Supply Chain Strategy of Let-Leeds with Best Practice (Duncan Christie)
February 25, 2013 |
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This report intends to critically analyse the current supply chain of Leeds Letting Agent: Let-Leeds and compare this to a comprehensive literature review of best practice in supply chain strategy. Any reference made to the Leeds Letting Agent: Let-Leeds can be backed up by referring to the full transcript of the interview carried out with the manager and director.
1.1 Company background
Let-Leeds is an Leeds letting agent based in Leeds city centre. The letting agents main tenants are young professionals and students in Leeds although they also rent properties to families across Leeds. Let-Leeds also provides a full property management service to landlords as well as marketing their properties. The Leeds Letting Agent can also oversee maintenance works ranging from minor repairs right up to full property refurbishments.
Let-Leeds (2012) states: “Let-Leeds is your local Leeds Letting Agents, providing a fresh and personal approach to rent in Leeds. If you’re looking to rent Leeds property, we’re dedicated to making moving simple, for all types of accommodation Leeds has to offer.” Luke Gidney, the director, set up the company in 2008.
He then quickly moved to appoint Neil Dawkin as the branch manager and the company now employs a further four full time staff in administration and lettings negotiation. Several part time and placement staff are also employed at any one time at the Leeds Letting Agent.
1.2 Distinction of supply chains in the service industry
A letting agency is quite clearly a service industry business and therefore differs from the traditional supply chain model. The traditional model is defined by Ellram, Tate & Billington (2006, p.24) as: “The management of information, processes, goods and funds from the earliest supplier to the ultimate customer, including disposal.” Ellram, Tate & Billington (2006, p.25) then goes on to define supply chain management in the service industry as: “the management of information, processes, capacity, service performance and funds from the earliest supplier to the ultimate customer.” It is important to note that the main difference is the inclusion of service performance in the definition as within a service based business the performance of the service is critical to success.
1.3 Let-Leeds current supply chain
Leeds Letting Agent Let-Leeds has three distinct sets of supplier which can briefly be categorised as property service suppliers – office/IT support suppliers and landlords. Property services provide Let-Leeds with general maintenance services, such as repairs and decoration along with more complex activities such as plumbing, gas work and refurbishments. Furniture and appliances can also be supplied. Office and IT support provide essential software and premises for the business along with support if things go wrong with them. Finally Landlords provide the Leeds Letting Agent with the properties they let out and manage. This of course is the core of the business as without properties there can be no letting agency.
Landlords along with tenants also make up Let-Leeds customers. Tenants, of course, live in the properties and pay rent to the business, in turn Let-Leeds sorts out any maintenance issues they report and chase arrears if they don’t pay rent. Landlords allow their properties to be marketed by Let-Leeds and then, if they choose, have the properties managed as well for a monthly fee.
The table below briefly outlines the current supply chain.
Note that landlords have an arrow pointing in to the business and one pointing back to them as well, as they are classed as both suppliers and customers.
2. Comparison of Let-Leeds to supply chain best practice
2.1 Discussion of areas for further analysis
The table below shows the areas of supply chain best practice that were identified as relevant to Let-Leeds:
11 Best Practice Relevant to Let-Leeds
1. Service Location
2. Layout Strategies
3. Managing Distribution Channels
5. Supplier Relationship Management (SRM)
6. Customer Relationship Management (CRM)
7. Managing Service Capacity
9. Managing Queues
10. Managing Service Quality
11. Vertical Integration
This report is going to look at three areas of service supply chain best practice in greater depth. These are supplier relationship management (SRM), customer relationship management (CRM) and cross functionality. Wisner, Tan & Leong (2012, p.423) states: “Service firms differ from manufactures in a number of ways including the tangibility of the end product, the involvement of the customer in the production process, the assessment of product quality, the labour content contained in the end products and facility location considerations.” As a Leeds Letting Agent: Let-Leeds offers a single tangible component, the house that the tenants reside in, it is crucially important that the quality of the intangible components of the supply chain are managed correctly to ensure all customers and suppliers are happy. Therefore SRM and CRM delivered by cross-functional staff that are all experts in delivering a quality service is vital.
CIO Leadership (2009, p.2) states: “SRM is the systematic, enterprise-wide (1) assessment of suppliers’ assets and capabilities with respect to overall business strategy, (2) determination of what activities to engage in with different suppliers, and (3) planning and execution of all interactions with suppliers, in a coordinated fashion across the relationship lifecycle, in order to maximise the value realised through those interactions.” Lambert (2006, p.11) adds: “The supplier relationship management process provides the structure for how relationships with suppliers are developed and maintained.” It is clear that SRM is a vital part of supply chain management today however Christopher (2011, p.113) shows that until recently this was not always so: “Conventionally firms have maintained an arm’s length relationship with suppliers. Suppliers have often been chosen on the basis of price rather than responsiveness.” This does not always provide the best results as suppliers competing on price are much less likely to provide a good level of service or quality products. All their time is spent on cost cutting activities. Christopher (2011, p.215) summarises the benefit: “The closer the relationship between buyer and supplier the more likely it is that the expertise of both parties can be applied to mutual benefit”
Let-Leeds definitely subscribes to the ideals of supplier relationship management but the size and service nature of the business means it deals with these relationships in a way that differs from traditional best practice.
Moore (2002 p.32) concludes: “Since roughly half of the average companies revenues goes to suppliers , then approximately half of its strategies for true gain to competitive position must be aimed at those programmes and actions that make the supplier more efficient , effective and innovative.” This is certainly the case for Let-Leeds.
Segmenting suppliers by relationship strategy
Let-Leeds has three distinct types of supplier- landlords, property services and IT/Office support. Employing the same approach to SRM for all would strain resources and potentially limit the value from such relationships. Therefore Let-Leeds has different relationship strategies for dealing with each group. Supply Management.com (2010) states: “Only by categorising suppliers into different tiers can an organisation know where to focus its relationship-building efforts. These tiers cover suppliers who are tactical, approved, preferred and strategic”. Each group needs specialist interactions that are coordinated across the business in order to get the most from the relationship. However, the small size of Let-Leeds allows closer relationships and all suppliers to be treated equally so there is less need for them to be tiered by importance.
Further to supplier segmentation and relationship strategies Webb & Hughes (2009) identify four other tools key to unlocking supplier value. These are: relationship governance, performance scorecards, structured review meetings and supply chain analysis & process re-engineering. Out of these areas the one used most by Let-Leeds is the structured review meeting. Regular meetings with all suppliers are essential in an SME and when most of the suppliers are also SME’s this makes setting up such meetings as simple as one phone call to the director. Examples of more specific supplier relationships are set out below.
Collaborating with landlords on ongoing maintenance for properties is essential as when budgets permit it is always Leeds Letting Agent: Let-Leeds policy to discover areas for improvement that will increase let-ability. There is an element of the performance scorecard here, the benefits of which Webb & Hughes (2009) defines as: “identifying improvement opportunities and measuring progress in implementing opportunities.” Landlord’s progress with property improvement is measured over time and problem properties identified that need attention.
Ongoing maintenance works and refurbishments need to be discussed regularly with property services to ensure works are being carried out as the landlord has requested and are on time/budget. These meetings also allow for cost savings to be identified. Webb & Hughes (2009) concludes “The improvements and opportunities identified through scorecards and review meetings often result in structural analysis and challenge of existing supply chains and processes.” As maintenance is a vital part of the supply chain for a letting agency then identifying and carrying out improvements to these processes can be argued to be classed as supply chain analysis and process re-engineering.
Let-Leeds constantly keeps in touch with office managers for the shared offices to make sure that everything is running smoothly and rules are being adhered to. IT support also needs to be on hand during office hours as if a printer fails or software shuts down for no apparent reason that can affect productivity for the whole business.
Having a close relationship with the web designers ensures that the vision for the website is also closely followed and it serves all of its purposes as a marketing tool. In these situations clear relationship governance is required. Webb & Hughes (2009) defines this as: “Clarification and documentation of roles, responsibilities and interfaces on both sides of the relationship” Having a clear set of guidelines by which to deal with these suppliers and also what Let-Leeds expects from them allows for the business to run much more smoothly than if there was no clear blueprint to follow.
It is clear that Let-Leeds makes use of some of the key SRM tools and clear, separate segmentation and relationship strategies are used for each different group. Key information between suppliers is shared to allow for quicker decision making between parties but due to the small sizes of all the businesses there is no need for large information sharing, supplier engagement or complicated performance measurement systems as outlined in the literature. Most SRM is done on the phone or face to face.
All in all Let-Leeds definitely displays characteristics of creating collaborative relationships. Adapted from Hughes (2008 p.24)
The office has an open door policy and therefore SRM is conducted in a much more social manner, with high levels of trust, transparency and a focus on maximising long term value as shown above.
CRM needs to be outlined as it is an important best practice of the services supply chain, although traditionally it is seen as more of a marketing function than a logistical one. Srivastava, Shervani & Fahey (1999) defines CRM as developing a comprehensive understanding of what the customer needs and desires as well as focusing efforts on meeting those needs and desires. The authors go on to add that linking CRM to supply chain management and new product/service development has been shown to increase shareholder value. Consequently it is clear that there is a great need for Let-Leeds to understand its customer base and it has already implemented steps to do this. Furthermore Ross (2005) describes the three main areas of CRM as marketing, sales and service.
Let-Leeds operates CRM in each of these areas. Marketing is through the website and hard copy communications that emphasize the brand image and draw the customer in to create an initial relationship. Sales and service CRM is achieved through interactions with the customers, data collection and analysis.
The two main types of customer are landlords and tenants. Landlords as outlined in the previous section are also classed as suppliers, but as Let-Leeds markets and manages the properties they supply then they also need to be classified as customers.
Tenants can be split into the two main groups of students and young professionals. A recent study carried out by Jones & Rushall (2012, p.6) in Leeds reported: “a clear shift in student demand towards Hyde Park and Headingley” and “growing demand from young professionals outside areas with high student concentrations.”
With market conditions changing all the time Let-Leeds is in constant contact with customers and has built up a significant database of customer details in their letting agency software, CFP. This is an ERP system designed for the letting industry that allows supplier and customer details to be held, invoices to be drawn up, accounts to be paid, marketing to be uploaded to the website and simple retrieval of information for things such as tenancies and supplier contracts. Chorafas (2001, p.9) states: “A good solution in reinventing ERP has been to create service-based architectures enabling more efficient handling from outside core applications. This is particularly important for customer relationship management, supply chain business transactions and internal management information requests.” This in essence defines what CFP is, i.e. a more service based ERP system with a service based architecture.
Let-Leeds has a database of over 16,500 potential tenants as they have a policy of recording names, contact details and requirements of all who get in contact with the business. The same is also done for landlords. This allows for a detailed picture to be built up of what properties people are looking for, in what areas and at what times of the year.
This can then be referred across to the landlord database and contact can be made with landlords who may have the particular type of property required. Wisner (2003) summarises that linking CRM along with SRM to supply chain management has been shown to increase firm performance in terms of improving supply chain responsiveness, communication and trust. This process does indeed improve communication with tenants and landlords whilst also improving supply chain responsiveness by identifying tenants needs and matching them with potential properties supplied by the landlords.
Zeithaml and Bitner (2003) adds that a big part of CRM is constantly monitoring customer satisfaction levels during the relationship to keep track on whether customer’s needs are being met, if they are not then behaviours need to be modified to meet these needs. Again as Let-Leeds is an SME, CRM is conducted on a more social basis similar to SRM. There is an open door policy for tenants to pop into the office to chat about their property or tenancy. Let-Leeds is always interested to hear how tenants and landlords are getting on with living in and letting out their properties respectively. Any improvements suggested to the service supply chain are always taken on board and again this information can be used to build up a broad picture of the market as a whole and how Let-Leeds can strive to provide the best CRM in the market.
2.4 Cross Functionality
Let-Leeds makes comprehensive use of cross functional teams to ensure that the businesses objectives are met. A cross-functional team as defined by Krajewski, Ritzman & Malhotra (2007, p.141) is: “A team consisting of members from each functional area.” Krajewski, Ritzman & Malhotra (2007, p.71) justifies the reasoning behind cross functional teams by saying: “Even though a project may be under the overall pureview of a single department, other departments likely should be involved in the project.” This is especially true for Let-Leeds where it is essential that all members of staff can be involved in decision making processes as all departments are involved in delivering the overall service package. Porth (2003, p.215) adds: “Cross functional integration implies the consistency of decisions across functions so that activities and decisions across marketing, operations, HR, and other functions complement one another.” Finally Parker (2003, p.4) states: “Successful teams combine skill sets which no single individual possesses.”
From studies carried out Parker (2003) also suggests that cross functional teams should include all levels of management, vendors and customers. Therefore if this is applied to Let-Leeds, cross functional teams can include landlords, suppliers, and tenants. This provides benefit to all involved and links back to supplier and customer relationship management. An example of this is shown in the next paragraph.
Henke, Krachenberg & Lyons (1993) summarises that functional areas represented in cross –functional teams vary from industry to industry and firm to firm but generally they include design, engineering, manufacturing and marketing. In other words any function that is directly or indirectly related to the product. However due to the size of Let-Leeds it is important to note that the size of these cross functional teams is restricted; for example admin may liaise with lettings negotiation to devise a way to chase up unpaid rental arrears. This team would then have to include the manager to make sure that the new method was ethical and in their opinion achieve good results. Another example would be when a property needs a full refurbishment. The manager would meet with maintenance who would provide an accurate assessment of the work required, a cost analysis and a time scale. The manager would then use their knowledge of the owner of the property and the type of tenant the property is intended to be marketed towards to decide whether the suggested works are viable and cost effective. The landlord would then also get involved in the team as an outside of organization member to approve the works and advise on the budget that can be afforded to them.
Wisner, Tan & Leong (2012, p.438) explains that: “Quite often in many service firms, some processes are temporarily overutilised while other processes remain under or unutilised. Rather than hiring someone to add capacity to the over utilised process, progressive firms have adequately hired and cross trained workers to be proficient in a number of different process functions.” Cross training and employee sharing are both heavily utilized by Let-Leeds.
Leeds Letting Agent: Let-Leeds has indeed adequately hired and cross trained workers who are proficient in many areas who can add capacity when needed. All employees have the ability to give credible property advice to tenants and landlords where required and all are able to make use of the CFP software to add properties to the website, make bookings and book keys in and out. All staff are also able to perform admin duties such as taking payments over the phone, drawing up tenancies and to some extent producing invoices.
At busy periods this is essential as administration is often the first area that gets bogged down with work. By sharing employees among a number of processes firms create the capability to quickly respond to rising capacity as demand increases and will also simultaneously reduce the costs of customer waiting or manipulation of the size of the workforce.
A study carried out by Valle & Avella (2003) although mainly focused on new product development concluded that cross functionality is indeed a useful exercise but that clear lines of management were still needed for cross functional teams. In practice this is true of Let-Leeds. Management encourages teams to think for themselves but ultimately all decisions come back to the top.
Throughout this report it has been made clear that due to the nature of Let-Leeds (it is mainly a service company and also an SME) that its supply chain is far from traditional. As most of the elements are intangible this means SRM and CRM are more important than ever, whilst cross functionality ties everything together in such a small business. Relationship management is mainly based around trust and face to face meetings rather than complex systems. Lewis (1995, p. 257) sums this up by stating “In customer supplier alliances, the completion of each negotiation is sealed with agreements based largely on trust.” This is especially true of Let-Leeds.
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5.0 Appendix 1 – Transcript of Let-Leeds Interview
Supply Chain Interview – Luke Gidney (Director) & Neil Dawkin (Branch Manager)
Interviewers – Paul Campbell, Duncan Christie, Mike Curnow & Ben Burnett
QUESTIONS YOUR ANSWERS
Could you briefly describe the supply chain of Let-Leeds in terms of its suppliers & customers?
Let Leeds places much emphasis on the quality of their property’s and the right location.
Suppliers – The supply chain for suppliers is based around the landlords, in that Let Leeds are trying to find the right providers for their property’s, and maintenance, in that they need an efficient maintenance team to maintain the quality.
Customers – Are obviously the tenants themselves. However Let Leeds does need to find the right type of clients to fulfill their supply chain.
Overall the supply chain is very product lead as Let Leeds need to find the right types of property’s that meet the demand of that particular time.
What are the difficulties you face when managing the supply chain of Let-Leeds?
Let Leeds do have a few difficulties incurred in their business, they are listed below:
• Finding supply – it can be difficult in this industry as the tenants don’t advertise themselves.
• Managing stock levels – having enough stock all year round to meet the demands of the tenants, Let Leeds have to get stock ready in advance in anticipation of the peak times of the year.
• Difficult to negotiate proper pricing strategies as Let Leeds ideally want to maintain a relatively low, affordable rent cost to attract the tenants, however landlords obviously want to establish rent costs as high as possible to maximise their profits.
• So basically they have to use a balancing act with their pricing between actually getting the property and then letting them out.
Could you describe how you feel your supply chain is more effective and efficient over your competitors giving you a competitive advantage in the marketplace? Let Leeds have an online base which others don’t have or at least not to the quality of Let Leeds’ base, this gives them an advantage as well as saving costs for the company.
A further advantage is that Let Leeds’ marketing of stock and quality of the maintenance team is very good; this means the properties are of a higher standard which then ultimately results in Let Leeds being able to let them quicker.
These two points both increase the efficiency of the company resulting in a higher turnover.
When are your peak times of the year in terms of student/young professionals/other?
Letting in terms of students
Letting in terms of young professionals
The maintenance team is busy throughout the year when the students tend to move in and raise problems with their property.
November is the beginning of the winter season when tenants require heating and this is when problems with boilers/plumbing can occur.
November is generally the time for property inspections so the team is constantly busy throughout this month.
And lastly June is busy months for maintenance also as the students reach the end of the tenancy and their properties require a lot of cleaning in time for the next tenant.
When are you peaks of the year in terms of landlords?
b) New Business Opportunities
Maintenance in terms of the landlords is less demanding than the students in that the only real peak time of the year for landlords is in the summer when the houses require refurbishment.
In terms of new business opportunities November and December as the new student properties become available on the market.
Switch over period
How does this period of peak demand impact upon business performance?
a) Before Peak Demand
b) During Peak Demand
c) After Peak Demand
Before – all the steps initiated by Let Leeds in this stage are employed to attempt to ensure the peak demand period is as efficient and smooth as possible.
Let Leeds plan effectively, strategically advertise and implement marketing strategies. This isn’t necessarily a busy period for the company, generally the employees hours are less.
The efficiency tends to me lower too as practices like photographing the properties are conducted individually and placed onto the system individually as staff have time to do this.
During – This period is crucial to the company and how this period is conducted generally makes or breaks the company, certainly for that year.
Let Leeds have a lot of practices in place to ensure that it does run smoothly. Luke emphasised the importance of the team working hard together to maintain the efficiency.
This period is very process driven; employees will be given a number of processes to complete.
Also economies of scale are evident in this period as the company groups together viewings, key cuttings, photographs etc. This also reduces costs and time, meaning Let Leeds is profitable and efficient.
After – This period is an assessment period where they look at what has been put in place and the results of their activities.
The majority of the steps taken are focused on planning to reduce the strain in the busy periods. Let Leeds have stock piling ready for the peak periods to alleviate some of the strain. They also attempt to plan property inspections in advance.
Also Let Leeds has tried to develop different service levels such as adding the professional markets as well as students to ensure that the periods are relatively constant. This will potentially give them the edge over other competitors as they can suffer from seasonal levels of service.
Have you taken any step to vertically integrate your supply chain to help during this period and during the year?
Would consider vertically integrating any other aspects in the future?
Also an investment sales company could be incorporated to improve the integration of the business and this sales team can feed more properties into the business as well as disposing of stock on behalf of the landlords.
Lastly could look to offer the maintenance team to other companies privately and look to expand it further.
Tenants – Assemble an excellent service with tenants keeping them updated via newsletters so they get a personal impression from the company.
Also building up relationships with all the students in particular as they tend to be less loyal and are also only at university for 3-4 years.
Landlords – This is important as in most cases landlords are networking and exchange a lot of information. Therefore it is extremely important to build up an honest relationship with them.
Constant communication is also vital Let Leeds are proactive with their landlords and are prompt and prioritise their inquiries to remain efficient with them.
Maintenance – Again this is focusing on being proactive and monitoring the maintenance team’s work, to ensure that their standards are retained to a high quality to keep up with the company image.
What promotional activities do you engage into ensure that stock is always replenished and increasing? And does it differ during/before peak demand period?
Let Leeds use the student magazine as one of their main forms of promotional activity as it is more direct to their target audience. They also release this just before the peak demand period.
The company also use Google, cold calling, brochure drops, networking to boost incoming enquiries, this is usually conducted during the off peak season to generate supply and stock for the peak period.