Laura Ashley and Federal Express Strategic Alliance

PRESENTED BY: GROUP 7

LAURA

ASHLEY

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

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Outdated systems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

Product Flows

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

Contd..

BLS had three systems: Tracking

Information

Inventory management

Desire to develop Pan-European business

Transportation network / infrastructure

European warehouse space

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Replace outdated LA systems with FedEx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

Areas for Concern

Length of Contract

Financial Arrangement

Leadership

Contract Firmness

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

Financial Arrangement

Cost plus LA pays:

Direct costs in managing logistics

Freight

Management fee (percentage of cost)

Pro

Simplicity

Con

Promotes inefficiency

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

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

Revised Product Flow

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