Use of the Lean Manufacturing Model of Manufacturing and Distribution for UK Retail Fashion: Focus on Adams Kids - Essay Example

? Use of the Lean Manufacturing Model of Manufacturing and Distribution for UK Retail Fashion: Focus on Adams Kids Contents Contents 2 Executive Summary 3 1. Limitations to Project Completion 3 2. Business Case 4 2.1 Findings 7 2.1.1 Examples of Lean Manufacturing 7 2.1.2 Adams Kids 9 2.2 Risk Analysis 10 2.3 Financial Forecasts 10 4.1 Quality Control 12 4.2 Stakeholder Feedback 12 4.3 Future Strategies 13 References 14 Appendices 16 Executive Summary One of the emerging models of manufacturing and distribution in the fashion retail industry is the use of JIT (Just-In-Time) structures to allow for following trends and the immediacy of today’s fashion needs through lean manufacturing. The following research proposal is based upon taking models that have been put into place by companies like H&M and Zara and translating it to a UK fashion retail outlet. The project will be based upon surveys of both customers and retail sales personnel as to their opinions about their retail experience in relationship to immediate response to customer wants in regard to fashion and the feasibility of creating a new system that is based upon JIT. The outlet that this proposal will address is that of Adams Kids. This retail franchise has a large enough number of stores through which to implement lean manufacturing techniques, which are also known as JIT. The stores number over 200 in 1997 when the manufacturer bought back its franchise from Sears which had taken over in 1973 and now has expanded to stores in Malta, Cyprus, Eire, India, Greece, Guernsey, Lebanon, Finland, Gibraltar, Iceland, Malaysia, Jordan, Egypt, Russia and Slovakia (Adams Kids 2012). 1. Limitations to Project Completion The following proposal will be limited by frameworks of inquiry that are outside the scope of possibility in relationship to a number of different criteria. In pursuing this inquiry into changes in manufacturing as they relate to customer satisfaction, actual changes to the manufacturing and distribution systems of a retail outlet will not be possible in order to prove the theories that are proposed. The proof of success through these models will be limited to the histories of companies that have used these methods for their manufacturing and distribution. Participants in the study will be limited to those who have layman’s knowledge of manufacturing models. The proposed research study will be limited by the understanding that participants have about the process of getting goods into retail stores, thus changing perspectives on the topic. Some aspects of research will be limited by the budget which will not allow for travel to destinations where manufacturing is being accomplished. 2. Business Case Adams Kids was established in 1933 by Amy Adams who began her clothing line from her home where she created high quality children’s fashions that were durable and of good value. The expansion of her business continued under her son, Michael, who sold the business to Foster Bros. in 1973 which was then bought out by Sears. In 1997 the company was able to buy its controlling interest back and forge ahead into international franchises (Adams Kids 2012). However, with the development of economic stress in the latter part of the first decade of the millennia, the company found itself in administration in because of lack of credit, but with Jack Shannon, its former owner, being able to buy it back in 2007 and acquiring 120 stores to save them from going under in 2009. Adams Kids in the UK (Wikimedia 2010) Habib Alvi showed interest in investing in the company in order to create a new business model through which to increase its stability and profitability (Corbetts 2009). In September of 2009, Habib Alvi bought both Adams Kids and another affiliated retail chain, Mini Mode, in order to invest and revitalize the company towards a larger return (Datamonitor, 2009). Habib Alvi had reduced the number of stores from 271 to 125 during the reconstruction that occurred after he purchased the retail chain. During January of 2010 the company found itself once again in administration (Insolvency News 2010). Currently, there are 120 stores with the brand carried in other outlets throughout the UK and the world. Approximately 1000 outlets carry Adams brand products with a presence carried in 86 countries (Franchise International 2012). The online store was established in 2005 with its existence still thriving now seven years later. Despite competition and the difficulties of current economic issues, the brand still has potential in the market and with some changes in manufacturing, could be developed back into the dominating presence it once held in the children’s wear industry. The Just-In-Time (JIT) model of manufacturing is a model that was adapted from a Japanese model of production. This creates a paradigm in which lean production occurs through the close collaboration of suppliers, manufacturing, and transportation to minimize the time from production to retail availability. This process allows for cutting edge information to be used to increase desirability of the products that are in the stores because they represent recent and fresh styling that has been made available early in the trend cycle (Lamb 2009, p. 182). The proposed research study will evaluate whether or not the public would be responsive to a restructured method of inventory availability in which new fashions were limited and in the stores through quick supply chain methods of lean manufacturing. Through cross functional team organisation, changes will be made to the way in which fashion is presented within the retail outlets and the responsiveness to inventory by the public. 2.1 Findings Customers are beginning to have an expectation of being able to receive goods quickly and with their own personalization available to their purchase. A fashion retail environment needs to mimic that capacity through quickly produced items that are replaced frequently and are limited in availability. As the internet has integrally changed the nature of consumerism, the ability to order virtually anything that is needed creates a challenge for physical retail outlets. Hobbes (2004, p. 21) states that “Improving response time is one of the first areas where competitors gain a foothold”. Through improvements in getting designs into the manufacturing process and out onto the sales floors, fashion companies can gain an advantage over their competitors in early translations of trends. 2.1.1 Examples of Lean Manufacturing Dell uses a process in which they formulate their expectations in fulfilling customer satisfaction. Dell makes computers for customers based upon filling out a customization form on their website to create a computer that is relatively unique to the needs of the consumer. The equation for software automation was worked out so that six workers working eight hours could assemble several hundred computers in response to orders. This build-to-order framework, commonly called mass customization, provides for a quick turnaround from the original time the customized order is placed to the time it is shipped. Through this methodology the supply chain is made more flexible (Lamb 2009). H&M and Zara both use this type of lean manufacturing through JIT in order to service their customer base, which has the effect of creating desire through limited availability and quickly changing inventory. In an analysis of their organisations between 2001 and 2009, both were seen to have high bargaining power with suppliers, with H&M having a slight advantage over Zara through significantly more locations. In addition to a higher number of stores, H&M has a higher turnover rate of merchandise (Pahl and Mohring 2009, p. 8). Zara’s manufacturing model is highly ambitious, but has returned in great profits for the company. From the time that an item is designed, it is possible that it can be in the stores fifteen days later. The number of each style that is available is limited so that it drives consumers to buy more quickly in fear they will lose that item (Wisner, Tan, and Leong 2011, p. 39). Outsourcing of manufacturing is limited with most of the manufacturing being done by European based factories owned by Zara. Most of the inventory is shipped by air so that an item is in the store no more than 72 hours from the time it was manufactured. No product is on the floor of a Zara store for more than four weeks (Shah 2009, p. 264). Zara’s organisational management system would also be of benefit to Adams Kids. In creating a closely tied system, Zara uses cross-functional teams in order to create a network of communications that can streamline the design-to-sales floor set of operations. This provides for a variation of the five organisational structures identified by Soo Wook Kim as it is a type of functional organisational in which the supply chain is an equal part of a system of functions (Gattorna 2009, p. 734). Schermerhorn (2009, p. 149) suggests that “A cross-functional team consists of members brought together from different functional departments or work units to achieve more horizontal integration and better lateral relations”. Through development of a highly integrated system of team work, a company can achieve a more tightly woven system for the function of production through distribution. 2.1.2 Adams Kids The design of children’s clothing is specifically and uniquely differentiating as clothing styles, colors, and motifs will determine the recognition of gender within a society. The traditional blue for boys and pink for girls has expanded to include a much wider color palette with the use of icons of children’s fashion, usually children of celebrities, making trends more relevant to children’s wear than it ever has been in the history of fashion. While traditional lines of discrimination are still potent in determining socially recognizable gender, the expansion of design and whimsical trends has created a more competitive market (Kirkham 2006, p. 120). Adams Kids has had a series of problems which have led to having less stores and restructuring of the business model. Three different times the company has gone into administration, suggesting that the business model in place is not working. Although the success of the internet store has been valuable, this will not successfully sustain the company through the long term. As well, while providing their brand through distribution in other stores, the name brand would likely benefit from a change in the manufacturing model towards a more lucrative and fast paced system. This would likely be more relevant to the children’s wear industry as children are in need of clothing at a faster rate than are adults. Their size range shifts quickly, even growing once or twice in the same year, meaning that new clothing that is unique and different from the last growth would be an advantage. Through high bargaining power and internalized control of manufacturing, coupled with a quick response time between design time to the time it gets to the retail sales floor would help to increase the sales of Adams Kids. Through increased urgency for selling items, responding to the need for new and fresh styles as children grow throughout the year and need clothing more frequently, lean manufacturing strategies will allow for a shift in the types of sales figures seen currently by Adams Kids. 2.2 Risk Analysis It is likely that this type of move will contain high risks as the financial investment towards making these changes will be heavily weighted. The development of the appropriately integrated teams that can create this type of quick supply chain requires precision and distinction. Without appropriate design teams, fabric making suppliers, garment construction teams, and distribution teams that can do the job required in the time required, the system will not function properly. As well, creating consumer interest at the heightened level required will be essential in creating the type of dynamic required to engage consumers in more energetic purchases based on the limited time a garment will be available. 2.3 Financial Forecasts If the investment is available for Adams Kids to make this bold of a transformation to their organisational structure and their supply chain management, the rewards would appear to be significant. H&M experienced increases in net sales between 2006 and 2007 of 15% with Zara seeing increases of 13% of net sales, with gross profits at 21% and 16% respectively, thus showing that the potential increases are available through the new structures (see Appendix 1). Although both Zara and H&M have well over a 1,000 stores, the proposed changes have value for a franchising that is selling both on the internet and through distribution outlets. 3. Timeline The time line for the implementation of the entire proposal would be twelve months through which organizational development and manufacturing development would be designed and instituted. The research for this proposal would happen over the initial three month period in which time consumers and sales personnel in fashion retail stores would be interviewed for how this proposal would be received in relationship to children’s clothing (see Appendix 2). The research would be comprised of a questionnaire instrument through which quantifiable data will be established. The first two weeks of the research time line are spent defining the questionnaire instrument. Weeks two and three would be spent defining which participant group locations would be utilized. The fourth week through the sixth week would be spend surveying consumers, while weeks five through seven will be spent surveying sales associates. Calculation and interpretation of data will be done during weeks eight through ten, with the results being written during weeks ten through twelve of the three month research period. The twelve week research period allows for time to evaluate the process as it is done so that changes can be made to facilitate the best possible outcomes in relationship to finding the benefits and potentials of the proposed changes for Adams Kids. 4. Evaluation of project 4.1 Quality Control In order to maintain quality throughout the proposed changes to Adams Kids, the project would need a cross-functional team that works as oversight to the whole project from research to implementation. Quality control can best be assessed through a team of people who understand each phase of the project, rather than be defined by one or two independent members of upper management. Team members would consist of members of top management, middle management, and supervisory members of the supply chain. Quality would be considered for everything from inventory to swiftness of transport of the finished products into the stores and onto the sales floor. Information Systems will be essential in creating the best possible quality control. Stair and Reynolds (2010, p. 74) suggest that “Total quality management consists of a collection approaches, tools, and techniques that fosters a commitment to quality throughout the organisation”. Through the use of well-defined measures and tools, the quality management team can continually assess the progress of the proposed changes. 4.2 Stakeholder Feedback One of the most important part of the process will be continually assessing stakeholder feedback from all stakeholders along the supply chain. Forbes and Manson (2007, p. 20) suggest that it is vital to obtain feedback from both external and internal stakeholders in order to evaluate services that are being used and provided. Without stakeholder feedback and appropriately supporting all stakeholders along the supply chain, it is likely that some aspect will fail. Creating positive motivations for continuing relationships is essential to create integrated teamwork and purposeful use of providers for quick supply chain structures. 4.3 Future Strategies Future strategies once this new organisational structure is created and the manufacturing structure is rehabilitated would be to work toward developing a design team that can adequately create quick and trending fashions for the continuation of the process. Evaluating each team within the structure, from the designers to the transportation would be necessary to make sure that each leg of the process was fully functioning up to expectations. Evaluating manufacturing itself will also be critical in determining which form is the best possible asset, whether it be outsourcing or buying manufacturing factories to create the garments needed in the time expected. References Adams Kids. (2012). [Online] Retrieved from http://adams.co.uk/about-us (Accessed 14 June 2012). Corbetts. (2009). Corbetts advises on Adams takeover. [Online] Retrieved from http://www.cobbetts.com/News/BirminghamlawfirmadvisesonAdamstakeover (Accessed 13 June 2012). Datamonitor. (15 September 2009). Habib Alvi investments acquire Adams Childrenswear and Mini Mode. [Online] Retrieved from http://www.datamonit or.com/store/News/habib_alvi_investments_acquires_adams_childrenswear_and _mini_mode?productid=10C19AA8-9413-41E0-9B00-FBAA281EBFF3 Forbes, E. M., & Manson, C. J. (2007). Innovate, collaborate or die: How to create an alliance or merger for a stronger, more effective non-profit. Toronto: Civil Sector Press. Gattorna, J. (2009). Dynamic supply chain alignment: A new business model for peak performance in enterprise supply chains across all geographies. Farnham, England: Gower Pub. Hobbs, D. P. (2004). Lean manufacturing implementation: A complete execution manual for any size manufacturer. Boca Raton, Flor: Alexandria Publishing. Franchise International (2012). The Adams success story. [Online] Retrieved from http://www.franchise-international.net/page/adams-kids/adams-success- story.php (Accessed 13 June 2012). Insolvency News. (2012). Industry: Adams Children’s Wear – third admin in three years. [Online]. Retrieved from http://www.insolvencynews.com/article/12450/in dustry/adams-childrenswear-third-admin-in-three-years Kirkham, P. (2006). The gendered object. Manchester: Manchester Univ. Press. Lamb, C. W. (2009). MKTG. Toronto: Nelson Education. Pahl, Nadine and Wiebke Mohring. (2009). Successful business models in the fashion industry: Strategic of H& M compared to Zara. Germany: Grin Verlag. Schermerhorn, J. R. (2011). Organizational behavior. Hoboken, N.J: Wiley. Shah, J. (2009). Supply chain management: Text and cases. Upper Saddle River, N.J: Pearson Education. Stair, R. M., and Reynolds, G. W. (2010). Principles of information systems: A managerial approach. Australia: Course Technology Cengage Learning. Wikimedia. (2010). [Online] Retrieved from http://commons.wikimed ia.org/wiki/File:Adams_kids_-_Townfield_-_geograph.org.uk_-_1690921.jpg (Accessed on 10 June 2012). Wisner, J. D., Tan, K, C., and Leong, G. K. (2011). Principles of supply chain management: A balanced approach. Mason, OH: South-Western. Appendices Appendix 1 Financial Performance of H&M and Zara in 2007 with comparison in 2006 (Pahl and Mohring 2009, p. 9) Appendix 2 Gant Charts Implementation of Entire Proposal Research Timeline Appendix 3 Self Evaluation In creating this proposal, it is clear that the learning outcomes were exceeded and the potential for real change for the Adams Kids retail stores is feasible. The structures used by H&M and Zara both reflect a forward thinking that will lead companies through globalization and into the future. As the topic developed, it was surprising to see the potential of this framework as it could be adjusted for smaller companies in order to work with the market in best pleasing consumers in order to draw them to specific brands. It is clear that the evaluation of both the cross-functional team management structure and the lean manufacturing structure provide for resource through which consumer satisfaction is exceeded and energetic response is elicited. The project called for putting together a reasonable expectation that the research that would be done could be implemented in a real world strategy in orders to have an effect on an existing business. While the limitations on the research will limit the capacity for implementation, they will provide for a structure through which to design such a system for a small retail franchise. Understanding consumer perspectives on this type of a JIT system will provide for further explorations of how the internet and the speed at which purchases are now available, and in addition the speed at which customization is available, have affected physical retail sales. This research will have far reaching implications on the retail store structure through organisation and supply chain management. Read More