Zappos.com: Developing a Supply Chain to Deliver Wow!

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13 Νοε 2013 (πριν από 3 χρόνια και 9 μήνες)

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Zappos.com:

Developing a Supply Chain to Deliver Wow!

Stanford Graduate School of
Business

David Hoyt, 2
-
13
-
09


Presented by:

Jon McDonald

Business 550

November 23, 2010


World’s Largest Online Shoe Retailer


Founded in 1999 by Nick Swinmurn


$1 billion annual gross sales (2008)


3% of U.S. population are Zappos’ customers


Known for its high quality experience: deliver
“wow” to customers, suppliers, and affiliates


Repeat customers grew from 40% in 2004 to
75% in 2008


Zappos.com


Strong supply chain management is an
important part of the company’s success


1,500 employees, half in its Nevada
headquarters and call center, and half in
its Kentucky fulfillment center


The company culture is an influence on
the supply chain



“Wow Experience”


Website speed


Telephone support: calls answered within 20
seconds


Free returns within 365 days


Free shipping


Large pictures of shoes on website so
customers know exactly what they are getting



Call Center


Staffed 24/7 by 400 people in Las Vegas
headquarters


All new hires spend two weeks in call center


5,000 calls received a day, 5,000 chances to
“wow” a customer


Free, Rapid Delivery


Free shipping, often arrives next day


Overnight deliveries made by UPS


Work closely with UPS to increase efficiency



Many Stages of Growth


Vendors


Other products added: clothing, electronics,
jewelry,
houseware
, luggage, sporting goods


Operational model:


Delivery system


Inventory system


Web system


International expansion


Evolution of the Operational Model


The drop
-
ship model:


Orders placed on Zappos website


Orders forwarded to vendor


Orders filled by vendors


Major problems with drop
-
ship model:


Information on website only 95% accurate


Zappos did not know when orders shipped


Zappos did not know of unhappy customers until
it was too late




Evolution of the Operational Model


Brought inventory in
-
house:


November 2000 Zappos began to stock inventory


Bought 30,000 sq foot store in Willows, CA


100 miles north of Sacramento


Not ideal:


No major airport


Shipments made by UPS Ground


Warehouse was a manual operation


Continued to use the drop
-
ship approach

Evolution of the Operational Model


Third
-
Party fulfillment


Outgrew Willows distribution center


UPS approached Zappos to manage its inventory
and fulfillment


Zappos continued to own the inventory, but it
would be stored at a UPS facility near its hub in
Louisville, Kentucky


Order fulfillment would be handled by a third
party


Evolution of the Operational Model


Advantages of third
-
party fulfillment:


Two
-
thirds of customers would receive deliveries
within two days using UPS ground and at a lower
cost than shipping from Willows


More efficient use of automated tools


Zappos would not have to make major capital
investment


Evolution of the Operational Model


Disadvantages of third
-
party fulfillment:


Zappos business involved more stock
-
keeping
units (SKUs) than the system could handle, since
each shoe style/size/color combination was a
separate SKU

-
Zappos had 70,000 to 80,000 SKUs, and within 6 to
8 weeks the company knew they had to develop
their own distribution center

Evolution of the Operational Model


Kentucky Distribution Center


Opened their own distribution center 30 miles
from the UPS hub in Louisville


Developed its own systems and procedures
focused on a highly SKU
-
intensive business that
required almost perfect inventory accuracy


Random stocking approach


Evolution of the Operational Model


Initial 265,000 square foot facility filled to
capacity in 2006, Zappos opened a new
832,000 square foot facility


Automated conveyors, carousels


Robotic system installed in 2008, doubled
worker efficiency


Evolution of the Operational Model


End of drop
-
shipments


Zappos was still sending orders to its vendors for
drop
-
shipping until 2003, though 75% of orders were
being shipped from the Zappos warehouse


Customers served by the Zappos warehouse were
happier with the experience than those whose orders
were drop
-
shipped


Zappos stopped using drop
-
shipments in order to
fulfill its customer service mission


When an item reaches zero inventory in the
warehouse it no longer appears on the website


Supply Chain Management


Buying


Difficulties of excess inventory or loss of potential
sales when items become a huge hit


Merchandising department has 100 employees,
half of whom are buyers and assistant buyers


Buyers are the primary points of contact for
vendors


Extranet allowed vendors to see the same
information as the buyers


Operating a Supply Web


Technology to design and run a retail website


Call center to deal with customer questions and
problems


Distribution system optimized for delivery to
retail customers


Zappos excelled at all these areas and began to
work with manufacturers to sell directly to
customers under a program called: “Powered by
Zappos”


The supply web allowed the same inventory to be
accessed through many websites

Scheduling Product Delivery


Zappos placed orders with 1,400 different
brands in 2008


Suppliers given delivery windows in which
product may arrive at distribution center


Inefficiencies in the warehouse operation, as
some days had significant order arrivals, while
other days were quiet


Dealing with Excess Inventory


Not constrained by space needs that brick and
mortar stores face


Some price reductions based on decrease in
sales


Opened several outlet stores to deal with the
excess inventory


Bought the online shoe company 6pm, which
Zappos uses to sell some slow moving
inventory

Opportunities for Improvement


Ship shoes directly from China to Zappos
distribution center


Cut down on partial truckloads by introducing
own fleet of Zappos trucks


Expansion outside of North America


Conclusion


Zappos remains true to its philosophy of
customer service


Zappos has been successful even in tough
economic climate


Zappos was sold to Amazon.com in July 2009
for 850 million dollars


Questions




1) What company bought Zappos in 2009?


A.
Wal
-
Mart

B.
Ebay

C.
Amazon.com

D.
Buy.com


2) What is not part of Zappos “wow” experience?


A.
Website speed

B.
Telephone customer service

C.
Guaranteed lowest price

D.
Free shipping and returns


3) What did Zappos do to deal with excess inventories?


A.
Opened several outlet stores

B.
Bought 6PM.com to use to sell discounted inventory

C.
Used some small price reductions

D.
Initiated a relationship with Overstock.com to sell excess inventory

E.
All of the above