Evaluation of Dior's Supply Chain Strategy
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Many scholars and practitioners have focused on areas such as operations, marketing and human resource as main factors for firm performance and strategic competiveness, but still were unable to answer the main question which is why firms still outperform one another? In recent years, the quest to discover why firms outperform each other has led to the empirically and academically research the supply chain management and its processes Slone, 2004. As this is the era of globalization, firms or companies now have to deal with foreign as well as local competition where as they need to cater the demands of customer all across the globe and satisfy them with quality and timely delivery. In the 21st century, if a company aligns its supply chain with its business decisions starting from product portfolio to distribution channels for the consumers, only then supply chain will become a important success factor (Kearney, 2003).So SCM has combined function that link major business functions and processes within and across organizations. It adds up to interconnected and organized business model contributing to attain high performance (Cook et al., 2011). The prime examples for the above statement are Toyota, Dell and Wall- Mart. By effectively and efficiently using their supply chain management, they gained advantage over their competitors all over the world. If a firm does not adhere and align their supply chain to the global needs they will perish from the market or they will not be able to sustain in the global arena. It also leads to heavy lose. Cisco is prime example of the above fact. Due to their negligence towards their supply chain department, they had to write off 2.25 billion$ in inventory in 2001 and so did Motorola in 2003 (Hendricks and Singhal, 2003). They also argued that supply chain problems lead to a decrease in on an average of 10% of their market share.
Dior’s supply chain management
Christian Dior is one of the most famous fashion brands in the world. In order for them to live up to the famous fashion brand tag, they need to keep on catering the demands of the customers from all around the world. Being “One of the famous brands in fashion” is not an easy ride. They need to satisfy the demands leading to the satisfaction of the customers. This needs dedication, hard work, innovation and timely delivery of quality products. If they are unable to do so, they will not be able retain their customers as there is a lot of competition in the fashion industry namely Gucci.
In Dior their supply chain management department includes focuses on Logistics. It is very critical to the Dior’s business. Dior is a Paris based company but their manufacturing plants are in Italy. It means all the goods are made there.
Their logistics, ware housing and travel and fleet team are responsible for moving the goods to location all across the globe. In regional areas they hire FedEx to transport their goods to customers and retail outlets all over Italy.
As they are the global business entity, they acquire the services of SDV for all the transportation of the products from the manufacturing plants in Italy to their warehouses outside of Italy, and the distribution from the warehouses to all the retail outlets in the country is done by SDV also.
They have outsourced their transportation/ travel and fleet to third party contractors mentioned above. The reason they chose SDV for international transportation is due to their vast experience and having their own network of 600 offices in 99 countries. SDV is a subsidiary of Bolloré, which ranks among the world’s top 10 in transport and logistics. Its core business has always been intercontinental air and ocean freight transportation but now they have broadened the scope of its expertise and is now a global leader in supply chain management.
In my opinion their Logistics strategy is one of the competitive advantages with a focus on customer and its satisfaction. From the above profile it is clearly seen that they have outsourced their logistics processes.
The core spirit of strategy is to perform the business functions and their activities better than their peers. Supply chain management is a core business need which is used to effectively manage and coordinate transformational activities from raw material and its storage to finished good to the end user/customer and its consumption (Heikkila, 2002). It involves various stakeholders therefore SCM proceeds with systematic and strategic coordination of the entire stakeholder domain and business functions with a clear focus on achieving greater profitability and better revenue stream. Supply chain management is not limited to profitability but is a source of competitive advantage. Ireland and Webb 2007, argued that the organization who adopts the supply chain as its strategic business function is basically investing in having a mode of creating as well as maintaining and sustaining its competitive advantage.
From the last thirty years supply chain management had various governing trends. In the 1980s, it was just-in-time production; in the 1990s, it was supply chain collaboration and the outsourcing of logistics activities; and in the 2000s, it was application of the internet, according to supply chain thinker, David Simchi-Levi (Hopkins, 2010).In this global business environment, the essence of competition referred to as firm vs. firm is changing into an arena where there is a war between Supply chains vs. supply chains. It is because businesses do not race with each other as independent entities but as supply chain. It is due success on the business depends upon management’s skills and ability to assimilate organization’s network of business relations. Supply chain is a key to achieving that mainly due to the fact that supply chain management offers various benefits which include inventory reduction, improved delivery service, shorter product development cycles, relationship between customers and suppliers. This is why it is one of the sources of competitive advantage. Therefore it enhances competitiveness and firm performance (Li et al., 2006)
A lot of firms focus on market driven quality goals. It is basically the goals made up from market research. The inputs from the customers regarding their needs are a source from which company makes up their internal process goals. So in short the knowing or spotting of customer need is the founding stone of quality goal. It is because customer needs start with quality and it ends up with their satisfaction. So in order for any company to make quality goals, they first should know about the quality expectation of their customers. Samson and Terziovski (1999) argued that customer focus is the underpinning principle for firms to implement quality management programs. So Knowledge about the customer’s needs is very important as knowledge leads to competitive advantages for supply chain partners (Wu, 2008).
Customer focus in supply chain management endow with basis for creating knowledge based competencies for managing the relationships between the supply chain partners in very effective manner. It develops rational capabilities in supply chain management which can create value in the business (Chen et al., 2004). The capabilities consists of lasting relationship; encouragement of intensive communication; and make use of cross-functional panel; and participation of supply-chain associate to develop, convey and enhance the strategic value among customers, and stakeholders (e.g. Chen et al., 2004; Gronroos, 2004; Kahn et al., 2006).
Due to globalization customer and consumer are geographically expanded. It means there are global markets for the firms to enter into. May be entering into the market is easy, but retaining and increase your share there is hard. It is because global markets want quality products but in a short span of delivery time. Harrison and New (2002) argued that organizational structure affects the movement of products, services, and information. Gries and Kasrda (1999) argue that when organization is expanding into different geographical location they become less and less hierarchal. Harrison and New (2002) found in their survey that one of the top four management priorities in terms of SCM was to increase the level of customer service offered. When the customer’s focus is identified, a firm can then mobilize its resources through management leadership to satisfy various customer needs. The top level of management assumes the responsibilities of identifying market demands and consumer needs, thus guiding product designs to meet customer needs and strive to exceed customer expectation (Flynn et al., 1995). When the customer’s focus is identified, a firm can then mobilize its resources through management leadership to satisfy various customer needs. If SCM is implemented successfully, it will improve the association between upstream suppliers and downstream customers, resulting in amplifying customer satisfaction and firm performance (Kannan and Tan, 2005).
On the whole customer satisfaction is the most essential for all the business or organizations. And to be able to create advanced level of customer satisfaction and fulfillment is definitely a competitive advantage or the major element for the entire business stratagem. Company can measure weather the customer expectation is exceeded or decreased by measuring the customer satisfaction or fulfillment (Fornell, 1992; Olsen and Johnson, 2003).
The term logistics is originated from the military. Through that perspective it concern with supplying the troops, equipment and supplies in war. This term s then borrowed in industry known as ‘business logistics’. In the Council of Supply Chain Management Professionals (CSCMP) defined logistics as the element of Supply Chain Management that plans, implements, and controls the proficient, effectual flow of products and service and its related information between the organization and the customers in order to meet customers' requirements.” CSCMP also defined it as “the management of inventory, at rest or in motion.” It has taken 70 year to fully define the concept of logistic in management (Narasimhan, R. and Kim, S.W 2002).
In today’s trend third party logistics service is very important. Due to vast geographical expansion there is a need for firms to have logistics processes so that their goods services and sometimes information reach the end user. Many researches are advocating that use of these logistics service providers are increasing. Now days they have became a company like DHL, SDC and FedEx. It has become an industry in the past decade or so. Interestingly 80% of industrial companies outsource their logistic activities and processes. As the firms require transportation, warehousing, on time delivery, administration of orders as well as their tracking, if it is in-house it’s very costly. Langley et al 2007 researched that by outsourcing logistic services result in 60% cost being reduced of their total logistics cost. It is preferred to outsource not only they are cost effective but the firm will share less risk and far more geographical reach. It is because all the above functions are the core areas of the Logistics service companies or providers (Fabbe-Costes et al., 2009). These companies have a lot of interaction with the customers if the company chooses the option of home delivery therefore resulting into an intermediary between the customer and the company (Hertz and Alfredsson, 2003). Therefore it is very important to focus on the performance of logistics. As customer want timely delivery of the requested goods, it is one of the notion from which logistics performance can be judged. Other factors like lead time can also be a performance measurement tool to measure the performance of logistics of a company. It is because lead time is the time for the product to reach its final end user. If logistics is negatively performing it will affect customers suppliers and LSP because it is a shared responsibly (Forslund et al., 2009). It is because. Supplier’s credibility, image and competiveness is on the line, where as LSP’s reputation about timely delivery is at risk. In the end if any one of them is unable to perform, it will result in customer dissatisfaction, commitment and loyalty towards the brand
“Logistic is the method of strategically managing the procurement movement, storage of materials, parts and finished inventory ( and related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost effective fulfillment of orders.”So in simple words we can say that logistics are the task of coordinating material flow and information flow across the supply chain.
Supply chain management contributes both the inbound and at out bound goods and services along with the value chain of networks of firms. It contributes the steps from which goods and services is been supplied from the supplier to the customers. Supply chain management is one of the essential and crucial processes for many companies. And organizations are now a day’s striving to have most optimized supply chain management system because of its competitive advantage (Janvier-James, A.M. 2012) to a certain extent, many people confuse the term logistics with supply chain. In general, logistics refers to the distribution process within the company whereas the supply chain includes multiple companies such as suppliers, manufacturers, and the retailers. Implementing the design of supply chain management in a successful manner reduces expenditure, develops suppleness, increase excellence, and certify satisfaction of customer; consequently built competitive advantage. (Li et al., 2006).
In supply chain management the function logistics deals with activities and procedures and measure by which products and services reach to its final customers in the most efficient and cost effective manner. Beside the flow of material it also deals with handling flow of information and financial values in the supply chain in order to fulfill customer requests. In total, inbound and outbound logistics of a company along with external logistics services constitute a market value that ranks logistics clearly among the top business sectors in any industrialized economy Grunow Et al(2012). Therefore logistics is the way from which the firm can be very competitive in the global environment. It is also a source for competitive advantage.
In the end the above literature review strongly correlate the observation which I had while interview the concerned personal from Dior The importance of a supply chain system to is achieving simultaneously a high level of efficiency, a high level of customer service and the ability to respond effectively to a changing environment. Due to the globalization the competition is between firm and companies are increasing enormously in terms of supply chain. Many factors include in the success of the firm successful strategy supply chain management. Now a day it is tremendously depend on the ability to organize, harmonize and amalgamate the manufacture activities occurring on scattered geographical areas or physical location of the organizations.
In the above literature supply chain trends changed enormously since the 80’s. Those trends were Just in time inventory system, Outsourcing of logistics and collaborative supply chain and lastly application of internet. Dior’s critical and being up to date with the SCM practices and trends led to them being one of the top brands. They are using the above three trends to sustain their elite global status as the one of famous brands in fashion industry.
In customer’s perspective, they require quality product with good delivery timelines. From the above literature it is concluded that if you have good supply chain management, you can ensure timely delivery. Dior has done just that by hiring one of the best names in the industry which are SDV and FedEx. They utilize part time sales guys to ensure the best customer service and delivery.
Inventory reduction is also a plus point of effective supply chain management. Dior is able to maintain good inventory level so that they ensure high demand items are not out of stock and the product which is over stock, they move to the stores where they are in high demand thus resulting in reduction of overstock inventory and buffer stock for high demand product. They are able to do it because of constant communication between the stores across the country and warehouses. They have opted to use just in time inventory system of Toyota thus being cost and cash sufficient by maintaining sufficient inventory.
In this competitive environment where globalization is in effect and markets are geographically expanding, having a sound logistics strategy is a key for competitive advantage. In order for a company to be successful they need to be logistically outclass and can only be done by managing their supply chain effectively and efficiently. The final customer requirements must be kept in mind before developing and creating the logistic strategy. The understanding of the requirements of the customer is really essential in all perspective merely then it is possible to attain the required performance of the firm throughout supply chain.
The above assignment clearly supports the notion that how customer focus leads superior supply-chain performance ultimately increasing firm performance as well as the importance of logistics in achieving the customer needs and demands
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