- 1 Fashion Supply Chain Supply Chain Of Fashion Industry Involves A Time Based Competition Many Customers Have The Uniq 1 (93.35 KiB) Viewed 11 times
existing competitive strategy of each company than provided at
least 5 points in favor, if you do not agree on the performance of
the existing competitive strategy of each company than recommend
your choice of competitive strategy to the
company.
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1. Fashion Supply Chain Supply Chain of fashion industry involves a time based competition. Many customers have the unique product needs but a competition is very fierce because of the low barriers of entry. Many new players try to offer specialized products to customers all the time. This section features the supply chain case studies of H&M, Benetton, Zara, Adidas, Louis Vuitton and Marks & Spencer (M&S). MEC_AMO_TEM_035_03 Page 1 GLOBAL SUPPLY CHAI 2.1 H&M aims to be the price leader in the fashion market. In order to materialize its vision, H&M tries to eliminate the middlemen in various stages of supply chain and consolidate the buying volumes. Product design is also the central part of its strategies. They don't try to follow the high fashion designs but try to adopt the street trends which are easier to produce. They don't invest in production facility at all because they utilize a network of nearly 700 suppliers located in Asia and Europe. They also don't own any stores because they choose to rent the space. In order to control its supply chain, they use a central warehouse to Germany to receive and ship products to local distribution centers in different countries. At the end of the day, they can bring products to market within 2-3 weeks. 2.2 Benetton, in contrast, chooses to have a full control of its production but allow its licensees to operate the stores so they can focus on production and quality control. The reason is that they would like to create the worldwide brand awareness. For fast moving products, they use the production facilities in Europe. Asian suppliers will perform production for standardized products. 2.3 Zara is very famous for its time based strategy. In order to launch a new product within 15 days, Zara uses a small lot production. A new product will be tested in pilot stores. If product sales is good, a larger batch will be ordered. Otherwise, remaining products will be removed from the shelves and sold as mark- down in other stores. This creates the perception among consumers that Zara's products are unique and you have to take it while stock lasts. Vertical integration contributes to the success of Zara, they own the majority of its production facilities and stores (this is the reason why Quick Response can be effectively implemented). Its automated distribution centers are strategically located between the centers of populations so products are delivered to stores quickly. Zara also works with Air France, KLM Cargo and Emirates Air in order that they can coordinate directly with the airlines to make the outbound shipments to its stores and bring back some raw materials and semi-finished materials with return legs. 2.4 Adidas copes with changing customers' demand by adopting Mass Customization strategy. The whole idea is to develop, market and deliver the product variety that most customers will find what they want. The first steps towards mass customization is to strategically offer the product choices. Too few variations will disappoint a customer but too many variations will simply postpone a buying decision. After that, Adidas asks the same key suppliers to produce custom components in order to achieve the economy of scale. In order to compensate a long waiting time, Adidas uses air freight or courier service. The reason why they can do this is that customized products are sold directly to customers so they have the higher profit margin to compensate the higher transportation cost. 2.5 Louis Vuitton is one of the largest luxury brand in the world. In the past, they supplied products to department stores. In order to create the better buying experience and control counterfeiting products, they establish their own stores in high-end shopping malls. Having own stores mean they can have better understanding about buyer behavior 50 they can adapt more rapidly.
2.6 Marks & Spencer (M&S) is one of the biggest fashion retailers from UK. Other than fashion items. they also sell food items and home products. The primary focus of M&S is always a cost reduction. For example, they ask each supplier to develop samples for all range of fashion items so they can decide which items they will order from whom. The delay in the development of samples, testing, sample approval and final decision making causes a very long time-to-market. As a result, they're able to respond to the rapid change in fashion industry. However, they change some of sourcing process as below, -Close its production facilities in UK and use suppliers in Asia or Eastern Europe -Instead of asking suppliers to produce the items exclusively for them, now they allow suppliers to produce items for other retailers too. Then, suppliers don't have to provide a dedicated production facility which results in no investment cost. Using common raw materials also help to reduce cost drastically - Assess the capability of each supplier and reduce number of suppliers - Ask low cost producers to make standard items and ask capable suppliers to make innovative products -Reduce number of inventory and pay much attention to 500 best-selling items Supply chain strategy of the summarized as below, fashion retailing industry is Business Strategy Enabler 1 Enabler 2 Enabler 3 Enabler 4 H&M Price Leader Low-cost country sourcing Eliminate middle- man along supply chain to consolidate volume Simplify product design to drive cost down Reduce time to market to 2-3 weeks Benetton Worldwide Brand Have full control of production facilities to control quality Outsource retail store operations Use near-shore sourcing for fast moving products Zara Time Based Competition Produce small batches and have them tested in pilot stores Utilize vertically integrated supply chain Automated distribution centers are strategically located between center of demand Use offshore sourcing) for standardized products Coordinate with airlines to reduce transportation lead- time for both outbound and Inbound shipments Use air shipment to compensate long waiting time Adidas Product Variety Mass Customization Offer product choices strategically Use same suppliers to product custom parts