laura ashley & fedex: strategic alliance
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Laura Ashley and Federal Express Strategic Alliance
PRESENTED BY: GROUP 7
LAURA
ASHLEY
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Overview Laura Ashley Founded in 1953 by Bernard and Laura Ashley
Specialty retailer of upscale women’s fashions, fabrics & home furnishing products
Market Segmentation- on the basis of customer lifestyle
High scale in-store services important to maintain the image of the brand
Problems faced by the brand: Although sales were up but profits were flat in 1980s
Overdependence on in-house manufacturing
Excessive short term debt
Rapid cash outflow
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Problems in distribution system of LA:
Availability at 80%(stock out 20%)
18 months of warehouse inventory
Outdated systems
Extended lead times
Multiple distribution contractors
Delivery problems
Inefficient good flows
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Product Flows
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Overview Federal Express and Business Logistics Services
Incorporated in 1971 by Frederick W. Smith Jr.
By 1991 they were the premier carrier in overnight delivery business
Renowned for its logistics expertise &tracking system
Business Logistics Division created in 1987 to provide specialized logistics services to businesses throughout the world
BLS had three major operations:
• System line
• Parts bank
• System care
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Contd..
BLS had three systems: Tracking
Information
Inventory management
Desire to develop Pan-European business
Transportation network / infrastructure
European warehouse space
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Strategic Alliance
Replace outdated LA systems with FedEx
FedEx to manage all aspects of LA distribution
FedEx gains entry into Europe and clothing business
Develop / Promote new FedEx business model
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Areas for Concern
Length of Contract
Financial Arrangement
Leadership
Contract Firmness
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Length of Contract Minimum of 10 years
Pros Stability
Eliminate the need for constant renegotiation
Promotes trust
Cons Too aggressive for a new business relationship
Limited options
Alternatives 2 year trial agreement
5 year with a 5 year option
Recommendation 5 year with a 5 year option
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Financial Arrangement
Cost plus LA pays:
Direct costs in managing logistics
Freight
Management fee (percentage of cost)
Pro
Simplicity
Con
Promotes inefficiency
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Leadership
Stability Success of alliance is heavily dependent upon leadership stability.
Pros
Maxmin’s level of determination
Flexibility
Cons
Any change may lead to challenges
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Contract Firmness “Loose Contract”
“Agree to agree” philosophy Outcomes not clearly defined No penalties for failure to perform No incentives for performance
Pros Flexibility Adaptability Encourages “win-win” atmosphere Empowerment
Cons Lack of specific direction Lack of contingency plan No consistency in event of leadership change
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Revised Product Flow
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Conclusion
“Substantial and real” benefits from the alliance
Benefits to LA:
• Access to new systems in compressed time frame
• New ways of doing business
• Improved performance
• Ability to focus resources where it could add value
Benefits to BLS:
• Trend setting
• Entry into clothing business
• Entry into Europe
• Establish global nature of its business
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