Service Industry Supply Chains - Assignment Example

TABLE OF CONTENTS 1.0 ABSTRACT 2.0 INTRODUCTION 3.0 LITERATURE REVIEW Logistics and supply chain 4.0 FINDINGS Quick response systems Fast Fashion Concept Lean supply chain De-coupling point approach  5.0 RECOMMNDATIONS FOR THE FASHION INDUSTRY E-Logistics Home Stretch IT and Logistics RFID application OLAP Cubes Key Challenges for the Fashion Industry 6.0 CONCLUSION 7.0 REFERENCES 1.0 ABSTRACT Companies’ worldwide struggle to maintain a competitive position and business sustainability along with sound financial results as compared to their industry peers. However, with increasing number of new products and dynamic business concepts rising on to the platform every day, it may seem very difficult for the companies to achieve the status. Today, it is not the firms that struggle with each other, but the effective supply chain management that makes the difference. Supply chain management has been regarded as one of the main concerns for companies to achieve better performances, (Porter, 1985). The Fashion Industry has been able to make significant alterations within its supply chain systems as a result of the changing characteristics of the fashion market around the world which requires price benefits by the company and fresh products by the clients. Leading Fashion chains like Zara and Gucci have developed successful supply chains, to meet consumer needs in an effective manner. The paper will analyze the supply chain strategies of the Fashion industry which holds a significant place in the International Market. The industry has displayed competitive character and has continued to gain advantage by employing modern systems as compared to other sectors. The industry has closely maintained its focus through the years on uninterrupted improvement and innovation supported strongly by customer needs and satisfaction criterion. The Fashion companies focuses on providing the market frequently with the latest trends and maintains to change over 70% of the products every month. According to Luis Blanc, an Inditex Designer Director, “Most of the Fashion Companies recommend their clients to understand that if they like something, they must buy it now, because it will not be in the shops the following week. It is all about creating a climate of scarcity and opportunity”. 2.0 INTRODUCTION Every retail business that includes supply chain systems, add value to their product in some form or other. An effective supply chain management is an act of optimizing all actions throughout the supply chain process for the retail businesses, and an efficient management of the supply chain is the key to obtaining higher competitive retail business advantages. Supply chain management is all about having the right kind of resources at the right time and supply of the products to the right customers at a limited cost. However, to reach at the helm of leadership and success, it is important that the various retail set ups within the Fashion Industry should bring about a radical change in its methodology and should be willing and determined to shift to the new paradigm. Supply Chain Management has become an imperative and indispensable constituent and any retail organization should make the best use of the resources and potential offered by such management system, (Stadtler and Kilger, 2004). The benefits that could be achieved with the help of a leveraged supply chain strategy include increased customer satisfaction, lower inventory tasks, less product obsolescence, and reduced workforce or manpower, (Abernathy, Dunlop, Hammond, and Weil, 2001). It is not easy to implement a successful supply chain, but definitely it is worth putting the effort in terms of the results that can result from the activity of implementing bringing together IT management systems and SCM. Usually, there are five parts to a supply chain in a fashion industry – processing of raw materials into fibres, weaving of fibres into threads, assembling the finished good, transportation to sale centres, and retail sale. With the increasing stiff competition, it is vital to gain higher advantage from superior supply chains in order to gain market share.  3.0 LITERATURE REVIEW Usually, every Fashion Chain or company employees a team of designers who are responsible for spotting the current trends in the fashion industry as per consumer demands. Also, the store managers offer valuable consumer feedback to the design team. This information communication on design, outlook and consumer demand is done with the help of wireless information systems. This feedback and spotting of current trends helps the design managers to develop products for the fashion company. The next step is the development of a detailed cost analysis and assessment of the production capability by the Procurement and production planning departments regarding the new product to be launched in the market.  The development of the product prototype occurs fast with the cooperation of designers, and the production planners who work closely and deliver the results within few hours.  The sampling process is carried out with the help of CAD which makes the process fast. After the decisions on the issue of design, fabrics, production costs are completed, the companies need to initiate their in- house production in low volumes with short life cycles for each product. Fabric is cut through automated manufacturing systems and then these cut pieces are sent to the sewing workshops. The process of design and cutting of fabric is completed within a period of 2 month in usual cases. Next, with the help of special algorithm based systems, pre-determined conditions and demands, the management initiates the production of some products while retaining some of them back. As an average, only 40% are turned onto styled products for customers. The articles are then returned to the manufacturing centres where quality control, ironing, tagging and wrapping occur. They are then transported to the automated distribution centre, which is divided into two main levels. On the first level the “folded” products are packed into boxes based on each specific destination. On the second level the garments are sorted according to the style and they are placed on hangers. All the products are pre-labelled and the lots marked according to each specific destination. In that case the products are ready for store display. The distribution centre is utilized as a Crisis docking facility without any storage. For the fashion industr, with a very high rate of sucessful supply chains, the delivery schedules and accuracy have already arrived at an high of 98.99% for some companies.  The supply chain within the fashion industry being of a vertical type, which means that it encompasses in itself all the processes from design to final distribution to the outlets, it has been able to reduce its cycle time by producing in smaller batches and applying just in time manufacturing concept. This cycle time reduction has enabled the fashion industry to continuously manufacture even within the season and place the majority of its production closer to the season,(Kok and Graves, 2002) Modern IT techniques and technology has greatly assisted in maintaining an efficient supply chain and production facility for the Fashion industry. There are a number of activities that have been shortlisted which have been enhanced with the help of a better supply chain management system, (Abernathy, Dunlop, Hammond, and Weil, 2001). They are:          Assembly sub-assembly of products, Package and product labeling of goods, Management of inventory Processing and planning orders Track and trace products logistics Subsequently, by the application of better management capabilities, the fashion industry has achieved the following: Greater operational flexibility Ability to expand geographically Focus on core competencies Ease of achieving economies of scale. Use of IT technologies like logistics electronic data interchange, Logistics Management Information Systems, RIFD, the Direct Store Delivery have definitely proved to be turning factor for the Fashion sector, (Christopher, 2005). These techniques are basically examples of a sophisticated knowledge management system that supports the supply chain business models in a highly competitive manner. The company has invested a substantial amount of money on an electronic warehouse that will drive the product information automatically without any man handling of information at any point in the supply chain, (Abernathy, Dunlop, Hammond, and Weil, 2001). Logistics and supply chain J. Kyle Addison, Global Supply Chain Manager for DuPont PPE’s apparel operations made the following observation. “Supply Chain Management Engine application when integrated with logistics is straightforward, easy to use, and cost-effective. It allows us to consider multiple factors, such as work-in-process, inventory levels, plant capacities, and production plans, in such a way that we can now optimize production scheduling to meet customer demand in a better way.” –  Logistics management has become a dedicated part of Supply Chain management. Because supply chains are constantly changing and evolving, a company may develop a number of logistics strategies for specific product lines, specific countries or specific customers, (Cummings, & Worley, 2001). The supply chain constantly changes and that will affect any logistics organization. To adapt to the flexibility of the supply chain, companies should develop and implement a formal logistics strategy. This will allow a company to identify the impact of imminent changes and make organizational or functional changes to ensure service levels are not reduced, (Lambert and Stock, 2002). This is true for the Fashion industry as well, where a number of supply chains exist that require efficient logistics application. 4.0 FINDINGS This section will study the various supply chain approaches or the competitive strategies employed by the fashion sector to differentiate their supply chain and produce better results.    Quick response systems (QR) – due to the threat from low cost overseas fashion product suppliers like China, many fashion companies across the globe have developed their own “Quick response” systems to gain advantage. QR allows the company to achieve higher flexibility to offer a higher range of products with better quality at the right time with the right price as stated by the real time demands. The fashion industry has applied these Supply chain management systems to decrease the inventory levels and forecasting errors, (Johnson and Scholes, 2005). Within a Quick response system, there exists a strong relationship amongst all parts of the supply chain which ultimately reduces process times. The base of the strong relationship is due to the fact that in a QR system, the production is based on real time demands for which effective communication relationship between supplier and buyer is necessary. With this, the fashion industry has been able to develop better buyer and supplier relationships. More over, QR support to extensive use of latest IT technology (CAD/ CAM) has resulted shorter lead and quick replenishment times for the sampling, designing and production teams of various Fashion Chains, (Birtwistle, Fiorito, and Moore, 2006).  Another example of QR supply chain approach is the utilization of Electronic Point of Sale information exchange from customers and retailers to the design team to achieve better results. Fast Fashion Concept – Fast fashion concept has been materialized by leading fashion companies in the fashion sector to reap more competitive advantages. With the help of this concept the companies has been able to significantly reduce its lead times to only 12 days as compared to earlier lead times which was of 3 to 4 weeks. The concept has increased due to the increase in demands and subsequent need for fast response and large product varieties by the companies, (Barrie, 2004). While QR is related to maintaining supply chain production efficiency within the manufacturing plant, Fast fashion concept relates to increasing efficiency within the retail supply and demand chain, (Johnson and Scholes, 2005). However, the main difference between the two concepts is that Fast fashion encourages retailers to motivate their customers to visit their stores more often by offering them best quality at affordable prices. Moreover Fast fashion concept allows for lesser production volumes and no replenishment within the supply chain than the traditional QR concepts.  In the same manner, the fashion industry has maintained its focus on effective response management to consumer demand in lower volumes, and no replenishment with the aim of offering new assortments more frequently to its clients. This has helped the fashion industry to achieve smaller lead times within its supply chain. Also, the fashion industry has been the first to lead the trend of managing its supply chains as per season forecast. Seasonal forecast is another strategy first developed by the fashion industry to launch new seasonal products in low volumes to attract fast turnaround times for its supply chain, (Barrie, 2004).   Lean supply chain -- Leanness is defined as the improvement of a supply chain or a value stream to reduce waste production, time, offer fast replenishment rate and improve product delivery schedules. In case of the fashion industry, it was important to meet the time boundations and product accuracy as per client demands, (Johnson and Scholes, 2005). Use of modern IT techniques like bar coding, EDI, and product marking tools helped the fashion industry to further enhance the logistics operations.  With the help of lean supply chain, all the waste activities can be eliminated, activities can be synchronized, and perform better communication and downstream flow of both product and information. This helps to increase the end value for the customer and the company/ IT techniques emerged as the most significant element of the lean supply chain for the fashion industry which helps to increase its logistics, delivery and real time information through the supply chain. The fashion industry improved its capability to predict short term visibility of customer demand within each period with highest possible accuracy by setting up the demand-driven supply chain which looks out for real time client orders. This system helped to transmit the point-of-sale (POS) data from the cash registers at the outlets back to company headquarters many times a day. This information related to the demand by the customer, helped to queue shipments to the various store distribution centers, (Birtwistle, Fiorito, and Moore, 2006).  This way an enhanced inventory positioning helped to lower costs and better forecasting of demands. De-coupling point approach – This supply chain strategy has been prominently used by the fashion industry to maintain its inventory in unfinished or generic form and to make the final product only when the accurate demand information and volume is known. This method offers great flexibility to design changes, production volumes and increasing customer’s interest by timely incorporating feed backs into the products, (Birtwistle, Siddiqui, and Fiorito, 2003). Moreover, De-coupling also offers the advantage of smaller batching to the supply chain of the fashion industry. Small order batching process is followed, which reduces order costs, and offers more transportation economics, and increasing sales benefits, (Porter, 2004). The fashion industry has adopted a strategy to take frequent orders frequently in smaller batches which have lead to smaller variance within its supply chain systems.  5.0 RECOMMNDATIONS FOR THE FASHION INDUSTRY The Fashion Industry in order to gain higher competitive advantage, can utilize some modern IT logistics trends being used in the industry. This integration of logistics with modern technique will help the managers within the industry to take a complete 360 – degrees view at the entire business activity, other than just looking at the end results. Here are some of the recommendations on logistics applications for the Fashion Industry. E-Logistics The Internet has created new means to reach the market. It has compressed time and moved the emphasis from supply-based to demand-based. The focus is converging on the customer. Many experts have coined the term e-logistics with home delivery (the ‘last mile’) but it is, in fact, an issue for the B2B market just as much as it is for the B2C market. The term e-logistics came about with the dotcom start-ups and was marked by the rush of the retailers to establish their position in new market, (Birtwistle, Siddiqui, and Fiorito, 2003). It is essentially about electronically managing the order-to-cash process. The basic e-logistics model remains customer-focused, giving the purchaser (whether business or individual) the ability to: • electronically place and pay for orders; • track orders from source to delivery; • select appropriate delivery time. This model combines bricks and clicks in the fulfillment process. It will include picking, packing, order confirmation and dispatch, customer help lines and returns process. In addition, demand driven secondary production activities, such as final assembly and servicing, are likely to increase with Business to Business and Business to Consumer Web-based transactions. Home Stretch Online consumption by the buyers around the world has been predicted to rise ten times in next four years. Though, this accounts for a minor percentage of total retail sales, it is still having an inconsistent impact on supply-delivery operations. The e-fulfillment logistics model for the last mile will transform a number of times before the favored solution for supply and return is agreed. Establishing partnerships with existing distribution channels can be a good option for the Fashion industry. Recognizing the value of existing mature supply chain infrastructures, the industry can set up a network based on established parcel delivery, the doorstep provider, eight-till-late local pick-up points and courier services. IT and Logistics Use of IT technologies like logistics electronic data interchange (EDI), Logistics Management Information Systems (MIS), RIFD, the Direct Store Delivery (DSD) and the geographic information system (GIS) can definitely prove to be turning factor for the Fashion industry. These techniques are basically examples of a sophisticated knowledge management system that supports the logistics business model in a highly competitive manner, [Perf 2003]. The Fashion companies can invest a substantial amount of money on an electronic warehouse that will drive the product information automatically without any man handling of information at any point in the logistics chain. RFID application - One of the most common IT applications within a logistics supply chain is that of bar codes which makes data collection accurate and fast. Most of the enterprises apply the bar code shipping labels or RFID application on their finished goods that are about to leave the company premises. But with changing trends, mangers have learned that if the use of bar codes is pushed back into the production system, then it provides tremendous labor and material savings, (Hyde 1992, pp 25). These new Information trends if applied by Fashion chains in the Logistics system can definitely lead to less time delays and this times saved can easily be converted into financial benefits and increased productivity. OLAP Cubes - A Goods supply data cube helps the company to identify the main products that can be sold easily over phone by analyzing the past trends of the tele-callers and the sales graph. The sales data can be recorded and converted in the form of an OLAP cube and then changed into textual form which can used for decision making by the management upon which products to re-in force in the market by studying their popularity chart, (Kok and Graves 2002, pp. 45). This data in the form of cube provides detailed information for resolving problems within the logistics distribution network of the business. Similarly, a problem with the Distribution network has been cited at many instances, causing difficulties with suppliers, production facilities, and distribution outlets. At the same time, the inefficient data distribution has been identified as a cause that leads to loss of integration of various processes and causes the inability to predict demands, forecasts, inventory and transportations needs, (JISC, 2006b). The use of data in the form of OLAP cubes can help to sort out the errors and analyze the losses and its causes in an effective manner. Key Challenges for the Fashion Industry The strategy adopted by the fashion industry also possesses some weakness. The vertical integration of the supply chain has some drawbacks which should be carefully considered. Vertical integration often hinders large scale production capabilities for the supply chain at discounted prices. Therefore, if in case, companies need to produce large scale volumes, then the cost of the same would be very high. In view of the high investments of the sector in future, it may not be able to support the high financial needs of market for a very long time, (Sustar, & Sustar. 2005). The fast and constant changing of products incurs high costs along with lots of money being spent on research, employee training and IT integrated manufacturing techniques. 6.0 CONCLUSION The fashion industry needs some changes in view of the changing industry environment and competition trends. The opportunity to enhance the profits of the business chain, it is required to control to the business more at international levels than at local and country levels. This will help the fashion industry to become more competitive.  New joint venture projects, internal management transfers and new holdings are some of the reforms that can bring out new opportunities within the fashion industry, (Porter, 2004). Business diversification and expansion in view of new market opportunities, creation of a large centralized management group, can be a successful plan, particularly in countries where the fashion potential is still untapped. It is important to marshal the resources behind the drive for good strategy execution and operating excellence within the existing supply chains of the fashion industry.This requires that the budget should be safely linked to the planning strategy and should at all times be able to support the policies that are meant to be initiated by the support systems. International budgeting plans should be implemented in order to capture the global market effectively.  Apart from budget issues, shifting of resources and localizing of leadership in particular areas is also very important to consistently hold the market attention. On local basis, fashion companies can further introduce some local teams that perform as specialists on local patrons and vendors for company units in the new markets. The aim of these localized units will be to shape up the advertising approach, strengthen the links with the local retailers and market promoters, and at the same time unlock new streams for product distribution for the Fashion industry, (Porter, 2004). In conclusion, the company possesses the capability to attain sustainable growth rate and face challenges from the new trends and expansion ventures while paying close attention to the market and company’s strategic needs. 7.0 REFERENCES 1. Porter, M. Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York, NY, 1985 2. Abernathy, F. H., Dunlop, J. T., Hammond, J. H. and Weil, D. (2000/1), "Retailing and supply chains in the information age", Technology in Society, vol. 22, no. 1, pp. 5-31. 3. Johnson, G. and Scholes, K. (2005). Exploring corporate strategy: text and cases 7th ed. Harlow: Financial Times Prentice Hall. 4. Porter, M. E. (2004). Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press 5. Barrie, L. (2004), "Making a mark: some of the issues to watch in 2004: Fast fashion continues to speed up", Just - Style, p. 17. 6. Birtwistle, G., Fiorito, S. S. and Moore, C. M. (2006), "Supplier perceptions of quick response systems", Journal of Enterprise Information Management, vol. 19, no. 3, p. 334. 7. Birtwistle, G., Siddiqui, N. and Fiorito, S. S. (2003), "Quick response: Perceptions of UK fashion retailers", International Journal of Retail & Distribution Management, vol. 31, no. 2/3, pp. 118. 8. Christopher, M. (2005), Logistics and supply chain management: creating value-added networks, 3rd ed, FT Prentice Hall, London. 9. H. Stadtler and C. Kilger: Supply Chain Management and Advanced Planning: Concepts, Models, Software and Case Studies, Indiana University Press, 2004, p. 25. 10. A.G. de Kok and S.C. Graves (Editors): Supply Chain Management: Design, Coordination and Operation, Cambridge University Press, Cambridge, England, 2002, pp. 45-78. 11. D.M. Lambert and J.R. Stock: Strategic Logistics Management J.J Coyle, E.J. Bardi and C.J. Langley: The Management of Business Logistics. Indiana University Press, 2002, p. 342 12. Cummings, T. & Worley, C. (2001) Organization Development and Change (7th edn). Cincinnati, OH: South-Western College Publishing, pp. 34 - 54. 13. [Perf 2003] “Supply Chain Performance Score Card Data Table for Electronic Equipement”, Performance Measurement Group, 1050 Winter Street, Waltham, MA 02451, http://www.pmgbenchmarking.com/ 14. JISC (2006b), Projects, Available at Kirchmer M., (2004), E-business process networks – successful value chains through standards, Journal of Enterprise Information Management, vol.17, no 1, 2004, pp. 20-30. 15. Sustar, B. & Sustar. R. (2005). Managing marketing standardization in a global context. Journal of American Academy of Business: Cambridge, 7(1), 302. Retrieved October 10, 2005, from ProQuest database. Project Plan - Master Schedule expressed in weeks Week Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Project Design                                     Establishment of Framework of Analysis                                     Data Gathering Phase                                     Data Analysis                                     Writing the guidelines on Accurate data and its distribution management                                     Conclusion/Wrapping Up                                     Read More