Operations management for IBA: Assignment 4

JD Sports

Group 6

Nikita Dubovs 2082206

Jort de Jong 2059329

Katrina Anna Stiebrina 2080602

Tiziano Di Gregorio Botek 2089304

Instructor: Brouwer, J.J.H.M.

Word count: 1984

Table of contents

Introduction..............................................................................................................................................................

Pull or Push operations Strategy?...........................................................................................................................

Arguments why JD Sports should or should not have inventory in their operations...............................................

The possibilities for implementing different elements of the lean management philosophy....................................

The applicability of Total Quality Management (TQM) principle..............................................................................

Conclusion...............................................................................................................................................................

Reference list...........................................................................................................................................................

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Introduction

JD Sports is a relatively big fashionable brand company. JD Sports operates

internationally, primarily in Europe but also in the U.S.A., Dubai, Singapore, etc. (JD Sports,

2023). The company was created in the UK in 1983 by John Wardle and David Makin and then

expanded across Europe and worldwide. JD Sports is well-known, particularly for being a

leading retailor company in the fashionable branded market. Henceforth, the company retails

only products from other brands such as Nike, Adidas, The North Face, etc. JD Sports is trying

now to expand its activities mainly in Asia. This paper will provide an analysis of the company,

considering the control strategy employed by JD (between push and pull), giving a description of

the strategy. It will argue the pros and cons of having an inventory involved in its operations.

Furthermore, there will be an analysis on the possibilities for JD Sports to implement different

elements of the lean management philosophy. The paper will finally present a study on the

pertinence of the Total Quality Management in JD sports.

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Pull or Push operations Strategy?

On the one hand, a pull strategy consists of leaving the product at its last production and

delivery stage, although that stage is already performed and completed. On the other hand, the

push strategy, ‘pushes’ the product to the following process as soon as the actual stage process

is completed (Slack et al. 2020). JD Sports uses a pull supply chain marketing strategy. The

stock in their retail stores is significantly limited. The client can go to the store or on the online

website to order a desired product. Those products are stocked in warehouses until the stocks

are empty or a client wants them. Such a strategy is more pull-based, as the warehouse

products are not necessarily “pushed” in the retail stores.

On the contrary, the client has to order the product for it to be available in the store (JD

Sports, 2023). The pull strategy aligns with the lean management of the company. Lean

constitutes an entire business philosophy concerned with the management of business

operations that aims to maximize efficiency and quality while minimizing waste and costs in the

production processes. In this philosophy, the company pushes continuously to perfect all the

processes involved in the production and delivery of a product or a service (Slack et al. 2020).

This type of management is, in particular, widely spread in Japan (Katayama & Bennett, 1996).

In 2023, the CEO of JD Sports announced a massive investment in the supply chain

management of JD Sports. The investment will, in turn, further optimize the supply chain.

Moreover, JD Sports brought the term “affordable luxury”.

Additionally, the company only sells qualitative brands and tries to make those products

affordable with discounts. JD Sports gives importance to the wasting reduction and the

optimization of its supply chain processes (The Guardian, 2023; Independent, 2023).

Henceforth, the company not only opts for a pull strategy but also tries to adopt a lean

management strategy, including this pull strategy for the sale of its qualitative products.

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Arguments why JD Sports should or should not have inventory in their operations

The decision to maintain inventory levels in JD Sports should balance the need for

immediate product availability and customer satisfaction with the costs and risks associated with

inventory management.

Arguments for having inventory:

1. Customer Satisfaction and Immediate Availability: Stocking inventory ensures that

products are immediately available for customers, enhancing satisfaction and potentially

increasing sales. For a retailer like JD Sports, having popular items in stock is crucial for

meeting customer expectations.

2. Buffer Against Supply Chain Disruptions: Inventory acts as a buffer against

disruptions in the supply chain. Given the current global supply chain challenges, having

inventory can help JD Sports mitigate risks associated with delays from suppliers.

3. Volume Purchasing Discounts: Buying in bulk often allows for volume discounts from

suppliers. This can reduce the cost per unit, potentially leading to higher profit margins.

4. Better Control Over Product Quality: By having a physical inventory, JD Sports can

better manage and control the quality of the products they sell.

5. Seasonal Demand Management: For seasonal products, having inventory allows JD

Sports to meet the increased demand during peak seasons without the risk of stockouts

(Ton & Raman, 2010).

Arguments against having Inventory:

1. High Costs: Inventory management involves significant storage costs, insurance, and

potential losses due to unsold goods or obsolescence. These costs can be particularly

high for fashion and sportswear items that may quickly go out of style.

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2. Cash Flow Constraints: Capital tied up in inventory could be used elsewhere in the

business. This can be particularly challenging for rapidly changing industries where

agility and the ability to invest in new opportunities are crucial (Johnson, 2022).

3. Risk of Obsolescence: In a fast-moving sector like sports apparel, trends change

rapidly. Holding large inventories can result in being stuck with outdated or unsellable

items.

4. Complexity in Inventory Management: Managing inventory, especially for a diverse

range of products, can be complex and resource-intensive. JD Sports would need to

invest in sophisticated inventory management systems.

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The possibilities for implementing different elements of the lean management

philosophy

JD Sports has meticulously integrated lean management principles into its operations,

encompassing various aspects of its business. Here's a breakdown of the key lean

management practices employed by JD Sports:

1. Kanban: JD Sports has strategically adopted Kanban, a visual management system that

utilizes cards to signal the timing and quantity of inventory movement and production.

This system has effectively streamlined inventory management, reducing excess stock

levels and optimizing inventory flow (Rahman et al., 2013).

2. 5S: Embracing the principles of 5S, a Japanese system that emphasizes organization

and efficiency, JD Sports has transformed its workplaces into well-structured

environments. This methodology encompasses Seiri (sorting), Seiton (setting in order),

Seiso (shining), Seiketsu (standardizing), and Shitsuke (sustaining), ensuring a clutter-

free, organized workspace that promotes productivity and reduces waste (Integrating 5S

Principles With Process Improvement: A Case Study, 2015).

3. Value Stream Mapping: Recognizing the importance of identifying and eliminating

waste, JD Sports has proactively employed value stream mapping, a tool that helps

visualize and analyze the entire value stream, from raw materials to the customer's

hands. This tool has enabled JD Sports to pinpoint areas of waste and implement

corrective measures, optimizing processes and enhancing efficiency (Rahani & Al-

Ashraf, 2012).

JD Sports' unwavering commitment to lean management has translated into a multitude

of tangible benefits, propelling the company to new heights of success:

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1. Cost Reduction: By eliminating waste and streamlining processes, JD Sports has

experienced significant cost reductions, enhancing its financial performance.

2. Quality Enhancement: Lean management's emphasis on standardization and defect

reduction has led to a noticeable improvement in product quality, boosting customer

satisfaction.

3. Enhanced Customer Satisfaction: JD Sports' lean management efforts have directly

contributed to improved customer satisfaction, as evidenced by positive customer

feedback, and increased customer loyalty.

4. Increased Competitiveness: JD Sports' ability to reduce costs, improve quality, and

enhance customer satisfaction has positioned it as a formidable competitor in the retail

industry.

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The applicability of Total Quality Management (TQM) principle

Total quality management philosophy focuses on quality management (development,

maintenance, and improvement) in all (total) parts of the organization. This part will cover most

of the basic activities and effort needed for increasing and maintaining quality that will increase

the benefits of JD Sports.

First and foremost, meeting the needs and expectations of the customers. JD Sports'

main operation is retail, meaning, the customers expect a certain level of quality for their

branded athletic footwear, apparel, and accessories. The best way how the company can be

certain about the quality of the products it sells is by choosing only well-known, popular, and

already proven high-quality brands, for example, Nike, Adidas, Vans, etc.

Another practice is including every person in the organization, which means, every

person in the company has the potential to contribute to improvements that could increase

quality or ways how to systemize processes better for more efficient ways of quality control. This

mindset means hearing from workers who do routine and the lowest level of duties, as they

encounter the same process every day and could have more practical and efficient solutions for

quality management. JD Sports in their Ethical code of practice has a section under its

“commitments” that states: “When notified in writing, we will respect any unique proposals,

ideas, or registered Intellectual Property Rights as appropriate” (JD Sports Fashion PLC

//Ethical Code of Practice, n.d.).

An additional activity that is crucial for an organization is considering all costs of quality.

Lots of organizations and managers cannot commit to fully implementing TQM due to the high

initial costs. The mindset needs to be changed from looking at quality control as something

extra that needs to be paid for to viewing it as a foundation of the operation process. What

organizations sometimes fail to consider is that the high initial costs will over time create a larger

benefit than before because when quality is maintained there are no costs for fixing any errors

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(Slack & Brandon-Jones, 2019). The first is prevention costs, which are incurred to prevent

problems and errors from happening, also called the proactive part – doing before something

has happened. In JD Sports' case, it means supplying only from quality brands in that way

avoiding troubles from brands that could have quality problems. As said in its Ethical Code of

Practice, under ways how the suppliers are chosen: “Ability to improve our customer and

colleague experience via quality product, service, or innovative use of technology” (JD Sports

Fashion PLC //Ethical Code of Practice, n.d.). The second type is appraisal costs – controlling

and checking if errors have occurred during or after the making of products. IN JD Sports

posted a document stating regular quality audits (JD Sports Fashion PLC Audit and Risk

Committee Terms of Reference, 2023). The third type – internal failure costs – deals with errors

inside the operation (costs of not usable materials or time spent on coping with the errors). An

example of this was also shown in JD Sports “commitments”: “Unsuccessful suppliers will be

offered the chance to receive feedback on their proposals” (JD Sports Fashion PLC //Ethical

Code of Practice, n.d.), where instead of finding other suppliers, time is spent on explaining the

errors to the unsuccessful suppliers.

All the previously mentioned practices, activities, and examples prove that JD Sports is

trying to systemize quality control even though there are still aspects that could be improved for

more benefits. Although the company is already known for its affordable prices which could

result from standardized and improved total quality management practices.

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Conclusion

JD Sports implements a pull strategy holding limited stock in their stores. The pull

strategy aligns with the lean management philosophy as the client has to order the product for it

to be available in the store. JD Sports also faces different costs, risks, and benefits when

balancing the immediate product availability and other considerations of inventory management.

The company has to make inventory decisions between immediate customer satisfaction, better

control over products, and discounts for buying in bulk against high inventory costs, tied-up

capital, and risk of obsolescence. Several lean management principles have been successfully

integrated, for example, Kanban for streamlined inventory, 5S for an organized workspace, and

Value Stream Mapping to identify and eliminate waste. The success of these implementations

has led to benefits like cost reduction, improved product quality, and enhanced customer

satisfaction. As for the TQM focusing on standardized quality in all operation parts, JD Sports is

implementing several practices that focus on the company's long-term benefits. Selecting only

from high-quality, well-known brands for guaranteed customer satisfaction, valuing input from all

levels for quality improvement, and considering costs and taking action in all stages of quality

control are some of the examples that allow JD Sports to be one of the best in the market.

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Reference list

Independent. (2023).

https://www.independent.co.uk/business/jd-sports-hails-record-profits-as-its-key-

customers-buoyed-by-jobs-market-b2340375.html

Integrating 5S principles with process improvement: A case study. (2015, August 1). IEEE

Conference Publication | IEEE Xplore.

https://ieeexplore.ieee.org/abstract/document/7273045?casa_token=XWv-

eM9V9XcAAAAA:k36p8oGTu--

eaNXLfwp6i26M4Sr8HExf7k_jBDtjbPRjDkTbt1UQjdwFml_MB3bDMaDk5qY2DjiQ

JD Sports Fashion PLC Audit and Risk Committee Terms of Reference.

(2023, January 24).

https://www.jdplc.com/sites/jd-sportsfashion-plc/files/homepage/esg/governance/2023-

02-02-final-terms-of-reference-jd-audit-and-risk-committee.pdf.

JD Sports Fashion PLC //Ethical Code of Practice. (n.d.).

https://www.jdplc.com/sites/jd-sportsfashion-plc/files/ethical-code-of-practice-2021.pdf.

Johnson, M. (2022, 7 februari). Why and How to Reduce the High Cost of Too Much

Inventory. The Retails Owners Institute. Geraadpleegd op 26 november 2023, van

https://retailowner.com/Inventory/Costs-of-Excess-Inventory

Katayama, H., & Bennett, D. (1996). Lean production in a changing competitive world: a

Japanese perspective. International Journal of Operations & Production Management,

16(2), 8-23.

Slack, N., & Brandon-Jones, A. (2019). Operations Management. Pearson.

The Guardian. (2023).

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 https://www.theguardian.com/business/2023/may/17/jd-sports-profits-trainers-us-europe-

price-rises

Ton, Z., & Raman, A. (2010). The effect of product variety and inventory levels on retail store

sales: a longitudinal study. Production and Operations Management, 19(5), 546–560.

https://doi.org/10.1111/j.1937-5956.2010.01120.x

Rahman, N. A., Sharif, S. M., & Esa, M. M. (2013). Lean Manufacturing Case Study with

Kanban System Implementation. Procedia. Economics and Finance, 7, 174–180.

https://doi.org/10.1016/s2212-5671(13)00232-3

Rahani, A. R., & Al-Ashraf, M. (2012). Production Flow Analysis through Value Stream

Mapping: A Lean Manufacturing Process Case Study. Procedia Engineering, 41, 1727–

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