Design, production, and distribution are the three major supply chain practices in Benetton, Zara, and Hennes & Mauritz (H&M) apparel companies in Europe. In Zara, design of the apparels started with the identification of varied trends all over the world. These were taken to the production and design centers in the headquarters in Spain. The design team in A Corunna, Arteixo in the north of Spain was very dedicated. Zara’s stores mainly suggested new designs or even the modification that were to be made with respect to the existing designs.
The sales staff and store managers on daily basis gave updates to the head office regarding the movement of stock in the product market. They also provided inputs concerning various new lines, styles, designs, fabrics as well as colors that were demanded by the customers. The designers were in a team that travelled all over the world scouting for emerging trends and new designs. The employees scouted in discotheques, universities, exhibitions, fashion shows and even watched movies and music videos to identify any new trends in the industry. Store managers who possessed ample knowledge in store management placed orders two times a week, while store specialists took responsibility for the stores. This was important step in the stock management in order to meet the market demand (Hulthe%u0301n & Gadde 2007).
A team of two hundred designers created sixty different styles, each at the production and design centre which had three units - for men’s, women’, and children’s clothing lines. The designers experimented within Zara’s parameters where store specialists provided an outline of design, fabric, and new styles as for the demand in the stores. The production and procurement managers gave inputs as for the capacity of the production plant as well as the manufacturing costs. The design specifications and even the technical brief were provided by the designers. The teams worked in tandem to produce prototypes within hours. This facilitated efficiency in the production process. Production was fast and this played an integral role in the supply chain management (Simatupang & Sridharan 2008).
Hennes & Mauritz (H&M) company sourced its products mainly from the agents whom it placed in various Asian countries. Later, the company sold these products via its stores in its initial stages. It started building its design team in the late 1980s. This enabled it to manufacture products that basically satisfied the requirements, preferences, and tastes of its customers. Later, its collections started being designed and planned centrally by the design and the purchase department that is located in H&M headquarters which were based in Sweden (Kotabe & Mol 2006).
Over a hundred in-house designers bolstered by the cooperation from approximately fifty pattern designers and a hundred buyers that were comprised the department. Quality, price, and fashion were the three factors that the company concentrated on. This enabled the company to satisfy customer demands easily and, therefore, proliferate customer loyalty from the consumers in the product market. Customers’ demands enabled the product designers to create innumerable colors, fabrics, themes, styles, and designs. The design software was highly sophisticated, and its products were standard (Best Practices 2002).
Color-matching helped the designers design a new set of collections. Otherwise, while the designers were required to observe trends, copying was highly discouraged. They were supposed to possess ample knowledge concerning the history of cyclical trends and fashion in the industry. They were supposed to establish new concepts as well as develop original designs when required. Employees’ inputs were integral in the design of new garments. The merchandise managers gave feedback about the apparels and also notified the production department about any new collections from the competitors, which would give them a cutting edge over the rest. H&M introduced two major collections annually, that is, during spring season and during autumn season. Brainstorming involving the designers enabled them to create innumerable designs to be the customers’ unique demand (Simatupang & Sridharan 2008).
Lastly, Benetton headquarters were charged with the role of keeping under careful observation the innovations in the apparel sector and design. The design centre in Ponziano, Italy, had a number of designers from varied cultures and backgrounds. This enabled the company formulate designs and styles that met the customers unique and specific demands. There existed three groups that were charged with the responsibility of conducting research, graphics, and managing the commercial aspect involving the products in the company. Bentton held in-store comprehensive surveys to comprehend customers’ varied tastes and preferences (Ayers 2002).
Top designers were hired to cater for the new trends in the market. Fashion shows across the world enabled them to suggest clues on new designs. Computer Aided Design (CAD) technology was used to design the new garments. Fabric in neutral colors was laid in various layers and then cut into required pieces through the use of a prototype once the designs were ready. The unstitched fabric was later sent to contractors (Qatar Financial Centre 2009).
Analysis of the Competitive Priorities of the Three Apparel Operations and the Approaches that Were Taken to Managing Their Supply Chain
In design, spotting trends globally is essential. This underscores the essence of extensive research in the global market in order to meet market needs. In Zara, for instance, a designers’ team and even employees continued scouting all over the world to spot any new trend so as to gain a competitive advantage over other companies. The movement of stock should meet the market demand during any point in time. Zara’s store managers placed orders two times a week for efficient supply chain management (Vachon & Beaulieu 2009).
Design teams help companies meet the specific customers’ requirements and tastes. These designers use color-matching tools to design new-fangled collections, for instance, H&M used sophisticated design software to better its products. It also produced collections in association with famous designers. This enabled the company meet consumers’ tastes and preferences and keep abreast of emerging trends in the global market. This was done periodically depending on the market trends. Buyers are the part of the design process. The involvement of buyers in the production process enables the company to meet the stock requirements that arise in the market. The production department receives the outmost final design which helps it in making prototypes (Ayers 2002).
For instance, Zara sourced its un-dyed fabric mainly from Morocco, India, and Far East. The layout is made in order to minimize any wastage of the fabric. This is, therefore, cost effective. The garments are then stitched properly. When they arrive in production centers, they are cross-checked to ensure that the company’s quality standards are satisfied. The major responsibilities which are carried by the production department include the identification of the new suppliers to improve sales and, thus, increase the total revenues for the company for profit maximization. The orders are placed with the appropriate suppliers. The production department also plays a role in negotiating prices for the goods. It also ensures that suppliers maintain the quality standards. To gain an edge over the competitors, quality controllers help in checking supplies in factories. These quality controllers ensure that the company’s quality values and standards are adhered to. Suppliers which are situated in close proximity to the customers help the company increase sales and, consequently, total revenue. To optimize cost and time, the supply chains are increased to meet demand for efficient supply chain management.
The stitched garments are then wrapped in the plastic bags. These garments are then distributed by the distribution centre. To gain competitive advantage, the distribution centre is centrally located. The establishment of numerous distribution centers is helpful for the company. Optical reading devices were used to scan the merchandise. Automation of the distribution centre is of major priority to bolster efficiency in the distribution of products. Austere quality procedures help in the control of the quality of products of the company (Ayers 2002).
Extensive training in logistics and human resources help improve in the management of human capital in the company. The companies have the capacity to buy out the franchised operations in case either of the franchise experienced problems when running these stores. Flexible supply chain derives innumerable benefits from its flexibility. Adoption of practices that result into higher costs for instance, increasing the number of product lines, making additions in the number of deliveries, using trucks and planes to transport the products enable the companies to gain competitive advantage. Freight costs are increased. These practices help the companies obtain higher profits through maintenance of low inventory. This is of integral role for the company to minimize costs and maximize revenues.
Outside contract companies were fundamental in H&M company. They were used to ship finished products. Central warehouses are important, as they serve as a transit terminal. This is a major priority for the company. Minimizing costs is of primary importance to the company. Large orders needed shipment to be directly sent to minimize freight costs.
Stock management is another competitive priority of the three apparel operations. In distribution, stores were stocked on daily basis. Where demand is high, the number of restocking times is improved. At times, when a new store has just been opened, the level of demand increases and consequently, restocking has to be done several times a day. Items that do not sell quickly are marked down to create way for the new items. When more time is required to deliver the products, the extra time gives the company a higher cost advantage (Qatar Financial Centre 2009).
In design, understanding the customer’s preferences in a better way is a central competitive priority. Conducting surveys is, therefore, important in a bid to establish the customers’ tastes and preferences. Hiring top designers help the company be aware of emerging trends in the apparel industry. Designers pick important clues from exhibitions and fashion shows. Technology, for example, the use of Computer Aided Design (CAD) helps in the automation of these apparel operations. CAD is used in designing garments (Ayers 2002).
To minimize costs, outsourcing of labor intensive parts is done. To maintain a competitive advantage in the production process, technically sophisticated tools of the apparel manufacture process had to be retained in-house. Building of a closer relationship with the contractors is also very important to enable the company coordinate various contractors smoothly (Kotabe & Mol 2006).
Employees are also encouraged to become contractors, since they are well aware of the required quality as well as other specifications which are required by the company. This arrangement accorded companies like Benetton the requisite flexibility which is required to operate in a competitive environment. It also enables the company to reduce labor costs. Planning support in the production process is accorded to contractors. They receive technical support in order to maintain the level of quality. Companies facilitate the provision of financial assistance in order to procure the machinery required. Therefore, contracting and subcontracting is essential to the company, if any competitive advantage is to be attained by the company. Contractors are an integral part in the supply chain.
Factors that May Create a ‘Bullwhip Effect’ in the Supply Chain for Any of the Three Companies and the Ways of Managing It
The bullwhip effect occurs when there are changes in the consumer demand, causing the companies along the supply chain to ask for more goods in order to meet the latest demand. It is also known as the whiplash effect and usually flows upwards along the supply chain. The bullwhip effect occurs, since the demand for the products is based on the demand forecasts by companies and not on the real consumer’s demand (Qatar Financial Centre 2009).
The causes of bullwhip effect can be categorized in two: behavioral and operational causes. Behavioral causes include overreaction towards backlogs, failing to order to reduce stock, communication breakdown along the supply chain, order batching resulting to more variance, and shortage gaming where customers order much more than they needed during a short supply period or the existence of inaccuracies in demand forecasts.
As much as bullwhip effect is a common problem, companies have managed to devise countermeasures to curb the effect. Order batching countermeasures enable companies to reduce the high cost of orders through the use of Electronic Data Interchange (EDI) as well as the use of Computer Aided Ordering (CAO). Logistics by third parties help in curbing bullwhip effect. To curb shortage gaming, units are allocated basing on the past sales. The store orders that are placed twice on weekly basis in Zara can easily be controlled through an electronic system. The EDI system will help reduce the ordering costs (Kotabe & Mol 2006).
To counter fluctuating prices, Every Day Low Prices (EDLP) replace high-low pricing method to bolster the synchronization of purchase and delivery. There exist a number of countermeasures that can help curb inaccuracies in demand forecasts. Accessibility to Point of Sale (POS) data can help overcome this problem. Replenishment of stock is singularly controlled, which, thus, curbs inaccuracies in demand forecasts. As for the distribution in the companies, for instance, in H&M company, buyers communicated to the production department on the number of garments which they needed, and, hence, the projected demand can easily be met by the company.
The sales staff and the store managers should update the head office daily about the movement of stock in the apparel company. In Zara company, inputs are to be used in the production process in regards to styles, colors, new lines as well as fabrics which the customers demand. This curbs inaccuracies in demand forecasts. The whiplash effect is, therefore, mitigated through the use of JIT system of inventory management.
Free-return policies causing bullwhip effect should be restricted or proscribed entirely. To manage fluctuations in the consumer demand, the Just-In-Time (JIT) system of inventory is used in the implementation of a Point of Sale (POS) system where electronic processing of information on individual goods is implemented. This aids in the comprehension of consumer demand and enables managers to order goods when needed (Qatar Financial Centre 2009).
In distribution, the automation of the distribution center in the three apparel companies will enable and facilitate efficient shipment of products and, consequently, meet the consumers’ demands. Electronic processing of information on individual products will help the companies keep a record of past demand by the consumers and, therefore, make future forecasts that are in tandem with the level of production by the companies. In Benetton, dual supply chain assisted the company when it delayed in dyeing the fabrics; this system helped the company meet the demand on the right time.
Provision of information by the agents of the company, therefore, assisted Benetton to gain a cut over above its competitors in the market. This competitive advantage is posed by the dual supply chain’s ability to swiftly respond to changes in demand better. Product design, production, and distribution operations in various locations by the companies are balanced through the use of the dual supply chain, which helped meet changes in demand.