Fashion Value and Supply Chain

-Role of Designers, Manufacturers and Retailers.

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What is Supply chain?

A supply chain is a system of organizations,

people, technology, activities, information and
resources involved in moving a product or
service from supplier to customer.

Supply chain activities transform natural

resources, raw materials and components into a
finished product that is delivered to the end
customer.

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 Supply chain management
 Supply chain management (SCM) is the process of
planning, implementing, and controlling the
operations of the supply chain with the purpose to
satisfy customer requirements as efficiently as
possible.

 Supply chain management spans all movement and

storage of raw materials, work-in-process inventory,
and finished goods from point-of-origin to point-of-
consumption

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A supply chain consists of
Supplier of Manufacturer/ Designer Distributor Retailer Customer
Raw materials

Upstream
Downstream

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 Classic textile Business Process:

Purchase
Design Raw Mat Mfg Dist Sell Discount

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 Supply chain aims to Match Supply and Demand,
profitably for products and services

SUPPLY SIDE DEMAND SIDE

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Supply Chain achieves

+ + + + + =
Higher
The right The right The right The right The right The right
Profits
Product Price Store Quantity Customer Time

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Flow in a Supply Chain

Material

Information
Supplier Customer
Funds

The flows resemble a chain reaction.

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SCM in a Supply Network
 Supply Chain Management (SCM) is concerned with the management and
control of the flows of material, information, and finances in supply chains.
Cash
Products and Services
Information
THAILAND INDIA MEXICO TEXAS US
N-Tier Suppliers Suppliers Logistics Distributors Retailers

Supply Side OEM Demand Side

Demand

Supply

 The task of SCM is to design, plan, and execute the activities at the different
stages so as to provide the desired levels of service to supply chain customers
profitably
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Cycle View of Supply Chains
Customer

Customer Order Cycle

Retailer
Any cycle
0. Customer arrival
Replenishment Cycle 1. Customer triggers an order
Distributor 2. Supplier fulfils the order
3. Customer receives the order
Manufacturing Cycle

Manufacturer

Procurement Cycle

Supplier 10
Push vs Pull System
• What instigates the movement of the work/Production in the
system?

• In Push systems, work release is based on downstream demand

forecasts
– Keeps inventory to meet actual demand
– Acts proactively
• e.g. Most of the retailers work in this format

• In Pull systems, work release is based on actual demand or the

actual status of the downstream customers
– May cause long delivery lead times
– Acts reactively
• e.g. Ur neighborhood tailor !!!!
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Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
Push-Pull boundary 12
Role of Designers, Manufacturers and Retailers.

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What is an inventory?
It is the products or goods which are
produced/manufactured in bulk by the supplier
or manufacturer (i.e he has invested in those
products) & is kept in the ware house or store
before its sold to the end customer.

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Inventory Management
 The term inventory management implies limitations of planning, ordering
and forecasting in a system
 Given a set of macro and micro conditions in a dynamic business
environment it is possible that decisions are not 100 % correct
 If you have low sales you will obviously have more inventory and why you
will have low sales is simply because
---- your product development or demand forecasts were inaccurate.
---- Also it could be a great product with a reasonable demand forecast but
due to lack of marketing and information to the customers it could not be
sold as predicted
---- Not priced correctly (MRP)
---- Great product but did not reach on time or season.
 Therefore it is important that an organization sees Inventory as part of a
bigger picture and not in exclusion. The focus should be on what caused
higher or low inventory and not on inventory itself.
 Inventory Management is done by Retail Merchandisers who scan the
daily sales report of each retail outlets and re- align the inventory and
also pass on the information to the buyers on the sales trend
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Distribution Network Configuration
 The supplier matrix would depend largely on the scale of operations
and positioning of the store.

 Large suppliers with compliant factories and state of the art

equipment are tend to be costlier. The retailer must look for a ‘best
fit’ model so that the business is relevant and valuable for both
parties.

 If the product is design oriented and the customers can pay more to
get it faster one may decide to get it produced in the best facility
nearest to the point of sales.

 If the product is value oriented and customers look for least priced
products then one can have it sourced in bulk ( like importing from
China rather than getting it from Tirupur !).

 The final end of the distribution network is the retail store.

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ZARA

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Zara is the flagship chain store of Inditex Group owned by
Spanish tycoon Amancio Ortega.

1st store opened in 1975 in Spain

Zara was described by

Louis Vuitton
fashion director as
"possibly the most
innovative and devastating
retailer in the world."

Zara has also been

described as a
"Spanish success story"
by CNN. 19
Zara’s Supply Chain
 While its rivals start planning their lines on
average nine months before they hit the shelves,
Zara has a reputation for instant reaction to
fashion trends and rapid restocking of stores to
meet demand on items that are hits.

 Zara can make a new line, from the initial concept

to when it arrives in the shops, in just three
weeks.

 It's also not afraid to pull items from shelves and

cancel ones that aren't selling.

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 ZARA design process:

Créative Final
Preliminary
Design Product
Designs
Design

COPY ADAPT
OUTSOURCE
and and and
SCAN SIMPLIFY OPTIMIZE

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ZARA Supply Process in full:
5 day lead time!!!
Step 1: Scan
fashion shows Step 3: Designers « pull »
next batch

Step 2: Simplify Purchase Step 3: Final

« hits » & produce Raw Mat Design of next Mfg Dist
library of designs batch

Shopping
experience

Step 2: Shoppers (and store mgers)

« pull » next design (shape) &
designers « adapt »

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What's a Ware house?

A warehouse is a commercial building for storage

of goods.

Warehouses are used by manufacturers,

importers, exporters, wholesalers, transport
businesses, customs, etc. They usually have
loading docks to load and unload goods from
trucks.

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Fast Fashion!
 La Coruna warehouse is 5 million square feet = 90
football fields.
Nine times the size of Amazon's warehouse
These facilities move about 2.5 million items a week.
Connected to 14 Zara factories through tunnels with
ceiling-mounted rails.

 Cloth is ironed and products are packed on

hangers so they don't need ironing when they
arrive at stores
Price tags are affixed
Unpack them & they're ready to be sold

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In-house or Outsource?
 Does Zara outsource production?

 Why Not?
 Production is the critical success factor for Zara
 Fast Fashion.

 Vertical Integration
 Zara produces 60% of its merchandise in-house.
 Zara makes 40% of its own fabric and purchases most of its dyes
from its own subsidiary.
 Fabric is cut & dyed by robots in 23 highly automated Spanish
factories.
 50% of fabric arrives undyed so the firm can react to mid-season
color changes.

 What about competitors?

 H&M has 900 suppliers and no factories.
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Fresh Fashion
 At Zara, most of the products you see in stores didn't
exist three weeks ago, not even as sketches.

 How often does the average Zara store accept delivery of

new products?

 Twice-a-week! It's like groceries!

 Items rarely remain on shelves for more than a week.
 You essentially walk into a new store each time you visit.

 What advantage does this give Zara?

 Exclusivity! No single Line is on the market for more than four
weeks.

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All this translates into speed.
 Turn-around from idea to shelves is 15 days.
H&M takes 3-5 months from creation to delivery
VF Corp (Lee, Wrangler) takes 9 months
J . Jill takes up to a year
Average = six months to design + three months to
manufacture.
Zara is 18 times faster than competitors!

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