A dominant retail centric supply chain participant - Research Paper Example

Analyze a case study of a dominant retail centric supply chain participant demonstrating the strategies it uses to retain its dominance: A case of Mark and Spencer – retail giant I. Introduction: Earlier manufacturers used to dominate the supply chain. But things have changed now. Today, supply chains have become retail centric where retailers have grabbed the power of control over the supply chain. This research report will analyze a case study of a retail centric supply chain participant demonstrating the strategies it used to retain its dominance. For the purpose of the research, this study has put its focus on one of the very successful international retailers, Mark and Spencer, which is originally based in UK, but has extended its wings to various countries across the globe. Mark and Spencer has been a very dominant player in supply chain management. This research report aims at findings out the strategies that it has applied to retain its dominance in the supply chain. One of the leading retailer companies of UK is Marks and Spencer (M&S). It is a successful company since its beginning in the year of 1984. The success, which this company has achieved, has been obtained through some excellent networks amongst the local suppliers who are indeed very dedicated towards the growth of their company. However, it has changed its strategy in sourcing when it tried to extend its area beyond the national boundary. In the 1990s, it dumped its sourcing strategies in UK and went in for more open policies. This was done keeping in mind the cost reduction which they would apply in relocating the various manufacturing units form the established suppliers in overseas at low cost. Such a change in these supply chain were brought about owing increase in competitive pressure. Downward pressure was felt in the movement of price due to increase in the competition level. This meant reduction in the cost to sustain the company in the competitive market. (M&S, 2010) Successful supply chain management means success for any retailer. Thereby it is indeed interesting to study the various strategies in the supply chain of M&S in UK. This paper shall deal with the strategies adopted by M&S in supply chain. It shall also enhance on the fact that whether these strategies are compatible with the competitive ones. In addition to the above said discussions, it will also check whether the structure of supply chain which it has designed can sustain the strategy. The paper will also discuss supply chain structure that the company has been designed to implement its supply chain strategy. It is very necessary to look into the supply chain structure of a company to have deep insights in the strategies that a retailer adopts to maintain its dominance in the supply chain. It will discuss whether the company has been able to respond to the changing environmental situation within supply chain to retain its dominance by improving its supply chain strategy over time. The reports will also look at the loopholes in the strategies adopted by the company in maintaining its dominance. The theme of this report, therefore, can be stated as follows: How efficiently does the retail giant Mark and Spencer have implemented its supply chain management strategies to retain its dominance in the supply chain? With this theme as the focal point the objectives of this research report can be summarized as follows: Examining the supply chain structure of M&S. Analyzing supply chain strategies of M&S that it has adopted to maintain its dominance in supply chain and examining whether they fit its competitive strategies. Evolution of the strategies over the years to retain dominance. Examining the loopholes in supply chin strategies of M&S. In order to accomplish these objectives, this study will conduct a thorough review of relevant literatures for having the required findings. II. Literature search: This section will try to put together the findings from various existing literatures relevant to the topic under consideration to accomplish the objectives of this research report. II. a. Supply chain Structure: Marks and Spencer has planned to design its supply chain arrangement in a way so as to execute its supply chain approaches, but before that it is vital to examine the key points of any sort of supply chain arrangement. There are six key points to any kind of supply chain plan which comprises of amenities or storehouses, stock supervision, shipping, information, sourcing and finally setting prices. Amenities relate to the places where supply is stored, accumulated, or to some fictitious inventory sites and storage spaces. Stock supervision relates to administration of raw resources, WIP, completed materials within a range of supply series in addition with some inventory procedures. Shipping relates to moving of stock from one point to the other in some resource chain arrangements of shipping means and paths. Information relates to the data gathered and analyzed regarding stock, shipping, conveniences all the way through the supply series and is also considered as probably being the vital key point of any supply series presentation. Sourcing relates to the way and means by which a firm delivers its performances and also comprises of the elements that are being outsourced. Finally, Costing relates to the standard set for prices of goods and facilities that are offered by any firms to any supply series arrangement. (Neef,. 2004; Hensher, 2001) So far the conveniences or storehouses of Marks and Spencer are related, the business entity has actually been known as a storehouse group that performs all the related functions of running all the provisions appropriately by guaranteeing the suitable products as and when required by the customers. The storehouse group has the responsibility of updating the storehouses with the latest stock available in the market. Marks and Spencer is also known about timely deliverance of stocked materials to the respective stores and stocking all the requisite products appropriately. Marks and Spencer has always guaranteed a premier efficacy and client service in its stockroom operation by means of various cost saving schemes. (M&S, 2010) In subject to stock supervision, Marks and Spencer had a separate stock controlling team who are responsible in shuffling out the out-dated supplies with the up-dated supplies in order to meet the existing want of the clients. Marks and Spencer has also executed a mechanized stock management system with aid of e-commerce execution so as to facilitate the response rate to its clients’ order in a more error-free and effective manner. This also helped in maintaining proper timeliness of incoming together with existing goods, so as to make the response rate further more effective. This in turn further helped in maintaining healthy client relationships. (Quantum Retail, 2010) Marks and Spencer has also concentrated in prompt transportation service related to its supply series arrangement. The company even bonded with APL Logistics so as to make its shipping service more efficient in Europe, North Africa as well as South Asia. Thus APL Logistics became a major supply series supervising partner of Marks and Spencer, thereby offering a class level shipment administration and logistic service at a global level. APL offered swift merchant supervision, delivery consolidation, supervision of international shipping services and also administration of imports from UK. It also delivered goods from different sources to the respective stores in United Kingdom. (Global Logistics & Supply Chain Strategies, 2007)  Marks and Spencer also had a very sophisticated information service system which is up-dated with all kind of information technologies. To facilitate an effective information system, the company has spent a considerable amount of money in upgrading the information technology set-up. For instance, in the year 2007, the company has spent about 150 million pounds in refurbishing its information technology system so as to make analysis of data further more efficiently. The firm even went with an e-commerce project with Amazon and substituted all the old information system structures. This helped Marks and Spencer to open innovative stores in United Kingdom and overseas by providing aid to conduct an effectual market analysis. (Grant, 2007) Marks and Spencer has also rightly recognized the value of time and thereby supported international sourcing policies which in turn helped in developing high standards for all its retailers. This guaranteed that all the contracted retailers will need to develop their services in order to meet the suitable international standards. (Rose, S. 2005) Marks and Spencer has also followed reasonable pricing procedures. This implicated that the firm has implemented such a policy to all its retailers just for the sake of better services that they always offer to Marks and Spencer. (M&S. 2010) The net work of distribution of a retailer like M&S, on the other hand, takes into account store and non-store selling media that include mail order, catalogue shopping, home shopping, etc. The distribution network of the company is very efficient in terms of realizing the requirement of the time the firm has always put its emphasis on developing the channel of distribution. This is era of internet and in this period shopping through internet has become increasingly admired. Therefore, M&S offers the facility of e-commerce which is capable of building a strong distribution channel across the world. (Neef,. 2004; Hensher, 2001) II. b. Supply chain strategies: When M&S was initiating itself, it did not cross through many hurdles as during that time the number of players were small in number in UK. It is true that the number of firms have increased all throughout UK as well as elsewhere in the world. This has happened because there has been a sharp increase in the popularity of the retail culture. Now with this increase in competition, M&S has also changed its devises to some of the effective strategies to survive in the market. (Neef. 2004; Hensher, 2001). One has to retain the same customer base and should also expand over the years for sustenance in this competitive era. M&S could recognize such need in the right time and have accordingly placed its focus to its valued customer’s choice to the delivery and packaging of the goods. This is indeed an important strategy for improving the profit as well as fostering new and huge advantageous competition in such industries. M&S have been able to emphasis on delivering high and good quality garments at very fair and reasonable prices to the customers. (Neef, 2004; Hensher, 2001) To sustain the company under such huge competition requires necessary amendments in the operational activities, logistics, and suppliers, designing of the different stores and branches and so on. Old stocks present in the warehouse should be cleared regularly to stock-in the new ones. Packaging is a vital part of the strategy and it should be done in attractive manner. M&S has been able to identify such needs for improving the strength of the competition in this tough market. They have also improved upon their strategies. (Neef. 2004; Hensher, 2001) M&S has been able to realize the need of purchasing form the suppliers form the overseas, which is in a way the most effective method of saving the cost and providing the various products to all the customers at a very low cost. Hence all their policies have been confined to the suppliers of UK only. (Neef. 2004; Hensher, 2001) As their competitive strategy, this particular company has been emphasizing on various redesigning of the stores in a way which they would provide more of comfort, more convenience and space when the consumers are present in the shop. (Neef, 2004; hensher, 2001) For every large scale business enterprises, M&S is one amongst the famous retailers is the Britain world. They have actually set a very good example. Since a long time M&S is the leader in this industry when there is also the presence of all the local suppliers are readily working in the united manner. During all the 1990s, it had the requirement of all the know suppliers for transfer of their production abroad, to the centers who are doing the manufacturing work in very negligible amount and then they opted on for the change in other policies. This resulted in the abandonment of the sourcing strategy. This was also the actual reason for the downfall in the prices which again was the reason to change the strategy. This has also put M&S in huge pressure and caused then to reduce cost. This was indeed the cause for various reaction which also accounted for different written documents. (Neef. 2004; Hensher, 2001; Cherunilam. 2007; Ray, n.d.) In accordance with the various research and study guide, which was done in the year 2000, the average cost for the labor per unit hour to manufacture the products in UK was 9.5 dollars which was in comparison with Morocco was 1.2 dollars. In china, Pakistan, Indonesia, the cost was 50 cents hourly. But M&S have been able to note that the simple loop behind all this simple calculation is that such mentioned cost did not account in the cost which are actually hidden like that of outsourcing cost. The main risk which they undertook was undertaken during the time of the lead. The calculation tried to overlook the transportation cost as well as the quotas of the various textiles which were imported bringing the note too late that it also lacks in different logistics. (Neef.2004; hensher, 2001; Christopher, et al n.d.) With such huge crisis in mind all the suppliers in the field of M&S were been able to give full supply. The orders from the overseas were required to be in the priority listings. The manufactures had to rely on the various forecast. They had forecasted volumes, styles, and colors, much ahead of the season. If the decision was takes considered to be wrong, it then brought about over stocking or less stock. In all the ways it hampered the growth. This was the reason that in late period of the year 1990s, consumers were not that interested in different trends provided by them, as a manufacturers completely misleader the actual trend of fashion. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) The major reasons behind the failure of M&S was their marginal cost which was too narrow this meant that they purchased all their goods at low cost than of the cost they had the ownership, which really got reflected at very high amount in solution base of their supply chain in low cost, as they adopt a particular strategy for supply chain of their clothing products. This strategy would have been successful for standard items in high volumes likes men’s wear but not special items which have small durations. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) Hence, now management teams of M&S have realized that a different strategy is required for the company to perform their businesses. The approach would be that there would be lengthier period for lead times and also ahead of the season they will bring in adequate stock as per season needs and more than 10% will be brought in as per the fashion trends demand. All these factors were the major determinants for running the business with a good profit margin. The sense of prediction needs to be very strong and firm which help one to decide that whether a particular stock will be there through out the year or it just on the basis of season or the demand patterns. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) During the spring season of 2004, most the clothing stock of the company were exported from abroad where most of the suppliers were UK based but it also had a very close relationship with the other top most branded suppliers. The time taken to do one delivery became very important for standard items which needed stock in supply throughout the year. So it mainly gathered these items from wherever possible in the world. (Christopher,et al n.d.) Marks and Spencer has got recognition for its management strategies and its hard struggle to provide the customers with branded items as per their demands. The basis emphasis is on quality products which will attract consumers to purchase their brand and also a continuous supply chain which will minimize the risk of not having the stock of items demanded. (Christopher,et al n.d.) II. c. Evolution of supply chain strategies over the years M&S has advanced its supply chain management arrangement with the requirement of time. However, in 1990s the company confronted huge criticism for maintain conservative supply chain management system and not accomplishing the latest trend of the market. Earlier it used to have a preference for sticking with its tradition system of supply chain management. Thus it performed poorly in 1990s. In late 1990s it fest the requirements of implementing changes in the system of its supply chain management. Since then the company has began to involve in finding out the need of the time and modifying the strategies accordingly. For instance, it has made a plan to refurbish its IT system over time. It has made a range of contracts with competent firms to develop its transportation process, the system of inventory management, and so on. Optimisation of the company’s supply chain saved Marks and Spencer over 35 million pounds in 2010, as claimed by the company. The savings has marked a noteworthy step in the current efforts of the giant retailers in order to reorganize its supply chain. At present it has moved over twenty per cent of its supply through four worldwide stores in Singapore, Hong Kong, Sri Lanka and Istanbul and has also planned to develop increasingly in the future years. According to Sir Stuart Rose, development in their supply chain have offered a better product for the individual markets and has make it possible for them to move the products all through their network more competently. (Procurement Leaders, 2011) It has been said last year that by the help of the project 2020, the major elements of the plan will be structured in order to reorganize the supply chain, put into practice innovative information systems and will develop the process of execution in operations. Since last year the whole process has started off to transform the mode of working of Marks and Spencer in totally fundamental way. (Procurement Leaders, 2011) In the year 2009-10, thirty-five million dollar of savings has been delivered in the course of storehouse consolidation and during the discharge of a few effective projects. As per Rose, the initial stage of the storehouse consolidation curriculum is, at present, in full swing with the shut down of about twenty-one sites among the total hundred and ten sites. He also highlighted that the new warehouse of the company in Bradford of about one million square feet also marked its opening. The firm also thought of an alternative site in Midlands which it planned to work as a National Circulation Centre and also to work as port where all sort of e-commerce provisions are available. As constructed by the planning structure, it was thought to start off in summer 2012. (Procurement Leaders, 2011) According to Rose, the supply chain was much more simplified and it has been demonstrated in the kids-wear section which enabled to move the products easily thus cutting off and saving the lead time and also the count of times the stock was handled. (Procurement Leaders, 2011) Rose also highlighted that Marks and Spencer has shown a remarkable and significant progress in all the key areas. It was said, no matter how worse the situation of recession can be, but with strong belief and hope together with a concrete foundation of core values, Marks and Spencer is all set to grow to heights. (Procurement Leaders, 2011) In order to minatian its dominance in supply chain, the company is not lagging behind other retail giants in implemneting innovative technologies to manage the supply chain. Wal-Mart is the store, which in general, comes to every ones’ mind when it concerns to the technology called Radio Frequency Identification (RFID) which relates to the food retailing sector. The reason behind this is very obvious as the hotshots in the retailing sector officially launched the RFID plan last month in one of the markets in Dallas, in gig with ninety four of its dealers. However on an overall basis, Marks and Spence, the esteemed supplier of clothing and food products have been so far known to move ahead with the RFID technology in comparison to any other retailers. (Garry, 2005) In this current year, the esteemed retailer Marks & Spencer is said to set up a huge supply chain curriculum into its six most important fresh-food delivery hubs. The plan includes four million trays which are reused and RFID-tagged and that which bears fresh foodstuffs from the firms to the developed countries and also about four hundred grocery stores in UK. (Garry, 2005) Marks & Spencer, as an esteemed food retailer, has followed an extraordinary policy, which offered about four thousand supply keeping divisions of made-to-order, private-label commodities, among which seventy percent comprised of frozen, fresh foodstuffs like animal protein and also cooked food. The RFID plan had its focus solely on consumable products which projected to develop the distribution process as highlighted by Ian Mumby, who is the head of IT-foods. (Garry, 2005) Marks and Spencer has kept an option of setting standards by EPC Global but has always maintained the present RFID systems which are apt for its respective supply chain. Besides the RFID technology, Marks & Spencer was known to be in the front line group of suppliers who mainly focused in sustaining a cool series of their consumable products. (Garry, 2005) Marks & Spencer has also won its name in bringing up in-store expertise for its food-product stores which comprised of a stylish space supervision system, which Marks and Spencer together brought up with Marketmax. The supplier has been highly skilled in adopting self-checkout tracks in UK, together with the expansion of an effective self-checkout supporter being designed to smooth the progress of the systems. (Garry, 2005) Marks and Spencer, for its daring and revolutionary application of RFID to its delivery chain, together with its headship in clean-food product distribution and expansion of in-store procedures, has been chosen as the clear winner of Technology brilliance Award of SN in the year 2005, in the global supply category. (Garry, 2005) II. d. Loopholes in supply chain strategies: Although, Mark and Spencer is quite efficient in implementing its supply chain strategies in order to retain its dominance, but it still has some loopholes in its supply chain management system. These shortcomings can pose threat to the company’s dominant position in the supply chain. II. d. i. Problem with Demand forecasting: The predictions of Marks and Spencer were really insufficient as there was a huge communication gap between the top and middle level management and also with its customers. Sometimes, the summer collection of Marks and Spencer begins its sale on June twenty-third, just a few weeks before than it usually starts, and instantly it has a tendency to stir rumors all around that the supplier is overloaded with stock. Then when the bargain is commenced on summer sale, seekers notice that the whole signature collection has been brought down significantly and thereby winning credibility that the range of summer collection is not being sold off as being expected. The drop in sales of clothing products, footwear products and gift items are generally accounted to have less availability in stock. These sorts of incidences have occurred a number of time sin M&S. II. d. ii. Problem with lead time: As in an intensively competitive industry, many retailers have realized the importance of short lead time. It benefits the retailers in two aspects: reduce the inventory level for retailers due to the quick turn over rate; increase the service level and customer satisfaction. Industry practice suggests that customers may be willing to pay a price premium for shorter delivery times. However, the problem with M&S with respect to customer responsiveness is that it generally involves in long lead time. III. Conclusion: On the basis of the discussion above, it can be said that the retail giant Mark and Spencer has been quite successful in maintaining it dominant position in the supply chain. It is not that its path of progress has been very smooth. In fact, in 1990s it struggled a lot to provide good performance. At that time, it was on the verge of loosing its dominant position in the market as well as in the supply chain. However, the management of the company was quite capable enough to fight back and regain its position and hold a strong footing in the supply chain. The company has been capable enough in recognizing the changing need of the time and designing supply chain structure and supply chain strategies accordingly. At present it holds a very strong position in the supply chain and it leads the supply chin through its effective policy implementations. However, the company should be overly satisfied with its current situation in its supply chain. There is no time for relax for the strategy makers as situations change at a rapid pace and failure to walk with the changing conditions will pose a threat to its leadership position. Although it has been quite efficient in reshaping its supply chain management policies after its dismal performances in 1990s, there still exists some loopholes in respect of making proper demand forecast and designing proper lead time. In future, the company should concentrate on making proper demand forecast so that it can meet its customers need accordingly and maintain its supply chain appropriately. Similarly it should also focus on making further improvements in lead time. References: 1. M&S. 2010. Warehouse. Retrieved from http://corporate.marksandspencer.com/mscareers/opportunities/store_roles/section_managers/section_warehouse on 23rd May, 2011. 2. M&S. 2010. About US. Retrieved from http://corporate.marksandspencer.com/aboutus on 23rd May, 2011. 3. Christopher, M., Peck, H. and Towill, D. n.d. A TAXONOMY FOR SELECTING GLOBAL SUPPLY CHAIN STRATEGIES. Retrieved from martin-christopher.info/.../taxonomy-for-selecting-global-supply-chain- strategies-2004-version.pdf on 23rd May, 2011. 4. Grant, I. 2007. Marks & Spencer to spend £450m on supply chain revamp. Retrieved from http://www.computerweekly.com/Articles/2007/05/23/224023/Marks-amp-Spencer-to-spend-163450m-on-supply-chain.htm on 23rd May, 2011. 5. Quantum Retail. 2010. Marks & Spencer Selects Quantum Retail to Improve Inventory Management. Retrieved from http://quantumretail.com/2010/01/05/marks-spencer-selects-quantum-retail-to-improve-inventory-management/ on 23rd May, 2011. 6. Global Logistics & Supply Chain Strategies . 2007. Marks & Spencer Signs APL Logistics for South Asia, North Africa, Europe. Retrieved from http://www.supplychainbrain.com/content/world-regions/middle-eastafrica/single-article-page/article/marks-spencer-signs-apl-logistics-for-south-asia-north-africa-europe/ on 23rd May, 2011. 7. M&S. 2010. We are Making Progress as a fair partner. Retrieved from http://plana.marksandspencer.com/we-are-doing/fair-partner/progress on 23rd May, 2011. 8. Rose, S. 2005. Global Resorting Principle. Retrieved from corporate.marksandspencer.com/.../global_sourcing_principles - United Kingdom on 23rd May, 2011. 9. Ray, A. n.d. Supply Chain Management For Retailing. Tata McGraw-Hil. 10. Cherunilam, F. 2007. International business: text and cases. PHI Learning Pvt. Ltd. 11. Neef, D. 2004. The supply chain imperative. AMACOM Div American Mgmt Assn. 12. Hensher, D. A. 2001. Handbook of logistics and supply-chain management. Emerald Group Publishing. 13. Garry, M. 2005. Marks & Spencer: Making Fresh Fresher With RFID. Retrieved from http://subscribers.supermarketnews.com/technology/winner_international_retailer/ on 23rd May, 2011. 14. Procurement Leaders. 2011. Supply chain programme saves Marks and Spencer £35m. retreived from http://www.procurementleaders.com/learninggroups/supply-chain-management/scm-news/2106-supply-chain/?version=1 on 23rd May, 2011. Read More