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Q1 Which operations management concepts introduced in this module will help you compare and contrast the different

supply chain strategies from a critical perspective?

Supply Chain Management

Figure 1.1 Example of Supply Chain Adapted from: Palladino, 2010 According to Slack (2007), supply chain is series of operations between origins of products or services and end customers, which transform (assembly, merging, etc.) an input (usually raw material) into an output (final products); supply chain management (SCM) aimed to satisfy end customers needs at competitive cost through managing these operations to achieve improvement in 5 operations objectives (speed, quality, cost, dependability and flexibility), make sure each operations can satisfy its own customers and also end-customers regardless of their position in the supply chain. Companies increasingly competing as a supply chain rather than independently in order to secure their underpinned competitive advantage in the industry(Hoppe, 2001; Hill, 2005). SCM involves decisions like what capabilities/operations should be outsource or develop internally, the location of firms' operations and the management of overall long-term capacity (Ghezzi, 2006; Hill, 2005; Slack et al., 2007). Fast Vs. Conventional Fashion Industry

Figure 1.1 Comparison of Conventional and Fast Fashion industry lead time Adapted From: Palladino, 2010 In conventional fashion industry, each supply chain members relationship is loose, they used to run their business separately without information sharing and schedule production based on their own forecast (Lee and Kincade, 2003); lack of information sharing on actual demand and operational differences caused long lead time (6 months) and "bullwhip" effect , restrained the launching of new items to twice a years (spring/summer and autumn/winter) and causing high level of inventory, and the risk of each chain members' inventory-on-hand become obsolescence is high. As a result, conventional-fashion player used to practice a push-strategy (due to longer lead time needed to introduce a new design) (Palladino, 2010; Lee and Kincade, 2003; Slack, et al., 2007). While fast fashion industry practice a totally different approach in managing its supply chain, the relationship between each chain is close (Barnes and Greenwood, 2006), many players like Zara often act as a supply chain leader to coordinate each chain, the close relationship among supply chain members not only enhance the dependability and flexibility of supply chain, it also allow concepts like QR (Quick Response) and JIT (Just In Time) to be practice throughout the whole supply chain, and this effectively shorten the lead time from a normal 6 months to 3-6 weeks (Palladino, 2010). Fast-fashion player can introduce new design within short period of time (In Zara case, 15 days) and the "bullwhip" effect is minimized, consequently, inventory level is low, so as the obsolescence risk. Short lead time allow practice of pull-strategy (as shorter time is needed to introduce a new design), which allow better respond to customers' demand (Palladino, 2010; Ghemawat and Nueno, 2006; Slack, et al., 2007). The make-or-buy decision, location decision and supply chain time compression concept can be used to further understands the differences and similarities between this two industry.

The Make or Buy Decision In SCM, the make-or-buy decision is used by firm to achieve desired supply chain performance objective, for example, outsource production to reduce cost or retain production in-house to maintain high quality (Slack, et al., 2007; Hill, 2005). In reality, company don't usually produce every service and products in supply chain that it needed to satisfy its end-customers, as Slack et al. (2007) explained, firms can choose to buy products/services directly through outsourcing or produce the products/services by itself through vertical integration along supply chain, firm usually choose to outsource activities which it had no competitive advantage in and retain activities which it believe are critical to firms' success base on the order winner and qualifier of competing market. In the make-or-buy decision, conventional-fashion industry player prefer outsourcing to leverage the cheap labour & material cost in developing country to keep their cost low (Lee and Kincade, 2003), however, outsourcing (especially to long distance countries) significantly increase lead time, longer lead time means that retailer must forecast the actual demand few months in advance to place order earlier so that each collection can be place in store on time. While fast-fashion industry player like Zara had turn the focus from cost to lead time through vertical integration, short lead time allow retailer to forecast demand closer to the time it actually occurs (Ghemawat and Nueno, 2006), consequently, the forecast is more accurate compare with conventional-fashion industry, therefore the inventory level is significantly lower than conventional-fashion player, the needs to markdown or write-off item is minimized, conventional-fashion industry player averagely had to mark down 40% to reduce obsolescence stock (Neuno, 2009; Gallaugher, 2008) . The Location Decision The location of operations is another elements need to be considered in SCM, according to Slack et al. (2007), locations decisions will affect supply chain performance objective, particularly the operations' effectiveness, operations costs and ability to fulfill customers' demand, factors that will affect the location decision can be categorized into supply-side and demand-side influences as shown below: Supply-side factors Labour Costs Land Costs Demand-side factors Labour Skills Suitability of Site

Energy Costs Image Transportation Costs Convenience for Customers Community Factors Figure 1.2: Supply-side and demand-side factors in location decisions Adapted from: Slack et al., 2007 In conventional-fashion industry, the location decision is much affected by the supply-side influences, primarily costs, conventional-fashion players seek to exploit the benefit of low labour, land and material costs through setting up their operations in developing countries (Barnes and Greenwood, 2006; Bonacich and Appelbaum, 2000), for instance, French Connection (FCUK) had setup their manufacturing plant in Turkey, this operations location had help French Connection achieved its objective on cost (Carroll et al., 2004). While in fast-fashion industry, the operations locations were influenced more by demand-side factors, particularly the convenience for customers, their operations location was setup close to the centre of demand, for example, Zara operations location in Spain is close to its major market Europe (about 70% of retail store is in Europe), so that lead time can be shorten through shorter distance between manufacturing and retailers, and hence achieve supply-chain objective in speed and flexibility (Zara, 2010; Ghemawat and Nueno, 2006; Craig, 2004). Supply Chain Time Compression Beside the make-or-buy and location decision, operational efficiency is also an important elements in SCM, in-terms of improving supply-chain performance, as Towill (1996) suggest, operations efficiency can be achieved through timecompression, which is speeding up the flow of materials and information within the supply chain, time-compression would not only improve supply-chain performance objective (cost, speed, quality, dependability and flexibility), it also had positive impact towards firms' profitability (Slack et al., 2007; Towill, 1996; Beesley, 1996). The fashion market is characterized by its short product life cycle, high volatility and low predictability (Christopher et al., 2004). Conventional-fashion industry player design their supply-chain to focus on low material and production cost in order to improve profitability, but at the cost of long lead time; while fast-fashion player focus is on short lead time, using time compression strategy to improve their profitability (Slack et al., 2007; Gallaugher, 2008; Towill, 1996).

Lowering material and production cost regardless of increasing lead time greatly reduce conventional-fashion player profitability, the reduction in profit even offset the cost-saving in production and material cost (Gallaugher, 2008); as shown by Towill (1996) in figure 2.1, short lead time can eventually increase firms' profitability, that's the reason why fast-fashion industry generally can have a higher profit margin compare with conventional-fashion industry (fast-fashion industry player sell 85% of their goods in full price, compare with conventional-fashion industry 65%) (IIBD, 2010).

Figure 2.1 Influence Diagram showing the mechanisms by which lead time compression influences profitability Based on: Towill, 1996, Slack et al., 2007 Consider the characteristic of fashion market, long lead time reduce firms' speed to market new products and make forecasting become more difficult, consequently, sales is low as they cannot fulfil customers demand on fast and fashionable products, the mismatch between forecast and actual demand cause high level of obsolescence inventory, therefore, they had to discount their products to sell obsolescence stock, greatly reduce their profitability (Towill, 1996; Christopher et al., 2004; Gallaugher, 2008).

Q2 What are the distinct features of the supply chain strategies employed by each of the three companies?

Figure 2.1 Positioning of Zara, Benetton and H&M Adapted from: Palladino, 2010 Zara, Benetton and H&M is three of the most representative player in fast-fashion industry, however, as shown in figure 2.1, they position themselves differently, Zara position itself to be most fashionable (2 week lead time to market new products) and low price, H&M position itself to be fashionable (3weeks lead time to market new products) at lowest price and Benetton position itself to be less fashionable(6 weeks lead time) but high price (high quality). In the second part of this assignment, the focus will on how Zara, Benetton and H&M apply the concepts mentioned in previous part of this assignment to enhance their desired position. The Make or buy decision According to Ghezzi (2009), Benetton pursue strong upstream vertical integration to manufacturing and design, Benetton had 32 production centres and 300 in-house designers all over the world. In manufacturing, Benetton only retained core-activities

like dyeing in-house to ensure products' quality, others labour intensive activities were outsourced to contractors nearby its own production plant to exploit benefit of specialization and low-cost. However, Benetton's usage of contractors in non-core activities increased the operating cycle (works to contractor and works from contractors had long operating cycles, refer to appendix I for more details) (Ghezzi, 2009); Benetton also acquiring or founding its first tier suppliers, like "Olimpias" (Supplier in yarns), United Web (E-commerce company) and "Fabrica", (a communication workshop) to ensure its materials' quality, so materials can be sent directly to contractors without extra quality control process, hence reduce lead time and transportation cost, also, secure Benetton from price pressures. Benetton also operates its own distribution centre like what Zara did to reduce lead time (Slack et al., 2007). However, compare with Zara, Benetton's extent of vertical integration is narrow, Benetton outsource downstream activities like retailing using franchising (93% of sales come from franchise operations) (Andreaiadis et al., 2004). This lack of focus on downstream activities like retailing, make Benetton difficult to obtain valuable information flow fast and directly from its customers and communicating a consistent image (Andraeiadis et al., 2004), the creation of wholly-owned mega-stores was somehow trying to address such problems (Slack et al., 2007). In contrast to Benetton and Zara, H&M outsource all productions activities to 750 suppliers all over the world to exploit the low-cost benefit (suppliers in low-cost countries) and flexibility, as capital is not tied up in machinery and equipment (EMCC, 2004); however, outsourcing all production activities make it difficult to control products quality and dependability of supply, unlike Benetton which had its own dependable material source, H&M needs extra inspection to check quality of final products, resulting in an increased lead time (Ghemawat and Nueno, 2006); H&M also used 21 production offices to ensure orders are correctly placed with correct supplier at the right price and quality, this extra tier in supply-chain also increase its lead time (Databank Consulting, 2004). Design is the only upstreamactivities remained in-house, so that H&M focus on speed, quality and cost can be controlled well (Ghemawat and Nueno, 2006; Li and Frydychowska, 2008). H&M then pursue downstream vertical integration; like Zara, all retail stores are owned and operated by H&M, this allowed H&M to stay closer and had direct control

over its market and customers; directly collect and exploit both customers and sales information helped in understanding market demand fast and accurately (Databank Consulting, 2004), also, due to its low price position, using own retail channel ensure that profit margin can be fully retained (Slack, et al., 2007); however, high initial and operating cost is incurred. H&M also had its own distribution centre in Germany primarily to exploit the economies-of-scale in transportation (Li and Frydychowska, 2008). Unlike H&M and Benetton, Zara had widest vertical integration span; in terms of upstream activities, Zara had 20 fully owned factories, over 300 in-house designers and fully-owned fabric supplier-Comditel, however, Zara also outsourced some labour-intensive activities (40% of total production) and materials like what Benetton did. For downstream activities, Zara operates its own distribution centre in Arteixo and 1,608 retail stores over the world (Ghemawat and Nueno, 2006; Fraiman and Singh, 2004). Compare with H&M and Benetton, Zara control over its supply chain is direct and powerful, Zara used this strong and wide span of vertical integration to reduce its lead time to the best in industry; wide-span integration promote accurate and up-to-date information flow from its retail channel back to its production and design section, shorter lead times mean better agility in responding to market changes, as a result, Zara is able to allow its retail store to adjust 40-50% of their orders after season started, compare with industry average 20% (Palladino, 2010; Ghemawat and Nueno, 2006). However, a significant drawback of wide span vertical integration is the high cost associate with it, as Palladino (2010) explained, high capital investment is needed to maintain the supply network, besides that, new design often means a changeover of production techniques, together with the cost to retrain not only a single segment but whole supply chain's employees, Zara incurred higher operating cost compare with H&M and Benetton which had outsourced part of their supply chain. The Location Decision Zara was headquartered in Spain, most of its upstream assets were located here (Ghezzi, 2009), according to Palladino (2010), Zara manufacturing (time-sensitive products), distribution and design function were highly centralized in Spain, so that

lead time and transportation cost can be shorten through shorter distance between subcontractor (primarily located in Spain and Portugal), productions plant and headquarter, also stay closer to Zara main market, Europe (Craig, 2004). However, remain production in Spain was 15-20% more expensive compare with Asia, therefore Zara outsourced price-sensitive items to Far East countries like China to lower cost (Ghemawat and Nueno, 2006). While for retail location, Zara retail store is primarily located in highly visible locations, often premier shopping street (like Regent Street in London and Fifth Avenue in New York) to ensure there is enough customers demand for fashion item, so inventory can be sold faster ,further enhance Zara aims on speed (Yim, 2003; Ghemawat and Nueno, 2006). As Databank Consulting (2004) shown, H&M central functions like design were based in headquarter Sweden, productions function is decentralize to 750 suppliers worldwide primarily due to the intention to exploit the regions' lower labour cost; however, among them, 40% is in Northern Europe, the rest is in Asia; production in Asia is mainly responsible for less fashion sensitive item as the labour cost is low, while Northern Europe production is responsible for fashion sensitive products, although labour cost is higher than Asia, but shorter distance between production facilities allow fashion sensitive item to be market faster. Distribution function were decentralized to every countries it operates, due to the demand-side influence, convenience for customers, as stock can be replenish faster so customers won't have to wait too long for product replenishment (EMCC, 2004). H&M retailer were mostly found in main shopping areas of major cities and towns, where customers are more sensitive towards price (Li and Frydychowska, 2008). Although decentralized to developing countries help reduce cost, longer distance between supplier and transit terminal in Germany increase the lead time needed for H&M to deliver its products, causing H&M had longer lead time compare to Zara (Slack et al., 2007). Benetton remain design function in Italy to helps create a high fashion image (Palladino, 2010). Research done by Ghezzi (2009) shown that, unlike what Zara and H&M did, for manufacturing, Benetton did not choose between centralized or decentralized, instead it use a combination, Benetton centralize upstream activities through creating a big production pole in Castrette, consist of its core activities like

CAD design, cut and dyeing, surrounded by its sub-contractors which provide materials and labour-intensive activities like sewing; Benetton then decentralized to other low labour cost countries like India through replicated this "production pole" model away from its headquarter (refer to appendix II for more details). Similar to Zara and H&M, fashion-sensitive items were produced in production pole closer to Italy like Hungary, price-sensitive item were produced in farer countries like China (Slack, et al., 2007; Palladino, 2010). "You definitely have benefits in terms of lower costs and being closer to markets, but by the same token you are buying higher risk country risk and currency risk." (Emilio Fo, CFO of Benetton cited in Kersnar, 2008) Benetton locate its production poles at low cost countries to exploit the benefit of lower cost through outsourcing to and sourcing from local sub-contractors (Ghezzi, 2009), centralize production poles also reduce lead time and allow better responsiveness due to shorter distance between suppliers, productions facilities and market. However, such move increase both country risk and currency risk of operations (Fo cited in Kersnar, 2008). Benetton distribution centre is located in Italy, in order to remain closer to its main Europe market (Andraeiadis et al., 2004). Benetton retail network is mainly compromise by its franchisees (78% of total apparel sales), over 6,300 stores is located in prestigious locations and commercial centres worldwide to make sure a high exposure rate and availability, also, compare with Zara 1,608 stores and H&M 2,200 stores, widespread presence in domestic market is another distinct features of Benetton (Palladino, 2010). Supply Chain Time Compression Benetton used 300 in-house designers to make sure new design can come out within short period of time (Palladino, 2010). While in manufacturing, Benetton adopted "leagile" approach through its revolutionized dyeing postponement process to compress its time; it moves dyeing to end of manufacturing cycle, products was completed without colour and dyed it when customer preferences is updated from retailers (Slack et al., 2007), by this, Benetton is able to starts productions before colour decision is made, JIT approach was used in producing greyed clothes, so that wastage and manufacturing cost can be lower; while agile approach was used in dying process, dying can start once specific colours decision is made, so that popular colours

can be made available as soon as possible (Christopher and Towill, 2000; Saini, 2007). Benetton is able to shorten normal industry 6 months lead time to 6 weeks (Sandler, 2007). Due to this advanced dyeing process, Benetton use colours as strategy to differentiate products instead of model (Palladino, 2010). Benetton also make large investment in its state-of-the-art distribution centre in Italy, which had the capability to handle 120,000 incoming/outgoing boxes daily, this tremendous speed further reduce the lead time (Benetton, 2010). As Stalk and Hout (1990) explained, reduction in lead time have positive relationship with forecast accuracy (reducing the lead time by 50 per cent will reduce the forecast error by 50 per cent); accurate forecast reduce need for safety stock and hence reduce stockholding cost and leads Benetton to higher profitability. (Slack et al., 2007; Towill, 1996). However, Benetton time compression strategy improve only material flow, therefore its competitiveness in terms of lead time is weak (6 weeks), competitors like Zara had duplicate such strategy to improve their material flow (Gallaugher, 2008) and with downstream integration, improve their own information flow, as a result, performance is better than Benetton (Zara shortest lead time is 15days; H&M is 3 weeks) (Slack et al., 2007). Similarly, H&M also used in-house designers, designers are required to follow general trends and come up with new concept when necessary in timely fashion to respond to quick-changing market demand (EMCC, 2004). In terms of manufacturing, un-dyed fabrics will be first manufacture by supplier long in distance but low in cost in large quantity to reduce cost, like China; later the dyeing process will be done by supplier close to its warehouse in Hamburg once after an actual demand information is received, as a result, lead time is shorten and cost is lower (Slack, et al., 2007; Saini, 2007). In retail sector, H&M implement same ICT system in both production office and retail store, it successfully shorten lead time by 15-20% as production office can place order to supplier instantly when retail store run out of stock, so information flow can be faster (Li and Frydychowska, 2008). For distribution, H&M operates independent "call-off warehouse" in each countries to reduce the lead time needed to replenish stock (EMCC, 2004).

A short lead time is not necessarily best, since the right lead time is always a matter of getting the right balance between price, time and quality. (H&M, 2010) However, production office which used to coordinate outside supplier and internal compartment create an extra tier in supply chain, causing a longer lead time, H&M lead time is 3 weeks, the information flow is faster than Benetton and comparable with Zara, but material flow is slower, but through this, H&M achieve significant cost-savings (30-50% lower compared with Zara) (Li and Frydychowska, 2008). Compare with H&M and Benetton, Zara time compression can said to be extreme, this is achieve through the implementation of QR (Quick Response) system throughout the supply chain (Cachon and Swinney, 2010; Ghemawat and Nueno, 2006). Zara QR system starts from its retail store, unlike its competitors, retailer is the starting point of its supply chain instead of ending point, Zara stores manager are required to submit sales report (sales analysis, products life cycle and store trends) frequently back to in-house apparel designers in Spain through a specially designed software to ensure fastest respond to market demand changes (Yim, 2003; Craig , 2004), also, slow selling item will be weeded out and send back to distribution centre, so that latest design can be brought to customers at shortest time (Ghemawat and Nueno, 2006). In designing, Zara employed young and fashion conscious designer (average 26 years old), send them to fashion show, exhibition, disco and universities campus to detect current trends, Zara trained and encouraged its designers to make quick decisions so that information flow from retail store can be respond faster, bad decision are not severely punished in Zara (Slack, et al., 2007; Saini, 2007). After designer complete a design, most fashionable item will be produce in small batches, so that production can be done faster by suppliers nearby and in-house factories using JIT system cooperate with Toyota, capital-intensive part (pattern design, cutting, final finishing and inspection) is carried out in-house, labour/scaleintensive part will be outsourced to suppliers nearby to ensure shortest lead time in manufacturing; while price-sensitive item will be outsource to Asia for lower cost (Ghemawat and Nueno, 2006). Finished products is then delivered to a highly-automated distribution centre nearby and shipped to destination in 24-48 hours according to different time-zone to reduce

time-wastage to minimum (packed and shipped orders to Americas, Middle East and Asia while European store is doing stocktaking; then focus on European stores in the afternoon) (Ghemawat and Nueno, 2006; Hodge, 2002). Zara time compression effort is throughout the whole supply-chain, both information and material flow are compress to be the fastest; as a result, Zara only need 14 days to put a design into stores, known to be fastest in the industry (Palladino, 2010; Craig, 2004). Although short lead time will lead to higher profitability (Towill, 1996), shortest lead time doesn't mean highest profit as in Zara and H&M case, although Zara lead time is shorter than H&M, but H&M extra attention to cost make it have a higher profit than Zara. (1822m compare with Zara 1322m) (Zara, 2010; H&M, 2010).

Q3. In view of global expansion, which of the three supply chain strategies is the most competitive and why?
In the last part of this assignment, the focus will on how Zara, Benetton and H&M supply chain strategies affect their competitive priorities as suggested by Reid and Sandra (2005) when they expand globally, as Reid and Sandra (2005) explained, firms can become more competitive through achieving 5 competitive priorities shown below. Speed In terms of speed, Zara is the fastest among three of them, however, in terms of global expansion, Zara centralized operations location in Spain tends to reduce its speed advantage due to longer distance between its operation locations and market in Asia and Americas (Businessweek, 2006); while H&M is able to expand globally using its current model without much obstacles, its highly internationalized suppliers give H&M more alternatives, for example, when enough demand occur in Asia, H&M used its production offices in Asia (10 in Asia, 10 in Europe, 1 in Africa) to coordinate suppliers in Asia to produce and sent directly to Asia market, thus maintaining high speed regardless of market location, which is vital in global expansion (Tungate, 2005; EMCC, 2004; Li and Frydychowska, 2008). Benetton replicate its production pole in Italy to other countries like India and Tunisia, however, all products will had to send back to distribution centre to Italy to packed and delivered to retail stores (Palladino, 2010), this is similar to Zara, speed is further reduced when the extend of global expansion grow larger .

Cost Both H&M cost and product price is lower than H&M and Benetton, particularly due to the benefit of outsourcing to low-cost countries and less focus on quality (Tokatli, 2007), when expand globally, the impact on cost for H&M is minimal as its suppliers were already highly internationalized (EMCC, 2004), as expansion goes on, H&M only need to open more production office and distribution centre, which is less costly compare with Benetton, which open new production plant to expand, this move not only incurred high initial cost, but also higher risk of failure (Kersnar, 2008). For Zara, centralized production and distribution plant in Spain increase cost as expansion goes further away from Spain, climbing transportation cost and the policy to replenish store twice a week is expensive and create revenue pressure (revenue growth in samestore had reduce from 9% in 2004 to 5% in 2008), as a result, Zara had to increase its products' price in market farther from Spain (Zara's price in U.S. are 65% higher than in Spain), but this approach somehow reduce its competitiveness(Business Week, 2006; Ghemawat and Nueno, 2006) . Quality Among three of them, Benetton products had highest quality, through upstream integration to its material supplier and manufacturing plant, quality is assured even in fast expansion situation (Palladino, 2010); while H&M is able to maintain its products' quality in rapid expansion, using its production office to control and select its suppliers, for instance, 2,717 inspections on suppliers were made by 40 auditors in H&M production offices in 2004, 16 factories were barred from supplier list after inspection to maintain its quality (Li and Frydychowska, 2008). Similar to Benetton, Zara also owned its fabric supplier - Camditel and manufacturing plant, which helps it to had higher control over product quality, Zara also had purchasing office in Hong Kong and Barcelona to helps ensure the quality of fabric and other inputs from external suppliers, as part of Zara global expansion strategy (Palladino, 2010; Ghemawat and Nueno, 2006). Flexibility Flexibility in global expansion is critical to fast-fashion industry players, flexibility is the ability of one operations to change what it does, how it does and when it does (Slack, et al., 2007). When expand globally, the fluctuation of demand in different market is high (Andreiadis, et al., 2004), as highlighted earlier, Zara speed advantage tends to reduce when its market grow farther from Spain, this increased in lead time

would greatly reduce its flexibility; besides this, Benetton and Zara central distribution centre were less effective to handle the surge in demand when expand globally, their flexibility were reduced when expand globally (Ghemawat and Nueno, 2006). In contrast to Zara and Benetton, H&M operates distribution centre in each markets it operates, this approach give H&M more flexibility as products not necessarily had to go through single distribution centre, also, as H&M don't own any production plant, capital is not tied up in plant and machinery, further enhance its flexibility (EMCC, 2004), but in terms of manufacturing, H&M is less flexible than Zara and Benetton which had own manufacturing plant, however, H&M used to be a loyal customers to its approved suppliers, existence of a very long-term relationship with supplier made suppliers willing to adapt with H&M fast-changing demand, provides H&M with high flexibility (EMCC, 2004; Stevenson and Spring, 2009). Dependability Zara wide span of vertical integration gives it unmatched dependability in supply chain, when expand globally, high dependability ensure that customers demand can be fulfil at the right time and right place (Ghemawat and Nueno, 2006); for Benetton, dependability is reduce due to the usage of franchise in retail channel, Benetton use agent to contact with its franchisee and had low control over its franchisee' behaviour (no formal agreement between Benetton and its franchisees), the problem may become more serious when expanding to countries with huge cultural or language differences, delay in this tier of supply chain greatly reduce Benetton's' supply chain dependability (Palladino, 2010; Ghezzi, 2009). The problem is reversed in H&M, however, with the help of its 21 production offices, careful selection of suppliers and close relationship with them is able to reduce the uncertainty and improve its supply chain dependability (EMCC, 2004; Li and Frydychowska, 2008). Conclusion As mentioned earlier, Benetton performance in terms of lead time and cost is less competitive, as speed and cost remain the order winner in fast-fashion industry (Ekwall, et al., 2004), this make Zara and H&M a more competitive players, Zara 14 days lead time is fastest, while H&M lead time is slightly slower (20 days) but price is significantly lower (30-50% lower), as a result, Zara and H&M competes fiercely in fast-fashion industry.

However, in terms of global expansion, Zara competitive advantage in terms of short lead time, quick inventory turnover may be obsolete when it expand globally, while H&M supply-chain strategies allows it to maintain its competitive advantage in cost, quality and speed when expand globally, this make H&M a more competitive players in the view of global expansion and achieve higher sales, revenue and profit margin than Zara and Benetton (Business weeks, 2010); also, in terms of proportion, H&M international sales contribute 91% of its total sales, while Zara only 69% (Lopez and Fan, 2009).

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Appendix I: Benetton's operating cycle Source: Rovizzi and Thompson, 1992 cited in Ghezzi, 2009

Appendix II: Benetton's operation pole outside Italy Source: Palladino, 2010