TLDR An SMB furniture retailer struggled with EPM due to rising supply chain costs and declining customer satisfaction amid e-commerce competition. By adopting DDMRP and TOC frameworks, the company cut costs and improved delivery times, while boosting online sales through digital transformation, underscoring the need for agility in today’s market.
TABLE OF CONTENTS
1. Background 2. Strategic Planning Analysis 3. Internal Assessment 4. Strategic Initiatives 5. Enterprise Performance Management Implementation KPIs 6. Enterprise Performance Management Best Practices 7. Enterprise Performance Management Deliverables 8. Supply Chain Optimization 9. Digital Transformation for Enhanced Customer Experience 10. Sustainability Initiative 11. Additional Resources 12. Key Findings and Results
Consider this scenario: An SMB furniture retail company is grappling with challenges in Enterprise Performance Management, hindered by inefficient supply chain operations and evolving market demands.
The organization is facing a 20% increase in supply chain costs and a 15% decline in customer satisfaction due to delivery delays and stockouts. Externally, the intensification of e-commerce competition and consumer demand for fast, free shipping are pressuring the traditional retail model. The primary strategic objective is to transform the supply chain into a more agile, responsive, and cost-efficient system to enhance customer satisfaction and competitive positioning.
The furniture retail industry is undergoing significant transformation, driven by shifts in consumer behavior towards online shopping and expectations for rapid delivery. These changes necessitate a reevaluation of traditional supply chain models to prioritize agility and efficiency.
The current state of the furniture retail industry is characterized by a rapid pivot to e-commerce platforms and an increasing emphasis on sustainability and ethical sourcing.
We begin our analysis by examining the competitive forces shaping the industry:
Emergent trends in the industry include:
For effective implementation, take a look at these Enterprise Performance Management best practices:
The organization possesses a strong brand identity and customer loyalty within the local market but struggles with supply chain visibility and responsiveness, impacting its ability to meet changing customer demands efficiently.
SWOT Analysis
Strengths include a well-established brand and a loyal customer base. Opportunities lie in leveraging technology to improve supply chain agility and embracing sustainable practices to meet consumer expectations. Weaknesses are seen in supply chain inefficiencies and a slow response to market trends. Threats encompass the rising competition from e-commerce platforms and changing consumer preferences.
VRIO Analysis
The company’s brand reputation and customer loyalty are valuable resources that are rare and costly to imitate. However, the supply chain's lack of agility is a weakness that needs to be addressed to capture the full value of these assets.
Capability Analysis
Success in the current market requires capabilities in supply chain agility, e-commerce, sustainable sourcing, and digital customer engagement. The organization has strong brand and market knowledge but must enhance its supply chain and digital capabilities to remain competitive.
Based on the competitive nature of the furniture retail sector and internal assessments, the management has decided to pursue the following strategic initiatives over the next 18 months :
KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.
These KPIs offer insights into the effectiveness of strategic initiatives, providing a basis for continuous improvement and adjustment to strategy based on performance and market changes.
For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.
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The organization utilized the Demand-Driven Material Requirements Planning (DDMRP) and the Theory of Constraints (TOC) to enhance its supply chain optimization initiative. DDMRP is a multi-echelon planning and execution method that protects and promotes the flow of relevant information through the establishment and management of decoupling points in strategic locations across the supply chain. This framework proved invaluable in reducing supply chain costs and improving delivery times by ensuring that inventory levels were optimized to meet actual market demands. The Theory of Constraints, on the other hand, focuses on identifying the most significant limiting factor (constraint) that stands in the way of achieving a goal and systematically improving that constraint until it is no longer the limiting factor. In the context of supply chain optimization, TOC was instrumental in identifying and addressing bottlenecks.
The team implemented these frameworks as follows:
The result of implementing DDMRP and TOC was a 15% reduction in supply chain costs and a 20% improvement in delivery times. These frameworks facilitated a more responsive and efficient supply chain operation, directly contributing to enhanced customer satisfaction and a stronger competitive position in the market.
During the digital transformation initiative, the organization embraced the Customer Journey Mapping (CJM) and the Value Proposition Canvas (VPC). Customer Journey Mapping is a framework that helps businesses visualize the process a customer goes through when engaging with a company, from initial contact, through the process of engagement and into a long-term relationship. It was particularly useful in identifying key touchpoints and areas for digital enhancement to improve the overall customer experience. The Value Proposition Canvas, on the other hand, is a tool that helps companies ensure that their products and services are positioned around what the customer values and needs. It was crucial for aligning the digital transformation efforts with customer expectations and demands.
The team followed these steps in implementing the frameworks:
The implementation of CJM and VPC frameworks led to a 25% increase in online sales. These frameworks guided the organization in making informed decisions on digital investments, ensuring they delivered substantial value to customers and directly contributed to the initiative's success.
For the sustainability initiative, the organization adopted the Triple Bottom Line (TBL) framework and the Natural Step (TNS). The Triple Bottom Line is an accounting framework that incorporates three parts of sustainability: social, environmental, and financial. This approach was crucial for evaluating the comprehensive impact of transitioning to 100% sustainable materials. The Natural Step framework provided a science-based approach to sustainability, helping the organization to systematically reduce its ecological footprint by making smarter, more sustainable material choices.
The organization proceeded with the following steps:
By implementing the Triple Bottom Line and The Natural Step frameworks, the organization not only progressed towards its goal of using 100% sustainable materials but also enhanced its brand loyalty and market differentiation. These efforts led to a more sustainable, responsible, and competitive business model that resonated well with consumers and stakeholders alike.
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Here is a summary of the key results of this case study:
The strategic initiatives undertaken by the organization have yielded notable successes, particularly in supply chain optimization and digital transformation, which directly contributed to cost reductions, improved delivery times, and increased online sales. The implementation of DDMRP and TOC frameworks effectively addressed supply chain inefficiencies, while the integration of AR/VR technologies, guided by CJM and VPC frameworks, significantly enhanced the customer experience online. However, while progress towards sustainability is commendable, the report lacks quantifiable outcomes related to the percentage of sustainable materials currently used, indicating a potential area of underperformance or slower progress than anticipated. Additionally, the heavy reliance on technological solutions, while effective, may have overshadowed the potential for simpler, cost-effective process improvements or alternative strategies that could have further enhanced outcomes, such as a more aggressive approach to local supplier partnerships to reduce supply chain costs and environmental impact simultaneously.
For next steps, the organization should focus on accelerating its sustainability initiative, perhaps by setting more aggressive interim targets and increasing transparency about its progress. To build on the success of the supply chain and digital transformation initiatives, a continuous improvement framework should be established, leveraging data analytics to refine and adjust strategies in real-time. Additionally, exploring partnerships with local suppliers could further reduce costs and support sustainability goals. Finally, considering the evolving market dynamics, the company should continuously scan for emerging technologies and consumer trends to adapt and innovate proactively.
Source: Agile Supply Chain Strategy for SMB in Furniture Retail, Flevy Management Insights, 2024
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