Supply Chain Management Fast Fashion Industry

MBA 4642 - Products & Processes
Module Leader: Dr. Louise Boutler Venkatesh Kumar Subburaj Assignment 2 (Individual) Word Count: 2193 M00328327

04.04.2011

1

Middlesex University Business School

Contents
Contents................................................................................................................ 2 ABSTRACT.............................................................................................................. 3 1. Introduction....................................................................................................... 4 1.1 Nature of fast fashion industry.....................................................................4 2. Importance of agile supply chain in fast fashion industry..................................5 3. Managing the Fashion logistics pipeline............................................................6 4. Global Quick Response (GQR) in Fashion Industries..........................................7 4.1 The new garment design and development process....................................9 4.1.1 New garment development process..........................................................9 4.1.2 Estimation................................................................................................10 4.1.3 Concurrent Engineering for new product design and development.........10 4.2 The First volume order................................................................................10 4.2.1 Decisions on Appropriate production units..............................................10 4.2.2 Learn from the established contracts......................................................11 4.3 The repeat order process............................................................................11 4.3.1 Dependable and capable network...........................................................11 4.3.2 Effective order placing process................................................................11 4.3.3 Effective control Systems........................................................................11 4.4 Enablers of GQR..........................................................................................11 5. Conclusion....................................................................................................... 12 6. Recommendations...........................................................................................12 7. References.......................................................................................................14 8. Appendices...................................................................................................... 15 Appendix 1: Key Operational practices and principles.........................................15 Appendix 2: Characteristics of Agile Supply Chain...............................................16

2

.. Helen Peck. This report also examine agile supply chain and GQR in the perspective of the garment design and development process. GQR is based on lead time compression....... effective information management. 2000). Robert Lowson. the ability to scale up (or down) quickly and the rapid incorporation of consumer preferences into the design process (Martin Christopher...... embedded within an agile supply chain .............Global Quick Response (GQR). This Report emphasize on new concept .. global supply and. Responsiveness is characterised by short time-to-market. 3 .....which strives to combine cost and scale efficiencies by sourcing globally with quick and accurate response to market requirements. We also discuss its requirements with respect to market intelligence and rapid new product introduction... and network capability... Finally. dynamic planning and strong logistics. network planning and staged postponement. the first volume order process and the repeat order process. commercial success or failure in those markets is largely determined by the organisation’s flexibility and quick responsiveness.Appendix 2: Enablers of Global quick response (GQR) .. reviewed and identified the good practice in relation to what other ‘fast fashion’ retailing companies are doing in this context and made the following recommendations a) Creation of agile organisation using an agile supply chain embedded with Global quick response(GQR) b) SCOR model to be used as reference model in framing/managing the supply chain and their network c) Key operating Principles and Practices These recommendations will give the edge for the organisation to have a greater chance of succeeding in a very competitive environment. as a result....18 ABSTRACT Fashion markets are synonymous with rapid change..

1 Nature of fast fashion industry Fashion industry encompasses any product or market where there is an element of style which is expected to be short-lived. it requires innovative operational strategies and practices. The nature of these global networks poses significant challenges for quick and accurate response. The demand for fashion products cannot be forecasted and we need to realise that fashion markets are complex open systems that demonstrates high levels of irregularity.1. Figure 2. Figure 1 : Generic high-level structure of the global clothing industry supply chain Source: MacCarthy B L and Jayarathne P G S A (2009).’Fast Fashion Industry’ 1. Refer Figure 1 for understanding of generic high level structure of global clothing industry supply chain. Introduction The clothing industry has become one of the most mobile industries comprising complex global supply networks to supply clothing to world markets. which clearly exhibits the characteristics of fast fashion industry Refer 4 . In order to ensure the right product volume and mix within retail stores from a globally dispersed supply network.

the nature of their relationships. buyers and merchandisers. 2000). manufactured and delivered on the basis of ‘real-time’ demand (Martin Christopher. ownership. Robert Lowson. to reach an end customer. power and control structures. A global supply network will include designers. Figure 2 : Characteristics of fast fashion industry Source :Primary Research 2. Helen Peck. Figure 3 : Suitability of agile chain in fast fashion industry 5 . distribution. Importance of agile supply chain in fast fashion industry Clothing products can take a circuitous route from fabric production. through garment production and distribution. the effort must be expended on devising strategies and structures that enable our products to be created. coordinated and controlled and how information flows in the entire supply chain network (Martin Christopher. Robert Lowson.In such conditions. Helen Peck. This is the context that has called for the agile supply chain and the concept of Global quick response based on philosophy of Quick Response. Key issues that need to be addressed comprise the different participants within the network. logistics and warehousing companies and may include additional finishers that ensure products are ready for display and sale to meet anticipated demand in specific retail chains and stores. Refer Figure 3 for the suitability of agile chain in fast fashion industry. how the network is managed. 2000).

Instead. Figure 4 : Critical lead-times Source :Primary Research A further distinction is that conventional supply chains are forecast-driven that implies that they are inventory-based. Helen Peck.Source :Primary Research 3. Managing the Fashion logistics pipeline The volatility of demand and the short life-cycles found in fashion markets make forecasting highly unfavourable. 2000). Refer Figure 4 for the three critical lead-times that must be well managed to compete successfully in fashion markets. we can find ways to reduce the reliance of organisations upon the forecast and focus on lead-time (Martin Christopher. Agile supply chains are more likely to 6 . Robert Lowson. that can predict sales consistently and accurately. The idea of agility in the context of supply chain management focuses around ‘responsiveness’ emphasising on shorter lead times and thus making forecast horizon shorter.

Agile supply chain has a number of characteristics. Global Quick Response (GQR) in Fashion Industries Quick Response (QR) has been a governing premise in the clothing sector for almost two decades (Hunter. much of the emphasis in QR initiatives has been on internal production systems. However. 1990). When the value chain is geographically 7 . Specifically the agile supply chain is: • Market sensitive – it is closely connected to end-user trends • Virtual – it relies on shared information across all supply chain partners • Network-based – it gains flexibility by using the strengths of specialist players • Process aligned – it has a high degree of process interconnectivity between the network members Figure 5 suggests that there are a number of practical ways in which these four key dimensions can be brought into play.be information-based. Fashion markets are volatile and difficult to predict and hence the need for agility. Christopher & Van Hoek (1999) 4. QR is premised on understanding precise market demands and on compressing the three key lead times to meet demands quickly and accurately. (Refer Appendix 2 for detailed description of these characteristics) Figure 5 : Generic process in clothing industry Source :Harrison.

As highlighted earlier. The first volume order process 3. 2009).distributed with diverse forms of supply chain relationships and ownership patterns. flexible pipeline management and optimal logistics and distribution systems (MacCarthy B L. Here we identify three key processes: 1. The garment design and development process 2. which has emerged in buyer-driven global supply networks. Jayarathne. Global Quick Response (GQR) must be considered with respect to the generic garment industry structure and processes (Refer Figure 6 for generic process in garment industry) in the context of the global supply network and the factors affecting lead time and the ability to respond. QR needs a global outlook. Global Quick Response (GQR). GQR can be defined as follows: Global Quick Response (GQR) is a strategy that seeks to achieve accurate. rapid and cost effective response to specific markets dynamically by leveraging the potential of dispersed global supply and production resources through lead time compression. The repeat order process Figure 6 : Generic process in clothing industry 8 . effective real time information management. here we define a new concept.

Jayarathne. leverage design resources. Substantial pre-production stages are needed in order to move from the production of small scale sample designs for showing or merchandising purposes to large scale volume production capable of sustaining multiple repeat orders 9 .e.’Fast Fashion Industry’ 4. logistics and understand what is practicable and realisable with available manufacturing resources . This should require capabilities to extract and utilise relevant market information. all focussing on fast turnaround times.1 The new garment design and development process 4. 2009).Source: MacCarthy B L and Jayarathne P G S A (2009). The process must be capable of ‘ramping up’ to volume production if a substantial volume order is placed. If the design is successful in the market with buyers. i. the quantities for each repeat order may vary in terms of colour. modify existing designs. merchandisers or retailers then first volume orders are placed.1.1 New garment development process It requires more and better market intelligence. The flow of garments may then be sustained for a period of time by repeat orders that will typically vary in mix during the period. size and style details (MacCarthy B L. Earlier and greater sensitivity to changes are needed particularly in rapid new product introduction and in specifying repeat orders.

4.2 The First volume order 4. Fabric supply is a substantial part of the overall supply process. A key part of ensuring that volume garment production can be initiated for a new style or range of related styles is the sourcing of the required fabrics and accessories in the required volumes and with appropriate timings and resources (MacCarthy B L. Having a ready source of fabric that is delivered with 10 . as well as detailed garment engineering and specification details need to be completed. 4. including sizing and pattern making and providing relevant instructions for cutting. sewing. Jayarathne.with varying mix over a season.1. finishing and packing. for each unique style variant.1. development and production are not co-located but dispersed internationally (MacCarthy B L. It requires profound Network planning. 2009). 2009). assembling. It is done before a garment is offered to retail buyers or merchandisers then decisions on where volume production is to be carried out. 2009). Thus. The time taken for cost estimation for a new design may also have to be factored into the new garment development process.1 Decisions on Appropriate production units A strong supply network with multiple capabilities that can respond appropriately to diverse and changing demands is essential in achieving GQR. structure and composition. Jayarathne. Multiple garment styles may often be produced from a specific fabric type. with typically substantially longer lead times than garment production cycles.2 Estimation Price estimation is a part of the garment development process. Concurrent engineering principles are well developed for engineered products in sectors such as aerospace and automotive and there is significant potential for the clothing sector to exploit concurrent product development concepts. 4. This should also consider the time and risks associated when it is done by contracting garment producer (MacCarthy B L.2.3 Concurrent Engineering for new product design and development Concurrent engineering is particularly important and challenging when design. Jayarathne. garment specifications need to be defined.

2009). Jayarathne. Supply networks need to be able to absorb the negative effects of volume and mix changes.the anticipated volume of orders is therefore important to ensure quick response to volume orders. 4. accurate market intelligence and effective controls to deal with both the volume and mix issues. At the very least there will be learning opportunities for repeat orders or new styles using the supply route (MacCarthy B L.g.2. Fabric sourcing should be agreed and capable of supplying at the rate required. Jayarathne. initial volume orders may also enable significant learning e. Supply networks cannot maintain high levels of unutilised capacity in anticipation of demand. Jayarathne. The potential downside of a strongly demand-driven order fulfilment system is that volume sales opportunities that arise quickly may not be capable of being fulfilled (MacCarthy B L.2 Learn from the established contracts In a buyer driven network.2 Effective order placing process An effective order placing and confirmation process must be in place.3.3 Effective control Systems GQR systems must have sufficient supply capacity.3. 2009). in regard to quality and distribution. 4.3 The repeat order process 4. 4.3.1 Dependable and capable network A dependable and capable network is needed for replenishment orders. 4. Lessons learned from a new supply route may well mean changes for subsequent orders. Quality and logistics issues need to have been eliminated to ensure that a supply route can respond to mix changes and costs with the required speed and responsiveness (MacCarthy B L. The network needs to be capable of working at the required pace for the supply chain and. 4. 2009).4 Enablers of GQR GQR needs to incorporate many of the elements of QR systems in the context of globally dispersed production and supply resources. They are as follows (Refer Appendix 3 for detailed explanation) 11 . be capable of accommodating changes in volume and mix requirements. importantly.

Configuration level (level 2) . distribution and retailing networks and have defined and described a new concept . there are few recommendations illustrating key principles and operational practices. Supply Chain Operation reference (SCOR) model is recommended to be used as reference model in framing/managing the supply chain and network.Process element level (level 3) . Conclusion This report has provided a conceptual focus upon the main supply chain issues involved in fashion retailing and has recommended GQR embedded within an agile supply chain as the operational strategy to be followed. Apart from this. which are observed from key players like Zara and H&M in the industry. This report re-examines the concept of Quick response in the context of globally dispersed production.Implementation level Figure 7 : Supply chain operation reference (SCOM) Model 12 .• Strive for fast and accurate information transmission: • Develop flexible production resources: • Utilise technology and automation where appropriate: • Develop fast logistics: • Exploit all opportunities for lead time compression: • QR must be a key part of an organisations strategy and have a supportive organisational culture: 5. complexity and dynamism. It has the ability to sustain an environment that optimizes the entire supply chain rather than each step. The SCOR model covers the followings levels of abstraction: . Following this. The need for agility and Global quick responsiveness in the Logistics pipeline has been identified and discussed in terms of industry’s volatility. 6. Recommendations 1) The SCOR model can be used and referenced for implementing and improving the supply chain management.Top level (level 1) .Global Quick Response (GQR) with respect to Generic chain in fashion industry.

2) Refer Appendix 1 for recommendations illustrating key principles and operational practices. It can go into the core details of any company and try to bring out the best possible results. 13 . When they are all added together. Though the SCOR Model speaks of 5 steps to analyze and apply (As shown in figure 7). the end result is a well coordinated study which can revamp a company’s supply chain model into a profit making model. these 5 steps are further categorized and each sub level has a different functionality.Source :Supply chain Council The SCOR Model can analyze many more levels apart from these. which are observed from key players like Zara and H&M in the industry.

Available at Web: http://martin-christopher. and Jose A. 19. 2009). Nottingham University Business School Research Paper No. Daly L.D. 24 No. Michael A. ‘Creating Agile Supply chain in the Fast Fashion Industry’. Journal of Enterprise Information System. Available at Web: http://hbr. Available at Web: http://martinchristopher. References • MacCarthy B L and Jayarathne P G S A (2009).7.info/wpcontent/uploads/2009/12/agile_supply_chain. Harvard Business Review.com/abstract=1360684 Kasra Ferdows. ‘Rapid – Fire • Fulfilment’.org/2004/11/rapid-fire-fulfillment/ar/1 Martin Christopher.info/wp-content/uploads/2009/12/CREATING-AGILESUPPLY-CHAINS-IN-THE-FASHION-INDUSTRY. 151-170 • 14 . Robert Lowson & Helen Peck (2000).pdf • Christopher. 2009-09 (Revised. ‘Lean or agile: A solution for supply chain management in the textiles and clothing industry?’ International Journal of Operations & Production Management. Vol.. August 10. (2000). pp. Fiorito S S. “The Agile Supply Chain: Competing in Volatile Markets”. M. 334-345 • Bruce M. Issue 3. ‘Fast Fashion: Achieving Global Quick Response (GQR) in the Internationally Dispersed Clothing Industry’.. “Supplier Perceptions of Quick Response Systems”. 2. Towers N (2004).pdf • Birtwistle G. pp. Lewis. Industrial Marketing Management. Vol. Available at SSRN: http://ssrn. Machuca (Nov 2004). Moore C M (2006).

Issue 6. which encourages everyone to comment on new 15 . d) Facility of Prototype Shops: A small proto type shop can be setup in the centralised design centres. International Journal of Physical Distribution and Logistics Management. the company can manage all its major and complex activities in house and can outsource the simple process outside. This constant flow of updated data mitigates the so called Bullwhip effect. Appendices Appendix 1: Key Operational practices and principles Those are key operational practices and principles observed from key players like Zara and Benetton in the Fast Fashion industry a) Super Responsive Supply chain: Like how Zara has developed a super responsive supply chain. produce and deliver a new garment and put it on display in its stores worldwide in a mere 15 days. b) Rigid Time Schedule: The Organisation should hold its retail stores to a rigid timetable for placing orders and receiving stock. (1994) ‘Quick Response: an International Perspective’. 8. move towards vertical integration. c) Leverage your capital assets to increase supply chain flexibility: Instead of relying on outside partners. Vol. In other words. 22. pp 38-46. J. The company should be able to design.• Fernie.

Point-of-sale data is analysed daily and is used to determine replenishment requirements and often 16 . Zara uses “postponement” to gain more speed and flexibility. It avoids the risks and costs of carrying large inventories. purchasing more than 50% of its fabrics un-dyed so that it can react faster to midseason colour changes. from buyers to subcontractors. which allow the company to customize its processes and exploit innovations. Appendix 2: Characteristics of Agile Supply Chain These are four specific characteristics of agile supply chain and are briefed as follows a) Market sensitivity Being close to the customer is vital for fashion retailing (Martin Christopher. the company can use sophisticated just-in-time systems. choose a design. from designers to production staff.from customers to store managers. h) Staged postponement: The postponement principle delays commitment to final product attributes until close to the point of real demand (Christopher. Robert Lowson. from warehouse managers to distributors. if necessary. from store managers to market specialists and designers. 2000). and commit resources for its production and introduction in a few hours.garments as they evolve. For example. like Benetton. f) Flat organisational culture: Fast fashion system depends on a constant exchange of information throughout every part of supply chain . The cross-functional teams can examine prototypes in the hall. Helen Peck. g) JIT systems: Specialized by garment type. and even its office layouts are all designed to make information transfer easy. e) IT enabled Infrastructure: The organisation can deploy the latest information technology tools to facilitate storage and transformation of all kinds of data such as hard data as orders and sales trends and such soft data as customer reactions and even the buzz around a new style. 2000). The organisation should develop operational procedures. Most companies insert layers of bureaucracy that can bog down communication between departments. Successful fashion retailers capture trends as they emerge using a variety of means. performance measures. and so on.

Shared information can enable higher levels of on-the-shelf availability to be achieved with fewer inventories (Martin Christopher. Co-managed inventory (CMI) can be adopted and it is a process through which the supplier collaborates with the retailer to manage the flow of product into the customer’s distribution system and can reduce transaction costs simultaneously. Using computer aided design and computer aided manufacturing (CAD/CAM). in such situations the data is used to analyse trends. the Spanish-based fashion retailer. each specialising in one particular part of the production 17 . The strategy at Zara is that only those operations which enhance cost efficiency through economies of scale are conducted in-house (such as dyeing. has teams of fashion ‘scouts’ who seek out new ideas and trends across the markets in which they compete. They also use their own salespeople to identify customers’ likes and dislikes and to feed this information back to the design team. b) Virtual integration The agile supply chain is virtual in the sense that it is connected and integrated through shared information on real demand so that all the players in the chain. Beyond point-of-sale data are real consumers and identifying their preferences and changing requirements should be a continuing priority. Robert Lowson.though the selling season is only intended to be short and product will not be replenished. Zara and Benetton are two fashion companies that have achieved high levels of customer responsiveness by working closely with specialist. 2000). The supplier and the customer jointly agree the desired stock levels that need to be maintained in the retailer’s operation. cutting. All other manufacturing activities. are completed by networks of more than 300 small subcontractors. The customer feedback sales data is sent on a regular basis to the supplier who then uses that information to plan replenishments. from the fabric manufacturers to the garment makers to the retailer. Retailers and their suppliers need to be more closely connected through shared information. Zara. c) Network based A distinguishing feature of agile companies is their use of flexible arrangements with a wide supply base. often small. manufacturers. Helen Peck. are all working to the same set of numbers. labelling and packaging). these ideas can quickly be converted into tangible products and be in the marketplace in a matter of weeks. including the labour intensive finishing stages.

in other words there are no delays caused by hand-offs or buffers between the different stages in the chain and transactions are likely to be paperless. The underpinning processes are probably managed by ‘horizontal’ and crossfunctional teams. Helen Peck. Helen Peck. they receive the necessary technological.A. Instead in an agile network there is a tendency for the focal firm to act as the ‘orchestrator’ of the network. In the fashion business there can often be many different entities involved in the process that begins with product design and ends with the physical movement of the product onto the retailer’s shelf. These subcontractors work exclusively for Zara’s parent. have long used a numerous of small manufacturers to give them additional capacity in activities such as knitting and final assembly. 2000). Inditex S. In an agile network. Benetton. Robert Lowson. 2000). Enablers of GQR as follows: a) Strive for fast and accurate information transmission 18 . the membership of which will change according to requirements. The system is flexible enough to cope with sudden changes in demand.process or garment type (Martin Christopher. In return. The principle behind an agile network in some ways runs counter to the prevailing idea that organisations should work with a smaller number of suppliers. Robert Lowson. Creating ‘virtual teams’ across the network where information is shared in real-time. process alignment is critical and is enabled by the new generation of web-based software that enables different entities with different internal systems. Co-ordinating and integrating the flow of information and material is critical if quick response to changing fashion is to be achieved. a much higher degree of synchronisation can be achieved. geographically dispersed and independent of each other in terms of ownership to act as if they were one business (Martin Christopher. likewise. financial and logistical support required to achieve stringent time and quality targets. Appendix 2: Enablers of Global quick response (GQR) GQR needs to incorporate many of the elements of QR systems in the context of globally dispersed production and supply resources. d) Process alignment Process alignment is meant the ability to create ‘seamless’ connections. but on a longer term basis.

flexible human skills are valuable in responding to changing garment designs (MacCarthy B L. material handling and material flow and technologies that enable flexibility need to be adopted. The entire distribution channel from production to the retail floor needs to be considered. for material flow within plants and outbound into the distribution channels is important (MacCarthy B L. pressing and packing (MacCarthy B L. Jayarathne. Jayarathne. 2009). particularly for replenishment orders where time is of the essence. particularly for quick changeovers and set ups processes. 2009). This is critical. particularly cellular manufacturing where whole garments or parts of garments are produced or assembled in flow driven cellular processes (MacCarthy B L. cutting. If such cells are rapidly reconfigurable then advantages can be gained in quickly responding to the required mix changes. In addition. The last ‘50 metres’ of the supply chain 19 . d) Develop fast logistics Rapid material flow needs to be encouraged and enabled in any QR system. Many opportunities exist to reconsider layouts and organisation of factory processes. The corollary to this is that stationary material and large inventory buffers should be avoided. Implementing fast logistics for in bound fabric supply. every opportunity needs to taken to adopt new technology in areas such as laying up and marking of fabric. When flexible skills are combined with cellular team based production. Jayarathne. 2009). 2009). Jayarathne. Jayarathne. However. 2009). c) Utilise technology and automation where appropriate Human skills perform much of the value adding activities in garment production. The technologies noted above can assist in achieving this. b) Develop flexible production resources Traditional garment manufacturing uses batch production methods. then rapid response to design and mix changes can be enacted without incurring significant set up costs. The formats for design and garment specifications need to facilitate both rapid transmission of design requirements and the rapid production of new designs (MacCarthy B L. sewing. Speed and accuracy are also important in the transmission of order information. particularly in the time consuming making up processes in garment production.The processes and speed of transmission of both product and order information need to be analysed. Also technologies that assist in rapid material identification.

e) Exploit all opportunities for lead time compression The combination of the above initiatives reduces many of the time delays affecting overall response times. One of the keys to compressing overall response times is to ensure fabric availability. Strong QR basics are needed in GQR systems. every effort needs to be made to develop a supportive organisational culture. production and distribution of garments must be looked at for opportunities to compress lead times. QR initiatives will try to identify specific opportunities for lead time compression in the systems and processes of any specific producer or supply chain prime partner and those aspects of the system that need close management and control. systems and procedures for gathering and transmitting demand information and for the design. In addition. In pursuing a QR strategy.should not be ignored. All aspects of processes. 20 . Not all organisations should attempt or will be successful at QR. f) QR must be a key part of an organisations strategy and have a supportive organisational culture An organisation that seeks to pursue QR must see it as a fundamental part of its business strategy. hence the importance of ‘floor ready’ garments that are appropriately tagged and packaged for immediate display once delivered.