1. Laura Ashley and Federal Express
Strategic Alliance
PRESENTED BY: GROUP 7

2. 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

3. 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Outdated systems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

4. Product Flows

5. 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

6. Contd..

BLS had three systems:

Tracking

Information

Inventory management

Desire to develop Pan-European business

Transportation network / infrastructure

European warehouse space

7. 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Replace outdated LA systems with FedEx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

8. Areas for Concern

Length of Contract

Financial Arrangement

Leadership

Contract Firmness

9. Length of Contract

Minimum of 10 years

Pros


Eliminate the need for constant renegotiation


Stability
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

10. Financial Arrangement

Cost plus

LA pays:


Freight


Direct costs in managing logistics
Management fee (percentage of cost)
Pro


Simplicity
Con

Promotes inefficiency

11. 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

12. Contract Firmness

“Loose Contract”


Outcomes not clearly defined

No penalties for failure to perform


“Agree to agree” philosophy
No incentives for performance
Pros


Adaptability

Encourages “win-win” atmosphere


Flexibility
Empowerment
Cons

Lack of specific direction

Lack of contingency plan

No consistency in event of leadership change

13. Revised Product Flow

14. Conclusion

“Substantial and real” benefits from the alliance

Benefits to LA:
•
•
New ways of doing business
•
Improved performance
•

Access to new systems in compressed time frame
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