University Name: ITS 631 Operational Excellence Analysis Report

This report analyzes operational excellence, focusing on supply chain management and ABC analysis within the context of the fashion retail industry. The report begins by comparing the supply chain strategies of H&M, Benetton, and Zara, highlighting their differing approaches to managing fashion cycles, inventory, and supplier relationships. It then delves into the application of ABC analysis to optimize inventory control, demonstrating how this technique can be used to categorize items based on their usage and quantity values to determine appropriate control methods. The report emphasizes the practical implications of these concepts, offering insights into how businesses can improve their operational efficiency and decision-making processes. The analysis is supported by a case study, providing a real-world context for the discussed concepts and strategies.

Running Head: ITS 631 – OPERATIONAL EXCELLENCE
ITS 631 – Operational Excellence Week 5
Name of the Student
Name of the University

1ITS 631 – OPERATIONAL EXCELLENCE
Answer to Question 1 Chapter 12
H&M, Benetton and Zara have three different approaches to managing their supply chain
networks although they emphasize on the same objective i.e. to sell up to date fashion items at
the best possible price.
H&M and Zara have rejected the most used concept of “two collections” per year and
have implemented a system where designed clothes are manufactured throughout the year and
the collections are done regular intervals. The suppliers of the companies are instructed to
manufacture a certain number of clothes with the latest fashion design within a short but specific
period of time. After collection of this batch, the cycle is repeated but this type, the designs are
entirely changed.
On the other hand, Benetton emphasizes more on the quality of the materials produced
and does not use such faster cycles. However, even within the bigger supply cycle, Benetton tries
to remain up to date with the designs without compromising on the quality of the garments
produced.
Benetton and Zara have set up automated warehouses near their main distribution centers
thus effectively cutting their supply costs by preventing the need for outsourcing of the supply
process. On the other hand, H&M mainly relies on the external supplies using sub-contractors.
Thus it can be seen that both the companies have different approaches to their retail chain
that are mainly due to the differences in their approaches to the market. Moreover, due to their
approach differences regarding supply chain, the prices and qualities of the materials vary by a
significant margin in spite of keeping up to date with the current fashion.

2ITS 631 – OPERATIONAL EXCELLENCE
Answer to Question 1 Chapter 13
ABC analysis is a technique that is used to determine the specific items that require or do
not require any control. This is very much useful when the seller is unable to determine which
items require more control regarding productivity and which items do not. From the case study,
it is evident that the Head of Operations do not have a clear idea regarding how to control the
production as per the demands of the different items. Hence, based on the situation, an ABC
analysis spreadsheet is developed.
The spreadsheet is developed as follows.
A-items B-items C-items
Usage Value 50% 30% 20%
Quantity Value 20% 30% 50%
Control Method Constant Control Need Based Little Control
From the table, it is seen that A-items have 20% of usage value as quantity value and
50% of actual usage value. Hence, A-items require constant control. On the other hand, B-items
have similar usage and quantity values and hence, need based control is necessary. Finally, C-
items require little control as the quantity value is much higher than actual usage value.
Now, the Head of Operations need to categorize the items as “A”, “B” or “C” based on
the given parameters i.e. usage value and quantity value. Both can be determined through
exploring sales data and conducting a customer survey. Based on the categories, the
aforementioned controls can be implemented.