The Best For A Fashion Retailer Commerce Essay

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There are some valuable researches in terms of fashion supply chain, including case studies that cover all aspects of this industry; but the industry is face to many more changes because of environmental, computational, and communicational changes and also facing to new risks. Furthermore, fashion supply chain has own characteristics which must be synchronized with the new technologies in order to gain value for the companies. This article discuss about the lean, agile and leagile paradigms from the literature view and their utilization in fashion supply, their advantages and disadvantages, comparison between two basic methods, risk management and finally review some case studies in this field and present their solution for fashion supply.

Fashion retail is one the major fields that provide benefit for European countries, either in the last two years when they face to global economy shortage and improvement of the global opponents like China, India, Thailand, and Brazil with low labour cost. As these changes result in more jobs lost in fashion industry, new technologies and especially internet and e-commerce cause to new jobs in this field and facilitate communications between suppliers, manufacturers and also customers as end user in the supply chain. However, the revolution in communication provides more facilities for fashion companies and open new horizons to develop globally, but create new risks and challenges for them that need expert managers to cope with this risk by using variety of methods for best result and few changes in supply chain. This paper analyze the lean, agile and leagile supply paradigms for fashion retailers and present their application in some fashion companies to provide better solution for retailers.

Literature review of Paradigms

Lean

Womack and Jones (1996) defined the idea of a lean enterprise, as a group of individuals, functions and operationally synchronized but legally separate companies. The main idea of lean supply is the elimination of all waste including time, to enable a level schedule to be established (Naylor et al., 1999). The first lean manufacturing was Toyota production system (TPS) with its focus on the reduction and elimination of waste within the factory (Ohno, 1988). Despite the presence of lean manufacturing facilities in the supply chain where throughput times were reduced, customers would still experience significant delays for delivery of their orders (Fisher, 1997). Further work on the application of the notion of the lean enterprise to small businesses was developed by �hlstr�m and Karlsson (1997). Abernathy (2000) argues that lean retailers require rapid replenishment of products, and shipments need to meet the delivery times, accuracy and order completeness. To achieve this, we should use bar codes, shipment marking and EDI.

Agile

The Iacocca Institute (1991) argued that an enterprise could benefit from an environment of rapid and unpredictable change, with an agile manner. Enterprises needed to find an effective response to a highly competitive and constantly changing business environment. Hiebelar et al. (1998) developed the agile operation with minimal lead times to be able to service volatile consumer demand with high level availability. The agile supply chain has a number of distinguishing features (Harrison et al., 1999):

* Market sensitive with the ability to respond to real time changes in demand,

* Capacity capability for organizations to react to volatile fluctuations in demand,

* Use of IT to share data between buyers and suppliers is crucial for agile supply.

This will improve visibility of requirements and reduce the stock amount, held in anticipation of predicted and often distorted demand (Hewitt, 1999). Shared information between partners is necessary to sustain the extended enterprise, where collaborative alliances support the exchange of information to enable such activities as common systems and joint product development.

Childerhouse and Towill (2000) argue that the lean principles are appropriate for commodity products with predictable demand and agile principles are relevant for innovative products unpredictable demand.

Leagile

Leagile is the result of combination of lean and agile approaches at a decoupling point for optimal supply chain management. Mason-Jones et al. (2000) argue that, from the decoupling point in the supply chain, agility will be used downstream and leanness upstream. Thus, leagile enables cost effectiveness of the upstream chain and high service levels in the downstream chain of a volatile marketplace. However, Van Hoek (2000) argues that although a leagile approach may work in an operational sense, it makes no sense to challenge the concept of agility, as it has to fit with an agile approach in order to be applied properly.

Fashion Supply Chain

The supply chain in the textiles industry is complex. Often the supply chain is involved with a number of parties (Jones, 2002). Consequently, it requires careful management, in order to reduce lead times and achieve quick response, highlighting the need to use an approach such as agility.

Deal with manufacturers, with centralized buying and considerable negotiation on prices, delivery schedules and quality, is a common practice for retailers (Bruce and Moger, 1999). However, Popp (2000) suggests that, sometimes an import or export agency is an intermediary figure within the chain. The addition of the intermediary occurs by increasing globalization within the industry. Globalization of the textile and clothing supply chain is increased, from sourcing components from overseas to moving manufacturing to countries with lower labor costs (Jones, 2002). Fashion industry is characterized by a number of factors: short lifecycle, low predictability, high volatility, and high impulse purchase (Fernie and Sparks, 1998).

Relationship management encompasses management and building of partnerships between different parties within the chain (Ford, 1980; Buttle, 1996). According to literature, collaborative relationships and partnerships are described as basic situations, and provide benefit for all parties (Wong, 1999; Dossenbach, 1999; Bowen, 2000; Harland, 1996; Lamming, 1996; Bidault and Cummings, 1994; Valsamakis and Groves, 1996). However, in many situations, this view is questionable. For example, the textiles industry tends to be dominated by large, powerful high-street retailers with multiple or international outlets, at the end of the chain. Further, the manufacturing sector is consists of large numbers of small companies with a limited amount of power (Werner Stengg, 2001; Key Note, 1996; Towers, 2000). Although it is questionable whether partnerships, provides benefits for all parties or means that, for push down prices, retail sector exert power over the smaller suppliers (Bhamra et al., 1998). With the improvement of globalization and achieving further profits through reduced purchase prices, partnering between organizations has move away (Jones, 2000).

A number of strategies have been used to improve supply chain management of fashion industry, including quick response and accurate response (Chandra and Kumar, 2000). JIT (just-in-time) in textiles and clothing is the delivery of finished goods through supply chain. Bhamra et al. (1998) highlight that to react to the increasing number of imports and levels of overseas sourcing, fashion supply needs to concentrate on quick response methods such as reduced levels of stock within the supply chain, flexible delivery through domestic sourcing, and increased net margins.

The lean, agile and leagile tries to reduce lead times with supply all effectively sequence and manage the manufacturing process. To achieve this, manufactures should improve customer order demand management and reduce wasteful activities. This is crucial because of a finite amount of available resource in enterprises. Consequently, for scheduling control of production, we should focus against wastage in manufacturing and supply. This is particularly relevant to fashion industry, because of increased competition and compounded with small businesses with less resource available.

Advantages and Disadvantages of Lean & Agile

Regarding to the fashion supply chain and features of Lean and Agile supply, some of these features consider as advantages and the others consider as disadvantages.

As you can see in table 1, the first 3 characteristics are essential for these two methods and also for the fashion supply chain, therefore these could be consider as 3 main advantages of both methods.

Eliminate Muda: by taking the minimum reasonable inventory (MRI) in to account; we can see that in an agile system, have to be a careful consideration of stock and/or capacity requirements to ensure the supply chain is robust to changes in the end users' requirements. Thus this feature could be an advantage of agile for fashion supply; but from the view of eliminating of all waste, this would be an advantage feature of lean for fashion supply.

Rapid Reconfiguration: In lean method, it is highly desirable, but not as essential as with agile manufacturing, because it is needed a certain amount of leeway with respect to the production schedule and the forewarning of product changes which is considered as a prerequisite for fashion supply, but in agile method, it is an advantage feature.

Robustness: Fashion supply not only should withstand variations and disturbances, but also can use these fluctuations to maximize their profit, so this feature is an advantage of Agile and disadvantage of lean.

Smooth Demand / Level Scheduling: In fashion supply where the end user demand is beyond the control of the supply chain, if is not possible to implement lean supply with the end-user interface, so either this is a disadvantage feature for lean and advantage feature for agile.

Table 1. Different characteristics of leanness and agility in fashion supply

Keywords

Comparison of Lean & Agile

The paradigm will depend upon the requirements of the customer at any point of supply chain. Here the customer is the next direct receiver of the material in the supply chain. The different application of agility and leanness with reference to these last two characteristics is summarized in Figure 1.

The darker areas on Figure 1 are willing to be lean and the lighter areas to be agile. The major factor is whether there is a demand for variability in the production rate. If there are a wide variety of products an agile supply chain will be able to switch between the products easily. If there is a wide range of products then the demand willing to become more variable at different level.

Supply Risks

Supply chain risk management is important because of the following features:

* Focus on core competencies, increase the dependency of companies,

* Outsourcing the products and services,

* ICT usage cause to disappear the geographical boundaries,

* Partnerships,

* Disruptions, because of natural calamities and terrorist attacks,

* Reduction of supplier base or even single sourcing.

* Volatile economy and dependent to fuel prices.

Risks cannot be completely eliminated from supply chains but strategies can be developed to manage the. Some of the variables related to risks that would help alleviate risks in a supply chain are shown below:

Information sharing

Free exchanges of information which starts with the product development stage and continue with the mature and end-of-life phases of the product life cycle is highly effective in reducing the risks of inventories, obsolescence and supplier failure (Lee et al., 1997; Lee, 2002). Internet and e-commerce provide opportunities for supply chain to transfer information in real time with least transaction cost and global reach (Zeng and Pathak, 2003) resulting in considerable reduction in distribution and coordination costs (Koh and Nam, 2005).

Collaborative relationships and trust

To manage risks successfully in a supply chain, organizations provide closer relationships with key suppliers (Giunipero and Eltantawy, 2004) with deep reorganization of relationships in the network (Caputo et al., 2004). Collaborative relationships require trust and commitment for long-term cooperation and sharing risks (Sahay and Maini, 2002). Trust is developed through unchanged and predictable acts of the partner over an extended period (So and Sculli, 2002) and has an important role in the well-functioning of lean, responsive, and agile supply chains (Svensson, 2001).

Aligning encourages and proper revenue sharing arrangements

According to Mentzer et al. (2001) a key component for SCM is sharing both risks and rewards among the members of the supply chain. A supply chain works well if the encourages of its members aligned, which requires that the risks, costs, and rewards of doing business are distributed fairly across the network (Narayanan and Raman, 2004). Revenue sharing is a kind of supply chain contract to share the risks between supply chain partners (Tsay, 1999).

Knowledge about risks and risk analysis

According to Morgan (2004) risk in a supply chain can be sorted in four general categories: political, economic, terrorism related and �other�. By understanding the variety of supply-chain risks, managers can design balanced, effective and risk-reduction strategies for their companies (Chopra and Sodhi, 2004).

Risk analysis is a practice with methods and tools for identifying risks in a process (Sinha et al., 2004).

Lean concepts assume that the demand is relatively stable and variety demanded by the customer is low. Thus, the supply chain is designed with a focus on waste elimination and little focus on market responsiveness. So when the customer requirements are somewhat stable and risk alleviation competency required is moderate lean supply chain would work well.

An agile supply chain is market sensitive with the ability to respond to real time changes in demand (Faisal, 2005) and so it ranks high on customer sensitivity dimension. According to Prater et al. (2001) supply chain agility is determined by speed and flexibility of sourcing, manufacturing and delivery. An agile supply chain can easily reconfigure itself according to the new market environment in very little time.

As leagile supply chain combines both lean and agile supply chain paradigms it is necessary that demand remains stable in the upstream side before decoupling point of the supply chain so that lean principles can be applied. After the decoupling point the focus is on agility and so it would respond well to the required market variety. As this supply chain strategy combines lean and agile principles and requires that demand remains stable after decoupling point it has a moderate risk alleviation competency value.

Combination of Lean and Agile paradigm in practice

There are a number of common elements between the lean and agile paradigms. Also there are three proven ways in which the paradigms have been brought together to provide available and affordable products for the end customer.

The Pareto curve approach

Analysis of the business will show that the 80/20 rule holds in some businesses (Koch, 1997). For example it could be argued that the top 20 per cent of products by volume are likely to be more predictable and hence they lend themselves to lean principles of manufacturing and distribution. The slow moving 80 per cent, on the other hand, will typically be less predictable and will require a more agile mode of management. Figure 2 suggests one generic way in which supply chain strategies may be devised for the predictable 20 per cent and the more volatile 80 per cent of products.

The de-coupling point approach

There are two policies in the apparel chain:

Make to Stock (MTS) and Make to Order (MTO). The MTS policy is for a wide range of raw materials and accessory types. In comparison, a small variety of them use the MTO policy.

Hoekstra and Romme (1992, p. 66), defined the Decoupling Point when analyzing the distribution network at Philips and used the definition: �The decoupling point is the point that indicates how deeply the customer order penetrates into the goods flow.� All the definitions are based on the fundamental concept of the P:D ratio, presented in Shingo (1981), where P represents the production lead time and D the delivery lead time. As shown in Figure 2 the supply chain can be modeled of two key processes on the supply side based on the P:D ratio. D here represents the time the customer can accept to wait for delivery and therefore provides an opportunity for the supplier to be truly demand driven, using the terminology in Christopher (1998). Upstream from this point the supply chain is forecast driven and activities must be performed, at least to some extent, based on estimate. The estimation can involve different levels of uncertainty and even be described as a customer order decoupling zone (Wikner and Rudberg, 2005a,b) but we do not explicitly include this aspect, here. In a forward supply chain context the mission is successful once the demand driven fulfill process is completed. From a closed-loop supply chain perspective this is however not the case and to start this extension we introduce the Consume process on the demand side, as in Figure 2, which shows the customer�s actual use of the products delivered by the forward supply chain.

Using standard terminology, MTS and MTO represents the two �pure� strategies from a logistics perspective where all activities are forecast driven, as in MTS, or all activities are demand driven, as in MTO.

Figure 2. Process perspective of the forward supply chain

Separation of �base� and �surge� demands

Other hybrid strategies that successfully used, is based upon separating demand patterns into �base� and �surge� elements (Gattorna and Walters, 1996). Base demand can be forecast on the basis of past history, but surge demand typically cannot. Base demand can be met through classic lean procedures to achieve economies of scale while surge demand is provided for through higher cost and more flexible processes. Such strategies are increasingly used in the fashion industry where the base demand can be sourced in low cost countries and the surge demand locally nearer to the market.

Well documented companies which used such strategies are Zara (Christopher, 1998), Benetton (Zuccaro, 1998), and National Bicycle (Fisher et al., 1994). Relate the strategy to the needs of the end customer in terms of both affordability and availability is particularly important.

Different examples of Lean and Agile

To study the fashion supply chain for the effect of lean, agile and leagile paradigm on it, four different companies from previous researches in different facets of textile and apparel supply chain in Europe, selected. These companies are ranging from one end of the spectrum, fiber companies, to manufacturers of apparel, to design companies in contract furnishings, to at the other retailers. These cases are described as follows:

Case 1 (a manufacturer of high street fashion): its supply chain began from agents or weavers to shipping companies, to garment manufacturers, to shipping companies, to Company 1, to customers (retailers), and finally to end users.

The company does not produce any textile products, but sourced from manufacturers, either directly or through agents. The company discovered the importance of overseas manufacturing to remain competitive. Increased lead times and difficulties with communicating changes to designs have become inevitable consequence. Subsequently, to guarantee the success of the company needs to set up certain systems to improve efficiency.

Case 2 (a fiber producer): its supply chain began from raw material suppliers to Company 2, to spinners, to knitters, to sportswear or raw material suppliers, back to Company 2, and finally to retailers.

This company has sales of 2.2 billion euro and employs 16,000 people. Production facilities are based in Germany, Netherlands, UK, USA, Brazil, Italy and Poland. It produces fibers and has a number of well-known brands. End market users for it, range from sportswear companies to hotel chains for antimicrobial fibers for bedding and interior textiles.

Case 3 (a sportswear accessory design company): its supply chain began from fabrics and yarns suppliers to manufacturers or overseas manufacturers, to Company 3, to clients, and finally to retailers.

The company is a small company in designing and sourcing the manufacture of headwear and accessories for the sportswear industry, and is currently moving into the fashion industry. It currently has ten employees based in the UK and a further two based in Europe. The annual turnover of the company for fourth year (1999-2000) is �1.5 million.

Case 4 (a premium brand manufacturer/retailer): its supply chain began from yarns and dyes suppliers to fabric mills, to trade shows and factories, to Company 4, and finally to retailers.

In 1970 Company 4 opened its first shop and today has over 220 shops world-wide, with merchandise sold in over 42 countries, and an annual turnover in excess of �180 million, and remaining self-financed. Since the start in 1970, Company 4 has flourished from a menswear designer name into a global brand. Company 4 is made up of four sub-brands that address the different lifestyles of the modern individual. Pretax profit for the company in 1999 was �4.4 million and the company had 376 employees.

Discussion

Company 1: manufacturer of high street fashion

The company has been able to remain competitive in a market where many small companies are facing immense difficulties to survive, because of the decision to source and manufacture overseas. The company has to respond to short product lifecycles and rapid product replenishment and achieves this through its flexible management of its supply base by using a mix of overseas and local companies. The success can be seen from the continuing interest from new and influential fashion retail customers. The company has had to completely reorganize its manufacturing and organizational structure through investment in a computerized process, in order to make the overseas manufacturing successful. For this process to be used, similar systems will need to be introduced into suppliers, in order to speed up communications. The relationships with both customers and large players within the market are strong, and these can guaranty the future strategies of the company in terms of expansion.

Company 2: fiber producer

The company has found that competition has increased in the sector in recent years, and trading conditions are more difficult. It has had to focus on added value products, because it was unable to remain competitive by supplying commodity products, as other countries, such as Turkey and China, are able to produce these much more cheaply.

By increasing the competition and speed of change in the sector, its fiber producers become responsive to market demands by using brand reputation as a form of protection against cheaper products, and by forming business partnerships to generate innovation to respond to both shorter term market demands and to invest in longer-term R&D.

Company 3: sportswear accessory design

Either the overseas manufacturer was able to produce products at a cheaper cost than the UK supplier, but the lead times proved to be long. By using a combination of UK and overseas suppliers working to the same product shortly, making the same samples and end products to the same specification enabled this company to position itself in the sportswear market. The UK supplier was able to guarantee delivery and get the product into the marketplace on time, but could not do so at the same cost of the overseas suppliers. Company 3 was able to optimize its own situation by using mixed supply base.

Company 4: a premium brand manufacturer/retailer

The company has developed and maintained close relationships with manufacturers, some of them are working with the company for 15 years. The company values these relationships because the small order quantities required by Company 4 may cause difficulties for some suppliers. The company has built close relationships with approximately ten mills. Building close relationships with the mills allows Company 4 to overcome any problems and negotiate on volume and lead times to their mutual benefit.

Conclusion

Fashion industry is a volatile market with variety of products and short life cycle. As it is low profit margins, produce and holding in small scale will result in bankruptcy. To cope with such risks and having stable state in market, companies should produce rapidly and variably.

The analyzed cases present that companies in fashion sector utilize both agile and lean methods. Considering to the fashion supply characteristics, a combination of the two methods which leading to a leagile approach is clearly needed. Consequently, fashion companies need to be able to respond quickly to changing markets and provide quick replenishment. Also they are not able to store large quantities of products. These products have a very short life cycle and fashion market is seasonal. Also relationships with suppliers are keys to extend supply chain management, because of low cost overseas manufactures. Therefore, fashion supply does not fit into either a lean or agile paradigm, but it needs a combination of two methods with low margins and volatility of demand. This would ensure fast product replenishment, flexibility in response to the volatility of demand from retailers and the building and maintaining of supply chain partnerships.

To improve responsiveness and develop relationship, managers should provide the tradeoff between cost of production, lead time of supply and volatility of demand within the sector. Further research to extend the understanding of supply chain management for fashion supply and the role of expert managers in this field prospected.

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