Case Study
The Swin Furniture Pty Ltd: Bringing About a Transformation Swin Furniture Pty Ltd is a big player in the Australian furniture market, with 400 employees and an annual turnover of $120 million. It is headquartered in Melbourne and has offices and production plants overseas. Its operating departments are: Sales and Marketing; Human Resource; Operations; IT; Research and Development; Accounting and Finance; Warehousing and Purchasing. The company, having been incorporated over 100 years ago, has been through many difficult times, such as the Depression, WWII and recently the GFC, yet continued to grow. It operates under a Board Directive to minimize waste in all forms, as part of its Corporate Social Responsibility Program (CSRP). The CEO, Clare Chambers, has identified a problem in the performance of the Company that has arisen as a result of the Covid-19 pandemic. As sales have increasingly gone online, she has observed a high level of product returns, which has not only been costly and led to inventory management problems, but also threatened to run foul of the Board’s CSRP. To address the problem, Clare called a meeting, to which you were invited to attend, with the senior managers. She stressed that it was a Company problem and that we should work cooperatively together to solve it, rather than find blame with each other. Your role, as a business analyst, is to help them: (1) analyse the problem; and (2) come up with an approach to put to the Board. At that meeting, you take the following notes: 1) Clare focussed on the problem of high product returns over the last three years, during the pandemic, when many customers opted to buy on-line. This led not only to a welcome spike in on-line sales, but also to an unwelcome increase in product 3 returns, which had been costly. She cited a couple’s reason for returning an item, after having installed it in their apartment: Oh, no! It doesn’t look like what I thought it would look like. Honey, this new furniture does not even fit into our living room in size, let alone it’s mismatching colour and texture. I am sorry for the trouble, but we have to return it. 2) Clare went on to say that the increasing rate of return of products had become a burden on inventories, and that we were struggling to keep up with the level of returns. This is costly for us and is having a negative effect on the environment. It had led to high levels of dissatisfaction for the Warehousing Department staff. She emphasised we need to find a solution for this because it could represent a failing in that the Company’s customers might become dissatisfied with its products and service. Furthermore, it could have a negative impact on the environment. 3) Ahmed, the Warehouse Manager, who has been working for the company for thirty years and has announced that he will soon retire, supported Clare by adding that he had never seen this level of returns in his whole career. He continued that the Warehouse staff now had to work extra hours to cope with the spike in returns, and, consequently, were very dissatisfied. Furthermore, inventory resources were exhausted, which had decreased our supply chain agility. This had led to the conflict between Departments, such as Purchasing and Sales, because neither Department could attain their goals according to their mission statements. The net result of which was a reduction in customer satisfaction. He added that he had been very accommodating with respect to other Departments’ requests, but, with the increase in on-line sales and returns, other Departments were blaming Warehousing for their own lack of performance. It seemed to him that they did not grasp the main issue. He said that the blame game should stop as this was not, at core, a 4 Warehousing issue. As the Company had found itself in a unique situation, caused by sudden changes in consumer behaviour, we need to better understand the new market dynamics, so that we might become more responsive to the new challenges and grow, rather than looking for culprits among our workmates. He said that he is going to retire at the end of this year, and whoever fills his role will face the same problem. Hence, he emphasised to find a solution to address these problematic issues urgently. 4) The Sales Manager, Alice, joined the conversion and said returns were an inevitable part of on-line sales. As on-line sales grow, we will have more returns, which in turn means that we have to learn how to deal with them. She said we need to expand our resources to cope with these trends, for example, by employing more staff and expanding the Warehouse’s resources. 5) The Finance Manager, John, said we did not have enough financial resources for such expansion because, despite the increase in on-line sales, the company was suffering financially as result of the pandemic. We need to come up with a costeffective solution that does not require a huge investment. He said, we need a ‘quick-fix’, whereby we are able to remain competitive, whilst keeping our customers and staff happy. This should be achieved without a major investment because, due to the pandemic, we face uncommon market uncertainty. We, therefore, need to be more prudent with our investment strategy. John said maybe we could change our return policy, so we limit the return products. 6) Alice shot that idea down in its tracks, from a sales perspective, saying that cancelling the returns policy could lead to customer dissatisfaction and a loss of reputation in the market. Further, it may even lead to legal disputes, which may 5 involve government agencies. We should not go down that path as it may compound out losses. 7) Clare agreed with Alice, saying that any change to the returns policy could make the overall situation worse. She said we need to react quickly to changes in the market and be nimble enough to respond to them to our advantage. She said we had experienced major growth in on-line sales in the last few years. We now have a much wider product range available, which we export to many countries. Also, in the recent years we had opened new production facilities in other countries. We had grown quickly and had transform the company from a local producer of furniture products with the limited products to a multinational offering a wide range of products. Obviously, such growth does not come without problems, and we must be prepared for such growth. She added, since joining the company, she had witnessed that many business opportunities missed because we were not quick enough to react to market changes. 8) The IT Manager, Natalie, young and ambitious, joined the conversion by echoing what Clare had said: In today’s demanding world, available technology offers promising ways to improve the shopping experience and help customers to make better decisions in their shopping. She said the solution that we are looking for can only happen through technology, which helps our customers by making the on-line shopping experience and the face-to-face shopping experience very similar. Augmented Reality (AR) which provides a real-world experience overlay is a way to decrease the level of product returns by replicating the face-to-face shopping experience in on-line shopping. This technology can recreate a realistic environment by layering videos, images, and 3D content on top of real-world objects. AR allows users to interact with the real world through a computer- 6 generated environment. Users engaging via AR can continue to see and hear their surrounding real world with the addition of virtual three-dimensional objects and accompanying sounds. AR enables firms to extend the carefully crafted in-store experiences to smartphones. We, therefore, need to develop an app using AR technology to help customers select the products with more confidence and accuracy, so that the number of returns is minimized. 9) The Operation Manager, Axel, a recent recruit to the company who had worked for many years with one of the leading furniture companies in Germany, supported Natalie’s position, saying that he had witnessed AR applied in retail and fashion settings to good effect, increasing customer satisfaction. He added that the IKEA AR app, known as the Place App, was launched in 2017 to help customers ‘try out’ furniture in their homes before buying it. The App uses AR to allow its users to visualize how furniture will look in their own homes. Not only would it remove take the hassle of furniture shopping, but also eliminate the burden of returning any furniture that does not fit. With this free app, IKEA has enhanced its servicecentred values, as it signals that it understands the hurdles involved in the furniture shopping process and extends support. IKEA Place App provides a means for customers not only to decide which furniture to buy, but also saves them from undesirable outcomes. It is as easy as photographing the space and then selecting the item. The App automatically scales the chosen product to size, based on the dimensions of the shopper’s rooms, with 98% accuracy. The ability to see the texture of the fabric, with light and shade, is among the App’s features. The object of IKEA’s Place App is to turn the experience of choosing an item of furniture into an enjoyable experience using digital engagement. Axel, added, if we wish to remain competitive, we will need to develop an AR app. 7 10)John said that, whilst he understood Axel’s and Natalie’s excitement for an AR app, it could not be taken for granted such an AR app would make the situation any better because many of our customers were not technically savvy enough to use it. As a consequence, he believed it would be necessary to test the idea before fully committing to it. He added, if the Board were to decide to review this technology, his Department should oversee the development of the IT investment business case, and that the IT Department should only be involved in its implementation. He added that, a Finance-led investigation of the business case would be more effective in questioning and analysing the imperatives for making an IT investment designed to improve financial performance and customer service — both of which would create added value for the Shareholders. 11) Natalie disagreed with John’s suggestion to give the responsibility of developing the business case to the Finance Department. She could not comprehend how a Finance-led evaluation, with the Finance Department taking leadership over all functions, including the IT and Operation Departments, of the case for adopting an IT system, would be more likely to result in improved performance and customer service. Natalie felt that John’s approach would take the Company back to the technological Dark Ages when IT was nothing more than a support function. Therefore, she believed a collaborative vision of both the Operations and the IT Departments should take the lead in the development of the case for new IT investments. At the end of the meeting, you were convinced that it would not be possible to analyse the requirements for the new AR app, without meeting with key users and stakeholders of the Company. Upon your request, Clare agrees for you to conduct interviews with the key stakeholders and potential users of the system.
