Department of Transport and Supply Chain Management

Assignment Task

Organization Background

• Describe the objectives of the study to the reader.
• Provide a short summary of the focal business organization Pick n Pay Holdings LTD (hereafter referred to as the Pick n Pay Group, the Group, the organization, or the Company).
• Introduce the reader to the various key issues to be discussed in this study.

General

Corporate strategy

• Describe the importance of corporate strategy
• Describe the importance of a logistics/supply chain strategy
• Explain the relationship between the logistics strategy and corporate strategy. Do you think the logistic strategy of the Group supports the corporate strategy of the company? Motivate your answer.
• What should be an appropriate logistics mission and overall organisational mission for the Pick n Pay Group?
• Based on the scenario provided for the company, describe how the logistics strategy should relate to other major business functions.
• Show how the logistics strategy can incorporate aspects related to individual customer service, inventory, warehousing, order processing, and transport strategies necessary to support the strategy.
• How can the logistics strategy positively impact the business in terms of corporate profits and customer service performance?
• How can the logistics strategy support the sales growth and expansion prospects of the Group over the next 5 years?

Strategic alliances and partnerships

• To what extent is globalisation part of the organisation’s strategy?
• Discuss the importance of sharing information between the relevant parties in the supply chain. What type of information is shared? 
• Describe the nature of the logistics-related alliances that the organisation can build.
• Discuss how the Group can establish supply chain alliances to:
• Improve core competency
• Improve quality
• Reduce Inventory
• Improve lead-time performance
• Create competitive advantage
• Evaluate the basis of the supply chain alliances regarding shared rewards and risks, relationships and/or contractual agreements?
• Suggest performance parameters to assess these alliances.
• How should these alliances be monitored?

Logistics channel/distribution strategies

• Critically reflect on the current distribution strategy of the Pick n Pay Group.
• Discuss the potential improvement of the distribution strategy for the Company.

Product strategy

• Discuss the product and market characteristics of its products and the impact thereof on the business and logistics strategy.
• Comment on the unit value of the products i.e., low margin, high value or full-stream cost?
• Comment on the impact of product packaging on the logistics system of the company
• Comment on the impact of product packaging on the materials handling, transportation, and warehousing of products

Special interaction requirements

• What should be the nature of the interaction between different internal and external departments (e.g. meetings and frequency thereof)?
  • Standard delivery and order requirements

Outbound shipments

• How does fluctuating order quantities affect the cost-effectiveness of the logistics system?
• Should minimum order quantities be applied? What are the pros and cons?
• Identify and discuss the likely challenges to be experienced in supplying products to the Pick n Pay Group’s customers?
• Is the demand pattern for the Pick n Pay Group’s products seasonal, derived, pull or push driven?
• Is demand predictable or highly variable and what influences exist on the demand levels?
• Discuss the impact that an increase in the product variety of the Pick n Pay Group will have on demand planning
• Discuss the impacts of forced reverse flows (reverse logistics) of products on the Pick n Pay Group.
• How can the performance of each of the Pick n Pay Group’s major suppliers be measured with respect to order cycle (lead) time and fill rate?
• Discuss the best way of transmitting orders to the main suppliers
• Proffer suggestions on the criteria to use in selecting suppliers
• How many supplier sources should normally be used when purchasing major components/products? What appears to be the strategy adopted by the Pick n Pay Group? What is the inherent risk of such a strategy? What are the advantages of the sourcing strategy followed by the Pick n Pay Group?
• Is the Pick n Pay Group involved in any supplier development programs? If not, would it be an advantage for The Pick n Pay Group to be involved in any supplier development programs? Why?

Handling requirements

• Describe material handling requirements on the supply side of the Pick n Pay Group
• Describe the product handling requirements for the Pick n Pay Group’s products on the outbound side. Consider product ingredients, packaging, and customer service requirements in your discussion.

Inventory requirements and potential for defection

• What is the importance of inventory holding for The Pick n Pay Group from a customer service perspective?
• Discuss the cost implications of lost sales (i.e., cost of stock-outs) 

General

• Should there be a dedicated person / department responsible for logistics and supply chain management? Justify your view.
• How frequently should the supply chain structure be re-assessed and how should this be done?

Overall view of the supply chain

• Map the supply chain for The Pick n Pay Group for the South African grocery and food retail part
• Where does the channel power/dominance for this particular supply chains lie? Why?

Relevant market and production parameters

• Explain the macro-economic factors which will impact the supply chain of the Pick n Pay Group in the medium- and long-term.

Supply chain network design

• Which of the following best describes the process flow system of the Pick n Pay Group? Push-based; Push-pull-based; or Pull-based supply chain system? Motivate your answer.
• Explain which supply chain approach (engineer to order; purchase and make to order; make to order; assemble to order; make to stock; pick and ship to stock) is appropriate for the Pick n Pay Group based on the factors of demand uncertainty and costs.
• Explain if postponement can work as a strategy to save costs or to differentiate products for the Pick n Pay Group.
• Are the channels customised to allow for tailored services to be provided to different customers in any way? (E.g. Special delivery times or special packaging for certain customers.)
• What are the key supply chain network design challenges the Pick n Pay Group faces?
• What can the Pick n Pay Group do to make its supply chain more competitive?

Channel dynamics and inter-relationships

• Identify key customers for the Pick n Pay Group and explain the need for a deep understanding of the needs of these customers. How can this be achieved?

LOGISTICS RELATED SERVICES

• To what extent is the Pick n Pay Group making use of logistics service providers?
• Should the Pick n Pay Group consider the outsourcing of its entire logistics function? Motivate your answer.
• What criteria should be used to select and/or evaluate logistics service providers?

General

• Describe different approaches to information systems that organisations can apply (i.e. corporate vs. decentralised, in-house vs. outsourced)
• Discuss the reasons why accurate and timely information is critical for the Pick n Pay Group
• What is the best information system strategy for the Pick n Pay Group to follow? Why?

Logistics management information system

• Discuss the main objectives of logistics information systems (i.e. service improvement, cost reduction etc.)
• Discuss the different components which should be included by the Pick n Pay Group’s logistics information system
• Discuss how the following information systems typically support logistics processes/network design:
• Electronic point of sale (EPOS)
• Electronic data interchange (EDI) between companies
• Barcodes / radio frequency identification (RFID)
• Warehouse management systems (WMS)
• Forecasting & Inventory management systems
• Vehicle routing & scheduling software
• Transport management systems (TMS)

Interfaces with service providers, customers, and suppliers

• What is the beneficial way of sharing information system resources between suppliers, customers, and service providers in the supply chain?
• How can the use of electronic communications technologies (i.e., bar code, EDI, satellite communication and/or real-time communication) be used by the Pick n Pay Group?
• Discuss the various ways how the Pick n Pay Group can communicate orders to service providers and from customers.
• Discuss the importance of a decision support system (DSS) for logistics and explain how it can be utilised within the Pick n Pay Group.

MATERIALS MANAGEMENT AND INVENTORIES

Analysis of current inventory profile (classification, location, quantities, etc.)

• Describe the importance of inventory deployment, inventory policy, and responsibilities regarding inventory.
• Should every product have a well-defined inventory deployment strategy?
• Discuss the importance of real-time accurate information on inventory.
• How should inventory-carrying costs be calculated?
• Why should inventory-carrying costs be used in cost trade-offs with other costs? Discuss the cost implications of excess stock for the Pick n Pay Group
• Explain how cycle time reductions impact inventory levels
• Discuss the importance of mapping all supply chain processes
• Discuss the benefits of the Pick n Pay Group having agreements with key suppliers for short-cycle deliveries?
• Why should the Pick n Pay Group know the precise lead-time for customer deliveries?
• Discuss why the logistics department should calculate and analyze measures such as cost of capital or return on investment
• Discuss the impact that an increase of product variety will have on the stockholding of the Pick n Pay Group in DCs and stores
• Identify the inventory management problems experienced by the Pick n Pay Group and the industry it operates in and give reasons for them. Provide solutions the company could consider.
• Calculate the capital cost part of the inventory carrying costs for the financial year 2022 for the Group.

Sales forecasting (sales and production)

• What methods should be used to determine sales forecasts i.e., should they be scientific, market research-based, or subjective forecasts?
• To what extent should a logistics department participate in the setting of these forecast levels?
• Which challenges do you think the Pick n Pay Group experience in terms of sales forecasting?

Inventory management

• Discuss how inventory turnover rates should be calculated
• Discuss how the use of a single plant warehouse impacts inventory management in the logistics system of the Pick n Pay Group
• Discuss various strategies on how Company the Pick n Pay Group can reduce inventory levels in the business
• Explain how the Pick n Pay Group can make use of technology in order to improve performance right now

LOGISTICS ORGANISATION / PERSONNEL

General

• Explain the role and responsibilities of the Logistics Director in the organisation.
• Relative to other corporate functions in the organisation, what should the management level and profile of logistics be?

Formal organisation regarding logistics

• Should the managing of the logistics department follow a functional or process management approach?
• Regarding Logistics operating presence, discuss the importance of senior logistics executives visiting key customers and suppliers.
• How should inter-functional co-ordination between logistics, production, finance, sales, and marketing be handled in the Pick n Pay Group?
• Suggest and discuss the type of organisational structure for logistics in the Pick n Pay Group i.e., line vs. project structure, management levels relative to other functions in the organisation.
• Suggest how the Pick n Pay Group logistics functions can be restructured to improve competitive advantage.

Reporting structures/responsibility profiles

• Discuss the desirable structure of the logistics department at the company. e. number of employees, levels of management, average number of employees per logistics supervisor, turnover of employees, etc.
• Suggest and recommend how senior logistics management can be involved in cost measurement and business planning?
• Regarding day-to-day logistics operations, who takes the responsibilities?
• Do these people have any decision-making authority?
• Who is responsible for the day-to-day logistics operations and decision-making?

Job specification/career planning and training

• Judging from the size of the Pick n Pay Group, and Logistics activities involved, recommend the level of specialisation in logistics job functions.
• Discuss how you would manage staff retention in order to minimise high turnover of personnel in logistics.
• Identify and justify the training of logistics personnel required at the Pick n Pay Group .
• How does the Pick n Pay Group benefit from sharing of resources such as employee exchange, technology, etc.?

PERFORMANCE MEASUREMENT /CUSTOMER SERVICE

General

• Explain the importance of performance measurement for the Pick n Pay Group.
• Should customers be segmented? If so, how should it be done?
• Explain the need for customer relationship management and advise on a process to be followed.
• Explain the type of logistics/marketing interface required to ensure success for the Pick n Pay Group and provide a brief analysis of the current relationship between these departments in the Pick n Pay Group.
• Explain the logistics elements of customer service.

Performance/customer service measurement mechanisms

• Advise on the use of performance measures for logistics elements of customer service and indicate critical measures for the Pick n Pay Group based on their market conditions.
• Explain the importance of analysing logistics costs for the Pick n Pay Group.
• Explain the importance of considering cost/service trade-offs.
• Should the Pick n Pay Group consider the use of the following strategies to improve service levels or are they already implemented in the organisation?
• Continuous replenishment?
• Flow through warehousing (cross-docking)?
• Which department is responsible to deal with customer complaints?

Response mechanisms

• To what extent should logistics performance results be shared within the Pick n Pay Group and with service providers, suppliers and customers?

Marketing and production interfaces

• How important is logistics quality relative to product quality and image?
• Is the interface between marketing and production measured either internally or externally?
• How do you view the interface between logistics with production planning and scheduling?
• What data does logistics provide to production planning?

Supplier and customer interfaces

• Should the Pick n Pay Group have a written customer service policy? Justify your response.
• Should the Pick n Pay Group provide customers with a copy of the organisation’s customer service policy? Justify your response.
• Discuss the importance of sharing the performance results with stakeholders such as the organisation’s suppliers, service providers, internally amongst the divisions and employees and the customers.
• Discuss why the Pick n Pay Group must conduct customer service audits regularly.
• Discuss the need for the Pick n Pay Group to measure the profitability of each product.
• Discuss whether the Pick n Pay Group should differentiate service levels to different customers.

Introduction

Pick n Pay Holdings Limited (hereafter referred to as the Group or the Company) is a South African retail company that was founded in 1967. The company operates a chain of supermarkets, hypermarkets, and convenience stores throughout the country. Pick n Pay is known for its wide range of products, including fresh produce, meat, dairy, bakery items, and household essentials. The company also has a strong focus on customer service and offers a variety of services such as in-store banking, mobile and online shopping, and home delivery. The company is listed on the Johannesburg Stock exchange.

Pick n Pay is one of the largest retailers in South Africa and has a strong presence in both urban and rural areas. The company has a strong focus on sustainability and corporate social responsibility and has implemented a number of initiatives to reduce its environmental impact and support the communities in which it operates. Pick n Pay also has a wide range of own-brand products, which are known for their quality and affordability.

In addition, Pick n Pay also has a loyalty program called Smart Shopper, which rewards customers for their purchases with points that can be redeemed for discounts or other rewards. The company also offers a variety of promotions and special deals throughout the year, making it a popular choice for budget-conscious shoppers. Overall, Pick n Pay is a well-respected and trusted retailer in South Africa, known for its wide range of products, commitment to customer service, and corporate social responsibility.

The company's logistics system is responsible for ensuring that products are delivered efficiently and effectively to all its stores. This includes managing inventory, transportation, and distribution of goods. The logistics system at Pick n Pay is designed to be as efficient as possible to keep costs low and meet the demands of customers. The company uses a centralized distribution system and third-party logistics providers to distribute goods to its stores. Additionally, Pick n Pay utilizes an advanced inventory management system that helps to ensure that products are always in stock and readily available for customers. This system also allows the company to quickly respond to changes in demand and adjust its supply chain accordingly.

This case study introduces the Pick n Pay Group, its corporate structure, strategies, markets served, and logistics system used

Introduction to Pick n Pay Holdings (Ltd)

The Pick n Pay Group is a retail company in the consumer goods industry that operates under three brands: Pick n Pay, Boxer, and TM Supermarkets. The company was founded in 1967 by Raymond Ackerman, who purchased the first four Pick n Pay stores in Cape Town, South Africa. Since then, the company has grown to include stores in multiple countries across Africa, including South Africa, Namibia, Botswana, Zambia, Zimbabwe, Nigeria, eSwatini, and Lesotho. Additionally, the company has a 49% stake in the Zimbabwean supermarket chain, TM Supermarkets. There are a total of 2081 stores in the group across the various countries mentioned above. Pick n Pay is a well-known and respected brand in South Africa, known for its customer-led store segmentation program, which ensures that product ranges, promotions, and customer engagements meet the needs of different customer segments. The company operates on an owned (corporate) and franchise basis (refer Figure 1), with a wide range of products and services available, including an online offering. The company's growth plan includes expanding to new communities through small convenience stores and focusing on delivering an exceptional customer offer throughout the product range, quality, price, availability, and service.

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