Major Economic Gains: the Supply Chain Performance - Assignment Example

QUICK RESPONSE APPROACH TO AN EFFICIENT SUPPLY CHAIN MANAGEMENT 0 INTRODUCTION: "The global apparel and textile industry spans the entire textileand apparel supply chain, from the processing of raw materials to the production of the finished goods"- in the words of Gabriel R.Bitran, Suri Gurumurthy, Shiou Lin Sam: MIT Sloan School of Management; in the Working Report 2006 Emerging Trends in Supply Chain Governance: available online from http://mitsloan.mit.edu/pdf/ups.pdf The primary negative effect of the supply chain uncertainty and variability is lateness. If deliveries from suppliers are late or incomplete, they slow down the flow of goods and services through the supply chain ultimately resulting in accumulation of unwanted inventories. This is especially true in the case highly fashion conscious and seasonal business of selling fashion wear merchandise. In this context the 'Quick Response' supply chain project of Jossey Menswear - a fashion retailer with more than 200 retail outlets is analysed to evaluate and critically comment on the scope of success of their project I improving the supply chain management. 2.0 IMPROVEMENT IN THE SUPPLY CHAIN PERFORMANCE: "More than ever before speed has become a source of competitive advantage. Competing on speed requires an organization characterized by fast moves, fast adaptations and tight linkages. .. Forming alliances is one of the most effective avenues for competing speed. The best example is the textile industry's quick response initiative, designed to improve the flow of information, standardize recording systems, and reduce turnaround time along the entire supply chain from fiber to textiles to apparel to retailing." - Roberta S. Russell, Bernard W. Taylor Operation Management: Edition IV (2003). pp 37. The quick response approach is essentially best suited to the Fashion Retail Industry. This is due to the following factors which are mostly enumerated in the cited case of Jossey Menswear: Seasonality - This is the main factor which necessitates the speed in the supply chain. Basically the fashion industry works on two seasons, Spring/Summer and Autumn/Winter, where supply decisions are conceived at least 18 months prior to the time the merchandise is supposed to be on the racks of the retail outlet. The various processes starting from the selection of design, selection of color trends and fabric trends for the next season are time consuming and in order that the garments reach the stores before the end of the season, there should exist an effective supply chain. Products are made according to a predetermined standard sizes and there is no time to revise the outfits once manufactured. This critical aspect in the supply chain movement sometimes delays the whole process of manufacturing resulting in the rejection of some garment lots being out of size specifications. Here again a team effort working in conformity to evolved standards will make the things move faster. Pricing-the determinant factor on the success or otherwise of a business venture is at the centre of all managerial decisions. This is particularly true in the case of the fashion retail business as any garments not reaching within the saleable window will naturally have to be sold at the end of the season at heavily discounted prices. Full price sales can be effected only when the merchandise reaches the stores and is available to the customer when they visit the store only once or twice in a year, which is a peculiarity attached to the fashion retail industry. The sale at full price is also determined by various other factors. 'Designers' collection' forms the foundation for the full price sales. Since designers work at a considerably advanced period before the actual sales takes place, they have to make intelligent guess work about the customer preferences in terms of deign, color and fabric which may sell well in a season. If the decisions on the collection designs are made right then the entire season may witness good full price sales. Getting the styles into the right retail outlet depending again on the customer preferences and choosing the right fabric are some other factors which determine a good sales. "Few industries are as notorious as the apparel industry for having such difficulty predicting demand," observed by Marion Bragger in article Supply Chain Management and Collaboration in the Apparel Sector - Learning from the best (2004) available online from http://www.ecr-academics.org/partnership/pdf/award/Beitrag_Website3.pdf With reference to this quote, all the above factors went in favor of quickening the response time to meet the changing demands of the customers. This means that the company wanted to work close to reality on getting the merchandise with the quickest possible lead time instead of getting goods made as per the design forecasts made sufficiently in advance of the sales period. What was required is a device which will synchronise the customer demands 'during' the season so that the right product is available at the right time and with the right quality.. However the factor that needs attention is the right design. Thus a proper integration of both an effective design function and the ability to get the products at a faster pace so that they arrive when they are needed is a prerequisite for improving the profitability of the company. To achieve this end, the company decided to adhere to the Quick Response approach to their supply chain management. 3.0 QUICK RESPONSE METHOD ADOPTED BY CORNWALL PLANT The Cornwall plant of the Company Jossey Menswear manufactured all tailored menswear products for the company. A senior experienced factory manager was shifted to an advisory position with a specific responsibility to remove the obstacles and implement quick response method of supply chain management. The barriers identified among other things were limited factory working space, availability of limited skills and non availability of special purpose machineries. The essential features outlined by the advisor on the new scheme of working are: There will be a conversion of only 30% of the capacity to QR - This idea to make a partial conversion of the capacity in to QR is actually the correct approach for the successful implementation of the system. As it is the normal human tendency to object to any change, this system would have naturally failed if it was thrust on the whole factory, since it may take some time for the people to get acquainted with the changed atmosphere. . Proper presentation of the QR plans was made with assurances from the management side to remove the apprehensions in the mind of the workers about losing the earnings. In fact this move of the management of the company would only have paved the way for the eventual success of the plan. Since there was a mixed reaction among the workforce unless a proper presentation about the objectives of the plan and the expectations from the workers is made the plan would have not taken effect. QR teams were formed from the volunteers who offered to join the team. This is another important and tactical move by the management. If the management adopted the method of selecting the team members on its own volition on the basis of skills, it would have sabotaged the employee morale and the production in the normal plant would have suffered. Presenting the QR team as an elite team and the QR as a novel idea to the customers and other outsiders would have de-motivated the other workers. Another tactical decision was to avoid the supervisors to look after this team. This would have placed responsibilities on the individual members of the team. The naming of the teams by themselves is also a good move as the team members will feel elated when they are identified with the team to which they belong. This will naturally improve the commitment among the team and would result in intra team healthy competitiveness. An attractive payment system to reward the multi skilled worker in the QR team and at the same time not acting as a deterrent factor for the efficiency of the workers in the normal stream was the idea of the compensation for the QR team prescribed by the management. This well thought out plan is the key factor for the success of the QR move. Thus it may be pointed out that the strategy adopted by the management in implementing the QR approach is the correct and tactical one. 3.1 OTHER STRATEGIC SOLUTIONS: As has been pointed by Russell E .King, Thom J. Hodgson, Trevor Little, Carol Carrere, Michael Benjamin, Tim Currin in Analysis of Apparel Production systems to support Quick Response Replenishment available online in website http://www.p2pays.org/ref/08/07145.pdf " The textile industry has an interesting production scheduling environment. Products are continually moving in to and out of the active mix. In addition much of the demand is seasonal. There are certain times of the year that are critical. This has significant ramifications for manufacturing facilities as well as the material and piece part supply chain." The following strategic solutions may be considered: Expanding and enumerating the channels through which products are moved to reach the customer so that efforts for speeding up the movements can be examined. Evaluating the existing scheduling tools to employ the best available tool to efficiently administer the production scheduling. Developing analytical models of the manufacturing systems to understand the optimal strategic operating policies. Considering the tactical issues of a supply chain involving multiple plants within the company as well as the vendors of material and piece parts. Developing software aided simulation models to analyse different environments. 4.0 THE FUTURISTIC PLANS OF THE QR TEAM: Jonathan W. Palmer and M. Lynne Markus point out in The Performance Impacts of Quick Response and Strategic Alignment in Specialty Retailing (2000) available on line in the Website: http://web.bentley.edu/empl/m/lmarkus/Markus_Web_Documents_(pdf)/The_Performance_Impacts_of_Quick_Response.pdf "surprisingly, this cross-sectional survey of 80 specialty retailers found more support 'for the practitioners' claims than for the academicians'. Adoption of QR program at a minimal level was associated with higher performance, although there was no performance impact due to higher levels of QR use". Extending the proportion of work made on QR - Based on the above statement so long as the extension of QR is limited to the proposed 35 - 40% in Trousers and 30-35% in Jackets would have yielded the expected results. Any efforts to increase further the capacity under QR would prove unnecessary. Speeding up the product development process - Yes! This is the correct approach to reap the complete benefit of the already existing QR team's performance by bringing in brand new ideas in front of the customer at the shortest possible time. Rethinking on new ways to capture market information - This effort also is in the positive direction as with appropriate and timely information the sales effectiveness can be increased. Exploring ways of choosing more flexible cloths - By adopting QR approach it was possible to make the designers understand the practicalities or otherwise of their selection of the fabric and how it affects the production process. Now by exploring the possibilities of more adaptable fabrics based on the knowledge of the production process, the speed of the supply chain can be improved. Improving Cloth Suppliers responsiveness - The delay in the supply of fabrics was the biggest limiting factor to bring the styles in to the stores. Encouraging the designers to work on a multi product approach on different easily available fabrics may go a long way in improving the supply chain. Working on Cloth Development with the supplier - This is one of the best futuristic approaches planned by the company. In this way the fabric supplier would know well in advance, what are all the fabrics that would be used for the ensuing season which will enable him to look into his available resources and react in time about the lead times and technical problems that he may face in producing the bulk fabric. 4.1 IMPLEMENTATION PLAN: For the assessment of the QR approach the following implementation plan may be suggested: A separate Job Progress Card for each of the orders handled by the QR, having entries with the projected delivery date assuming that every process will be handled without anticipating any delay may be prepared. The final date will be broken down into dates for completion of each process like fabric ordering, fabric receipt, cutting, sewing, packing, delivery ex factory, delivery at the stores point of sale. This card will give an actual chronological sequence of events from the order receiving stage till the delivery at the stores as compared to the target dates. This card will also contain columns for specifying the no of days delay and the space for detailing the reasons for the delay. After each order is completed, a study of this card will automatically bring out the inefficiency in any particular link of the supply chain which will improve the scope for correction in the future orders. 5.0 EVALUATION OF CONTEMPORARY ISSUES: The following are some of the contemporary issues to supply chain which will definitely have an impact on the efficiency of the supply chain management. 5.1 GLOBALISATION: "A growing number of firms choose to break down their production process into various stages spread across different countries or regions" - observes Masahisa Fujita and Jacques-Francois Thisse, Institute of Developing Economics in Globalisation and the Evolution of the Supply Chain: Who gains and who loses available on line in http://www.ide.go.jp/English/Publish/Dp/pdf/005_fujita.pdf With the advent of globalization, new trade agreements between countries and nations have been established. The dissolution of communism has opened up new markets and the creation of European Union has made the world's biggest elite market accessible to any country. Technology advances have made it possible for even the middle tier companies to establish the global presence. To be successful in a global environment, supply chains must be managed in ways that minimize problems caused by distance, language, time zones, business practices, tariffs and other impediments to the efficient flow of material and information. 5.2 BUSINESS ETHICS: Whether the standards for ethics and principles for social responsibility are compatible or mutually exclusive, supply management professionals play a pivotal role due to their sphere of influence throughout the supply chain. When a small firm supplies a giant, the imbalance of power can lead to bullying. But the smaller companies should find appropriate measures to safeguard themselves against such unethical practices. "Until recently the focus of media reports on company relations with suppliers has been on health and safety standards, child labor and wages at overseas plants making products to be sold in Western markets. A series of big names have been rightly vilified for procuring such items as clothing, footwear and toys to sell profitably without bothering about the conditions under which they are made. A sense of responsibility coupled with reputational damage has pushed many managements to take supply chain ethics seriously". Dr Laura Spence Institute of Business Ethics, (2006) "Supplier Relationships in the UK: Business ethics and procurement practice" available online from http://www.ethicalcorp.com/content.aspContentID=4762 5.3 TECHNOLOGY: "Supply chain performance management analyzes supply chain process requirements to produce objective metrics, it uses technology to track processes according to those metrics and it provides managers with reliable information they can use to make accurate assessments of and better decisions about operations and personnel" quotes Colin Snow, in article Supply chain Performance Management for Operational Excellence Available online in http://www.intelligententerprise.com/info_centers/supply_chain/showArticle.jhtml;jsessionid=IH1WT32WKFWZGQSNDLPCKHSCJUNN2JVNarticleID=196801671 Information technology can provide the following multifarious functional advantages to improve the performance of the supply chain management. Centralised coordination of information flows. Integration of transportation, distribution, ordering and production. Direct Access to both domestic and global transportation and distribution channels. Locating and tracking the movement of every item in the supply chain. Consolidation of purchases from all suppliers Inter company and Intra company information access Data interchange. Data acquisition at the point of origin and point of sale Instantaneous updating of inventory levels in real time. 5.4 OUTSOURCING: Outsourcing is the act of purchasing goods and services that were originally produced in-house from an outside supplier. In recent years, outsourcing has become a long term strategic decision instead of simply a short term tactical one. Companies especially large, multinational companies are moving more production, service, and inventory functions into the hands of suppliers. "The key to success for practitioners in outsourcing and supply chain management is the ability to find better ways to manage buyer and seller relationships so that value can be appropriated more effectively by buyers from, or in conjunction with, their suppliers" based on a report by Andrew Cox, Business school Birmingham University How is Effective Outsourcing and Supply Chain Management Achieved: available online in http://www.touchbriefings.com/pdf/967/55.pdf 5.5 REGULATORY FRAME WORKS: Established regulatory measures and codes of conduct are often confined to segments of the supply chain, such as production standards, and confined to either environmental management systems or social welfare. For example, accredited fair trade products ensure improved wages and working conditions for producers in poorer countries, but many employees working downstream in food distribution and processing and retail suffer some of the worst employment conditions in the richer countries. Basically regulatory frame works aim at the conduct of the business safely and legally within the stipulations laid down for the different supply chain associates. Apart from safety, there may be some regulatory provisions enacted by different countries for environmental issues also. 6.0 CONCLUSION: Finally as stated in the Press Release No 25 of International Trade Centre Geneva (October 2005) "Major international buyers are shifting to new ways of buying.Major economic gains could be achieved by applying new technologies linking the whole supply chain". Available online from: http://www.intracen.org/docman/PRSR7594.pdf This will aptly fit for the QR approach to Apparel Production. Word Count: 2941 REFERENCE LIST 1. Gabriel R.Bitran, Suri Gurumurthy, Shiou Lin Sam: MIT Sloan School of Management; Emerging Trends in Supply Chain Governance: (2006) [online] Available from: http://mitsloan.mit.edu/pdf/ups.pdf Accessed on 06th January 2007 2. Roberta S. Russell, Bernard W. Taylor Operation Management Edition IV (2003) pp 37 Prentice Hall India Private ltd. 3.. Marion Bragger, ECR International Commerce Review: Supply Chain Management and Collaboration in the Apparel Sector - Learning from the best (2004) [online] Available from: http://www.ecr-Academics.org/partnership/pdf/award/Beitrag_Website3.pdf Accessed on 06th January 2007 4... Russell E .King, Thom J. Hodgson, Trevor Little, Carol Carrere, Michael Benjamin, Tim Currin: Analysis of Apparel Production systems to support Quick Response Replenishment [online] Available from: http://www.p2pays.org/ref/08/07145.pdf Accessed on 05th January 2007 5. Jonathan W. Palmer and M. Lynne Markus point out in The Performance Impacts of Quick Response and Strategic Alignment in Specialty retailing (2000) [Online] Available from: http://web.bentley.edu/empl/m/lmarkus/Markus_Web_Documents_(pdf)/The_Performance_Impacts_of_Quick_Response.pdf Accessed on 05th January 2007 6. Masahisa Fujita and Jacques-Francois Thisse, Institute of Developing Economics in Globalisation and the Evolution of the Supply Chain: Who gains and who loses (2004) [online] Available from: http://www.ide.go.jp/English/Publish/Dp/pdf/005_fujita.pdf Accessed on 06th January 2007 7. Dr Laura Spence Institute of Business Ethics, "Supplier Relationships in the UK: Business ethics and procurement practice" (2006) [online] Available from: http://www.ethicalcorp.com/content.aspContentID=4762 Accessed on 06th January 2007 8. Colin Snow, Supply chain Performance Management for Operational Excellence [Online] Available from: http://www.intelligententerprise.com/info_centers/supply_chain/showArticle.jhtml;jsessionid=IH1WT32WKFWZGQSNDLPCKHSCJUNN2JVNarticleID=196801671 Accessed on 06th January 2007 9. Andrew Cox, Business school Birmingham University How is Effective Outsourcing and Supply Chain Management Achieved: [online] Available from: http://www.touchbriefings.com/pdf/967/55.pdf Accessed on 06th January 2007 10. Press Release No 25: International Trade Centre, Geneva: (2005) [online] Available from: http://www.intracen.org/docman/PRSR7594.pdf Accessed on 06th January 2007 Read More