The Link Between Marketing and Production Operations of Any Business Enterprise - Research Paper Example

 This report will discuss the case of Stevenson and Zara. Eventually, general discussion will be tackled concerning the importance of considering product and process design in terms of establishing a strategic performance in supply chain and supply chain which focus on market order winners / qualifiers, and aligning / subordinating the operations capability. Stevenson’s Case Circumstances the Led Stevenson’s Retail Customers Move to Offshore Suppliers Stevenson’s profitability dropped from £15 million down to £5 million per annum since the company’s retail customers decided to move to offshore suppliers (Stratton, n.d., p. 1). Upon reading the case of Stevenson, one of the main factors that made Stevenson’s retail customers move to offshore suppliers includes the lack of development in CV’s operations particularly with regards to the process of dyeing some knitwear since 2001 (p. 4). When it comes to dyeing of garments, decision for colour choices is a significant factor that affects the ability of the retailers to sell their garments. To avoid stocks of garments with wrong choice of colour, most of the retailers are trying to delay the provision of their colour choice (p. 2). This makes the demand for Stevenson’s services seasonal. Before 2001, the operational process of dying garments will first have to be knitted separately: the neck and the body. Once the customer has submitted their preferred colour, ecru garments will have to be processed provided that there is available dyeing machine. After dyeing the garments, the body and neck garments will be assembled, labelled, hung, pressed, and packed at one of the company’s local satellite finishing factories (p. 3). Given that retailers often delay the submission of their colour choice, the dyeing operational process that takes place in CV during peak season is more than the actual operational capacity that the company can supply. As a result of the long waiting process, some of the retailers’ orders take a very long time to complete. In relation to the long lead-time for the retailers to actually receive their orders from Stevenson made some of the retail customers decide to locate alternative offshore sources. Hoping that the retailers can receive the finish product ahead of time and at a much lesser cost, some of the company’s retail customers decide to shift to international sources (p. 3). Impact of Moving to Offshore Suppliers on Retailers’ Performance Most of Stevenson’s retail customers had been very much accustomed with the offshore purchasing process. As a serious economic consequence on the part of the retailers, most of the retailers’ end up paying more money because of the need to refurbish some garments that were not produced based on the quality expected by the retailers. In line with this, the retailers’ performance in terms of being able to benefit from Stevenson’s expertise in dyeing garments suffered most (p. 5). The problem with ordering the dyeing of garments from offshore services is that it normally takes 18 to 20 weeks before the retailers can actually receive the finish product at the retailers’ distribution depot (p. 4). Instead of being able to receive and sell the finish product within a short span of time, it takes a longer time for the retailers to sell the garments they ordered offshore because of the need to re-dye the garments with off-colour or dyeing errors (p. 5). Another issue that is involved with offshore services is that the low global supply routes could also result to a longer lead time. With the use of the basic law of supply and demand, the lower the market price of goods would mean a significant increase in demand (Baumol & Blinder, 2009, p. 66). Since Far East based garment manufacturers are able to sell their products at a very low price, a lot of retailers are taking advantage of ordering their garments from offshore suppliers. Because of the high demand for offshore dyeing services, most of the offshore dyeing companies in the Far East strictly require Stevenson’s retailers to immediately submit their colour choice in few weeks before the peak season. This makes the retailers unable to determine the colour of garments as demanded by the consumers. As a result, the retailers will have to seek the professional assistance of Stevenson by re-dyeing garments that were produced with low quality (pp. 5 – 6). Strength and Weaknesses of Stevensons’ Offer to Retailers Stevenson’s is a well-known company that has the expertise in dyeing garments. In relation to the company’s increased knowledge and skills on re-dyeing garments, Stevenson can easily win back the trust of its past retailers by offering a fast response to retailers’ demand. Specifically the managers’ decision to integrate the dyeing and finishing process in one location can significantly reduce the unnecessary time loss associated with the need to transfer unfinished garments from knitting factory to the finishing factory where the garments will be assembled, labelled, hung, pressed, and packed before transporting to the retailers’ distribution depot (p. 3). Aside from integrating the dyeing and finishing process in one location (p. 4), it is possible for the company to offer a fast response to retailers’ demand since the company is now capable of re-dyeing garments with neck and sleeves attached (p. 5). This option is advantageous on the part of the retailers since reducing the operational bottleneck associated with the need to transport the garments from one place to another can be avoided (Slack, Chambers, & Johnston, 2007, p. 311). Likewise, this strategy can make Stevenson able to offer a shorter lead-time for colour choices in order to reduce the need to fix the garments’ dye based on customers’ demand. Despite the strengths of Stevenson’s offer to its retailers, the company may not be able to smoothen out the seasonal load without the assistance coming from the offshore knitting companies (p. 7). For this reason, it may be necessary on the part of Stevenson to consider developing a strong alliance with some of the competitive Far East knitting manufacturers. Likewise, the late release of retailers’ colour choice could tighten the operational schedule at Stevenson’s. Therefore, the company should consider developing new business strategies that could encourage the retailers to submit their preferred colour choices ahead of time. For instance: Stevenson can provide some discount to retailers that are able to provide immediate colour choices weeks before the peak season comes. (See Table I – Summary of Stevenson’s Strength and Weaknesses Regarding the Company’s Offer to Retailers below) Table I – Summary of Stevenson’s Strength and Weaknesses Regarding the Company’s Offer to Retailers Strength Weaknesses Offer a fast response to retailers’ demand Increased knowledge and skills on re-dyeing garments. Ability to dye garments with neck and sleeves attached to the garments. Decision to integrate the dyeing and finishing process in one location. Increased ability to offer a shorter lead-time for colour choices. In the absence of offshore knitting companies, Stevenson is not capable of smoothing out the seasonal load. Late release of colour choice could tighten the operational schedule at Stevenson’s. Zara’s Case Zara is a clothing company that serves the needs of men, women, the young adults and kids. Founded and established by Amancio Ortega Gaona back in 1975, the management behind Zara was able to open as much as 2,692 retail store outlets around 62 countries all over the world as of 2006 (Lopez & Fan, 2003). Given that the distribution management of Zara is being handled by Inditex Group1, the company manages to become the second biggest international fashion companies all over the world (Zara, 2010; BBC News, 2008; Manning-Schaffel, 2004). Zara’s Success in Its Chosen Market One of the main factors behind Zara’s success in its chosen market is its ability to promote a successful brand that provides unique clothing designs that are appealing to the eyes of its target consumers. According to King (2008), branding is more than just choosing a corporate name and advertising it in the newspaper. A successful brand is not limited in developing familiarity on the part of the company’s target consumers. It should make the company’s target consumers feel special when being associated with a brand. Having a strong globally known brand name is considered as one of the most important company asset in terms of encouraging the company’s target consumers to purchase Zara’s merchandises (Neumeier, 2006). As a result of having a positive branding, Zara is able to capture a huge circle of loyal consumers who are willing to purchase the latest fashion and merchandises that are being sold by Zara all over its worldwide retail store outlets. It means that the company is able to gain the benefits of enjoying lesser need to spend on advertising and marketing expenses as the company attracts new customers without the need to exert much effort (Aaker, 1991). The ability of Zara to produce and deliver limited designs of garments on display within a short span of 15 days also enabled the company to stay ahead of the fashion industry. Given that the product lifecyle of fashion items is very short (Stark, 2006, p 17), we can say that Zara’s success in business heavily lies on its the ability to control the product up to the point wherein the target customers are willing to purchase the item (Ferdows, Lewis, & Machuca, 2004, p. 106). This is possible by limiting the quantity of each designs and enhancing the efficiency of its product distribution network. Zara’s Production and Distribution System By maintaining a close communication loop, sticking to a rhythm over its supply chain, and leveraging the capital assets to increase Zara’s supply chain flexibility, the company’s production and distribution system effectively satisfies just-in-time approach. Zara uses different communication technology such as computer system and internet, PDAs, and telephone as a way of communicating the inventory and product supply within each of its store outlets (Ferdows, Lewis, & Machuca, 2004, p. 108). By enhancing the flow of Zara’s production and distribution system through the use of close communication loop, Zara is able to immediately response to the customers’ demand. To increase the efficiency of Zara’s production and distribution system, Inditex maintains three spacious halls which directly respond to the inventory system of women’s clothing, men’s clothing, and children’s clothing (Ferdows, Lewis, & Machuca, 2004, p. 107). The company follows a weekly rhythm when managing new orders (ibid, p. 110). In line with this, speeding-up the company’s supply chain system is crucial to the success of Zara within the global fashion industry. By immediately responding to the customers’ specific needs and preferences, the company is able to avoid losing new business opportunities due to lack of available supply of new clothing designs. Given that Zara manufactures each design in small quantities, the movement of the company’s supply chain is constantly changing. This strategy enabled the company to immediately sell all remaining items even before the clothing design becomes obsolete in the market. Since Zara strictly follows JIT in its production and distribution system, the company is able to save a large amount of money from unnecessary warehouse rent and excessive manpower assigned in managing the company’s supply. Ability of Zara’s Design and Production System Meet the Needs of the Business Because of globalization, competition within the international fashion businesses tightens. Therefore, the modern marketing managers who are working in fashion businesses are facing new challenges on how they can effectively capture and develop more loyal customers. Specifically Zara’s design and production system is cost-effective in the sense that maintaining each of Zara’s new design in smaller quantities enables the company to avoid the inability to sell the item and waste a lot of money due to oversupply of clothing design whereas the practice of JIT in its production system enables the company to avoid unnecessary cost associated with the need to maintain a large area of warehouses. Aside from being able to reduce the market price of its fashionable clothing, it remains a challenge Zara to satisfy the individual needs and preferences of its loyal customers. According to Theodore Levitt, “gone are accustomed differences in national or regional preference; gone are the days wherein a company can sell last year’s models” therefore international fashion companies such as in the case of Zara should learn how to operate in a global scale by ignoring the superficial regional and national differences (Levitt, 1984). In relation to the significant factors that could affect the fashion business, it is good that international fashion companies like Zara remained focused on increasing the value of its brand, maintaining its ability to immediately respond to the needs of its valued customers, ability to offer high quality and reliable products at the right time, and ability to sell fashionable clothing at a competitive market price (Levitt, 1984). General Discussion The success of a business enterprise heavily lies on the ability of the company to align its supply chain system with the constantly changing market demand (Ross, 1998, p. 1). In line with this, it is very important for supply chain manager to consider the real-time changes in the company’s target customers’ preferences and needs with regards to its products and services. For example: Given that the target market of Zara are young individuals who are willing to pay premium prices for fashionable men’s, women’s, and children’s clothing. Considering the market objectives of the company, it is necessary for the business owner to re-align its supply chain system in such a way that it could effectively satisfy its market objectives which is to deliver new fashion clothing within a short time-frame of 15 days (Ferdows, Lewis, & Machuca, 2004, p. 106). Being able to produce new fashion clothing in smaller quantities made the company able to easily sell old clothing design in exchange with new clothing designs. In case Zara failed to align its supply chain system with the fast-changing demand of its target customers, the company will not be able to meet its market objectives. Therefore, it would be difficult for Zara to achieve marketing And business success within the global fashion industry. As created by Terry Hill, order winners is referring to operational changes that creates competitive advantage and market success whereas order qualifier is a product and service characteristics that could satisfy customers with products and services they receive from a company (Reference for Business, 2010). To achieve zero-inventory goal, a manufacturing company should improved its IT system to enhance the ordering process and production flow suitable for its MTS system. Specifically the IT systematized operations networks can provide employees who are working in a manufacturing company with real-time data concerning the operational flow of the business. As the company expands its existing market channels, successfully implementing its operational strategies can be advantageous on the part of its operations analysts and customers. In general, the IT system which speeds up the flow of operational data is a market qualifying criteria that makes the company able to stay within the global market despite the challenges in today’s business world. The use of IT system can be considered as an order winner since fast response to customers’ specific needs and preferences makes the company able to convince the customers to stay loyal with the company’s product and services. Therefore, a manufacturing company’s IT system is considered a value added expense within organizational budgets. Reducing levels of inventory is good in terms of preventing the negative business consequences of having obsolete items which can be very difficult to sell in the market. In line with this, investment on IT MTS operational system enables manufacturing companies to enjoy cost-saving strategies by keeping its production system limited to the market demand of its target customers. Manufacturing resource planning (MRP-II) is an operational planning system that aims to increase the competitive advantage of manufacturing firms by enhancing the operational flow of a manufacturing company through the use of a computer-based inventory management system that incorporates planning matters related the marketing, sales and order management, finance and accounting, distribution of inventory management, engineering, and human resources into the production operations (Lai and Cheng, p. 89). On the other hand, just-in-time (JIT) scheduling and inventory control is a strategy that is commonly used in minimizing unnecessary costs associated with non-moving inventory and less efficient storage system. Aside from being a significant factor that contributes to the success of supply chain management, JIT scheduling is commonly integrated with MRP-II to improve the efficiency of the overall supply chain system. According to Helle (1988), integrating the concept of JIT scheduling with the MRP-II could not only preserve the simplicity of MRP-II design but also enables the end-users to easily understand the purpose of using the MRP-II (p. 100). Even though both the concept of JIT and MRP-II aims to reduce the bottle-necks that could hinder the flow of production, the success of JIT scheduling is still highly dependent on the capabilities of the MRP-II. In general, the application of MRP II can lead to management problems related to inaccurate information entered in the MRP II software. In other words, the absence of proper skills necessary for the implementation of effective production planning and control system, the absence of top-management support, and the probability wherein the MRP II report will be by-passed by staff equally contributes to the failure of developing an efficient supply chain system (Sheikh, pp. 190 – 192). Manufacturing and control system is complex by nature. Since failure of staff to utilize the MRP-II could negatively affect the success of implementing an efficient JIT scheduling, it is important on the part of the supply chain managers to immediately solve problems related to the use of MRP-II to keep the supply chain system stay focus on the market demand. Just like in any business, it is important to consider the nature of the product and the design process of the operational flow in order to develop useful strategies that can improve the performance of a supply chain system. In line with this, learning more about the plant production capacity, the in- and out-process of inventory of raw materials, the actual time wherein the end product will be completed, and the system wherein the end-product will be transferred to finish goods storage area should be carefully studied in order to reduce the bottle-neck within the supply chain inventory system (Sheikh, 2003, p. ii). Conclusion The link between marketing and production operations contributes to the success of any business enterprise. By maintaining zero-inventory, it will be easier on the part of manufacturing companies to sell its finish products without the need to worry about having high levels of finish goods inventory that can be hard to sell in the global market. *** End *** References Aaker, D. (1991). Managing Brand Equity. New York: The Free Press. Baumol, W., & Blinder, A. (2009). Microeconomics: Principles and Policy. South-Western Cengage Learning. BBC News. (2008, October 30). 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