Sheffield Electrical Limited – Key Question
Sheffield Electrical Limited (SEL) is a retailer of consumer electrical products. It retails through two channels through out-of-town superstores and its e-commerce web-site.
SEL’s warehouse is a modern building; with an area of 60,000 sq ft. (In addition there is office space for the supply chain team.)
Senior management are concerned that the warehouse isn’t performing as well as it should:
- Service to customers isn’t meeting target levels of performance
- Costs are higher than budget and efficiency measures are poor
- At times the warehouse seems to be hitting capacity problems – e.g. supplier deliveries are held up, or store orders and customer orders are not picked on time.
Management are concerned about current performance, but also worried about how the warehouse will meet SEL’s growth objectives:
- SEL plans to open 2 additional stores next year – these will be a similar size to the current stores, and so will increase retail sales by approximately 50%
- SEL also plans to expand the product range significantly, adding 100 additional products in the Accessories category – these products offer particularly high profit margin and they are also attractive in the e-commerce channel, being low-cost to ship and with a lower returns rate
- Alongside the increased Accessories range, SEL is implementing software to promote bundles on its website – e.g. a TV will always have a choice of soundbars suggested, and laptops and desktops will always have printers recommended; SEL therefore expects 100% increase in Accessories sales through the e-commerce website next year.
The Chief Executive says: “Taking on this new, large warehouse was a big investment. It’s meant to make us more efficient, give great service to stores and customers, and see us through many years of growth. But it seems to be failing on all three of these objectives. We need to sort it out urgently.”
What changes should be made in the warehouse to address the current performance problems, and to allow it to handle the planned growth of SEL?
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