Operations Management in

Clothing Industry

Dr. Yan Feng

Associate Professor
School of Management
Wuhan Textile University
 Agenda
• Logistics
• Supply Chain Management
• Operations Management
• MRP & ERP
• Zara Case
• Resources
– China National Garment Association (CNGA)
– Software

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 Logistics
• Logistics studies of the efficient delivery of goods and
services.

• A total-cost approach recognizes this involves not only the

obvious vehicle-routing issues but also shipment size and
mix, warehouse location, product design, and customer
services. Includes study of real companies' logistics
problems.

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 Goods vs. Services
• Products are typically neither purely service- or purely
goods-based.

Goods Services
Surgery, Teaching

Songwriting, Software Development

Computer Repair, Restaurant Meal

Home Remodeling, Retail Sales

Automobile Assembly, Steelmaking

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Popular logistics terms
– Logistics Management
– Business Logistics Management
– Integrated Logistics Management
– Materials Management
– Physical Distribution Management
– Marketing Logistics
– Industrial Logistics
– Distribution

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Logistics
the process of planning, implementing and controlling
procedures for the efficient and effective
transportation and storage of goods including
services and related information from the point of
origin to the point of consumption for the purpose
of conforming to customer requirements and
includes inbound, outbound, internal and external
movements.
-Council of Supply Chain Management

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 Seven Rights
• Right Quantity
• Right Time
• Right Commodity
• Right Quality
• Right Place
• Right Price
• Right Impression

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 Logistics Activities
• Transportation • Production planning
• Storage • Purchasing
• Packaging • Customer service
• Materials handling • Site location
• Order fulfillment • Other activities
• Forecasting

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 Identifying Supply Chains
• Manufacturing supply chain model

Suppliers’ Direct Final

Producer Distributor
suppliers suppliers Customers

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Supply Chain Management
the coordination of production, inventory, location and
transportation among the participants in a supply
chain to achieve the efficiency for the market being
served.

The goal of supply chain management is to increase

sales of goods and services to the final end use
customer while at the same time reducing both
inventory and operating expense.

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Benefits of Effective Supply Chain
Management
• Improved customer service: having the right
products, available for delivery when requested,
at a good price.

• Reduction of costs across the supply chain and

more efficient management of working capital.

• More efficient management of raw materials,

work-in-process, and finished goods inventory.

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Benefits of Effective Supply Chain
Management
• Better manufacturing resource management.

• Optimized manufacturing schedules.

• Optimal distribution of existing inventory across

the supply chain.

• Enhanced customer value, often in the form of

lower prices.

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 key supply chain processes
• Customer relationship management
• Customer service management
• Demand management
• Order fulfillment
• Manufacturing flow management
• Supplier relationship management
• Product development and commercialization
• Returns management

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 Operations
• Operation is concerned with transforming
inputs into useful outputs and thereby
adding value to some entity.

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 Operations management (OM)
design, operation, and improvement of the
systems that create and deliver the firm’s
primary products and services

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 Scope of Operations Management

The operations function includes many interrelated activities

such as:
– Forecasting
– Capacity planning
– Facilities and layout
– Scheduling
– Managing inventories
– Assuring quality
– Motivating employees
– And more . . .

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 Steps in Forecasting
1. Determine the purpose of the forecast

2. Establish a time horizon

3. Obtain, clean, and analyze appropriate data

4. Select a forecasting technique

5. Make the forecast

6. Monitor the forecast

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• whether to produce a good or service itself or outsource

• Factors to consider:
– Available capacity

– Quality considerations

– The nature of demand

– Cost

– Risks

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• Things that can be done to enhance capacity management:
– Design flexibility into systems

– Take stage of life cycle into account

– Take a “big-picture” approach to capacity changes

– Attempt to smooth capacity requirements

– Identify the optimal operating level

– Choose a strategy if expansion is involved

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 Facility Layout Design
 Basic Objective
 Facilitate a smooth flow of work, material, and information
through the system
 Supporting objectives
1. Facilitate product or service quality
2. Use workers and space efficiently
3. Avoid bottlenecks
4. Minimize material handling costs
5. Eliminate unnecessary movement of workers or material
6. Minimize production time or customer service time
7. Design for safety

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 Scheduling
• Scheduling:
– Establishing the timing of the use of equipment,
facilities and human activities in an organization
• Effective scheduling can yield
• Cost savings
• Increases in productivity
• Other benefits

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 Types of Inventory
• Raw materials and purchased parts
• Work-in-process (WIP)
• Finished goods inventories or merchandise
• Tools and supplies
• Maintenance and repairs (MRO) inventory
• Goods-in-transit to warehouses or customers (pipeline
inventory)

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 Inventory Cost
 Holding (carrying) costs
 Cost to carry an item in inventory for a length of time, usually a
year
 Ordering costs
 Costs of ordering and receiving inventory
 Setup costs
 The costs involved in preparing equipment for a job
 Analogous to ordering costs
 Shortage costs
 Costs resulting when demand exceeds the supply of inventory;
often unrealized profit per unit

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 Determinants of Quality
• Quality of design
– Intention of designers to include or exclude features in a product or
service
• Quality of conformance
– The degree to which goods or services conform to the intent of the
designers
• Ease-of-Use and user instructions
– Increase the likelihood that a product will be used for its intended
purpose and in such a way that it will continue to function properly and
safely
• After-the-sale service
– Taking care of issues and problems that arise after the sale

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 Total Quality Management (TQM)
Approach
1. Find out what the customer wants
2. Design a product or service that meets or exceeds
customer wants
3. Design processes that facilitate doing the job right the
first time
4. Keep track of results
5. Extend these concepts throughout the supply chain

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 Working Conditions Occupational
Healthcare

Illumination Safety
Temperature
& Humidity

Ethical
Issues

Noise & Work Time &

Ventilation Work Breaks
Vibration

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OM in the Organization Chart

Finance Operations Marketing

Plant Operations Director

Manager Manager

Manufacturing, Production control,

Quality assurance, Engineering,
Purchasing, Maintenance, etc
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 Operations Strategy
Strategy Process Example

Customer Needs More Product

Corporate Strategy Increase Org. Size

Operations Strategy Increase Production Capacity

Decisions on Processes
and Infrastructure Build New Factory
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 Competitive Dimensions
• Cost or Price
– Make the Product or Deliver the Service Cheap
• Quality
– Make a Great Product or Deliver a Great Service
• Delivery Speed
– Make the Product or Deliver the Service Quickly
• Delivery Reliability
– Deliver It When Promised
• Coping with Changes in Demand
– Change Its Volume
• Flexibility and New Product Introduction Speed
– Change It
• Other Product-Specific Criteria
– Support It

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 Dealing with Trade-offs

Cost

Flexibility Delivery

Quality

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Order Qualifiers and Winners

•Order qualifiers are the basic criteria that

permit the firm’s products to be considered as
candidates for purchase by custo mers

•Order winners are the criteria that differentiate

the products and services of one firm from the
competitors and build relationships that bind
customers to the firm in a positive way

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Steps in Developing a Manufacturing
Strategy
1. Segment the market according to the product group

2. Identify product requirements, demand patterns, and

profit margins of each group

3. Determine order qualifiers and winners for each group

4. Convert order winners into specific performance

requirements

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Material Requirement Planning (MRP)
• A computer-based information system that translates
master schedule requirements for end items into time-
phased requirements for subassemblies, components,
and raw materials.

• The MRP is designed to answer three questions:

1. What is needed?

2. How many is needed?

3. When is it needed?
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Independent & dependent demand
 Dependent demand: Demand for items that are sub-assemblies or
component parts to be used in production of finished goods.
 Once the independent demand is known, the dependent demand can be
determined.

Independent demand Dependent demand

(forecast) (calculated)

100 x 1 =
100 tabletops

100 tables 100 x 4 = 400 table legs

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 Example of MRP Logic and Product
Structure Tree
Given the product structure tree for “A” and the lead
time and demand information below, provide a
materials requirements plan

Product Structure Tree for Assembly A Lead Times

A 1 day
A B 2 days
C 1 day
D 3 days
E 4 days
B(4) C(2) F 1 day

Total Unit Demand

Day 10 50 A
D(2) E(1) D(3) F(2) Day 8 20 B (Spares)
Day 6 15 D (Spares)
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 we have to place an order for 50 units of “A”
on the 9th day to receive them on day 10.

Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day

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 need 4 B’s for each A. 50 A’s=200 B’s. back the
schedule up for the necessary 2 days of lead time.

Day : 1 2 3 4 5 6 7 8 9 10
A R e q u ire d 50
O rd e r P la c e m e n t 50
B R e q u ire d 20 200
O rd e r P la c e m e n t 20 200

LT = 2
Spares
A 4x50=200

B(4) C(2)

D(2) E(1) D(3) F(2) #

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Finally, repeating the process for all components, we
have the final materials requirements plan:
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
B(4) C(2) 40 + 15 spares

D(2) E(1) D(3) F(2) #

 MRP benefits
• Enables managers to easily
– determine the quantities of each component for a given order
size
– To know when to release orders for each component
– To be alerted when items need attention
• Additional benefits
– Low levels of in-process inventories
– The ability to track material requirements
– The ability to evaluate capacity requirements
– A means of allocating production time
– The ability to easily determine inventory usage
– Exploding an end item’s BOM to determine the quantities of
the components that were used to make the item
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 Enterprise resource planning (ERP)
• Enterprise resource planning (ERP) is defined as the ability to
deliver an integrated suite of business applications. ERP tools share
a common process and data model, covering broad and deep
operational end-to-end processes, such as those found in finance,
HR, distribution, manufacturing, service and the supply chain.

• ERP typically has an MRP core

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Example of ERP

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 Overview of ERP Software Modules
Module Brief Description
Accounting/Finance A central component of most ERP systems. It provides a range of financial reports,
including general ledger, accounts payable, accounts receivable, payroll, income
statements, ad balance sheets
Marketing Supports lead generation, target marketing, direct mail, and sales

Human Resources Maintains a complete data base of employee information such as date of hire, salary,
contact information, performance evaluations, and other pertinent information

Purchasing Facilitates vendor selection, price negotiation, making purchasing decisions, and bill
payment
Production Planning Integrates information on forecasts, orders, production capacity, on-hand inventory
quantities, bills of material, work in process, schedules, and production lead times

Inventory Management Identifies inventory requirements, inventory availability, replenishment rules, and
inventory tracking
Distribution Contains information on third-party shippers, shipping and delivery schedules, delivery
tracking
Sales Information on orders, invoices, order tracking, and shipping

Supply Chain Management Facilitates supplier and customer management, supply chain visibility, and event
management
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 ERP central database

Finance &
Accounting

Sales & Production &

Marketing ERP Data Materials
Repository Management

Human Resources

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ERP modules

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Companies using ERP

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 MRP vs ERP
• MRP started much earlier • ERP is latest addition to

• basically a solution tool used planning in business

in production planning and • plans how to manage

also inventory management resources available in the

• facilitates production enterprise

planning in addition to • covers areas including HR,

purchase as well Finance, Accounting and
Logistics

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 Zara
• http://www.inditex.cn/about-us/our-brands/zara

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In 2012, Inditex, reported total sales of US$20.7 billion, with Zara
representing a powerful 66 percent, or US$13.6 billion, of that total.

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 Zara
• Open the first store in the Spanish coastal city of A Coruña in 1975.

• its core values, expressed simply in the same four key words that
define all our stores: beauty, clarity, functionality and sustainability.

• Nurturing a highly intimate relationship with its customers, Zara’s

designers respond instinctively to customers’ changing needs,
reacting to the latest trends and constant feedback received across its
Woman, Man and Kids collections, to deliver new ideas in the right
place and at the right moment.

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 Zara
• Further enhancing the quality of our customer service, Zara stores
also include Radio Frequency Identification Technology (RFID), using
cutting-edge systems to track the location of garments instantly and
making those most in demand rapidly available to customers.

• Zara’s flagship eco-stores underline the brand’s unwavering focus on

sustainability and improved customer experience, such as the
installation of clothing recycling containers in-store and a scheme
providing for free at-home collection of used garments to
complement the delivery of online orders.

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 Zara – fast fashion
• produces around 450 million items a year.

• small-batch deliveries, twice a week to all of their stores around the

world.

• best - controlling of its manufacturing and supply chain than most of

its competitors.
• It adapts couture designs, manufactures, distributes, and retails
clothes within two weeks of the original design first appearing on
catwalks. (This is in stark contrast to the average six months it takes
to produces items in the fashion industry.)

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 Zara - Just in Time production
• relies on keeping a significant amount of its production in-house and
making sure that its own factories reserve 85 percent of their capacity
for in-season adjustments, which allows the organization to be
flexible in the amount, frequency, and variety of new products to be
launched.

• relies heavily on sophisticated fabric sourcing, cutting, and sewing

facilities nearer to its design headquarters in Spain.

• The wages of these European workers are higher than those of their
developing-world counterparts.

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 Zara – Just In Time Production
• Postponed manufacture. only locks in 50 to 60 percent of its line by
the start of the season, up to 50 percent of its clothes are designed
and manufactured smack in the middle of the season.If a certain style
or design becomes the new must-have on the street, Zara gets to
work.

• Store managers communicate customer feedback on what shoppers

like, what they dislike, and what they’re looking for. That demand
forecasting data is instantly funneled back to Zara’s designers, who
begin sketching on the spot.

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 Zara – Just In Time Production
• Zara also has extra capacity on hand to respond to demand as it
develops and changes. For example, it operates typically 4.5 days per
week around the clock on full capacity, leaving some flexibility for
extra shifts and temporary labor to be added when needed.

• This then translates to frequent shipments and higher numbers of

customer visits to the stores, creating an environment of shortage
and opportunity.

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 Zara – Just In Time Production
• Zara’s business strategy allows the company to sell more items at full
price because of the sense of scarcity and exclusiveness the company
exudes.

• Zara makes 85 percent of the full price on its clothes, while the
industry average is 60 to 70 percent. Unsold items account for less
than 10 percent of its stock, compared with an industry average of 17
to 20 percent.
• This is also the reason why Zara can afford the extra labor
and shipping costs needed to accommodate and satisfy changes in
customer demand.
•
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 Zara – Lean Inventory Management
• Inventory optimization models are implement to determine the
quantity delivered to every retail stores via shipments that go out
twice every week. The stock delivered is strictly limited, ensuring that
each store only receives just want they need.

• This quick in-season turnaround allows Zara to ship more often and in
smaller batches. If the design does not sell well, little harm is done.

• The batch is small, so there’s not a ton of unsold inventory to get rid
of.

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 Zara – Centralized order fulfillment
• Zara sticks to a deep, predictable and fast rhythm, based around rapid
deliveries to stores.

• every staff member involved in the supply chain – from design to

procurement, production, distribution, and retail – knows the
timeline and how their activities impact other functions. That
certainly also extends to Zara customers, who know when to visit
stores for fresh new garments.

• centralized order fulfillment enables incredibly efficient workflows –

from initial design right through to delivery to stores and customers.

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 Zara – Solid Distribution Network
• Zara’s strong distribution network enables the company to deliver
goods to its European stores within 24 hours, and to its American and
Asian outlets in less than 40 hours.

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fy1
fy2

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幻灯片 61

fy1 feng yan, 2018/8/18

fy2 feng yan, 2018/8/18
 Lefties
• Zara is definitely a leader among affordable high-street retailers,
which always have a fashionable say when it comes to the season’s
hottest catwalk trends.

• There are also people, who still can’t afford buying Zara pieces, yet
strive to look trendy and cool in the streets. Well, you still can wear
Zara-worthy pieces, following the fab fashion updates from Lefties,
the younger sister brand of Zara and the low-cost option (which retail
at almost half the prices of Zara’s pieces. ) in the famous Spanish
Inditex group.

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 Zara Summary
• Small batch delivery, twice a week
• Two weeks from design to retailers (others 6 months)
• 85% sold at full price (60-70%)
• RFID to tack the location of the garments
• Eco-stores for clothing recycle
• to its European stores within 24 hours, and to its American and Asian
outlets in less than 40 hours.

• Strong control of production and supply chain (listen to

customers, Quick Response, JIT, in house, flexibility, well
paid, inventory management, delivery)

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http://www.cnga.org.cn

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 China National Garment Association
(CNGA)
• Founded in 1991, CNGA is a national organization of the Chinese
clothing industry.

• At present, it has more than 1200 members in the country, including

most of China's outstanding independent clothing brands,
outstanding clothing manufacturers, local industry organizations and
important industrial clusters. It has played an active role in promoting
scientific and technological progress, brand building, industrial
resources integration, international exchanges and cooperation, and
industrial upgrading and development.
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http://www.kingdee.com/sem/

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Thank you!