Laura Ashley is a global clothing and furnishings merchant based in the United Kingdom. They have actually grown at a really fast rate from operating 231 stores in 1986 to 481 shops in 1990. Regrettably, its profits were not increasing as expected due to the ineffectiveness of its logistics management. There was an over dependence on in-house manufacturing, SBUs ran as stand-alone companies with independent inventory and systems which implies duplicated systems that are not integrated, and inefficient distribution operations such as out-of-date inventory purchasing methods and inefficient movement of products along the supply chain.
Based upon these problems, Jim Maxmin decided to form an alliance with Federal Express BLS, to let them handle the logistics of LA’s service since that is what BLS does best, while at the exact same time also benefiting Federal Express.
The contract between LA and BSI for the strategic alliance was not your normal contract with specific rules, price, charges, and so on. The alliance was a “win-win company collaboration,” without any specified end point and lasting a minimum of for ten years.
The contract had a really fairly loose structure, and it was based on trust and concentrates on locations of mutual interest. There were no specifics on defining concerns because it might clash with the shared interest that this alliance is based upon. Both sides have actually concurred to be transparent and share details with each other, and have mechanisms integrated in to handle matters that might not be concurred upon.
When it concerns forming a tactical alliance, this kind of agreement is good due to the fact that it is based upon a high level of trust and the focus of mutual interests, to help each other gain competitive benefit in the market.
Trust is very essential in every relationship, even in service. Also, having a loose structure makes more sense in a quick changing environment due to the fact that specifics changes with time. To put it simply, the agreement was extremely basic. And by having it to be open-ended, implying there is no specified end to this partnership. Therefore, if this collaboration succeeds, they will have the ability to continue being an alliance and benefit from it. The only problem with this type of contract is that it will be harder to examine any disputes that may emerge in between the two business in the future.
From LA’s point of view, I believe this alliance will be very beneficial to them. Currently they are very inefficient with the distribution area of the business, which is costing them a lot more money. It will be difficult and will take a long time for LA to try and reengineer its processes and form a distribution system that will work. So instead of trying to invest all that time and money into reorganizing and developing a working system, forming an alliance with FedEx and having them take over that function will be better since FedEx is known for its logistics expertise. Also, they have one of the best tracking systems in place, and that can definitely benefit LA. By integrating LA’s current systems to FedEx’s systems, it will allow LA to access FedEx’s efficient tracking system, and eliminate the duplicate and independent systems that LA currently have with the SBUs, all in a much shorter time. With the new infrastructure, information is transparent and flows throughout the supply chain, and everyone will be able to see it.
Also, FedEx’s dependable delivery services will get goods to destinations quickly and efficiently, reducing lead time (products shipped anywhere in 24hrs-48hrs), transportation costs, and inventory costs. All this will improve LA’s customer service, better informed front-line employees due to the transparency, reduce costs, improve efficiency in its operations, rebuild its reputation and relationships with its customers, and be more competitive globally. The only downside of this for LA is that they will lose complete control of the distribution part of the business, but at the rate LA is growing with the increasing inefficiency that it’s facing, that is a small price to pay because LA’s current distribution operations needs help.
As for FedEx BLS, I believe this alliance is beneficial overall, but it is much more risky for them than it is for LA. For FedEx, it allows them to expand and utilize its capabilities on a global basis. This type of alliance was one of the first, and if successful, FedEx BLS can set a new trend and have a tremendous future. It will improve its current performance in Europe and gain market share due to the increased reputation that this will bring. Also, this could mean alliances with other companies and industries in the future.
FedEx will be able to use the success with LA to form alliances with other companies, which will allow them to gain competitiveness and business. Even if other carriers try to do this in the future, it will be more difficult for those other carriers because businesses will know FedEx BLS are experienced and dependable, and will more likely go to them. But on the other hand, if this alliance was to fail, it would ruin FedEx’s reputation for reliability, which is the most important factor for FedEx in its industry. Also, it would cause FedEx to rethink the strategic-alliances idea, possibly damaging BLS’s potential future.
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