMENT STRATEGY The risk management plan will play a pivotal role in analysing the likelihood of impact of the risks that face the implementation and management of the project. The plan will also outline the recommended risk response and the responsible individuals. The table below shows the risk management plan. 5.4 PROJECT QUALITY MANAGEMENT STRATEGY The Quality Management Plan consists of the quality assurance, quality control and quality improvement. The quality assurance ensures that the processes and methods of the project exhibit the highest quality standards. Quality control necessitates the development of quality outputs. Finally, quality improvement will entail the review of specific aspects that improve the quality of the project. 5.5 PROJECT COMPLETION STRATEGY The project completion strategy entails ensuring that the project meets the timely completion of the project (time criterion) and within the anticipated budget (budgetary criterion). The other critical aspects of consideration include ascertaining that the project attains the expected objectives (effectiveness criterion) and its acceptance by the clients (client acceptance criterion) (Pinto & Slevin, 1988). Therefore, the project completion strategy focuses on the four phases of the project life-cycle thus ensuring the completion of the activities of the phases within the anticipated timeframe and budget. The phases include the conceptualisation, planning, execution and termination. 5.6 BENEFITS REALISATION PLAN The Brilliance Project Benefits Realisation Plan consists of the project objectives and the description, category and area of the project. It also consists of the benefit measure, realisation timescale and the estimated benefits. The other aspects of the plan are the measure status, the target date and the responsible manager. Figure in the appendix shows the plan. 6 REFERENCES Ab Talib, M. S., & Abdul Hamid, A. B. (2014). Application of Critical Success Factors in Supply Chain Management. International Journal of Supply Chain Management, 3(1). Ackermann, F., & Eden, C. (2011). Strategic management of stakeholders: Theory and practice. Long Range Planning, 44(3), 179-196. Brache, A. (2002). How organizations work: Taking a holistic approach to enterprise health. New York: John Wiley & Sons, Inc. Burger, D. H. (2007). The applicability of logotherapy as an organisation development intervention (Doctoral dissertation, University of Johannesburg). Garfein, S. (2007). Executive guide to strategic portfolio management: Roadmap for closing the gap between strategy and results. Paper presented at the annual North American meeting of the Project Management Institute, Atlanta, GA. IPA. (2006). Communication Strategy: A best practice guide to developing communication campaigns. Koh, S. L., Gunasekaran, A., Goodman, T. (2011). Drivers, Barriers and Critical Success Factors for ERPII Implementation in Supply Chains: A Critical Analysis. The Journal of Strategic Information Systems, 20(4), 385-402. Kohn, C. (2005). Centralisation of distribution systems and its environmental effects. Kotter, J. P. (1995). Leading change: Why transformation efforts fail. Harvard business review, 73(2), 59-67. Morris, P. & Jamieson, A. (2004). Translating corporate strategy into project strategy: Realizing corporate strategy through project management. Newton Square, PA: Project Management Institute, Inc. Pinto, J. K., & Slevin, D. P. (1988). 20. Critical Success Factors in Effective Project implementation. Project management handbook, 479. Rosenhead, J. (1989). Using Cognitive Mapping for Strategic Options Development. In 'Rational Analysis for a Problematic World'. Wiley. University of Technology Sydney. (2015). Project Management: Initiating Processes. Retrieved from: http://www.projects.uts.edu.au/stepbystep/initiation.html Webiner, S. (2013). Five Steps to building a successful procurement strategy. Denali Group. Životić, I. M., & Radovanović, L. S. P. (2013). SETTING UP CENTRALISED DISTRIBUTION. APPENDIX A A.1 PROJECT RISK REGISTER Risk Likelihood (H/M/L) Impact (H/M/L) Risk response (Containment or contingency strategies) Responsibility Sabotage, war, crimes High High Using escort vehicles to transport goods Transport Manager Unavailability of labour Low High Outsourcing labour HR Manager Lawsuits Low High Adhering to the legal requirements Operations Manager/Legal Advisor Physical and regulatory risks Low High Adhering to the legal requirements and construction standards Construction Manager/Legal Advisor Premiums and financial risks Low High Ensuring a constant cash flow Finance Manager Upstream risks Low High Hiring professional executives The Company Management Unavailability of infrastructure Low High Avoiding inaccessible areas Transport Manager Design uncertainty Low High Hiring professional designers HR Manager Demand variability High High Increasing the number of suppliers and clients Marketing Manager Management of supplier relationship High High Ensuring proper management of supplier relationships Operations Manager Underperformance of the enterprise Low High Adhering to the competitive performance standards Operations Manager ­ The Brilliance Project Project Sponsor: Woolworths Ltd Project objective: To centralise the logistics operations in each store Date prepared: 27/08/2015 Ref Description of benefit Category of benefit Area of benefit Benefit measure Estimated benefits $ Timescale for realisation Current status of measure Target date Manager accountable for benefit realisation 1 Competitive advantage Qualitative Entire organisation Organisational performance One year Low 30/08/2016 Operations Manager 2 Reduction of costs Quantitative Entire organisation Project costs One year Minimal 30/08/2016 Financial Manager/Operations Manager 3 Centralised decision-making Qualitative Entire organisation Effectiveness of the decision-making process One month Low 30/09/2015 The Management Committee 4 Guaranteed effectiveness Contributing benefit Entire organisation Efficiency of the organisation’s operations One month Low 30/09/2015 Operations Manager 5 Use of coordinated strategies Contributing benefit Entire organisation Assessment of the utilised strategies One month Low 30/09/2015 Operations Manager 6 Global optimisation Direct benefit Entire organisation Global performance One year Low 30/09/2015 The Management Committee A.2 BENEFITS REALISATION PLAN Read More