Supply Chain Management of Marks and Spencer - Essay Example

?Supply Chain management – Marks and Spencer Introduction: Marks and Spencer (M&S) is a leading retailer of UK. It has been a very successful industry leader since its initiation in 1984. It has achieved its success through an excellent network of local suppliers who are extremely dedicated towards their activities. However, over the areas as it has extended its operation and started to move beyond its national boundary, it has incorporated significant changes in its sourcing strategy. For example, in 1990s, it has dumped its UK sourcing strategies and embraced more open policies for sourcing. This has been done with an aim to reduce costs by relocating manufacturing units of its established supplier in low costs areas overseas. This change in the supply chain management has been brought about due to increasing competitive pressures. With increase in the level of competition, there has been downward pressure on the movement of price that consequently asks for costs reduction to sustain in the highly competitive market. (M&S, 2010) The success of any retailer depends on successful supply chain management. Thus it would be quite interesting to examine supply chain strategies of one of the most famous retailer of the UK, M&S. this paper will not only simply discuss the supply chain strategy of M&S, but it will try to examine whether the its supply chain strategies matches its competitive strategies. The paper will also discuss supply chain structure that the company has been designed to implement its supply chain strategy. Finally it will discuss whether the company has been able to respond to the changing demand of the market by improving its supply chain strategy over time. Competitive strategies of Mark and Spencer: At the time of its initiation, M&S did not face much competition as the number of market players was very small. However, over the years the number of retail firms has increased in the UK as well as throughout the world with increasing popularity if retail culture. With increase in the level of competition, M&S felt it necessary to devise some effective strategies to deal with increased market competition. (Neef,. 2004; Hensher, 2001) In order to sustain in an intensely competitive market, it is very much necessary to retain existing customer base and expand it over time. M&S has rightly recognized this need and accordingly have placed focus on delivering goods in the best possible manner to its customers. This strategy is very helpful in improving profitability of the firm and fostering a huge competitive advantage in the industry. M&S have now emphasized on delivering high-quality up-to-date garments at fair prices to its customers. (Neef,. 2004; Hensher, 2001) To survive under extremely competitive environment, it is necessary to improve its operational activities, suppliers, logistic, designing of stores and so on. The old stocks should be cleared from the warehouses to give way for new stocks that are up-to-dated. Apart from this, it is also necessary to provide due consideration on packaging of the products. M&S has identified all these needs for improving its competitive strength in the market and has designed competitive strategies accordingly to meet these needs. (Neef,. 2004; Hensher, 2001) M&S has also realized that purchasing from overseas suppliers is the most effective way of saving costs as well as of providing the products to the customers at lower prices. Hence, it has abandoned its policy of confining to UK suppliers only. (Neef,. 2004; Hensher, 2001) As one of its competitive strategy, the company is emphasizing on redesigning its stores in such a way that they provide more comfort, more space and more convenience to the customers at the time of their shopping and browsing. (Neef,. 2004; Hensher, 2001) Supply chain strategy: For a large scale of business enterprises, Marks and Spencer, one of the famous retailer in Britain, had set a very big example. For a very long time, Marks and Spencer has been a leader in the industry where there is a team of local suppliers working collaboratively. During 1990s, it required well-known suppliers to transfer their production overseas to centers who do manufacturing in less cost and then also they opted for other policies, as a result of which it abandoned the sourcing strategy from UK. This is actually due to the downfall of the price rate which pressurized them to change the strategy. This in result, have put Marks and Spencer in pressure, to reduce the cost. This has caused a lot of reaction and drama, at least, through written documents. (Neef,. 2004; Hensher, 2001; Cherunilam,. 2007; Ray, n.d.) According to research and studies, it has been seen in the year of 2000, that, the average cost of labor per hour to manufacture clothes in UK is 9.5 dollars in comparison to Morocco where hourly labor cost is 1.2 dollar and in China, Pakistan, Indonesia, the labor cost on hourly basis is 50 cents. But Marks and Spencer have noted the loop hole behind this simple calculation that this mentioned cost has not taken into account the cost which are hidden like outsourcing cost from overseas, mainly the risks that were undertaken during lead times. The calculation has also overlooked the transport cost and the quotas of textiles getting imported, bringing into note very late that it lacks in the logistics mainly needed. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) But with such a crisis, the suppliers of Marks and Spencer were able to supply again in full force, but the orders coming down from the oversea needed to be placed in prior to the requirements. This led manufactures to rely on the forecasts. They had to forecast volumes, colors, styles much before the season strikes in. If they make a wrong forecast by mistake, then it result into an over stock or else not in stock. In both ways, this hampers the profit margin in a huge way. This was one of the reason that in the late period of 1990s, consumers were not so much interested in clothing trends provided by Marks and Spencer, as the manufacturers completely misleaded the trend of fashion setting. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) One of the major reason for the failure of Marks and Spencer was their cost margin was too narrow, which means they purchased goods at very low cost than the cost they have the ownership, which actually got reflected as a very high cost in the solution base of 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 mens wear but not special items which have small durations. (Neef,. 2004; Hensher, 2001; Christopher,et al n.d.) Therefore, now management teams have acknowledged that a different strategy is needed for Marks and Spencer to carry out their business. The strategy would be that there would be longer duration for lead times and also before the season they will bring in sufficient stock as per season demands and more 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.) In 2004, during the spring season, most the clothing sock of Marks and Spencer were exported from overseas 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 struggling hard 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.) Supply chain structure: In order to examine the supply chain structure that M&S has been designed to implement its supply chain strategies, it is necessary to look at the six drivers of any supply chain structure. These six key drivers of any supply chain strategy include facilities or warehouses, inventory management, transportation, information, sourcing and pricing. Facilities stand for places where inventory is stored, assembled, or fabricated production sites and storage sites. Inventory management refers to management of raw materials, WIP, finished goods within a supply chain as well as inventory policies. Transportation implies moving inventory from point to point in a supply chain combinations of transportation modes and routes. Information refers to data and analysis regarding inventory, transportation, facilities throughout the supply chain and it is considered to potentially be the biggest driver of supply chain performance. Sourcing refers to functions a firm performs and functions that are outsourced. Finally, Pricing refers to setting of prices of goods and services that are provided by a firm to the supply chain. (Neef,. 2004; Hensher, 2001) As far as facilities or warehouses of M&S are concerned, the company has actually built as warehouse team that has been assigned the function of keeping all the stores running accurately by ensuring the appropriate products on the shelves when the customers require them. The warehouse team is responsible for keeping the warehouses up-to-date by storing latest stock. In M&S, it is also responsible for ensuring timely delivery of the stored materials to the stores and storing all the required products properly. The warehouses of M&S always search for the way of operating in cost saving ways. M&S always ensures the highest efficiency and customer service in its warehouse operation. (M&S, 2010) In case of inventory management, the M&S has an inventory control team which looks into the matter of cleaning up out-dates stocks and maintaining up-dated stocks to meet current need of the customers. In order to fasten the response rate to the customers’ orders, the company has implemented an automated inventory control system with the help of e-commerce implementation. This system is responsible for matching order in a faster and error free way. This system helps the company in conducting real-time check of arriving goods as well as available goods and thus enables the company to pay its suppliers more quickly as well as to respond to the customers needs more quickly. The inventory management system of M&S is also very careful about accomplishing replenishment very quickly and thus it improves customer relationships. (Quantum Retail, 2010) M&S is also very much careful about providing speedy transportation process associated with its supply chain. Marks &Spencer has formed a partnership with APL Logistics to look into its transportation process within its supply chain in South Asia, North Africa and Europe. APL Logistics has become a significant supply chain management partner of M&S. APL provides M&S with a high quality cargo management and logistic services at an international level. APL provides speedy vendor management, shipment consolidation, management of international transportation, and management of UK imports. It also delivers products from various sources to the stores in UK. (Global Logistics & Supply Chain Strategies, 2007)  The Information system of M&S is also very advanced and it utilized up-dated information technologies. In order to run the information system efficiently, the company has always invested significant amount of money in building up graded information technology network. For example, in 2007, the firm has spent a huge sum of 150 million pounds for revamping its IT system to make the process of data analysis more efficient. The company undertook an e-commerce venture with Amazon and replaced old information system. This kind of up graded information system has helped the company in opening up new stores in UK and overseas by helping in conducting effective market analysis. (Grant, 2007) In case of sourcing, M&S has rightly acknowledged the need of the time and hence embraced global sourcing policies. The implementation of this kind of sourcing policies has helped in building high standards for the suppliers that work for M&S. These principles ensure that the contracted suppliers of M&S will improve their facilities to meet acceptable global standards. (Rose, S. 2005) As for pricing, M&S also follow fair pricing procedure. It implies that the company has implemented the policy of paying fair prices to its suppliers for the good that they provide to the M&S. (M&S. 2010) Distribution network: Distribution network of a retailer like M&S include store as well as non-store selling media including mail order, catalogue shopping, home shopping, etc. the distribution network of M&S is very effective in the sense that realizing the need of the time the company has always put its focus on improving in distribution channel. Today is the age of internet and in this age internet shopping is becoming increasingly popular. Hence, the company provides the facility of e-commerce which has been able to build a strong distribution channel all over the world. (Neef,. 2004; Hensher, 2001) Evolution of supply chain management over the years: M&S has evolved its supply chain management system with the need of time. However, in 1990s the company used to be very much criticized for maintain conservative supply chain management system and not accomplishing the latest trend of the market. Earlier it used to prefer to stick with its tradition system of supply chain management. Thus it performed drastically in 1990s. In late 1990s it realized the need of incorporating changes in its supply chain management system. Since late 1990s, the company has started to engage in identifying the need of the time and implementing the strategies accordingly. For example, it has planned to revamp its IT system over time. It has made various contracts with efficient firms to improve its transportation process, inventory management system, and so on. Conclusion: On the basis of the discussion above it can be said that the biggest retailer of UK, Marks & Spencer has built a very strong supply chain network in order to meet the demand of its customers instantly. Although it was quite late to respond to latest trend, but at present it has rightly identified the need of the time and implemented strategies and structure accordingly. References: 1. M&S. 2010. Warehouse. Retrieved from http://corporate.marksandspencer.com/mscareers/opportunities/store_roles/section_managers/section_warehouse on 9th March, 2010. 2. M&S. 2010. About US. Retrieved from http://corporate.marksandspencer.com/aboutus on 9th March, 2010. 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 9th March, 2010. 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 9th March, 2010. 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 9th March, 2010. 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 9th March, 2010. 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 9th March, 2010. 8. Rose, S. 2005. Global Resorting Principle. Retrieved from corporate.marksandspencer.com/.../global_sourcing_principles - United Kingdom on 9th March, 2010. 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. Read More