Holt Renfrew, is high-end retail chain for designer fashions and cosmetics that imports their products from Europe, Asia and USA. They are facing some challenges regarding the size of their current warehouse and inventory levels. The warehouse is not big enough to accommodate all their inventory and as such goods are always scattered everywhere. They are also finding it difficult to track their orders, due to the fact that they do not have an updated Enterprise Resource Planning (ERP) system to help them track these orders. They follow up over the phone which is never accurate. For this reason, they hardly how much goods are coming in and what to expect at a particular time. This has also created an issue of stock outs. These issues need to be addressed to ensure customer order fulfillment. Different options have been made available to help Holt Renfrew address these issues which are improving the physical structure of the warehouse by installing mezzanines, outsourcing warehousing to a third party or building/leasing a new warehouse, modernizing their distribution process and human resource reallocation.
Upon review of the different options, the most favourable one for the company would be to install mezzanines. By installing mezzanines, the physical layout of the warehouse will be increased and it will create more room for inventory. The new available space will accommodate the extra products, usually scattered on the ground as well as the ones that are usually sent to the secondary warehouse where unsold goods are kept. This will enable the company shut down the secondary warehouse and save that extra cost of leasing, since the newly installed mezzanine will now owned by the company. This will save the company a total cost of $540,000 per year that is used to lease the secondary warehouse in Mississauga. A proper and updated ERP system will also need to be installed for the company to keep track of their inventory records.
The human brain is never as effective as machines when it comes to record keeping. This will produce accurate records so that the company knows exactly what to expect, how much to expect at any given time and will be able to provide equal storage bins for the products. This will solve the issue of clustered merchandizes scattered everywhere, causing health and safety hazards. Once these strategies are implemented, Holt Renfrew will enjoy continued substantial growth and business sustainability because they will now be able keep track of their inventory and store them accordingly. There will no longer be the issue of stock outs and customer fulfillment will be at the highest level. They will also be able to increase profit, while maintaining and increasing their market share.
Holt Renfrew is a high-end Canadian retail chain based in Toronto, Ontario. It was founded in 1837 as a hat and fur shop and is owned by The Wittington Group, headed by Canadian business leader Galen Weston. Tony is a new employee and will have to prepare a detailed plan that will identify the major steps he intended to take in his new position. He will do this well because new employees are more likely to introduce radical change into an organization than old employees. Peak sales for the company are in March/April, July/August, and November/December but used publicity campaigns for promotion. This meant more advertising cost and less sales for Holt Renfrew for half of a year. There is need for marketing and sales improvement.
The company has approximately 3,000 suppliers but only 1,000 are used in a typical year. Secondary warehouse was used to store items that were not sold in the store which is a huge waste of a whole 60,000 sq. ft. facility. There is no need for that additional facility since it increases direct and overhead costs. It should be eliminated. The DC is cluttered with merchandise everywhere, under conveyors and scattered across aisles. Tony considered three strategies: improving the physical structure and process flow in the distribution center, the modernization of distribution systems and business processes, and to reallocate human resources. He had to obtain goods from the companies international suppliers and quickly distribute them to their stores within Canada to gain competitive edge.
It will be dangerous not to do anything about the issues the company is facing. Even though the company will save a little cost by doing nothing now, it will have long term effects because if they keep dissatisfying their consumers by not delivering their orders on time because of the issue of stock outs, and no space to put inventory, they will have a reduced market share, which is not good for any company.
It is my recommendation that mezzanines be installed in the current warehouse. This is the best option because it is the most cost effective, least expensive and less time consuming. Tony estimated that the cost of installing a 20,000 sq. ft. mezzanine to accommodate the inventory is $1 million dollars, which is much less than the cost of leasing/building or outsourcing. The current activities of the warehouse will not be disrupted and the geographical location will not shift. There will be no additional cost of marketing any new location and the mezzanines will be engineered to Holt Renfrew’s specs. Another important consideration is ownership, it will be owned and operated strictly by Holt Renfrew. Once there is a mezzanine installed and more room to store inventory, health and safety concerns will be reduced because the products will be stored perfectly. Tactical Improvements
A project team should be set up that will oversee the installation of the mezzanines over the period of installation. Mezzanines should be bought from ArcForce Mezzanines. They are manufacturers of this product which makes their own price cheaper than most other dealers. Their skilled staff will assist the project team from the project conception through completion with insight, experience and engineering integrity. The design engineers will customize any steel mezzanine storage system to meet Holt Renfrew’s warehouse requirements. Once purchased, work should begin immediately and installation should get started. After the installation is complete, management will need to constantly follow up and inspect the mezzanines regularly to ensure it is utilized effectively, and maintained.
Holt Renfrew has faced several issues regarding their stock keeping unit. This has led to stock outs, delivery inconsistences and lack of space in the current warehouse due to bad record keeping. However, from the recommendation given above, this issue will be resolved but not completely, giving the warehouse enough room to store their inventory. Once the mezzanine has been installed, the next action plan should be to get an up to date ERP system that will enable the staff keep proper record and track of their inventory. If the mezzanines are built and there is still no proper track kept, the issues will not be solved completely. They will still be unsure of their inventory supplies. The complete solution will be to install the mezzanines and then immediately after, update the ERP system.
Ivey Case Study- Holt Renfrew. (2012) StudyMode.com. Retrieved from http://www.studymode.com/essays/Ivey-Case-Study-Holt-Renfrew-937118.html
Hi-Cube Blog (2013). All about Structural Mezzanine. Retrieved from http://blog.hicube.com/blog/bid/280503/All-about-Structural-Mezzanine
ArcForce Mezzanines (n.d). Custom Steel Industrial Mezzanines -Direct from the Manufacturer! Retrieved from http://www.arcforce.com/default.htm