Comparative Analysis o H&M and Benetton in terms of Supply Chain Management - Case Study Example

Comparative Analysis o H&M and Benetton in terms of Supply Chain Management Supply Chain Management Supply chain management (SCM) is the supervision of materials, information, and funds as they go in a procedure from supplier to maker to wholesaler to vendor to consumer. Supply chain management involves managing and integrating these streams, within and among firms. The ultimate objective of an effective supply chain management system is to trim down inventory, with the supposition that products are accessible when needed. As an answer to successful supply chain management, refined software with Web interfaces are available in the market to compete with Web-based application service providers (ASP) who assure to provide all of SCM service for firms who hire their service. (Cohen and Lee, 1988; pp. 216-228; Geoffrion and Graves, 1974; pp.822-844) Supply chain management flows are divided into three major flows, the flow of product, the flow of information and the flow of finances. The flow of product includes the movement of commodities from a supplier to a buyer, as well as any return from buyers. The flow of information involves transmitting and updating of the orders and the delivery status. The flow of finances consists of credits, payment schedules, and shipment and title ownership preparations. There are two kinds of SCM software: planning applications and execution applications. Planning applications use sophisticated algorithms to find out the best way to seal an order. Execution applications follow the physical status of commodities, the management of resources, and financial information relating all parties. (Cohen and Lee, 1989; pp.81-104; Lee and Billington, 1993; pp.835-847) Supply chain management (SCM) is the mixture of skill and knowledge that goes into enhancing the way your firm finds the raw materials it needs to craft a product or service and sell it to customers. There are five fundamental components of SCM. (Supply Chain Management, n.d). 1. Plan— Planning is the tactical portion of SCM. Firms need a strategy to manage all the resources which goes in meeting customer demand of their goods or service. A large piece of planning involves development of a group of metrics to watch the supply chain for its efficient handling, reducing costs and delivering high quality products to customers. 2. Source— In sourcing, companies have to select suppliers for delivering the goods and services that are needed to make their product. Therefore, it is essential for the supply chain managers to develop a group of pricing, delivery and imbursement processes with sellers of raw materials and create metrics for supervising and improving the contacts. Then the SCM managers can develop processes for their goods management, including getting and verifying shipments, transporting them to the manufacturing units and authorizing the payments of the sellers of these materials. 3. Make— In this step the manufacturing procedure is developed. The Supply chain managers plan the activities which are necessary for the production of goods, testing of the products, packaging and preparing the products for delivery. This portion is the most metric-intensive portion in all of the supply chain process where the firms are able to gauge the quality levels of the products, production output and labor productivity. 4. Deliver— This is the portion that many SCM followers call as logistics, where firms organize the acceptance of orders from clients, develop a set-up of warehouses, choose transporter to get products to clients and arrange an invoicing system to collect the payments from the clients for the delivery of goods. 5. Return— This portion can be considered as the problematic part by many companies who follow the supply chain systems. It is necessary for the Supply chain planners to set up a responsive and bendable network for receiving the returned goods which are defective or in excess from the customers. This portion also involves the development of a supporting system for the clients who have problems or defects in the products which had been delivered to them. (Arntzen, Brown, Harrison and Trafton, 1995; Ballou, 1992; Breitman and Lucas, 1987, pp. 94-106) A number of SCM applications stand on open data models which support the allocation of data both in and out of the project (this is known as the extended enterprise, and comprises of key suppliers, producers and clients of a specific corporation). This collective data may exist in various database systems, or warehouses of data, at quite a few different sites and firms. By sharing these informations with a company’s seller and with a company’s buyer, SCM applications have the prospect of improving the time-to-market of goods, reduce costs, and let all groups in the supply chain to improve their management of current resources and future planning. (Masters, 1981; pp. 165-195;Schwarz, 1981, pp. 163-193) Fashion Industry in Europe Supply chain management in fashion industry of Europe is usually viewed to lie amid fully upright integrated firms, where the material flow is entirely owned by a solitary firm, and each channel member had to operate independently in manufacturing the product. Therefore synchronization between different players in the chain of fashion business is the main key in its efficient management. The supply chain management in fashion industry can be compared to a balanced relay team which had a good practice of the race. These sorts of teams are more competitive as they know the roles of each player and how to position themselves for the hand-off. There is a strong relationship between the players who are responsible in passing of the baton but there should be proper coordination among all the players in the team to win the contest, which is quite similar in case of supply chain management and for its success. (Stenross and Sweet, 1991; pp.341-351; Vollman, Berry and Whybark, 1992) Outsourcing of production by fashion retailer of Europe To Asian Countries The fashion retailers of Europe who follow the Supply Chain System are often found outsourcing their production from Europe to the Asian Countries. This is done mainly because the Asian countries are labor abundant countries and hence, the cost of labor is quite low in these countries. It is found that the leading companies in the fashion industry in Europe have started opening production offices in the Asian regions like in India, China and Japan. The labor cost is cheap in these countries and the products market is also quite large which grab the attention of the European fashion companies to focus on selling their products in these regions. If the production is also done in this part of the world then a heavy transport cost will also be saved which is another concern of the European companies to outsource their production from Europe to Asian countries. Supply Chain Management of H&M Hennes & Mauritz was founded by a salesman from Vasteras, Sweden in the year 1947, whose name was Erling Persson. On his trip to US he found a store selling stylish garments for with very low prices. He was totally struck by the idea and opened a similar kind of store namely, Hennes in Sweden. He thought that the idea might work well in other countries and he opened a store in Norway in the year 1964. With the success he got in Norway he eventually opened a store in Denmark in 1967. For the growth of the business he acquired a store chain in 1968, which used to sell hunting guns namely, Mauritz Widforss in Stockholm, Sweden. This venture made person change the name of the store chain to Hennes & Mauritz (H&M). The store added garments for men and children in their collections for grabbing the apparel market in Stockholm. Stefan Persson, the son of Erling Persson joined the business in 1972. In the year 1974, the first Public issue of H&M’s shares came and the company got listed in the Stockholm Stock Exchange. H&M started selling cosmetics products in the year 1975 for more expansion and growth of their business. Further, expansion of H&M was seen when it opened a big store in the Oxford Street in London, UK. H&M started to sell their products through internet in the year 1998 in Sweden and eventually in 1999 in Denmark and Finland. The selling through internet started in 2001 in Norway. With the increasing chain system of H&M, the number of stores reached 1000 in the year 2004 which in 2006 reached 1345 in 24 countries. The sales turnover reached SKr 80081 million (including VAT) in 2006. This achievement was a result of the effective supply chain management of H&M. The time taken for a new garment to travel from the designing table to the stores shelves is mere 21 days and that is the secret behind the enormous growth and popularity of the company. (Just style, 2007;Reuters, 2009) In case of H&M, all the production had initially started in Sweden but with the growth and expansion of the business owing to the market demand, they eventually shifted some of the production works in the 1960s to the neighboring Scandinavian countries and United Kingdom. Some of the production activities were then shifted to the southern European countries like, Italy and Portugal in the late 60s. In the early 1970s, the company had started to produce in countries like Hungary, Poland and Yugoslavia. With the expansion of the business in Far East, the company started its production activities in Hong Kong also. In the year 2000, there were 10 production offices each in Europe and Far East and one in Africa, with a total of 21 production offices around the world. Later one production office was opened in US making the total number 22. There were production offices all over the world but there were no manufacturing units of H&M, as they procured the clothes from around 700 independent suppliers. The manufacturers were constantly being monitored by the quality controllers in the respective production offices for better production procedure. There were about 100 suppliers of H&M in China who provides Chinese clothes to the company for its production which had better lead time. They also had opened office in India in the year 1992 and by 2003 had about 60 suppliers around their chain of operation. (Case Study, Ref no. 608-004-1, n.d) The employees for the production offices were selected locally by H&M so that they can have proper monitoring of the local manufacturers in that area. The main tasks of the employees in the production offices are to identify the new suppliers and placing orders with the right ones. They also take part in price negotiation and transport cost minimization along with reduction of time period. There were necessary quality maintenance test of the products by the Research & Development teams of H&M who were appointed in the production offices for this purpose. Logistics were mainly managed by the company itself from its Head quarters in Stockholm. There is a transit terminal in the Hamburg, Germany through which the products had to pass before they are shipped to their destination countries. In 2002, there are 13 distribution centers of H&M in Europe and Asia and one in US. From the distribution centers either the goods were sent to the stores or to the ware-houses for future dispatch. (Funding universe, n.d; (Financial times, 2009) Dual Supply Chain Management of Benetton After the conclusion of World War II, a boy called Luciano Benetton from distant village Ponzano Veneto from Venice, Italy commenced a business of selling bright colored sweaters with his brothers and sister. He initially sold the sweaters door to door in Venice and had grabbed the attraction of the buyers with the bright colors of his sweaters. There used to be plain sweaters at that time so, the unusual colors generated business scope in the local market. They launched their own line with the label ‘Tres Jolie’ in the year 1956 and gradually expanded their business of sweaters. With the increasing popularity the Benetton brothers started a partnership business group called Benetton Group in 1965. In case of Benetton Group, the operations are carried out through the production facilities. In 1984, they had a plan of investing large amount f money on procuring an advanced production facility. This was done in Castrette which is in Italy, and the operational work in that plant started in 1986. Though the operations had started still the investment were continued in the 90s by Benetton for more advancement in technology and increased the capacity of production in the plant. In the year 1999, the plant area of Benetton was around 190,000 sq. meters and had the output capacity of 100 million units per year. There was implementation of an advanced sorting system in the Benetton’s plant for the better management of production in 2006. Benetton operated through a three-tier model for its production under supply chain. The first tier of the system consists of the suppliers who provide the raw materials to the plant, the unfinished goods and the production plants. The second tier of the model comprises of the contractors and the sub-contractors who works under the supply chain of Benetton. Finally, the retail outlet of the finished products who works as franchisees or agents under the system falls under the third tier. (Logistics, 2009; supply flexibility, 2009) Benetton had around 200 contractors and many sub contractors who work to produce specific garments as per the direction of the authority under the supply chain system. They are the integral part of the Benetton’s supply chain and their failure can break the whole system. At present, Benetton is the largest buyer of wool in the whole world and their raw materials are supplied by about 180 suppliers around the Globe. In 2006, there are 18 factories of Benetton, out of which 12 factories are situated in Italy. The distribution center of Benetton is huge in its area coverage and is a two storey building with about 250,000 boxes storage capacity. The distribution center handles 6000 consignments on a daily basis which consists of 12,000 parcels. The distribution of Benetton is done by direct shipment of products to the stores in different countries. For the countries which are far from the distribution center, the shipment is done by air and for the neighboring countries the shipment goes either by rail or road. (Industrial flexibility, 2009; Case Study, Ref no. 608-003-1, n.d) Problems and Solutions for the two companies The essence of supply chain system is the link between the production units and effective management of the units and their links is the key to success. The main objective of supply chain management is to see that there should be availability of required products when they are demanded by customers in all the stores linked in the chain. There should be proper collection of informational data from all the channels of production and distribution which can help the management in future planning of the production and sales in each unit. If the working in the chain is carried on in a proper way complementing the each linked unit then only a business following Supply Chain Management can succeed in reaching its goal otherwise not. The operations that are carried in H&M are all IT based and the production offices of the company are connected to the head office through the internet. The head office of H&M is responsible for sending the designs and the sketches of the garments through internet to their production offices. The problem with H&M is that, it depends excessively on the independent manufacturers who are third party to the business. Any dispute with these manufacturers can lead to bad effect on the performance of business of H&M. Hence, they should be careful in that aspect and there is also noticeable inconsistency in the variety of products of H&M according to the fashion trend which should be rectified. (Case Study, Ref no. 608-004-1, n.d) Benetton faced severe consequences of the changing fashion tastes of the buyers, specially the youngsters, in the later period of 90s and could not keep pace with the change. There was a drastic change in the fashion industry with the regular change in the fashion trends. There was a ‘cool’ factor introduced in the fashion industry but Benetton was unable to cope up with it. This resulted in the downfall of their business and the behavior of their buyers also changed with the trend towards them. There was a challenge for every garment company to come up with new collection every month and Benetton failed to overcome that challenge. The bright color garment which was the unique feature in Benetton’s business was no longer unique. The competitors of Benetton in the fashion industry provided 12 collections of garments in each year in comparison to only two sets of collection from Benetton which are highly priced. The competitors of Benetton had more number of designers who provided around 1000 designs per year. The revenue of Benetton which was € 2.098 billion in the year 2001 decreased to € 1.992 billion in 2002, and Benetton incurred a loss of 10 million. The number of stores of Benetton also got reduced due to losses. The major competitors of Benetton were Zara and H&M who were also trying to enter and grab the garments market in Italy. In 2003, Benetton appointed Silvan Cassano as the CEO and under his leadership in the year 2004; Benetton’s Dual Supply Chain System was introduced to overcome the problems. The Benetton’s Dual Supply Chain model was introduced in the 2004 owing to the severe market threat experienced by Benetton. It was done under the leadership of Cassano, who worked on different models to integrate them into this one. This model is better in terms of handling the frequent market changes in the garment industry. It can balance the production activities with the sales and designing of new products. There were different locations where the production had been carried and done within the time limit of marketing of the product. This system helped Benetton to overcome the previous problems and they were able to come up with more collections each year with variety in their designs. (Case Study, Ref no. 608-003-1, n.d) References 1. Cohen, M. A. and Lee, H. L. (1988). Strategic Analysis of Integrated Production-Distribution Systems: Models and Methods. Operations Research. (accessed on December 30, 2009) 2. Cohen, M. A. and Lee, H. L. (1989). Resource Deployment Analysis of Global Manufacturing and Distribution Networks. Journal of Manufacturing and Operations Management. (accessed on December 30, 2009) 3. Geoffrion, A., and Graves, G. (1974). Multicommodity Distribution System Design by Benders Decomposition. Management Science. (accessed on December 30, 2009) 4. Lee, H. L., and Billington, C. (1993). Material Management in Decentralized Supply Chains. Operations Research. (accessed on December 30, 2009) 5. Ballou, R. H. (1992). Business Logistics Management, Prentice Hall, Englewood Cliffs, NJ, Third Edition. (accessed on December 30, 2009) 6. Breitman, R. L., and Lucas, J. M. (1987). PLANETS: A Modeling System for Business Planning. (accessed on December 30, 2009) 94-106. 7. Arntzen, B. C., Brown, G.G., Harrison T.P., and Trafton, L. (January, 1995), Global Supply Chain Management, Digital Equipment Corporation. (accessed on December 30, 2009) 8. Masters, J. M. (1993). Determination of Near-Optimal Stock Levels for Multi-Echelon Distribution Inventories, Journal of Business Logistics. (accessed on December 30, 2009) 9. Schwarz, L. B. (1981). Introduction in: L. B. Schwarz (ed.), Studies in Management Sciences, Multi-Level Production / Inventory Control Systems, North-Holland, Amsterdam. (accessed on December 30, 2009) 10. Stenross, F. M., and Sweet, G. J. (1991). Implementing an Integrated Supply Chain in Annual Conference Proceedings, Oak Brook, Ill: Council of Logistics Management, Vol. 2. (accessed on December 30, 2009) 11. Vollman, T. E., Berry, W. L. and Whybark, D. C. (1992). Manufacturing Planning and Control Systems, Irwin, Homewood, IL. (accessed on December 30, 2009) 12. Hennes & Mauritz (2007), Background, Just-style.com. Available at: http://www.just-style.com/factsheet.aspx?id=133 (accessed on December 30, 2009) 13. H&M Hennes & Mauritz AB (December 2009), Stocks Overview, Reuters.com. Available at: http://www.reuters.com/finance/stocks/overview?symbol=HMb.ST (accessed on December 30, 2009) 14. H&M Hennes & Mauritz AB (n.d), Company perspective, funding universe.com. Available at: http://www.fundinguniverse.com/company-histories/Hennes-amp;-Mauritz-AB-Company-History.html (accessed on December 30, 2009) 15. H&M Hennes & Mauritz AB (December 29, 2009), Comparative analysis, financial times.com. Available at: http://markets.ft.com/tearsheets/performance.asp?s=se:HM%20B (accessed on December 30, 2009) 16. Benetton Group (December 2009), logistics, Investors Relation, Benetton group.com. Available at: http://investors.benettongroup.com/phoenix.zhtml?c=114079&p=irol-VCOperationsLogistics (accessed on December 30, 2009) 17. Benetton Group (December 2009), supply flexibility, Investors Relation, Benetton group.com. Available at: http://investors.benettongroup.com/phoenix.zhtml?c=114079&p=irol-VCOperationsSupplyFlexibility (accessed on December 30, 2009) 18. Benetton Group (December 2009), industrial flexibility, Investors Relation, Benetton group.com. Available at: http://investors.benettongroup.com/phoenix.zhtml?c=114079&p=irol-VCOperationsIndustrialFlexibility (accessed on December 30, 2009) 19. Case Study, Ref no. 608-004-1, (n.d), H&M’s Supply Chain Management Practices, ICFAI. (accessed on December 30, 2009) 20. Case Study, Ref no. 608-003-1, (n.d), Benetton’s ‘Dual Supply Chain’ System, ICFAI. (accessed on December 30, 2009) Effective Supply Chain Management Strategies Traditionally, in case of supply chain management system marketing, distribution, manufacturing as well as the purchasing process was operated independently by the organizations. However, there are different objectives in each organization which lead to conflicts between them. For example, the objective of marketing might clash with the objectives and goals of the manufacturing and distribution organizations. There were many manufacturing units which were designed for maximization of output at minimum costs but they did not considered the impact of these objectives on the inventory levels and capacity of distribution. There were often no discussions on the purchasing contracts as there was lack of availability of information beyond historical buying samples which pointed out the need for an integrated plan for smooth running of the business. Supply Chain Management provided the necessary strategy for the integration of the different functional processes which run independently in the process of making a product. (Deuermeyer and Schwarz, 1981; pp.163-193; Houlihan, 1985; pp. 28-38). Effective Supply Chain Management The supply chain management systems are overloaded with the complexities of the whole manufacturing and distribution process involved in production. Most of the systems are not up to the mark in handling the ups and downs of the variables in the supply chain. To maintain a strictly effective supply chain the manufacturers should have enough knowledge of the system. There were lots of fundamental weaknesses in the older versions of the supply chain system which causes various schedule compliance problems and therefore needed rectifications but they are still in practice. The effective management of chain of events that occur during production procedure is known as the effective supply chain management. The coordination of all the parts in the supply chain as fast as possible without compromising in quality or client satisfaction with cost minimization is the main criteria of effective supply chain management. (Donovan, n.d) Supply Chain Decisions We categorize the decisions for supply chain management, broadly as strategic and operational sections. As per the implication of the term, strategic decisions are taken usually over a longer period of time. These are intimately associated with the corporate strategy and conduct supply chain measures from a design point of view. In contrast to that, operational decisions are taken over shorter period of time and focus on the basis of day-to-day activities in a firm. The attempt in these types of decision processes is to manage the flow of products in a more effective and efficient way in the strategical planned process in the supply chain management. (Lewis, n.d). There are four chief decision areas where the supply chain decisions are taken in supply chain management, location, production, inventory, and transportation and both strategic as well as operational elements are found in each of the above four decision areas. Location Decisions In creating an effective supply chain, there are certain initial steps taken mainly in stocking and sourcing points and locating the place for the placement of production unit. The location involves commitment for longer period of resources. The initial steps are very important and once the size and number of products are determined along with the location then it becomes easy for the smooth flow of products to the customers in the supply chain system. These initial decisions are very important to a firm as they provide the basic strategies in accessing the market of the customers and have significant impact on the cost structure and the service level of the firm. The location decisions are mainly strategic but it also has some implications on the operational level of the firm. Production Decisions In case of production decisions we find both strategic as well as operational decisions are taken in supply chain management. The strategic decisions which are taken in case of production are about the types of product which should be produced and allocation of the plant where the production should take place. It also involves allocation of suppliers and the customer market for the sale of the product. Like the previous one, these decisions also have huge impact on the revenue and cost structure of the firm along with the level of customer services. Although the existence of facilities is a major assumption in these decisions still it manages to locate the exact path for the flow of products in the business. The main focus of the operational decisions is on the detailing of the production schedule. These decisions are taken on the basis of production schedule of different machines and equipments and their maintenance. The quality control measures also have impact on the production decisions. Inventory Decisions In these types of decisions, the focus is one the efficient means of inventory management. There is existence of inventories or stocks at every stage in the production process of the supply chain either in the form of raw materials or in the form of semi-finished or finished goods. The inventories are also present in the process between locations. The primary purpose is to provide a buffer stock to overcome the uncertainty which might exist or arise in the supply chain in the course of business. The holding of inventory requires a fair bit of cost hence, an efficient management is necessary in taking operational decisions. Although the inventory decisions according to many researchers are mainly operational decisions, it has a strategic aspect as well. The strategic decisions are taken by the top management of a firm in setting goals for the production process. This section involves operational decisions regarding the stock like, determination of the optimum order quantities or the reorder points. The safety stock levels are also determined by this type of decisions. Transportation Decisions The method of taking transportation decisions are more of strategical form than operational. These decisions are very closely linked with the previous inventory decisions, as determination of mode of transport is also indirectly related to the inventory associated with it. For example, the shipments which are sending by flights reach faster in comparison with the shipments send by trucks and are more reliable but they are very expensive. Hence, the firm requires proper strategic transport decisions to manage the costs efficiently. The shipments by ships or railways are much cheaper than shipment by flight but they require large buffer stocks as the uncertainty level is very high in terms of lost or theft of goods in these types of shipments. The geographic locations of the clients also play major roles in deciding the mode of transport for shipment of goods. Hence, these types of decision making are the key aspects for the smooth running of business in supply chain management. (Cohen and Lee, 1985, pp. 153-188 ; Geoffrion and Powers, 1993; Cooper and Ellran, 1993, pp. 13-24) Supply Chain Modeling Approaches It can be clearly seen that both strategic and operational decision making in case of supply chain management requires different perspectives. In case of strategic decisions, the decisions are taken by integrating several aspects of the supply chain system and hence, the models used for this purpose are huge and they use extensive amount of data. The solutions from these models are also approximate in terms of decisions due to the enormous use of data. However, the models which are used for the purpose of operational decision making are specific in nature as they address the daily operations that take place in the supply chain. These models use relatively small data and specific and significant solutions in operational decision making. The modeling approaches in supply chain which are helpful in strategic as well as operational decision making are classified into three types namely, network designing methods, rough cut methods and the simulation based methods. (Lee and Billinton, 1992, pp. 65-73) Network Design Methods It can be clearly understood by the name itself that these methods are used in determining the location, stocking and sourcing facilities of the products. They also suggest the effective paths that should be taken for the production. These methods are used on a large scale at the commencement of business in the supply chain. The earliest model in this aspect was set up by Geoffrion and Graves in 1974 and was known as multi-commodity logistics network design model. It was used for the optimization of annualized flow of finished goods from plants to the final customers. A comprehensive model of production and distribution system was provided in 1987 by Breitman and Lucas which is called ‘PLANETS’. This model is extensively used to determine which product to produce with what resources and in which market it should be sold. General Motors were successful in implementing various parts of this project. There was a development of a conceptual framework in 1985 by Cohen and Lee for analyzing manufacturing strategies in supply chain business. There were initially lots of sub-models and very complicated methods are used to link these models for achieving the optimized results. Hence, in 1988 they came up with an integrated form of the model. However, in 1989 Cohen and Lee came up with another standardized model for resource usage in case of manufacturing and distribution in the global framework. The profit after tax was maximized in Global perspective through the controlling of flow of materials and designing of facility framework. The model considered both variable as well as fixed cost in the cost structure and was applied on a personal computer manufacturing company to analyze its Global manufacturing strategies. Finally, in 1995, the most deterministic model for this purpose was provided by Arntzen, Brown, Harrison, and Trafton. (US Patent 6141318, October 2000; Arntzen, Brown, Harrison and Trafton, 1995) Rough Cut Methods The rough cut models are the core of the supply chain study and they mainly deal with the operational decision making. They also help in taking the tactical decisions in supply chain. Most of the researches that took place regarding the supply change were based on the inventory management approach. Hence, the developments of these multi-level rough cut models were also done for controlling of inventory policies. There was an extensive and successful use of Multi-echelon inventory theory in the industries. In 1990, Cohen described another complex model called the ‘OPTIMIZER’ for the management of spare parts stock of IBM. There are still various limitations in multi-echelon supply chain inventory theory in spite of the promise shown in the current research that happened on the subject. The major limitations these studies faced that it completely ignores the production aspects of the business in supply chain. The major focus is on the stock of finished products and how they can be managed effectively. The structure of distribution also has some disputes in this study as it considers only one higher site supplies the goods and then they are distribute to lower levels but in practical it does not happen every time. The researches were also done mainly on inventory system which is also a limitation. (Daniel, Guide and Spencer, 1997). Simulation based Methods Simulation methods help in complete analysis of supply chain model as it considers both strategic as well as operational aspects involved in the business. However, the simulation models are not helpful in developing new policies rather they evaluate whether a pre-specified policy is effective or not. When decisions are to be taken under conditions of uncertainty, simulation can be used. Simulation as a quantitative method requires the setting up of a mathematical model which would represent the interrelationships between the variables involved in the actual situation in which a decision is to be taken. Then, a number of trials or experiments are conducted with the model to determine the results that can be expected when the variables assume various values. (Monte Carlo Simulation, n.d) Supply Chain Strategies of other companies in contrast to H&M and Benetton The supply chain management strategies that are been applied by global garments companies are of various kinds and they are implemented according to the companies’ business activity around the world. The first thing done by any global garment company for the application of supply chain system is to develop a proper supply chain strategy for the betterment of the company’s performance. For the development of the proper supply chain strategy the first thing that the companies tend to do is to understand the exact business strategy of the fashion market and follows the trend of the market. This allows them structure their strategies accordingly and make the necessary moves associated with it. Then, they assess the extension of the supply chain which is needed to carry out the business in the most efficient way and the exact capability of the company. Then there is the development of a proper implementation plan of the supply chain strategies which are developed by the company. Then after all the plans are developed there is a need of consideration of the development plans in the present market scenario and how to grow the business. This task is done very carefully by the companies by conducting market researches before the final implementation of the strategies. After the supply chain strategies are executed in the business, a global company needs to focus on the performance management in the business. This is done by the companies by tracking and evaluating the performance of the employees as well as the implemented process. The strategies that the company had implemented should be tracked to see if it is working according to the plan. The companies also do the cost-benefit analysis of the business to point and rectify the flaws which are hampering the performance of the business. The communication of the company with its partners in the supply chain is also a point of concern in proper execution of the plans and should be done regularly. The regular communication helps in quick rectification of the problems which may arise in the business. The companies for the avoidance of potential pitfalls should align their supply chain strategy with their ongoing business strategies. The intent of the business strategies should get proper support from the supply chain strategies for the success of supply chain practice and the better performance in the business. (Ayers, 1999); (Happeck, 2005). One of the world’s leading global fashion garment company is Zara which also follows the Supply Chain Management but it had different strategical approach towards its business. Zara’s supply chain strategy is to provide limited supply of stock to the stores but with varied range of designs. The exclusivity of Zara’s product is the major key of success to the company. The company feels that a customer will buy a product depending on its exclusivity and he will think that if he does let the product go then it might be grabbed by other customers. This thought makes him buy the product and Zara also provides a varied range of designs which attracts the customers to buy their products. Zara’s success in the supply chain management lies on its easy transfer of information between the partners on a constant basis in contrast to the following two companies. (Ferdows, Lewis and Machuca, 2005). The operations that are carried in H&M are all IT based and the production offices of the company are connected to the head office through the internet. The head office of H&M is responsible for sending the designs and the sketches of the garments through internet to their production offices. With the increasing popularity of H&M all over the world and to go with the time, H&M started to sell their products through internet in the year 1998 in Sweden and eventually in 1999 in Denmark and Finland. The selling through internet started in 2001 in Norway. With the increasing chain system of H&M, the number of stores reached 1000 in the year 2004 which in 2006 reached 1345 in 24 countries. The sales turnover reached SKr 80081 million (including VAT) in 2006. Logistics were mainly managed by the company itself from its Head quarters in Stockholm. There is a transit terminal in the Hamburg, Germany through which the products had to pass before they are shipped to their destination countries. This achievement was a result of the effective supply chain management of H&M. The time taken for a new garment to travel from the designing table to the stores shelves is mere 21 days and that is the secret behind the enormous growth and popularity of the company. (Case Study, Ref no. 608-004-1, n.d; Thomson Financial Business Description, 2009). The Benetton’s Dual Supply Chain model was introduced in the 2004 owing to the severe market threat experienced by Benetton. The dual supply chain system which was used by Benetton had two types, the sequential dual supply chain and the integrated dual supply chain. The action of sequential dual supply chain was mainly on the push focused demand. This model was used in producing and delivering the products to the stores before the commencement of the season. The collections for the season are first developed and then send to the stores for sale. The integrated dual supply chain acted on the pull focused demand. The model was used in case of customers demand for more products or the sales forces during the season. The production is short term based as the products would only be available during the season and not after that. This was mainly used to increase the stock during the season to cope up with the demand of the latest fashion trends. Benetton’s dual supply chain system was applicable to the delocalized locations and the garment industry in Italy. After the incorporation of dual supply chain model, Benetton started creating five types of collections in their seasonal collections with different names and different time limits to battle the market forces. The dual supply chain system of Benetton helped it to overcome almost all the previous problems that the company faced due to the changing structure of the garment and fashion industry all over the world. (Case Study, Ref no. 608-003-1, n.d; Lucica, 2008; ICMR, n.d) References 1. Deuermeyer, B. and Schwarz, L. B. (1981). A Model for the Analysis of System Service Level in Warehouse/ Retailer Distribution Systems: The Identical Retailer Case, Studies in Management Sciences, Vol. 16, North-Holland, Amsterdam. (accessed on December 30, 2009) 2. 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