Your SlideShare is downloading. ×
Supply chain
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Supply chain

1,144
views

Published on

This assignment is a case study. The focus of this case study is the supply chain of three companies of garments retailers. These fast fashion quicker picker upper class retailers of H&M, Benetton and …

This assignment is a case study. The focus of this case study is the supply chain of three companies of garments retailers. These fast fashion quicker picker upper class retailers of H&M, Benetton and Zara are competitors in the market globally. Each of these brands in multi national. The case study is about the supply chain strategies of these case studies. The structure of the case study has been divided into four stages of designing, manufacturing, distributing and selling. Each of these companies individual strategies of supply chain are being critically analyzed in question one of this assignment. And the second question critically evaluates the most effective of these supply chain strategies followed.

The strategies of H&M are different from ZARA’s and Benetton supply chain strategies. The later two companies have the automated systems of distribution that connected together the designing and manufacturing plants spread all over the world. ZARA’s is following the most efficient supply chain strategy because the designing is the most crucial phase of the whole manufacturing of garments business. The designing is prototyped and confirmed for its acceptance in society by market specialists before it is launched in the market. The manufacturing is specialised and performed by highly skilled people.

Published in: Education, Business, Technology

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,144
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
32
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Title: Critical Analysis of Various Strategies of supply chain management at H&M, Benetton and Zara. Author: Submission Date:
  • 2. 1. Executive summary: This assignment is a case study. The focus of this case study is the supply chain of three companies of garments retailers. These fast fashion quicker picker upper class retailers of H&M, Benetton and Zara are competitors in the market globally. Each of these brands in multi national. The case study is about the supply chain strategies of these case studies. The structure of the case study has been divided into four stages of designing, manufacturing, distributing and selling. Each of these companies individual strategies of supply chain are being critically analyzed in question one of this assignment. And the second question critically evaluates the most effective of these supply chain strategies followed. The strategies of H&M are different from ZARA’s and Benetton supply chain strategies. The later two companies have the automated systems of distribution that connected together the designing and manufacturing plants spread all over the world. ZARA’s is following the most efficient supply chain strategy because the designing is the most crucial phase of the whole manufacturing of garments business. The designing is prototyped and confirmed for its acceptance in society by market specialists before it is launched in the market. The manufacturing is specialised and performed by highly skilled people.
  • 3. Table of contents. 1. Executive summary: ................................................................................................................................. 2 2. Introduction: ........................................................................................................................................... 4 1.1. Aims: .............................................................................................................................................. 4 2. Question 1: ............................................................................................................................................. 4 3. Question 2: ............................................................................................................................................. 9 4. Conclusion: ........................................................................................................................................... 13 5. References: ........................................................................................................................................... 14
  • 4. 2. Introduction: The case study of Supplying fast fashion is about the quicker picker upper class retailers of H&M, Benetton and Zara. Each brand has its own business initiative fable but they have been successful in retailer business and all are multi national. The structure of the case study has been divided into four stages. These stages are designing, manufacturing, distributing and selling. Each of these companies individual strategies of supply chain are being critically analyzed in question one of this assignment. The second question gives the overall analysis of these three retailer companies of garments. The most effective supply chain and operations management systems is determined in this question . 1.1. Aims: The aims of this case study are: To critically evaluate the case study containing cases for three fashion retailers. To critical analyze the given supply chain strategies of each of H&M, Zara, and Benetton from operations management viewpoint. To figure out the best supply chain strategy followed from either of these brands. These aims are the focus of entire case study. The following are answers to questions will be fulfilling these aims effectively. These tasks are critically evaluated and balanced. 2. Question 1: Critically evaluate from an Operations Management perspective, the different supply chain strategies adopted by H&M, Benetton and Zara as described in the ‘Supplying Fast Fashion’ attached case. Theoretical framework. Answer: The operations of H&M, Benetton and Zara are different in terms of their supply chain. The strategies of each of these fashion retailers vary from each others. The strategies for supply chain of each are described below:
  • 5. H&M: The H&M started its business in 1947 from Sweden. The business has the cosmetics and clothing line. There are over 1000 stores in more than 20 countries of the world. The supply chain starts from Sweden Stockholm’s. The designing stage being the first takes many components under consideration before manufacturing the products. The fashion, price and quality are the considered components for designing. More than 100 designers design products by joint efforts of a team of 50 pattern designers. The designer department create an optimum balance in buying volumes, extensive clothing, fashion knowledge, costs of every component and designing processes. H&M does not have its own manufacturing factories instead it deals with 750 suppliers. Half of manufacturing burden is taken by the European factories and rest is taken by Asian factories. More than 21 manufacturing offices reside in the world the control the production and other supply chain. The relationship between suppliers and production offices controls the main supply of garments around the world as it determines the buying of clothes. The dying can be done as per specifications as a later stage after the order has been placed. The supply lead time ranges from 3 weeks to 6 months. It all depends on the nature of the good produced. Trendier garments take short lead times. The distribution at H&M is much of manual done by the subcontractors. The stock management is done internally. The H&M Transit Terminals in Hamburg supports the routing of stock to retail stores. There are stock rooms that receive the inventory. These stores check the orders inspect and allocate the stores centrally. There is a central stock room which is called Call Off Warehouse. This is the main store room for final distribution to stores for selling. The final supply chain stage is when the garments reach the retail stores. These stores are sole property of H&M. the average size of the retail stores are 1,300 square meters. The air and atmosphere is created to be comfortable and inspiring. Zara: Zara brand is a Spanish fashion retailer started in 1975. It is a part of Inditex group which is a global specialty retailer. According to the survey of 2001 there are more than 1300 stores in over 39 countries (Sanblue 2011).
  • 6. The supply chain at ZARA follows the vertical integration. The supply chain of vertical integration means that the distribution is controlled by only one entity to increase the company’s market share (Izi 2011). The designing of ZARA clothing is done with the combines efforts of designers, market specialists and buyers themselves. The designing of three types is done distinctively in three groups for men, women and kids. There are design halls where the market specialist to design with buyers in the area. The prototypes are created in a workshop. More than 300 designers are there doing the designing of clothes. Zara lead times are fastest in fashion garments industry. The rack time is almost 15 days for these garments in racks. Almost half of the manufacturing is done in 20 Spanish factories. Just like Benetton, the operations are more of capital intensive operations like dying and cutting, and the labour intensive operations are done by subcontractors. The dying is done at dying assemblies. Most of ZARA factories work in single shift systems to retain flexibility in system. The 3rd is distribution stage of Benetton where it has been operating in automated warehouses. A large investment has been done for the automation of warehouses. These warehouses reside closer to manufacturing plants. The operations of storing, assembling and pack the items is performed in this unit. The assembling is also done in these warehouses as per specifications. The automation called for the heavy investment but the benefit to it goes all the way around. It makes the operations all online and fully updates and completely synchronized all the time. The new project is under consideration of making more automated warehouses. The retailing and selling is the last stage of supply chain. The stores of ZARA are smaller as compared to H&M stores. Each store has an average size of 800 square meter. The best thing about ZARA garments is that the clothes are sold within the 15 days of arrival in stores. The reason being the designs are always unique and robust. Due to this the customers are always looking for a new look for their clothes (Ward 2010). The supply of small batches but with regular periods of time are shipped to these stores. This avoids the delaying and purchasing from this store frequently. Benetton:
  • 7. Benetton started the retail business over fifty years back. It started with sweaters of casual type. By 2005 there was the presence of this group in over 120 countries. There are 5000 above stores world wide of United Colors of Benetton (UCB). The supply chain strategy of Benetton also starts with designing stage. The designing of clothing is done by more than 300 designers. The ranges of these clothes are standardised globally. These ranges are specified for country to country. The manufacturing stage of supply chain was situated in Italy. The business expanded to other countries to save the labour costs. The offshore manufacturing units are now in North Africa, Asia and Easters Europe. The central manufacturing unit has the expensive technology facilities. This central unit coordinates with other operations units in a network of small contractors. The main responsibilities are assigned and controlled from the Italian central manufacturing unit like jackets are manufactured in Eastern Europe and T-Shirts are manufactured in Spain. The dying of clothes are the last thing in supply chain. The stage three is of distribution which is much like that of ZARA’s. Benetton established the automated warehouse and spend bulk of money in making the operations all automatic. These warehouses are placed near manufacturing plants so as to store and pack the items. The assembling is also done in these warehouses. These automated systems are the major investments because it makes the operations all online and fully and completely synchronized. Also the RFID tags are attached to these garments for the sake of tracking these garments. The final stage of Benetton is retail as well. The retail operations have been reshaped in 2000. Once upon a time the retail stores were small shops run by third parties. Now these shops have been the Benetton owned mega stores of 1,500 to 3,000 square meters. These stores can reinforce shopping at Benetton stores. The supply chain of these three fashion garment sellers is competent with each other. The supply chain strategies of Benetton and ZARA are very organized and automated where as the supply chain of H&M is more concerned with the subcontractors and the suppliers within the supply chain. The automation in warehouses makes the supply chain effective and reliable. The strategies of ZARA are most idealistic for an unbroken network of retailing. The production of each product is specialised in each country and manufacturing unit. This is how the designs are not repeated because of the highest level of
  • 8. specialization. The automation is another big reason for success of the retailing. Finally the clothes that arrive at ZARA stores have the rack life of only 15 days.
  • 9. 3. Question 2: In the light of the above, recommend the operations strategy which you think is most effective for a fashion retailer to adopt going forward and justify your position. Answer: Johnson, Scholes & Whittington (2008) define strategy as the direction and comprehensive long term scope of an organization that helps achieving competitive advantage through its operational configurations of resources within a highly challenging environment in order to fulfil the needs of markets and expectations of stakeholders. Operations strategy exhibits a distinct role with a differentiated strategy, it also serves as a distinctive competence in implementing similar strategies better than competitors (Asllani 2006). Corporate strategy is defined as goals and directions encapsulated in a scope of a corporate operations done in a way to achieve particular goals (Grinblatt and Titman 2002). The strategic cycle is essential for a fast operative business making an effective use of supply chain. There are three aspect of a corporate strategy in general as show in the flow chart below: Strategic Analysis Strategic Choice Strategy Implementation
  • 10. After the strategic analysis the strategic choice is position and aligning operations capabilities that cast a significant impact on competitive strength and thus business performance (Anderson, Cleveland et al. 1989). Supply Chain Operations Reference Model: The model SCOR offers a unique framework that joins together links performance metrics, people and their best practices into the framework structure. This frame work supports communication between partners of supply chain and improves supply chain management, the technology in use and related activities (Baker 2010). (Concil 2011) The operations strategies used by these three retail stores are quite close to each others supply chain strategies. Each of these strategies has its own pros and cons. The most successful and effective strategy out of H&M, ZARA and Benetton is that of ZARA. It shows in the form of the success rate when the garments get sold within 14 days. The supply chain efficiency is seen in
  • 11. the way the orders are taken and processed within two weeks. Even though ZARA did not start as a new business meant for retailing but it was a part of Inditex group (Indetex 2011). The number of stores of ZARA is also the maximum out of the other companies in this case study. The use of vertical integration at ZARA for the supply chain in the designing stage keeps the designing effective and the most crucial phase for ZARA’s (Idea 2009). The designs of the garments of zara is so unique for each of men, women and kids wears containing diverse designs that the customers do not wait for long for sales. The good prices and quality of garments is on top of the robust designs. As soon as the designs come, the clothes are sold in latest of fifteen days. The reason for this good sale rate is that the clothes are designed in diverse designers (Kasra Ferdows 2005). The specialty units have been created. The customers feedback and opinions play a good role in helping designers get to know their demands . Besides this, the market specialists and customers feedback is created in prototype workshop. Here the designs are experiments and tested by the focus groups for the approval for the new arrivals at stores. Over 300 designers were doing designing. The number of designers is even less than the other companies designers but still their success rate is better because of their core competence of a good market research capability. The supply chain is automated and networked through online sources that each piece of the garment is manufactured and designed in one unit. With time, the specialization keeps polishing and knowing customers’ responses shows how they want something to be in the future. The business policy for growth and expansion makes abundant impact on these strategies at corporate level (Ansoff 1965). Each of these processes is controlled through vertical integration. The vertical integration of supply chain connects the specialised units each specialized in designing and manufacturing one type of product. The manufacturing units of each type of garment is located in a different geographical location. Each of the manufacturing unit is capable of introducing variation and diversity in the clothing type, colours and designs.
  • 12. The market specialists market at customers and keep gathering the fashion trends (ZARA 2011). This is the reason the fashion expectations are always kept as per the demands of customers. Zara’s operations are more capital intensive. This means that a large amount of investment has been done to carry out the supply chain management (Irfanullah 2009). The capital intensiveness is observed in the distribution chain of the supply chain process. The capital intensiveness is observable at the dying and cutting department of ZARA’s/ the labour intensive operations are performed by subcontractors in all (Carlton 2011). There are assembling units that assemble the orders and clothes. The systems are single shift and flexible systems. The distribution is done from warehouse. These are automated warehouses. The creation of each of them is done through a large investment to network and establish coordination of each automated warehouse. These warehouses are located near manufacturing plants. Storing, assembling and packing of products and creating the orders is done at these assembling units. The operations of storing, assembling and pack the items is performed in this unit within the warehouses (S.J 2011). The systems of warehouses are completely structured where each department has its own specialised task of performing it. Unlike H&M, the automated systems are always updated and contain the order information without any human mistake. The systems of Benetton are very similar to ZARA’s warehousing automation system. Zara differs in this other brand in that Benetton attaches the RFID tags to track their garments all over the world. An extortionate investment has been done on these assemblies at ZARA warehouses. The coordination is the key to their success. The assemblies and manufacturing units are connected to each other through this automated system and the whole supply chain is kept connected and updated. With the expansion, the new investment is done in every warehouse. The final stage of supply chain shows the success of the whole supply chain. The short timed or orders with placed with short lead times. The main place where the customers interact with the products are the stores. Just like the warehouses, ZARA brand has exquisite stores all around the world. These stores is meant to be kept inspirational and the environment is thought provokingly comfortable. The customers feel good and friend the sales representatives friendly with talking to them about the new fashion demands of time (Waters 2011). The spacious stores are of 800 square meters. The orders are
  • 13. sent regularly at the stores in short lead times. The stock comes every month. The efficiency of supply chain is evident with the new arrival of clothes every fort night at these stores. Even the clothes get sold within 15 days. There are no delays in supply chain. The efficiency of these steps in ZARA are admirable for the rest of the companies dealing with clothes. This is the reason, the success rate of this brand is sustained. The market share remains sustained. As compared to Zara’s the supply chain of H&M is completely contract and subcontract based. All these tasks are performed through physical networks of people. The retail stores of H&M were even not company owned. It was later in time they started their own stores. The brand of ZARA’s always had the most established goals and their fulfilling was monitored. The focus is all on customers and their demands for ZARA this is the reason they spend a lot of time on designing of clothes and getting opinions of their customers. SWOT OF ZARA: The strength of Zara’s is the focus and hard work on designing of clothes which is not there in H&M and Benetton retailers. ZARA’s retailer’s supply chain strategies are closest to supply chain operation references model. The weaknesses of ZARA is the short term order duration which makes them have to work without delays. Opportunities for ZARA are in the vertical integrated communication system of zara. The other retailers are not vertically integrated in their communication. Threats for Zara are the adoption of all these successful strategies by H&M and Benetton. 4. Conclusion: The case study containing the supply chain management and operations management strategies are critically analyzed in this assignment. The question one described the supply chain strategies of each of these companies. The comparison analyzing of the supply chain strategies is performed by evaluating each of the companies supply chain processes and strategies. The supply chain strategies of each of H&M’s, Zara’s and Benetton’s has been divided into four stages of designing, manufacturing, distribution and selling. Zara’s designing is done by designers, maket
  • 14. manufacturers and customers in a workshop. These prototypes are critically analysed for their acceptance in market. The manufacturing is specialised in each of the manufacturing unit geographically distributed. The distribution is done through automated warehouses that network with each department within warehouse of packing and assembling and the manufacturing units and even retailers. The retailers have created an inspirational atmosphere for customers and the rack life of these garments does not complete even 14 days. The supply chains of Benetton is much Zara but the designing is done through many designers, manufacturing is done at various manufacturing units that are coordinated and networked. The distribution is also automated like Zara’s and the retail stores are big enough and specious. Where they lack is the designing focus which zara’s is competing on. H&M designers are geographically distributed, manufacturers manufacture at various locations. The warehouses are manual and operated by the contractors and subcontractors. The retail stores are big enough and attractive but most of them are not H&M owned. The most effective supply chain strategies is of ZARA’s as they focus on each stage of their entire supply chain. The designing is the lengthiest phase and spends the maximum time and investment on this stage. This is the reason for their consistent sales and market share. 5. References: References: Anderson, J. C., G. Cleveland, et al. (1989). "Operations strategy: a literature review." Journal of Operations Management 8(2): 133-158. Ansoff, H. I. (1965). Corporate strategy: An analytic approach to business policy for growth and expansion, McGraw-Hill New York. Asllani, B., Ed. (2006). Operations Strategy. Operations strategy, John Wiley & sons.Inc. Baker, C. R. (2010). "Supply Chain Operations References Model." Journal Of Supply chain management 10(1): pp.1-24. Carlton (2011) "Capital Intensive." Business and Society 1, pp.1-3. Concil (2011). Supply chain operations reference model version 7. M. G. Hill, Brussels. 7: 12. Grinblatt, M. and S. Titman (2002). Financial markets and corporate strategy, McGraw-Hill/Irwin. Idea (2009). Vertical Integration. The Economist, http://www.economist.com/node/13396061. 1: pp.13-17.
  • 15. Indetex. (2011). "About Inditex Group." Retrieved 10 December 2011, 2011. Irfanullah (2009). "Capital Intensive." Investopedia 2(1): pp.1-4. Izi (2011) "What is Vertical and Horizontal integration?" Biz Dharma 1, pp.1-10. Kasra Ferdows, M. A. L. (2005). "Zara's Secret for Fast Fashion." Journal of Working knowledge for Business leaders 2(21): pp.1-7. S.J, D. (2011). "DISTRIBUTION & WAREHOUSING." Journal of Marketing Research 1.5(26): pp.1-26. Sanblue. (2011). "ZARA." Fashion Gear Retrieved December 5, 2011, 2011. Ward, B. (2010) "Creating Customer Loyalty: The Customer Loyalty Grid." Customer Service 9, pp.1-10. Waters, S. (2011) "What Size Building or Store I Need?" about.com 1, pp.1-6. ZARA (2011) "Fasion Business Structure." Fashion Auctions 2, pp.1-4.

×