Business Operations Management - ASOS - Case Study Example

Business Operations Management Introduction The study has selected ASOS.com which is a UK based online retailer; the company specializes in offeringfashion and beauty products to customers. The company is headquartered at London, England, UK. Original name of the company was As Seen On Screen. ASOS.com was established by Quentin Griffiths & Nick Robertson in the year 2000 (ASOS, 2013). ASOS.com maintains portfolio of more than fifty thousand branded and private label product lines which include womenswear, menswear, footwear, accessories and beauty & jewellery items. The UK based online retailer launches more than one thousand new product lines. The company has expanded its operation in more than one ninety countries. The online retail giant has more than eight million registered users and four million active users who are from one sixty countries. Target customer for the company is fashion forward men and women in the age group of 16 to 24 (ASOS Plc, 2012). Part A Components of Business Operation of ASOS The company follows the business model of Amazon, e-bay etc in order to deliver products to customer through parcel delivery system. Central distribution centre of the company is located at Barnsley, UK. The online retail giant uses ‘Global Free Shipping’ in order to deliver products to customers without charging any shipping cost. Customers have the option to choose from various payment alternatives such as Visa, PayPal, Delta, DK, Lazer etc in order to purchase products. The London based online retailer has established satellite warehouses in Sydney, Australia and Georgia, USA in order to return faulty products from customers without charging them additionally. Customers can purchase merchandises from ASOS website, ASOS mobile site, and iPhone and iPad applications. The company has created supplementary websites such as, 1- ASOS Fashion Finder- this supplementary site helps customers to explore customized fashion style in accordance with their personality and 2- ASOS Marketplace- this supplementary site helps customers to sell old clothes to like-minded ASOS customers in a virtual market place in order to increase customer engagement level with the brand. ASOS defines customers, innovation and collaboration among stakeholders as DNA of their business. According to Hammer and Champy (1993), business operation of companies can be divided into six verticals such as, 1- Product Development, 2- Customer Engagement, 3- Customer Acquisition, 4- Order Fulfilment, 5- Service and 6- Manufacturing. This model can be modified in context to business operation of ASOS. ASOS is an online retailer and they do not manufacture products, the company focuses on engaging customers by using the own websites and social networking sites such as Facebook, Twitter etc. Customer acquisition is done by the company with the help of ASOS Fashion Finder and ASOS Marketplace. The London based online retailer has outsourced the inventory and warehouse management activities to Unipart Logistics in order to decrease cost and complexity of value chain integration. Unipart Logistics has helped ASOS to draw the process map of parcel delivery and subsequently increased speed and accuracy of the parcel delivery. Unipart Logistics checks the parcels in accordance with the customer order; such activity of the partner has helped ASOS to decrease scope for parcel delivery faults like delivering parcels to wrong address, delay in delivery process and many others. ASOS offers two types of delivery options such as normal postal service and next day courier in order to give opportunity to customers to select mode of parcel service as per their convenience. Five percent of parcel transport and delivery cost has been saved converting crediting and returns handling process into someday affair by ASOS. The Parcel Delivery Conundrum According to British Broadcasting Corporation (BBC), majority of online retailers face "The parcel delivery conundrum" in terms delivering product on time, tracking the movement of parcel, accurate geo-positioning and delivery of the parcel, tracking the location of customers, reducing the chance of theft during the movement of the parcel etc. In UK, rate of parcel delivery failure is almost 12% where online retail industry of the country loses almost £0.5bn annually in re-delivering parcels. According to report published by Heriot Watt University, parcel delivery system emits 18 times less CO2 in comparison to collecting parcels from local depot by driving cars (Bomford, 2012). Hence environmentally, parcel delivery system of online retailers is far more sustainable in comparison to traditional brick and mortar retail concept (Meadows, 2007). System Analysis CATWOE model can be used in order to in order to understand "The parcel delivery conundrum" in context of the parcel delivery system of ASOS. CATWOE Customers (C) System beneficiaries for the business system of ASOS are customers who use the online website to find, buy and sell fashion merchandises. Customer base for the system is twelve million including both registered and active users. Target customers for the system are the young people in the age group 18-25 in many countries across the world hence ASOS tries to inculcate innovations in their collections on weekly basis in order to retain the customers of the system. Actors (A) More than 950 permanent employees of the business system handle the operational activities of ASOS across UK. Additional 1500 employees of Unipart Logistics work for increasing efficiency of parcel delivery system of ASOS. The online retail giant has established European Customer Care department in Belfast with the help of Concentrix. Average age of actors or employees of the business system is 26, which shows the commitment of ASOS to deliver merchandises to “twenty-something globally” (ASOS Plc, 2012). Transformation Process (T) It has been already mentioned that ASOS has established partnership with Unipart Logistics in order to facilitate the transformation process or logistics and supply chain management of the merchandise ordered by customers. Weltanschauung (W) Parcel delivery system of ASOS and other online retailers is far more environment friendly in comparison to traditional brick and mortar retailing where customers drive cars to retail shops in order to purchase products. Driving cars by customers to visit retailers increase the CO2 emission in the environment whereas using parcel delivery system decreases the CO2 emission by cars of customers or public transports which are being used as mode of transport to reach retailers. Owners (O) ASOS is a publicly listed company in London Stock Exchange; hence shareholders are the owners of the business system. Environmental Constraints (E) The business system of ASOS needs to comply with regulatory norms in terms of taxation legislation, employment, environmental issues, security threat of unauthorized access of customer data of the company etc. Failure to meet above mentioned compliances will not only cause financial penalties but damage the brand name of the company also. The study has taken SSM or Soft Systems Methodology in order to formulate root definition for the parcel delivery system of ASOS. Root Definition X- ASOS has established partnership with Unipart Logistics in order to deliver orders to customers. Unipart helps ASOS to map the internal process such as delivery of the product, tracking the shipment, communication between warehouse staff etc of parcel delivery process. Y- Radio frequency networks are used by Unipart in order to consolidate intra level activities that are required to deliver parcels. Unipart has created e-fulfilment solutions, which is a simulation tool to identify capacity constraints and configure the supply chain centre in accordance with logistical requirements (Unipart Logistics, 2010). Z- Long term objective of the parcel delivery system is to decrease cost of operation, increase quality of parcel delivery, decrease carbon footprint in the value chain and achieve competitive advantage over other online retailers. Rich picture of the "The parcel delivery conundrum" has been drawn on the basis of above CATWOE and Root Definition analysis, the picture has been attached with the word file. Part B Business Process Plan Parcel delivery system of ASOS is one of the best in its class and as such very few customers have complained against the parcel delivery service of the company, hence the study has decided to develop a holistic business process plan for the company. Current condition for parcel delivery is denoted as “AS IS” in the following table. Parcel Delivery Process Components AS IS Partner Dependency ASOS relies heavily on Unipart Logistics in order to stock merchandises in warehouses and deliver parcels to customers. Unipart Logistics has established 55,000 sq ft distribution centres and installed warehouse management system in order to facilitate the parcel delivery process. Radio frequency network of Unipart focuses on capturing data through bar code reading terminals and transmitting it in warehouse management system. Key performance indicators are used for mapping the logistic process of parcel delivery system. Currently, ASOS offers next day courier and normal postal service which delays the parcel delivery process. Delivery First time delivery rate of ASOS is comparatively lower due to the fact that ASOS has not tried to integrate the customer tracking with the mobile or Smartphone applications. In some cases, driver of the parcel van fails to track the exact location of the customers. ASOS has not taken any additional steps to provide pin code to parcel boxes in order to ensure security from theft, decentralization of parcel delivery process has decreased the control of ASOS over delivery process. ASOS does not use GPS location stamping for drivers of parcel delivery van which gives the opportunity to drivers to conduct faulty parcel delivery. According to Dierickx & Cool (1989), Rumelt (1986), Grant (1991) and Barney (1986), companies should focus on using their internal resources in order to deliver sustainable competitive advantage over other competitors. Hence, ASOS should deploy their financial and non financial resources in order to improve parcel delivery system. Proposed changes in the business process is denoted as TO BE in the following table. Parcel Delivery Process Components TO BE Partner Dependency ASOS needs to decrease its dependency on Unipart Logistics in terms of involving company employees in the parcel delivery process. Proper coordination between ASOS and its logistics partner is needed in order to decrease the service delivery time. The online retail giant should hire external supervisors in order to monitor activities business partner while delivering parcels. Delivery A new parcel delivery system should be installed in order to avoid possible conundrum associated with parcel delivery process. A separate parcel delivery outlet should be created for individual localities, from where parcels can be despatched to exact location of the customers. Establishment of local parcel delivery centres will not only decrease the scope of sending parcel to wrong address but also will help customers to return faulty merchandises to ASOS. Two separate price range should be created such as high price charge for next day delivery and medium price charge for standard delivery. Unique identity code for each person will be sent to customers via e-mail and customers can check the authenticity of the delivered order by matching the identification code. Customers should be asked to enter the postcode while ordering an item, entering postcode will help the system to suggest nearest delivery centre of the ASOS merchandises. Customers have the flexibility to select delivery point in accordance to their convenience. Customers will be asked to provide mobile number so that local ASOS delivery centre and parcel drivers can contact the customers regarding any inconvenience while delivering the parcels. A separate software application will be created for tracking the location of the parcel during the interim period of order placement and parcel delivery and customers can download the software application in their Smartphone from the ASOS website. Technological & Environmental Impact It is evident from the above discussion that in the proposed business process for parcel delivery system, technological integration in terms of software application for tracking parcels through Smartphone, radio frequency identification of each parcels, GPRS system to locate delivery centres, e-mailing the unique identification code for parcels to customers etc is needed in order to ensure smoothness of the business process. According to porter (1980, 1985 and 1991) companies need to identify activities of existing players in the industry in order to achieve competitive advantage, hence ASOS need to bank on technological integration after doing detail analysis of activities of other industry players. In simple words, developing the technological interface in terms of customer engagement and interaction will be the key strategy for business process reengineering (BPR) of parcel delivery system of ASOS. The company should increase number of pop ups in the website in order to attract customers to latest offers or collections. ASOS should work on decreasing carbon footprint in the value chain process by eliminating activities which can fillip carbon emission, as the company is delivering parcels through local parcel delivery centres hence it is expected that carbon emission regarding fuel fed vehicle based transportation will be reduced significantly. The company should completely eliminate the usage of PET plastic and decrease the size of the parcel packet in order to decrease wastage of packaging papers which are being chopped from trees. Low fuel consuming parcel vans should be used for parcel delivery in order to achieve fuel economy and decrease carbon footprint in the delivery process. Eliminating redundant steps in the parcel delivery process will not only save cost for the company but also decrease carbon emission caused by each step in service delivery process. Part C Managerial Qualities & Resource Requirement Intention of the proposed BPR model for parcel delivery system of ASOS is to redesign the delivery process rather than preserving the status quo. According to Hamel and Prahalad (1990 and 1991) organizations should take initiatives to establish strategic directions for the change process by using the intent rather than relying on portfolio analysis. Hence, managers of ASOS should have the quality and capabilities to visualize the outcome of the proposed business process reengineering model. BPR is a top down approach and discrete phases are involved during the project implementation phase (Carr and Johansson, 1995). According to Petrozzo and Stepper (1994), although involvement of external consultants, technology, employees, resource deployment are essential part of BPR but support of top level managers are required in order to make the process the successful. Following qualities of the managers of ASOS is required in order to ensure successful implementation of new parcel delivery system. Managers should have the quality of identifying previous mistakes and have the courage to admit it in front of stakeholders. Managers should be adaptive to learning management concepts, which means learning from existing best practices in the field parcel delivery process. Managers need to facilitate transparent communication between employees of own company and employees of delivery channel partners. Managing and coordinating between activities of internal stakeholders will increase scope for adaptation among partners and employees with the installed system. Managers need to monitor and personally involve in new parcel delivery system installation process in order to ensure timely completion of the project. ASOS needs four types of resources such as financial capability, technology, human capital and infrastructural support in order to improve the parcel delivery system. Financial & infrastructural resources will be used for establishing nationwide local delivery centres while human resources will be required for managing operational activities and delivering parcels to customers. Technological resources such as software application for parcel tracking, website development, RFID integration, unique identification number generation will be used in order to facilitate the installation of new parcel delivery system. Business Performance Measurement The concept of Balance Scorecard can be used in order to measure performance of newly implemented parcel delivery system. The concept balance scorecard to measure was first proposed by Kaplan and Norton (1996). According to the research scholar duo, balance scorecard can measure both short term and long term performances of organization. Balance scorecard has performance measurement components such as Business Process Perspective, Learning & Growth Perspective, Financial Perspective and Customer Perspective. Balance scorecard measures performance both in terms of financial and non-financial perspectives. Performance of lower level managers is measured in terms of non-financial performance whereas top level managers control financial performance of the firm, hence it can be said financial measures are lag indicators which measures performance on the basis of past financial results while non-financial measures are leading indicator which decides the future performance of the firm. A diagrammatic representation of balance scorecard can be presented in the following manner. (Source: Kaplan and Norton, 1996) ASOS should use the basic components of balance scorecard in order to measure performance of newly implemented parcel delivery system. Customers The company will establish local parcel delivery points from which parcel will be delivered to customers of nearby locality. Hence delivering parcel without committing errors like delay in delivery, parcel theft, delivering parcel to wrong address and delivering exact the same product what has been ordered by customers etc is most important characteristics of a sustainable and profitable parcel delivery system. Hence the proposed balance scorecard will measure the performance gap in terms of customer retention rate, customer profitability, customer satisfaction level and churn rate. ASOS needs to work on establishing relationship between internal and external stakeholders; hence the company should use generic value proposition network in order measure business performance in terms of customer perspective. Value proposition model can be depicted in the following manner. (Source: Kaplan and Norton, 1996) Basic attribute of the business system is delivering parcels in accurate and faster manner; this basic attribute is complemented with quality of service and competitive price for the service. ASOS should also focus on engaging and creating relationship with customers which can enhance the brand image among customers. Financial Perspective Financial sustainability of the implemented parcel delivery system can be measured by using balance scorecard in the following manner. Direct Objective Possible Options Revenue Growth Cost Reduction Growth Increase or decrease in revenue earning for ASOS after implementing the new parcel delivery system should be measured. Measuring revenue versus cost for each parcel delivery. Sustain Measuring sales revenue fluctuation. Measuring variable cost, indirect expenses related to parcel delivery. Harvest Measuring product line profitability. Calculating unit cost for each transaction. (Source: Kaplan and Norton, 1996) Internal Business Process Cross functional monitoring is needed in order to bridge the performance gap in internal business process. Implemented balance scorecard should measure performance business process in terms of three factors such as technological innovation in the parcel delivery process, decreasing lead time in the operation and after sales service in order to reduce conundrum in parcel delivery process. Learning and Growth Learning and growth aspects of performance are used in order to measure long term performance of organization. Van Weele (2005) has stated that organizations should use the concept of balance scorecard for measuring performance of logistics and supply chain management. Hence it can be said, ASOS should use learning and growth perspective of balance scorecard in order to decrease carbon footprint or CO2 emission in the value chain operation which will ensure environmental sustainability of the implemented parcel delivery system. Reference ASOS Plc., 2012. Annual Reports & Accounts For the Year Ended 31 March 2012. [pdf] Available at: [Accessed 12 March 2013]. ASOS., 2013. About ASOS. [online] Available at: [Accessed 12 March 2013]. Barney, J. B., 1991. Firm resources and sustained competitive advantage. Journal of Management, 17 (1), pp. 99-120. Bomford, A., 2012. The Parcel Conundrum. [online] Available at: [Accessed 13 March 2013]. Carr, D. and Johansson, H., 1995. Best Practices in Reengineering. New York: McGraw-Hil. Dierickx, I. and Cool, K., 1989. Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12), pp. 1504-1511. Grant, R. M., 1991. A resource based perspective of competitive advantage. 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