Analysis of Lean Operations and Inventory Management at UCB Report

This report provides an in-depth analysis of United Colors of Benetton's (UCB) inventory management practices, identifying inefficiencies and waste within its current system. The study highlights UCB's struggles with over-manufacturing, resource wastage, and inventory inaccuracies, stemming from ina...Read More

Lean Operation
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Table of Contents
INTRODUCTION ...............................................................................................................................4
UCB and its inventory management ...............................................................................................4
Lean out inventory management process.........................................................................................6
Wastage that would eliminate from process....................................................................................8
Benefits from the overall lean inventory management operations to the organization ..................9
CONCLUSION ...................................................................................................................................9
REFERENCES...................................................................................................................................11
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Illustration Index
Illustration 1: Principles of lean operation ..........................................................................................7
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INTRODUCTION
Lean operation is considering as a part of business that support a strategy of manufacturing
best quality of goods by using least amount of resources. The focus of this technique is on enhance
the efficiency, optimized production and effectively utilize the resources (Kokemuller, 2015). The
application of lean operations or environment depend on the nature and characteristics of the
business as well as the products or services. This concept is supporting the continuous
improvements in order to improve efficiency and quality. It eliminate the wastage of time, money,
efforts and other resources from the system and enhance the production process (Rouse, 2016). The
present study is based on lean operations and to understand this concept within the companies,
United Colors of Benetton (UCB) is taking into the consideration. It is a Italy based company and
deal in fashion sector by serving worldwide area. The major products of the company are clothing,
bags, shoes and accessories. The areas that will be highlight during this research are lean operations
and its benefits (Oh, Bae and Min, 2010).
UCB and its inventory management
Benetton is known as international apparel manufacturing as well as retail company and its
shows its presence in 120 nations across the world. Its strong Italian styles puts a good brand image
in the customer mind. The combination of style, quality and color gives a great look and style to
the products (Clark, Silvester and Knowles, 2013). Benetton is famous for its effective logistic and
supply chain strategies where it has used lean system. Organization make all the apparels in the
same colour and store them in inventory section. When the demand comes in the season, they day
them. So on this basis of this, UCB has produced large number of basic cloths and prepare them by
colouring when the customers wants. So, it can be easy for the firm as well as consumers to follow
the trends. The product differentiation is held at very last stage of manufacturing. This strategy has
got the success to Benetton in forecasting of demand in textile industry and reduced the errors.
But UCB does not use lean operation techniques in inventory management which is the
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main element. The result of this is company has faced number of issues at the workplace such as
over-manufacturing, wastage of resources, defects in the materials etc. These all have increased the
wastage of several resources. The reason behind this situation is organization has forgot to consider
the various internal and external factors at the time of forecasting the demand of textile market
around the world. Due to this, Benetton has struggled with inventory management on daily basis.
Firm has not able to maintained the semi-finished and finished goods inventory level. For managing
huge same natural colour materials, company has invested money for developed large warehouses
but the maintained inventory level has not sold out at fast speed (Fadly Habidin and Mohd Yusof,
2013). Many of the apparels have not sold and they remained in the warehouse. Along with this,
some of the time, due to the defects issues, the customers return the goods to company. All such
situations have increased the wastage of men, machine and material resources and that is not good
for Benetton.
On the other hand, some of the staff employed in warehouse of Benetton are not that
sufficient or having the appropriate skills to use inventory management software that are installed
on the system. So the lack of proper training to the employees have increased the issue of inventory
management (Martínez-Jurado and Moyano-Fuentes, 2014). The result of this, company does not
get the proper update of current inventory level because of improper feeding of information in the
software. Therefore, UCB has produced more new apparels stocks and the old inventory still remain
unsold. Hence, it has increased the wastage of all type of resources.
Beside this, the less frequent inventory checks by operation manager and inventory manager
of Benetton has also leads to wastage of the goods. Due to this, the management does not know
about the present inventory level in the warehouse of both semi-finished and finished goods. Along
with this, they have produced apparels on daily basis to complete the targets. So, this kind of
mistakes have increased the wastage of the products and resources within the workplace of UCB.
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Lean out inventory management process
From the above discussion, it has been found that the current inventory management system
of Benetton has increased the wastage of goods and resources. The following issues has raised the
cost of the company and needed more funds to brought new resources for manufacturing of the
products. Along with this, the carrying and holding charges of warehouse have also increased. To
overcome the negative impacts of all these on the productivity and performance of the organization.
In this context, UCB needs to adopt lean approach that help out in solving the various inventory
issues and minimize the wastage.
Lean operation is know as a best method of minimizing the waste by using limited sources.
It is more appropriate as compare to the traditional methods of reducing defects and waste. It has
five principles: determine the values of customers, emphasize on process that create value for the
users, elimination of waste, manufacturing of the goods as per the demand of the consumers and
looking for perfection in the work by maintain quality.
In the case of Benetton, the causes of waste in inventory management of the company can be
reduced by Lean Inventory Management. It is a systematic approach to enhance value in an
organization inventory by determining and eliminating wastage of materials, time and efforts via
continuous improvement for seeking the perfection in the process (Meiling, Backlund and Johnsson,
2012). For this, UCB first have to work on five principles of Lean Inventory Management approach
which are as follows:
Value: Here, the value needed to be defined that Benetton will receive from Lean Inventory
Management.
Flow: Under this, the management of the company have to understand how inventory flows in
warehouse and remove those obstacles that do not add value in the product.
Pull: Whenever the demand of the customer generate, the inventory level will build.
Responsiveness: Here, the system will be such type which easily adapt to changes.
Perfection: Benetton will continuously refine it inventory management process for bring the
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improvement in the quality, reduce the cost and cycle time of preparation and improve efficiency.
With the help of above stated five principles of Lean operation, it will remove the major
causes of wastages during the inventory management of UCB. In this context, company can use JIT
(Just in Time) method which is considering as a next step of lean operation (Gowen III, McFadden
and Settaluri, 2012). By using this, the various building blocks can be prepare such as product
design, process design, human element, manufacturing planning and control etc. The aim of product
design block will achieve appropriate quality and standardized the products by developing modular
designs. On the other hand, with the help of process design block, Benetton will able to reduce the
size of lot. Along with this, it will minimize the need or number of warehouse for storing of the
products because all will be produced on the basis of the customer demand.
Beside this, another building block of JIT is human element that assist UCB to provide the
training to employees about how to use inventory management software. It will also help in develop
a flexible labour that will ready to accept the changes within the workplace and work practices. It
will bring continuous improvement in the work. In addition to this, in manufacturing and control
building block, company will create a pull system where it will add the values in the products as per
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Illustration 1: Principles of lean operation
(Source: PRINCIPLES OF LEAN, 2016)

the need of the customers. It will promote paperless working within Benetton organization to track
record of current inventory level. Rather this, it will boost the good relationship with the vendors so
that when the demand generate, the raw material can purchase. Along with this, it will reduce
hidden expenses in inventory management and minimize the waste.
Illustration 2: Different building block of Lean Operation
Wastage that would eliminate from process
By removing or eliminating any of waste in inventory management, Benetton company can
be save the expenses and make more profit. In this context, there are various wastage that would be
needed to eliminate from inventory management process and these are as follows:
Waste of transportation: It is the movement of the goods from one location to another either for
storage, packaging or quality checking. It is not adding any kind of value in the product and
customer will not happy to pay the extra price for this. So, such kind of waste would reduce from
inventory management process of Benetton.
Waste of waiting: It is doing the work slowing or stay remain ideal for the long time increase the
waiting time for a previous step in the process. In the case of UCB, this waste would eliminate from
inventory management process.
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Waste of motion: It is any motion of worker or machine that does not add value to the products of
Benetton. The reason of this waste is due to poor workstation layout, large lot size, poor method
design to store the products in warehouse etc. So, it would also eliminate from inventory
management process (Fadly Habidin and Mohd Yusof, 2013).
Waste of overproduction: Benetton has produced the large quantity of same natural semi-finished
goods which is actually increase the inventory level. As the time pass, the trend of the apparels
becomes old and the stock remain unsold. Therefore, overproduction would also remove from
inventory management process.
Waste of defects: Most of the time, UCB has sold out the products to the customers and when they
got back than company realize that they are defective. Along with this, at the time of manufacturing
of the goods in the large quantity than number of defects has raised and it leads to waste. Therefore,
waste of defects would be remove from inventory management process.
Benefits from the overall lean inventory management operations to the organization
Cost reduction: The new lean inventory management operation will reduce the cost of Benetton
because the new method will effectively manage the inventory level and minimize the various
wastage. It will leads to save the lot of cost that spends by the company in holding and carrying of
the stocks for the long time in large warehouses.
Quality advancement: New lean inventory management techniques will assist Benetton company to
improve the quality of the goods. It will reduced the defects in the products and boost the efficiency
level of machines (Martínez-Jurado and Moyano-Fuentes, 2014).
Meet demand level: With the help of lean inventory management, Benetton organization will easily
meet the demand of the customers by making the products according to their needs and
specifications. It will reduce the changes of wastage of the goods.
Enhance productivity: By reducing the wastage and manage current inventory level of the
products, it will leads to improve the productivity of UCB in different aspects. The other supportive
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operations will also improve due to new system (Clark, Silvester and Knowles, 2013).
CONCLUSION
From the above study, it can be concluded that Benetton has faced poor inventory
management issue. Due to this, the huge of amount of wastage of resources and products have taken
place. The various reasons have identified which has responsible for improper inventory
management. But with the help of new lean inventory management, it has easy to minimized the
waste and other issues during managing inventory level. It has delivered several benefits to the
organization.
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REFERENCES
Books and Journals
Clark, D.M., Silvester, K. and Knowles, S., 2013. Lean management systems: creating a culture of
continuous quality improvement. Journal of clinical pathology, 66(8), pp.638-643.
Fadly Habidin, N. and Mohd Yusof, S.R., 2013. Critical success factors of Lean Six Sigma for the
Malaysian automotive industry. International Journal of Lean Six Sigma, 4(1), pp.60-82.
Gowen III, C.R., McFadden, K.L. and Settaluri, S., 2012. Contrasting continuous quality
improvement, Six Sigma, and lean management for enhanced outcomes in US
hospitals. American Journal of Business, 27(2), pp.133-153.
Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain management
and sustainability: a literature review. Journal of Cleaner Production, 85, pp.134-150.
Meiling, J., Backlund, F. and Johnsson, H., 2012. Managing for continuous improvement in off-site
construction: Evaluation of lean management principles. Engineering, Construction and
Architectural Management, 19(2), pp.141-158.
Online
Kokemuller, N., 2015. The definition of lean operations. [Online]. Available through:
<http://www.ehow.com/about_6666969_definition-lean-operations.html>. [Accessed on:
27th April, 2016].
PRINCIPLES OF LEAN. 2016. [Online]. Available through:
<http://www.lean.org/WhatsLean/Principles.cfm>. [Accessed on: 27th April, 2016].
Rouse, M., 2016. Lean management. [Online]. Available through:
<http://searchcio.techtarget.com/definition/lean-management>. [Accessed on: 27th April,
2016].
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