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Supply chain management (SCM) is the process of managing an interconnected business network in the provision of service packages and products needed by the end customers within the supply chain. The process of supply chain management spans all storage and movement of the finished goods, work in process inventory, raw material storage and finished goods from the point of origin to the place of consumption. (Buxton, 2009) It mainly involves monitoring, control, execution and design of supply chain objectives with the aim of building net value, competitive infrastructure, synchronizing and leveraging worldwide logistics with respect to the demand and supply thereby measuring performance globally. (Especially in the cases like M&S). So there is every chance for of issues to take place in global supply networks. (Briggs, 2002)
The supplier's bargaining power is very low in clothing industry especially when it is in retail clothing purchases and buying. The supplier of M&S are changed quite often, the best example is that the company have alliance with British suppliers in order to attain high quality but later it decided to outsource it globally, this decision has been taken putting lower costs in consideration but the supplier relationships has raised questions. Now M&S is no longer reliant on specific suppliers, so the bargaining power of them has drastically lowered. M&S is also purchasing good in bulk which is leading the bargaining power to fall year by year. (Murray, 2013)
The biggest single problem at the moment with M&S is the logistics, Christmas in 2012 saw unexpectedly bad fall of 3.8% in the sales and Simon Irwin to BBC has claimed it to be the supply chain which is the cause. They are making measures to modernize it but not until 2016 and this is causing many problems with to the suppliers. Pitcher (2009) M&S is undertaking a multimillion-pound plan which includes big logistical moves having automated warehouses but this transformation period is causing logistical issues in communicating the demand and forecast of the goods globally. (Foster, 2013)
With the steady decrease in the pound value and European debt crisis the suppliers of UK retail giants are facing problems with profits, the currency conversion is one of the issues faced by the suppliers as M&S has outsourced its supplier opportunities to other countries leaving the British companies.
Moreover M&S is proposing amendments to the relationship with its supplier asking them to contribute (600millions) to the revamp and innovative plans but they are missing a fact even they have to identify their core market before doing this. The supplier contributions might be very common in the non-food and food retail industry but the input levels of the suppliers will be escalated suddenly. They are expecting 1.25% retrospective levy in an year turnover. It might be a part of journey among the vendor and suppliers but having a department store format comprising of multiple brands this is raising questions to their brand name. (Mortimer, 2011).
Supplier partnership with M&S is not very transparent these days as there are different organizations including distinct departments are involved in their supply chain. The expectations and results of M&S is creating pressure and more competition among the suppliers thereby decreasing the bargaining power. (Murray, 2013) SCOR model suggest to use a common language for the language of supply chain but M&S is solely concentrating on cutting the cost when selecting the suppliers and this is effecting many past suppliers and the brand image of the company. Shifting its base to other countries rather than in UK has decreased the supply visibility of M&S so the order batch size is drastically reduced where the suppliers are not able gain bigger margins on the supply to M&S. Whitehead (2001)
Risk management is an end to end aspect in a supply chain and all the key partners should be involved according to their demand planning and manufacturing capacity but M&S during the recession had a tough time to manage financial risks of the suppliers who are in alliance. Many companies like M&S are looking to shift more risk on the suppliers, they are ordering only what they need or to fill the shelves of the stores which is now becoming a new set of challenges for the suppliers. Pitcher (2009) They are trying to put the supply chain as thin as possible by taking active role in planning the demand but by limiting the product complexity which comes from the late-stage customizations and inventory-related risks the responsibility is being transformed to the suppliers who are at the end of the chain rather than distributing equally throughout the supply chain. Whitehead (2001)
2. Critically evaluate how large organizations like Marks and Spencer can work with their suppliers to increase the level of understanding and align their supply chain processes? [25 Marks]
Developing supplier relationships and level of understanding:
In the supply chain, the ability of Marks & Spencer in actively responding to the varying needs and demands of customers is determined by the relation the company holds with buyers and suppliers. Marks & Spencer has ensured the business growth of suppliers. The critical element in the business development is the trust and relationship between the suppliers and Marks & Spencer. (Murray, 2013) Fairness is one of the main elements in supply chain management. (Briggs, 2002) Closely working with limited suppliers pertains to helping them for meeting the business aspirations without costing a lot for other main suppliers. In supply chain management, the starting point is coordinating the business strategy of Marks & Spencer with the business plans of suppliers. This provides the direction and structure for all the suppliers. Integrity forms the heart of this process. It is very important for Marks & Spencer to ensure that they have dealt with all parties in equitable and fair way such that relations will be sustained and there will be opportunities and developments in long term. (Buxton, 2009)
Many suppliers are being in contact with Marks & Spencer. This relation is interdependent as the Marks & Spencer organization largely depends on the supplier capabilities in meeting the customer requirements. If the organization has successfully met the customer needs, suppliers can reap the rewards and benefits. Supplier meeting enables everyone in the supply chain to provide clear structure for wide range of products in the early stages. Key issues like which products must be used, which products should be manufactured and released and other technical priorities can be identified. (Buxton, 2009) The potential problems which hinder the business should be identified and solved. Conducting the early meetings reduces the burden on crisis management. (Foster, 2013)
In meetings, discussions will also be done on developing previous season's products such that priorities can be established in coming years. The meetings focus on sales patterns, market and fashion trends, theme boards, and color palette, components involved in various products, and fit and range of products. This will hugely increase the level of understanding. Pitcher (2009)
Methods to tackle the issues and maintaining relationship with retailers
Functional shifts generally take place when distinct entities in the supply chain partnership vary and it will have a substantial amount of power economically over other entities. Moreover the entities that are powerful will transfer more activities and responsibilities on to a weaker entity and the weaker entities are made to look for ways to cut the distribution or manufacturing costs. So the four key factors that global companies like M&S need from their suppliers are electronic data interchange, storage of raw inventory, organization of products and various packaging activities. The retail supply chain should be optimized with the help of cross-entity functions in order to maximize the profits in the entire supply chain. There is also another retailer and supplier partnership initiative namely CPFR (collaborative planning, forecasting,
and replenishment). Crum and Palmatier (2004) claimed that focal point to reduce uncertainty must be the demand knowledge of the global retailers. This will help the suppliers and in turn reduces the bullwhip effect. There should not be differences in actual orders and demand information as this will result in suppliers fulfilling orders unnecessarily. To maintain good relations the communication between the global retailers and the suppliers should be more open with trust. (Foster, 2013)
Fig 1: Strategy for improvement of SCM in retail sector. Pitcher (2009)
The supplier retailer trend of collaboration can be done using the VMI method (vendor managed inventory). Davis (1999) claimed that maintain VMI facilitates cost cutting for both suppliers and retailers thereby increases customer service level. VMI is a method by which vendors hold the responsibility to determine level of retail replenishment and manage the inventory of the retailer. The retailers can meet the customer demand very easily as there will be frequent replenishment according to the demand or distribution facilities. The on shelf availability of the global companies will be increased which results in increase of sales revenue of the retailer.
Fig 3: Visibility enhancement in SCM (Suppliers and retailer's perspectives). Whitehead (2001)
The supplier also benefit as the variability of the demand is transparent. Ultimately the suppliers can be prepared well in advance to avoid logistical issues and transportation costs. Although this method incurs risks because of sharing the sensitive data across the companies it provides good results. A company like M&S can implement the VMI as they are direct buyers and direct sellers in the market which makes it easy to distinguish the data shared with various suppliers. (Briggs, 2002)
3. Analyze which supply chain solutions could be employed to answer the variety in consumer demand and associated fluctuation from its customers on the global supply network of Marks and Spencer. [25 Marks]
An organization should have a clear understanding about the opportunities and potential threats of their suppliers for taking competitive advantage in the market conditions. Suppliers can be defined as the collection of organizations and individuals who act as the potential sellers of services and products. Market conditions will be influenced by many factors such as changes in the buying patterns, needs, demands and expectations of customers. M&S incorporates fashion, food and core products. In an organization manufacturing of various products is determined by changes in the business trends and preference of people. So, organizations have to constantly update their products and release new products for meeting the customer demands. (Buxton, 2009) If the organizational performance is not up to the standards expected by the people, the failure probability will be very high. In Marks & Spencer, designing and developing new products has turned out to be one of the toughest challenges. The organization has to identify and analyze the gaps which created failure to sustain and flourish in the tough market conditions. In order to understand and analyze the complex cycle of retail market, decision makers should have entrepreneurial flair, experience and sound judgment. The best example is the UK lingerie market which is £1.75 billion worth. The Marks & Spencer is a market leader which can be indicated by the statistical figures which show that the organization is having a market share of 40%. In order to take competitive advantage, Marks & Spencer should have good relation and understanding with their buyers and suppliers. (Murray, 2013)
The strategic objectives of Marks & Spencer are to develop new products such that they satisfy the customer needs in terms of fit and comfort and are available on demand. The products should be specified clearly such that they can be launched to any manufacturing site and provide maximum benefits. The season strategy meeting of Marks & Spencer will be a good opportunity for the suppliers in discussing about their expectations and areas of growth in business. This meeting enables the decision makers of Marks & Spencer in providing realistic assessment about where the suppliers have to develop. In this stage, discussions broach many issues regarding how others should be encouraged in taking their products and how the knowledge should be spread.
M&S supply chain and use of technological recommendations:
M&S has more supply chain partners all over the world and there is an increase in the supply chain initiatives. So the company should make use of the technology to meet the demand of the customers. Using technology will help M&S to cut costs and communicate better. The company can make use of the international information technology to drive its suppliers as it is a unique way of supply chain. The supply chain of M&S should also make use of the RFID tags which will help them to pilot the changes in the trend of the sales. With the ability to store more data in a omni-directional way with automatic barcode detection M&S can provide error-free visibility, delivery and fulfillment within its supply chain. It will also decrease the labor cost as it does not need human intervention. Hence the response to the demand of the consumer and events which are unanticipated in the supply chain of M&S will be expected to be faster than ever before with all these strategies.
Fig 4: Meeting customer demand and reduction of time variability (Murray, 2013)
Securing growth and meeting the customer demands need truly global Customer and supplier Networks, it is clear that the future of the retail giants depend on the global customers and products that are customized. So the supply chain complexity will grow accordingly and it needs to be managed effectively. (Erog, 2002). 85% of the companies in the world are expecting the supply chain complexity to grow significantly in the next decade. Hence the locations of the customers along with product variants and SKU counts grow, then the manufacturing locations might decline drastically because of outsourcing. Thereafter it is obvious that there will be scarcity in the suppliers where M&S could end up not meeting the demand of it customers. So the recommendation is to configure supply chains regionally because the regional supplier will better understand the trend before bundling the goods. They can also make the logistics look better and easy. M&S decision to outsource work to the global suppliers might help them to reduce the cost but on a long term basis the distribution centers might be a supply chain problem if it expands in a faster pace than ever before. (Buxton, 2009)
The major supplier for Marks & Spencer over the last 50 years is the Coutaulds textiles, one of the large scale textile organizations. Both the organizations share common values and goals. The Courtaulds textiles reap the rewards if the Marks & Spencer's product range is successful. The textile organization firmly believes that the Marks & Spencer's demand for excellence and through the organization's support the Courtaulds Textiles has turned out to be one of the prominent companies. Both the organizations ever consider that the people always look for innovation and newness in products. (Briggs, 2002) This stimulated the innovation and interest which directed the market towards scientific and technological development. Following the standards of environment and quality, Coutaulds textiles have become one of the successful textile organizations. On the side M&S has earned reputation in meeting the customer demand. Pitcher (2009)
4. Evaluate the role of Quality in enhancing the efficiency and effectiveness of the Marks and Spencer supply chain. [25 Marks]
Role of quality: Quality in the context of supply chain has many factors involved in it, so this section brings you a critical understanding of how the quality can enhance the effectiveness of M&S supply chain. (Erog, 2002)
4.1 Customer focus
The core principle and idea behind quality of M&S is customer focus. Quality effort arises from customer needs and end with customer acceptance. In supply chain, customers are classified as sellers, manufacturers, suppliers and users. In supply chain, problems arise due to inadequate communication between members in supply chain. (Buxton, 2009) In the process of bidding, procurement specifications are equivocal and buyers don't dare to argue about them. So as discussed earlier if the communication with the suppliers and customers are of high quality it gives the best edge for M&S to enhance their supply chain effectively.
Leadership determines the effectiveness in the process of quality management. Leadership should be effective improving the quality effort. In supply chain, leadership is the core enterprise because development strategy is established through it. (Erog, 2002) Core enterprise must be a leading for adequately considering the expectations and needs of members in supply chain, lead the team members and in establishing a holistic target. In parallel, core enterprise must foster more leaders in quality assessment. M&S has to consider the target and expectations of the customers by making the availability of goods with high standards.
4.3 Involvement of people
The prerequisite in quality management is exertion of creativity and enthusiasm in all the employees. In supply chain, work environment should be excelsior such that employees will be inspired in showing enthusiasm and come up with creative thoughts. (Whitehead, 2001) In the system of supply chain, employees should learn the skills, technologies and principles of quality. In supply chain, the ethos of self-knowledge and self-motion can be fostered. M&S Quality Control teams are cross functional and by means of establishing them we can enable the employees to actively participate in supply chain.
4.4 Process management
The modern quality view focuses on the process of quality management and not on the traditional quality view. In every step of supply chain, the correlative processes involved are service, selling, inventory, production, logistics and procurement which will be having their own set of independent programs and objectives. (Murray, 2013) Some conflicts exist between suppliers and retailers but the mutual effects between the processes should be identified and managed such that the supply chain operation will be harmonious. Although M&S is outsourcing supplier opportunities, if it can maintain the quality standards of the local companies it will have the best ways to improve their efficiency.
The system approach considers the quality management as holistic system in identifying and managing the sub systems. The mutual promotion and coordinated effect in sub-systems improve the efficiency and validity of targets. In supply chain, enterprise must confirm the relation of mutual dependence in the processes, break the boundaries in members of supply chain and integrate various processes in the system of supply chain. Operational efficiency is denoted by the ability in collocating the resources rationally between sub systems. (Whitehead, 2001) Finally, in the supply chain system which comprises of supply, production, inventory, transport and distribution realizes the quality and policy of target by means of optimal operational mode. This will enhance the efficiency of supply chain process at M&S. (Erog, 2002)
The focus of modern research quality will be on continual improvement. Enterprise should improve the service quality as well as product quality and reduce the costs such that customer satisfaction is ensured. As the competition is increasing, more burden has been created in the continual improvement of supply chain process. (Erog, 2002) Logistic providers, sellers and suppliers should improve their skills for achieving the harmony and establishing the quality assurance. Core enterprise must use benchmarking for continually improving the performance.
Factual approach to decision making
The data available should be adequate such that decision making will be effective. Many organizations are using the technologies like POS, EDI, ERP and MRP for making decisions effectively. (Buxton, 2009). Data gathered should be analyzed for decision making. Based on the data analysis, potential problems can be found in the every stage of supply chain. Decisions should be taken accordingly for improving the organizational performance. Most importantly they should speed up the process of warehouse automation upgrades (Due till 2016) because it will affect the supply chain and logistics in a huge way
Mutually beneficial supplier relationships
As mentioned earlier profits margin cuts and fund requests (1.5% from suppliers) mentioned in section 1 is not good for M&S to maintain supply chain quality. The recommendation provided companies work directly with the suppliers of raw materials and ensure that materials are of high quality. (Murray, 2013). Many TQM organizations are working in collaboration with suppliers for increasing the product quality. Organizations are maintaining quality action teams in consulting their major suppliers. Value will be added if there is good relation between suppliers and organization.
So if the above strategies are followed in the context of quality then M&S can enhance their efficiency with respect to their strong supply chain.
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