Such an approach, of looking at the entire supply network helps organizations Identify their competitive advantages and parts of their processes that contribute the most to he performance objectives that are of the greatest Importance to the customers (Slack et al. , 2007). It also helps to develop long-term strategies for the company based on the Identified advantages. H&M, Benton and Ezra are all garment retailers. Key stages In their supply chains that I will discuss are product design, manufacturing, distribution and retail.
Ezra and H&M are so called “fast fashion” providers. Their clothes do not have to be of an exceptional quality as the most important factor is to quickly deliver catwalk design to high street customers at an affordable price (Slack et al. , 2007). Benton clothes are of better quality and higher prices but they are at the same time less fashionable and not as trendy. Despite these differences in the target markets, all three companies operate In a very similar environment and all offer Innovative products with a life cycle that is very short.
Therefore, they need a responsive supply chain that will respond with flexibility to the uncertainties of the environment in which the three companies operate (Fisher, 1997). These uncertainties can be avoided by decreasing lead times, increasing a chain’s flexibility or allowing excessive Inventories ND lower capacity utilization Fisher, 1997). The later, though, require great capital and leads to high costs. How do the companies balance these factors?
In order to answer this question I will follow the product life cycle as it moves down the supply chain of each company, starting from the design, production of the garment, its distribution and retail. In the fashion Industry design Is one of the most Important things. Successful design will have to have the right cut, the right color and pattern, and be made of the material appropriate to the rest of the design. No wonder that companies spend so much effort on this stage. Benton staffs 300 designers who create designs for all compass product lines and are Involved In researching new materials and trends (www. Interrogator. Com, 2007). H is similar to Benton in the approach of keeping the design of all product lines together. The company has 100 designers who work with 50 pattern designers and around 100 buyers and budget controllers creating a team of 500 people working together to balance H’s components of design of this very first stage of product creation indicates that design departments in Benton and H&M are organized in a cell layout that “allocates dissimilar shines to work on products that have similar processing requirements” (Chase et al. 2001, p. 189). In our case of course the role of machines are taken by different tasks of designing, choosing patterns, color and material; whereas women, men and children’s lines have similar processing requirements. Sara’s design department is organized differently. As with Benton and H&M, Ezra employs number of designers, market specialists and buyers who are then allocated to each of their product areas – women’s, men’s and children’s garments (Slack et al. , 2007). Each product line has its own designers, its own buyers and market specialists.
Running three product line designs have its advantages and drawbacks. “It is more expensive to operate three channels, but the information flow for each channel is fast, direct, and unencumbered by problems in other channels making the overall supply chain more responsive” (Ferrous et al. , 2004, p. 107). What also needs to be mentioned regarding design is the volume of the designs produced. Traditional fashion retailing was seasonal, with two collections being launched for the spring and summer period and another for autumn and winter.
Only Benton may be described as following this pattern. The company introduces two basic collections per year and supplements them with small flash collections that are being put into the stores in the middle of the seasons to attract customers (Soddy, 2005). H and Ezra rejected the traditional model and switched to a senseless cycle where new designs are being introduced throughout the year. Ezra mastered this strategy to the extremes by bringing new designs to customers in small batches on a weekly basis.
Successful designs will be modified and another batch sent to customers while those that did not meet with customer interest will be Ovid out of stores within two weeks (Tippled, 2006). H also introduce new designs on a rolling basis like Ezra but the company does not apply this strategy to all its products. Fast-fashion garments account for one quarter of H’s cloths, whereas the remaining three quarters are basic, everyday clothes that once designed are being produced in much larger quantities (Tippled, 2006). Another difference between H&M’s and Sara’s approach and Bonnet’s strategy is the design range offered.
All three companies operate world-wide. Ezra and H however do not differentiate their products depending on where the garments will be sold. Whereas Benton up until recently had quite a lot of its designs customized to the needs of specific countries market (Slack et al. , 2007). Currently however, the company is standardizing its range world-wide which will mean major process and product range simplification for the entire supply chain. The next stage in the garment life cycle is its manufacturing. At this stage the three companies differ the most.
Half of all Sara’s clothes are produced in Sara’s 20 Spanish factories. 40% of all fabrics used are bought from one of Sara’s parent 2004). After the design stage has been completed, fabrics are cut using a highly automated production line and the pre-cut pieces are sent to Sara’s subcontractors – small workshops in Spain and Portugal – that take care of the labor intensive part of the processing Cobber, 2006). Ezra tends to use subcontractors in Europe rather than carrying out the work in the Far East, famous for its cheap labor.
In 2006 for example, 64% of all production was done in Europe and the rest took place in Asia (wry. Inedited. Com, 2007). Ezra owns most of the infrastructure needed to produce its clothes and has great control over its suppliers. Therefore the company is backward integrated. The advantages of this are that they have a lot of control over production in terms of scheduling, quality and capacity but at the same time this requires greater capital to be invested in the infrastructure and the costs of running it are also higher.
H uses completely different model. The company does not have any factories of its own but buys everything from around 700 independent suppliers in Europe and Asia (wham. Ham. Com, 2007). H has around 20 production offices all around the world that are responsible for placing the orders with the right supplier, ensuring the laity of garments, the production standard and the timing (wry. Ham. Com, 2007). H is outsourcing their entire manufacturing stage of a product life cycle.
By doing this H is able to keep its cost very low and therefore sell the finished product to the customer at very competitive prices. But outsourcing does not only mean saving money. It may cause a company a lot of trouble, as the company does not have the same amount of control over a process as it would have if it were kept in-house. The usual problems associated with outsourcing is maintaining the quality standards, levering goods on time and being able to respond quickly to any changes in the market.
H however managed to overcome these problems by setting up their production offices close to their suppliers. Moreover, the employees in the production offices are drawn from the local population, which means they know the suppliers and the environment in which they operate very well (wry. Ham. Com, 2007). They communicate with suppliers very effectively and as they buy in big amounts, they have managed to maintain a lot of control over their suppliers. Yet another model is being used by Benton, which may be said to fit somewhere in- teens Sara’s and H&M strategy.
Just like Ezra, Benton perform itself the manufacturing operations that require great skills and technology while outsourcing the labor intensive activities (Slack et al. , 2007). Previously Benton was famous for using the same network of suppliers who were either former Benton employees or had a family ties to Benton (Giantess et al. , 2004). These close ties between Benton and its contractors encouraged dedication to quality and enabled quick responses in the case of changes and created a clearer understanding of Bonnet’s objectives (Giantess et al. 2004). More recently, Benton started to outsource more and more of its manufacturing to China to take advantage of cheap labor. The only thing in common with all three companies at the manufacturing stage is of the garments. This strategy helps companies to keep the cost low as late ordering means keeping lower inventories and choosing the color of the clothing at the very end of production allows greater flexibility in meeting the actual demand of customers. In terms of distribution, Ezra and Benton use similar strategies.
Both companies invested huge capital in building high technology distribution centre to which all produced goods are sent, checked and prepared to be delivered to individual stores (Slack et al. , 2007). Ezra currently owns two such warehouses one in La Corona the other in Saratoga, which not only prepares the order for each store but pre-prices and tags each garment and hangs most up on racks (Ferrous et al. , 2004). The difference between Ezra and Benton is in the frequency of shipments. Ezra sends new batches of clothes to stores twice a week and these reach their destination within 24 hours in Europe and 48 in U.
S (Ferrous et al. , 2004). Whereas Benton now send stock to its stores every two weeks, much less frequent than Ezra but still quite often in comparison to its earlier practice of restocking stores every two months (Mandrakes, 2007). H again outsource a lot of its distribution especially in its new markets (wham. Ham. Com, 2007). H run one centralized transit terminal in Hamburg where all produced goods are sent for quality checks and then shipped either to individual stores or to a call-off warehouse used to re-stock stores with greater demand for certain items Cobber, 2006).
The final stage of a product life cycle is retail where the items finally reach the customers. Ezra & H use a similar strategy in their retail channels as they both own and run all of their stores situated in the prime locations. H stores are large and are designed in a way to inspire customers as they wonder around (wry. Ham. Com, 2007). To ensure that the H brand is communicated transparently in each market, each store follows guidelines on how to expose garments and set up displays (wry. Ham. Com, 2007).
This is also the case with Ezra but here stores also play another role apart from being a retail channel. Ezra does not carry out any standard advertising but instead uses its stores as a promotional vehicle Cobber, 2006). Stores are spacious and stylish with large areas being left empty and it is an informal policy of Ezra to allow occasional stock-outs (Ferrous et al. , 2004). This strategy creates the feel of exclusiveness of Sara’s designs and encourages customers to visit the store much often. Stock-outs of one item surprisingly do not mean loss of sale but help to sell other items (Ferrous et al. 2004). Benton operate their retail stage very differently from the two other companies. Bonnet’s own a handful of stores themselves whereas the majority of the company’s retail operations are done though franchised and partnered shops Cobber, 2006). The company use the two collections per year model and therefore make its stores order way in advance. Benton also does not accept returns of allowing some order adjustments in the middle of the season and postponing the color choice of goods until much later (Giantess et al. , 2004). All three companies are successful apparel retailers.
The common characteristic of all three companies is the fact that all of them use their operations as a source of nominative advantage. For them operations are a source of excellence that if managed accordingly may not only support but also drive a company’s strategy. They all apply the five operations performance objective – quality, speed, dependability, flexibility and cost- and use the best possible mixture of them to meet their customers’ demands. The other similar aspect of the supply chain management approach of the three companies is their use of technology.
All three invested in the high technology communication systems that link all stages of the supply chain. Yet the companies differ in other aspects. Ezra is not only backward integrated as it owns the majority of its manufacturing but also forward integrated by running all its distribution and retail operations. Such a high degree of vertical integration enables Ezra to stay in control at every stage of the product life cycle and makes the entire supply chain super responsive. The strategy of producing small batches of each design helps to keep the inventory levels at minimum and increase flexibility to customers demand.
This great flexibility and responsiveness of Sara’s supply chain help the company to tackle the bullwhip effect, the phenomenon of variability magnification as we move from customer to the producer though the entire supply chain” (Chase et al. , 2001, p. 335). H&M has a different approach. It holds total control over design and retail while outsourcing entire manufacturing and a lot of distribution. By doing that H&M keeps the costs low while at the same time is able to deliver good quality garments with a top design created by an in-house design department.