Analysis of the Article about Morrisons Drop Sales by Graham Ruddick - Assignment Example

?Morrisons Reported a 2.5pc Drop in Like-For-Like Sales for the Six Weeks to December 30 The article d ‘Morrisons’ online problem becomes clear after Christmas turkey’, by Graham Ruddick, exhibits the fact that Morrisons, which is one of the major food retailing companies operating in the UK, has been facing certain problems related to its logistics operations leading to the fall in its market share and sales value. The article reports a drop of 2.5pc in the like-for-like sales figures of Morrisons in the end months of 2012, i.e. until December 30th (Ruddick, 2013). The two major problems, which include lack of online market and convenience stores, were reported to be responsible for the inefficient performance of Morrisons in 2012. To be noted, the company does not possess any online facility in order to sell or provide customers with efficient services. This hinders the company’s efficiency as compared to other large brands such as Aldi, Tesco, Asda and Sainsbury’s among others. Moreover, the company is reported to have only 12 convenience stores in the UK and around 455 stores in London suburbs, which again makes its consumer reachability weaker than its competitors in the global perimeter. As a consequence, logistics problems faced by Morrisons gave rise to its competitive disadvantages, not only in the local and national contexts, but also from foreign competitors (Ruddick, 2013). In modern organisational structures, logistical operations are often argued to be a significant facet of supply chain management, which aims to build and secure corporate competencies as well as sustainability of the company in the long-run (Morgan et al., 2012). Referring to the case of Morrison, the problems faced by the company can be evidently related with the aforementioned statement, where the failure of the logistics in led to the 2.5pc decline in the like-for-like sales. Even though Morrison’s logistics system was observed to pay due attention towards every necessary aspect of the supply chain management, it apparently failed to develop its logistics more efficiently as compared to its rivals in the present market scenario. The logistics process is important for the efficient delivery of products to the end consumers (Ailawadi & Singh, 2005). However, given the limited reach of Morrison, with 12 convenience stores only, 455 grocery stores in the suburb London and no online stores, the company faced certain limitations in serving its targeted large customer base. On the contrary, owing to the perfectly competitive market scenario, national and global brands proved to be more efficient in attracting as well as efficiently serving the customer base and thus, creating pressure on Morrisons’ sales performances. . Morrisons is primarily involved in dealing with food as well as grocery items, tanking among the largest UK retailer. The company employs around 132,000 employees who are entrusted with the job of serving its customers with quality standard (Wm Morrison Supermarkets plc, 2013). Morrisons is a company identified for its better value-added services. The company offers its products and/or services through its manufacturing units or facilities following a traditional logistics mechanism. Although the traditional logistics form assists the company to preserve its control over the quality of the products and/or services retailed in the UK market, the element also hampers its competencies and global expansion prospects to a certain degree (Wm Morrisons Supermarkets plc, 2013). The traditional logistical operations are usually based on the notion that acquiring different business units within one value chain can enable the company to have a better control over the flow of goods and/or services. Morrisons, following the same strategy has been able to maintain a better coordination within its logistics in a cost effective manner. Furthermore, its vertically integrated logistics chain has been facilitated Morrisons with the opportunity of minimising the bargaining power of suppliers which in return reduces the transaction costs incurred by the company. In this respect, the company with its vertically integrated manufacturing and logistics chain was able to maintain a better flow of materials and products at a minimum cost, rewarding it an opportunity to enhance its profit margin (Lehtinen, 2010). From a general perspective, the strategies used to control the logistics in Morrisons can be argued to be in favour of the company to allow it greater profit margin. However, when comparing its performance with that of its competitors including Asda, Aldi, Sainsbury’s and Tesco among others, Morrisons can be identified to lag behind in attracting a larger customer base to substantiate its growth needs. One possible reason that can be identified in this regard is the operating competitive forces in the retail market (Lehtinen, 2010). Two strategies might prove beneficial for Morrisons in order to overcome the limitations resulted in the decline of its like-for-like sales during the end weeks of 2012. Notably, the company possesses the ability to serve its customers at a lower price owing to its traditional logistics structure advantages, compromising its profit margin to an extent. Again, developing an online market place may also redefine the competencies of the company in the global context to beat its competitors on the basis of customer reachability and sales volume. Critical analysis of both the short-run and long-run logistical implications of the aforementioned strategies to rejuvenate the sales figure in Morrisons, may further conclude differing results, subjected to the effectiveness of the strategies applied. To be precise, in the short-run, these strategies might prove beneficial in offering competitiveness to the company in return to certain investment, but in the long-run, the company will require to inculcate continuous innovation in its logistical operations to preserve its competencies. Morrisons follows a vertically integrated logistical chain, due to which, the expansion of its logistics operations through the development of online market place may substantially raise to the bureaucratic costs. Involvement of bureaucrats in the complex hierarchy system of the value chain of Morrisons shall also make the decision making process costlier. Moreover, the complex organisation of bureaucrats in the hierarchical level will also increase the risk of any kind of distortion in the communication process within the supply chain network. Illustratively, in order to develop online market place to serve customers in the UK and surrounding places, Morrisons will have to involve a greater number of bureaucrats from specialised fields which might increase complexities in the logistical system. In this regard, it can be affirmed that increase in the bureaucratic costs along with the complexity in the entire process, will necessitate more efficient management structure in the company. Additionally, as the company follows a rigid organisational structure, the logistical implications of developing an online marketplace, may require restructuring its entire management procedure in a more flexible and modernised way (Lehtinen, 2010). Morrisons, with vertical integration of manufacturing units in its logistical system can further be observed as less inclined towards information access deciphering its inadequacy in terms of rigorous knowledge concerning outside suppliers as well as distributors. In this respect, the company may lose the opportunity of acquiring low cost suppliers with better quality logistics services when applying the strategy to lower its product prices for the ultimate customers. Thus, in the short-run, the logistical implications of lowering prices, may prove to be a burden for Morrisons, as it can lead to a declining profit margin and that too at a greater percentage in comparison to the percentage change in its cost effectiveness throughout the value chain (Lehtinen, 2010). In other words, Morrisons will have to increase its cost efficiency throughout its value chain owing to the logistical implications of delivering its customers with products at lower prices, which will most possibly require complex and long-term procedural changes. On the other hand, considering the seriousness of the decline witnessed in the like-for-like sales of Morrisons at 2.5pc, the company will have to implement the strategy of lowering prices within its short-term performance, which will lead to a further decline in its profit margin. Nevertheless, subjected to strategic effectiveness and managerial efficiency, the company shall have to suffer the decline only for the short-run, i.e. until it is able to raise its cost efficiency throughout the value chain. Apart from the changes probable in the cost structure of Morrisons’ value chain as well as managerial framework, the logistical implications of lowering prices and developing an online marketplace will also influence the network design in the company, so that the products and/or services are offered to the customers in an appropriate manner. In this regard, the company will have to redesign an efficient network in its logistics system which will facilitate it to manage positive alterations in its demand and supply functions. Additionally, efficient network design will facilitate the company to manufacture products and meet the customer requirements according to market needs, rewarding it with competitive advantages (Ailawadi & Singh, 2005). Furthermore, Morrisons, in order to mitigate the two issues concerning with lowering prices and developing its online operations, should ensure a smooth flow of communication within its supply chain. Contextually, as a number of bureaucrats are involved in the supply chain of the company, decisions to be made regarding the development of online stores and lowering of prices will have to undergo a complex process which may cause hierarchical conflicts and miscommunications resulting in further deterioration in the sales figure of Morrisons. Thus, to mitigate these limitations in the logistical implications of the two selected strategies, the company should adopt appropriate ‘Information and Communication Technology’ (ICT) with the intention of enhancing the performance of its logistics systems. In this respect, the company with reliable ICT will enable better flow of information so that appropriate decisions are made and quality products and/or services are offered to customers on a timely manner at lower prices (Ailawadi & Singh, 2005). Transportation is as important element of the logistics system as it ensures the free movement of goods and/or services in a timely as well as cost effective manner (Ailawadi & Singh, 2005). However, the logistical implications of developing an online marketplace may raise certain challenges for Morrisons which will have to develop its transportation system with the inclusion of larger numbers of transportation means to reach a larger base of customers to be attracted through the virtual marketplace. It is worth mentioning in this context that Ruddick (2013) ascertains Morrisons to witness challenges regarding transportation and inventory even in its current stance when serving its customers through 455 stores located in different suburban parts of London. Therefore, it is quite vital that the company must reframe its transportation strategies to meet the demand of its customers with greater efficiency and effectiveness. Additionally, material handling, warehousing as well as packaging are recognised to be integral elements of logistics operations performed by Morrisons, owing to the nature of goods and the nature of marketplace it deals in. As was mentioned above, Morrisons mainly deal in grocery food items which are highly perishable. Also, the nature of the customers in the market tends to be strongly inclined towards quality rather than solely being concentrated on price factors. Therefore, it is necessary for Morrisons to design its warehousing, material handling and packaging strategies in a manner that will reward both cost and time effectiveness to the company. With adequate changes in these strategies rendering due significant to time value and cost as well as quality issues, the company is likely to deliver products to convenience stores without any delays along with preserving its visionary attitude of quality assurance. To be precise, Morrisons needs to deliver due significance in raising its effectiveness concerning Total Quality Management (TQM) when bringing changes in its warehousing, inventory management as well as packaging and other logistics strategies (Ailawadi & Singh, 2005). The modern market scenario, especially in the retail business faces significant challenges in terms of new entrant interventions, innovative logistics strategies as well as complex managerial notions. Limitations to deal with these aspects result in situations like dipping sales volume, as witnessed in the case of Morrisons. It is in this respect that Morrisons need to bring significant changes in its logistics as well as overall organisational structure, making it more flexible and effective to inculcate modern values in alignment with the external environmental changes. References Ailawadi, S. C. & Singh, R. P. (2005) Logistics management. New Delhi: PHI Learning Pvt. Ltd. Lehtinen, T. (2010) Advantages and disadvantages of vertical integration in the implementation of systemic process innovations: case studies on implementing building information modelling (BIM) in the finish construction industry. Available at: http://lib.tkk.fi/Dipl/2010/urn100299.pdf (Accessed: 13 July 2013). Morgan, J., Lalwani, C. and Javadpour, R. (2012) Global logistics and supply chain management. 2nd edn. United Kingdom: John Wiley & Sons. Ruddick, G. (2013) Morrisons' online dilemma becomes clear after Christmas turkey. Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9786486/Morrisons-online-dilemma-becomes-clear-after-Christmas-turkey.html (Accessed: 13 July 2013). Wm Morrison Supermarkets plc. (2013)Strategy & structure. Available at: http://www.morrisons-corporate.com/About-us/Strategy-structure/ (Accessed: 13 July 2013). Wm Morrison Supermarkets plc. (2013) Company history. Available at: http://www.morrisons-corporate.com/About-us/Company-history/ (Accessed: 13 July 2013). Read More