NOON COMPANY OPERATIONS ANALYSIS

INTRODUCTION

BACKGROUND

Noon.com is an e-commerce website that operates mainly in the Middle East. The company is based in the United Arab Emirates and is currently operational in the United Arab Emirates, Egypt, and the Kingdom of Saudi Arabia. The company now has three fulfillment centers and over 30 distribution centers across the three markets. The company was founded in 2016 and has been growing significantly over the last three years with a focus on being the first Arabic-first e-commerce company to become the leading retailer in the rapidly growing Middle East.

This paper looks at the operations of the company and pinpoints operational challenges that exist within them. The paper additionally offers a solution to the difficulties identified while applying functional theories learned in class. The paper aims to understand the operations of a company that is seeking to provide world-class e-commerce service to its customers while competing against Souq.com, which is backed by the world’s largest company in the form of Amazon.

This research stems from the premise that for the company to be able to reach its goal of being the largest retailer in the Middle East, it will have to improve its operations drastically. Additionally, a study published in a recent article shows that the company is lagging behind Souq despite its seemingly higher growth rate. To beat a company that has been in existence for nearly 15 years requires a near-flawless system to attract and keep customers. This paper explores the significant challenges and how the company can go about addressing them.

Explanation of the problem

Online retailing is similar to traditional brick and mortar retailing in many ways. One way in which the two are identical is the expectations that the customers have of the service provider. For the most part, the customer wants to get what they ordered and promised to them on purchase. In e-commerce, since the product is not visibly examined before purchase, the reputation of a retailer on the issue of product quality is a critical one. According to a study I conducted online, 46% of the respondents admitted to looking out for quality first when shopping online. Noon.com has an issue with product quality due to its decision to carry products from a large number of vendors.

This issue of inauthentic goods has a negative influence on public perception of the company and may lead to significantly lower traffic and sales through its site. Additionally, large numbers of returns are bound to reduce the company’s profits by increasing return shipping costs. With the average rating of suppliers on the company’s listings reducing, the company may experience lower sales and see a significant loss in revenue from dropping consumer confidence in the brand.

The second issue noted in Noon.com’s operations is the delivery services they offer. For products that unlisted under their Noon Express flagship, the company ordinarily takes a lot longer to deliver than competing firms. This prolonged delivery time is due to the inventory having to be delivered from the vendor to the retailer and then await fulfillment and, finally, delivery to the client. Additionally, the company does not guarantee the availability of the product. At times, the client may fail to receive delivery of the product they already paid for due to it running out of stock between payment and fulfillment.

Scope of the Study

This research will explore the operational challenges of the company through interviews, review of available literature, and case study. The delineation of the operational challenges will be the first part of the research as the researcher seeks to paint a clear picture of the issues to the client. The interview will be conducted through online means. It will aim at gauging public perception of the firm, its services, and particularly their view on its chances of survival given its current status.

The review of online literature will aim at comparing company practices to industry standards while also seeking to see what experts in the field have to say about the identified challenges. The choice of literature will depend on the recency and relevance of the text and the authority of the author(s). The literature review will form part of the solution selection and development in conjunction with the company’s unique qualities.

The case study will deal with matching solutions selected fro development with the company’s particular position. The case study will involve a review of related materials to the company and using the knowledge that arises from such research to refine the study’s conclusions to make them as accurate and relevant as possible.

Overall, the study will limit itself to the analysis of the way the company offers its services and how these processes may be improved with help from the theories of operational management. The improvements will be developed and presented as the conclusions of the study with recommended action steps laid out for review by interested parties.

Rationale of the Study

Internet technology, combined with smart devices, has led to many of the companies operating through online channels. Projections show that online advertising will exceed traditional advertising by 2022. This increasing reliance on online advertising shows the shifting of businesses’ attention to the online domain. As this volume of online transactions increases, the need for well-developed knowledge on the operations of online enterprises will increase. This study helps provide a basis for online activities in the online domain of the Middle East. The Middle East is one of the fastest-growing markets in the world, and increasing the available knowledge on the topic of operations management would have a profound effect on the future operations of online enterprises in the area.

Additionally, an audit of the challenges faced by one of the best-funded companies in the region would serve to provide a picture of some of the most significant operational challenges that face the e-commerce sector and specifically in the Middle East. This research will provide a knowledgeable starting point for companies looking to enter the market as well as established players looking to streamline their business models to get the best out of the cash-rich Middle Eastern market.

This research also provides an opportunity for the researcher to become well versed with the task of operational systems auditing. Familiarity with these concepts is vital as it prepares the student for real-world challenges while contributing to the body of knowledge.

Literature Study

Value of Quality in Online Purchases

Online consumer buying behavior is significantly different from offline buying behavior. Aggarwal (2017) observes that online buying behavior is affected dramatically by consumer perception compared to offline buying. He attributes this to a lack of visual proof for the buyer, which pushes them to rely much more on the quality ratings of other consumers who have had the experience of purchasing form the brand. Parmar and Chauhan (2018) support this view by pointing out that this metric is one of the most trustworthy sources of information by online consumers. Customers value quality ratings for their perceived impartiality and a lack of interference from the vendors compared to other sources of information such as sponsored reviews.

According to Astuti and Putri (2019), quality is a significant factor for most online purchases, including among the highly sought-after millennial market segment. The most commonly used measure of quality is the reviews and customer ratings issued by past purchasers for the product in question (Shi et al. 2018). Developing a system of ranking and tracking these metrics is an effective way of identifying low product quality suppliers (Karthik, Ganapathy & Kannan 2018).

Quality Management in Online Commerce

As mentioned above, customer-generated reviews are an appropriate way of ranking suppliers based on quality (Karthik, Ganapathy & Kannan 2018). E-commerce companies need to provide incentivization for suppliers to offer top-notch quality. One way to do this is to use algorithms that reduce the views that a supplier’s products receive if their rating is consistently low.

Quality management in online enterprises can be problematic as it involves different people at different stages of the fulfillment and delivery process. On the one hand, the delivery of products to the retailers needs to be managed effectively with methods on hand to check and verify the quality of every received product. Due to the competitive nature of the online retailing industry, it is crucial to ensure that the systems in place allow for speedy verification of product quality.

The delivery process falls entirely under the control of the retailing firm and therefore needs to be managed in-house. The use of industry packaging standards can help reduce damage to goods while on-transit. Additionally, checks and balances from the driver and handler of the package from the warehouse to the last mile need to be established. With clear lines of custody from the start to the finish of the fulfillment and delivery process, the number of products broken or damaged can go down.

The requirement of third-party evaluation of supplier products is also a commonly used method of quality management. Amazon, the world’s leading retailer, faced a quality audit that forced it to introduce this measure as a requirement for seller products listing on its site. Additional steps that may require the use of third parties include the condition that suppliers meet international standards I procurement and labor.

Effect of Delivery Times on Consumer Purchase Decision

Online consumers are getting more and more demanding on the speeds of delivery they expect. Large companies such as Amazon are continually reducing the delivery items to appease consumers. These high speeds of delivery require significant resources and are often the cause of substantial increases in the price of the product. Companies are continually facing the challenge of balancing speed and cost of delivery to find combinations that increase consumer action and improve profitability values.

Customers increasing need for speedy delivery is trounced by their desire for cheap delivery rates. Companies must balance increasing speed of delivery with costs to ensure that they do not sacrifice profitability or cash flow unnecessarily. Costs associated with the increasing pace of delivery are warehousing costs and transport costs. Just in time inventory and faster fulfillment of orders are some methods used to reduce the cost of operation while meeting the required standards.

Order Fulfilment and Delivery Speed

Order fulfillment refers to the process of packaging, tagging, and matching products to their destinations. Other steps, such as batching by location or by the delivery method, may be added to the process. The initial position of the package at the time of order placement plays a significant role in the time it takes to fulfill an order and deliver it to the client. Fulfillment systems such as Amazon’s FBA can improve the speed of order fulfillment and delivery to the client. These systems work because they reduce the time it takes the product to get to the packaging step by excluding the middlemen in the form of the supplier.

Technology Suitability

There are a lot of e-commerce sites across the world. Market differentiation is a huge part of why globalization of e-commerce has become such a difficult achievement for the market leaders. Due to this challenge, the purchase of technology systems from external developers has become an unsustainable method of doing business. Most companies result in building and maintaining systems in-house as they are customizable to suit locales. In-house developed systems have the disadvantage of being untested and may contain many bugs.

Methodology

This research uses online surveys to establish operational challenges that the Noon e-commerce company may be facing. The online survey method uses the online poll to ask questions of a predetermined respondent type. The online survey tool used for this study is surveymonkey.com. The service allows the user to upload a series of questions and define an audience. Respondents who meet the qualities predefined in the audience traits then answer questions, and the uploader can view these responses and even analyze them within the survey tool.

This method was chosen for its ease of use and the speedy nature with which one can get access to accurately acquired responses. Ordinarily, such a survey would require a significant number of people to seek respondents who meet the requisite criteria. Additionally, it would be impossible to complete the data collection phase as quickly as can be accomplished through online means due to the increased engagement of online media in the current age.

An added benefit of online surveys is the fact that it rescued incomplete responses. By serving the study to respondents who already meet the criteria, the number of respondents who do not answer the questions or provide low-quality responses goes down. This low quality of responses is mainly an issue where the target demographic is required to give precise information regarding a topic of interest that may be of little interest to those outside a specific niche or age bracket.

The online survey method has the disadvantage of people only completing the surveys to receive the compensations. In this case, this was limited by ensuring that the questions were short enough that they did not allow time for boredom or monotony to creep in during the survey period. Additionally, precise details were provided to ensure the respondents were all people who were invested in the topic and were bound to give the correct answers as an honest review of a service they have used before.

To further understand the operational challenges faced, the research also made use of a literature review. The literature review included a review of literature about the challenges faced by the e-commerce company and how different solutions may be sued or have been used before by companies facing similar challenges. The literature review enables the researcher to establish a baseline on what previous research has uncovered. It also provides topic experts with the opportunity to inform decision making in the selection of a solution to the problems.

Additionally, the research uses case study to relate the e-commerce problems to the Noon e-commerce company. This case study requires the study of new material about the company to identify trends and circumstances that are unique to the company and may have an impact on the choice or implementation of a solution. The case study will help ensure that the solution provided is a reasonable and practical one for the company by taking into account the current status of the company and its target markets.

Overall, the data from the survey will be discussed with the aid of knowledge garnered from the literature review section, as well as those concepts discussed in class. Afterward, the formulation of a solution will be done by considering case factors together with knowledge from the literature review section and presented to the reader in an easy to understand the way that it can be implemented at the company.

Findings

The following section will serve to support the hypothesis that Noon Company’s operations management requires improvement. The charts are derived from the analysis of the survey administered through the online service known as Survey Monkey.

Fig. 1: Frequency of online shopping.

The above figure shows that e-commerce is gaining traction among the public, with the majority of people shopping at least monthly (77.63%).

Fig. 2: Website preference.

This figure shows that Noon is gaining traction among the public.

Fig. 3: Customer Influences.

This figure shows that quality is still the customer’s most significant factor for purchase. This significance is particularly relevant to the study as it highlights the high risk presented by the lack of good quality management procedures at Noon.

Fig. 4: Noon’s identity fame.

This figure shows that all respondents know about Noon, which is good news for the company.

Fig. 4: Effect of quality on company position.

This figure shows that most respondents (80.27%) think the issue of many vendors and its effect on quality may impact Noon negatively. This impact is also relevant as it represents the essential nature of the management of vendor quality and, consequently, retailer reputation.

Fig. 5: Noon quality public perception.

This figure shows that the public perception of Noon product quality is mostly positive.

Fig. 6: Noon Delivery Speed public perception.

This figure shows that the public perception of Noon delivery speed is mostly positive. It indicates that some things are doing well. However, it may also represent the fact that most people buy Noon Express items. This would imply they purchase other items from other retailers. Getting delivery times down is critical for improving overall sales numbers.

Fig. 7: Consumer preference for Noon Express products.

This figure shows that most respondents would instead purchase Noon Express-branded products.

Analysis of Current Operational issues

The delivery of products lacking in quality is a significant challenge for Noon.com. First of all, the products are often returned according to their return policy. Returns result in loss of revenue in terms of the return shipping costs incurred by the company. Additionally, the reasons for the returns may be spread about through word of mouth or written review and result in a negative perception of the company within the public. With reduced trust in the company, the sales on the site will gradually decrease, and the company will lose ground on its competitors. This falling further behind competitors is contrary to the company’s goals and ought to be avoided at all costs.

This challenge could be due to two different errors in the system. The first possibility is a lack of effective screening of products before they are accepted from the supplier. This would result in suppliers delivering defective products to Noon fulfillment centers and Noon representatives failing to notice the defect and delivering the product to the consumer as is. If this is the case, then this challenge requires an overhaul of the training and vetting system of the company to ensure competency among its chief staff. Additionally, emphasis ought to be laid upon being able to verify the quality of products. A chain of custody policy should also be effected to ensure that the products delivered by the company’s suppliers always meets the quality requirement and that the product remains in good quality till it reaches the consumer’s hands.

The other alternative is that the goods are in good condition on arrival, and sometime between submission by the supplier and reaching the consumer’s hands, they get damaged. Similarly, this would be a sign of flaws within the product handling system. The chain of custody policy, as well as the use of requisite product quality management devices such as padded packing and stacked trucks, should be able to reduce the occurrence of such errors.

A less than timely delivery of products not listed under the Noon Express banner is the other operational problem. For most people, the choice to go with Noon Express listed items is almost obvious as they cannot wait the nearly two weeks it may take to receive delivery of a product not listed under that category. This lengthy delivery period is a result of the time it may take the supplier of a product that is not already within the company’s fulfillment center to be brought in by the supplier. Asking all suppliers to pre-supply orders in batches for faster fulfillment is an expensive affair and may not bring the desired outcome if not done correctly. Just in time inventory systems allow a retailer to reduce the costs of storage and warehousing as well as maintain freshness within the inventory.

Working on inventory management as well as a more incentivized program for sellers to bring them aboard the Noon Express program should be a priority of the administration to boost sales and eliminate frustration with the quality of service among the company’s customers.

Conceptual Solution

With the shortcomings of Noon’s operations, it is clear that a theoretical solution needs to be introduced. For both the challenge of quality management and delivery speed; redesign of the process is critical.

The current process involves suppliers delivering products to the fulfillment center on an order-by-order basis. This method introduces inconsistencies in both the quality management process and the delivery speed. This step should be eliminated to reduce delivery time and allow for orders being delivered to be separate from those arriving from the suppliers. This allows for smoother division of work and eases the task while also improving customer experience.

Splitting the tasks of receiving supplier deliveries and preparing orders for customer deliveries can ease the burden on workers, make them more productive, and make their performance trackable and manageable. Additionally, the reduced number of tasks to be handled by each warehouse clerk will reduce the number of errors made by these workers. This improved workplace accuracy will result in better quality management of products during the fulfilling and delivery process.

A cataloging system should also be installed to ensure that the computer system can track the remaining number of products and automatically prevent orders from being made until they have been restocked. This would aid in inventory management and reduce the frustrating occurrence of a product going out of stock midway through the process of ordering and delivery. Such a system would be easy to install because the firm already has its tech department that covers in-house system development. This would require the simple matter of adding in a snippet of code to track the inventory and allow for a much more seamless customer experience in terms of availability notification.

Conclusion and Recommendations

The increased number of task warehouse clerks are expected to handle their efficiency and increases room for error. Additionally, the inclusion of an extra step in the fulfillment and delivery process in the form of a vendor supplying ordered goods slows down the delivery process. It increases customer dissatisfaction with the quality of service. This extra step also makes it difficult to monitor the quality of products thoroughly as they come in with very little time before they have to be packaged for delivery. This makes the process of quality control be a rushed one and reduces effectiveness.

With the above conclusions in mind, the study recommends the following:

• The separation of receiving and fulfilling duties at the warehouse.
• Conducting quality checks at the receiving terminal before accepting goods for holding.
• Modifying system to automatically track inventory and notify customers accordingly.
• Requiring all vendors to provide stock of listed products before-hand.
• Having a transparent chain of custody of products to ensure quality is managed as carefully as possible.

Reference LIST

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Parmar, G. and Chauhan, J., 2018. Factors affecting online impulse buying behaviour. International Journal of Education and Management Studies, 8(2), pp.328-331.

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