Supply Chain Management in Fashion Industry Report

This report provides an in-depth analysis of supply chain management within the fashion industry. It begins with an introduction to the topic and then explores key concepts such as globalization, e-commerce, outsourcing, supply chain relationships, and supply chain improvements. The report examines the impact of globalization on the fashion industry, including both the benefits and challenges it presents. It discusses the role of e-commerce in the sector, including electronic data interchange (EDI) and the issues related to it. Furthermore, the report also delves into outsourcing strategies, emphasizing cost reduction and its implications. The report aims to provide a comprehensive understanding of the key issues and trends in fashion supply chain management, offering insights into how businesses can optimize their operations and navigate the complexities of the global market. The report concludes with a reflection on the key learnings and implications of the analysis.

Supply Chain Management

Contents
INTRODUCTION...........................................................................................................................3
Globalisation....................................................................................................................................3
E-Commerce:...................................................................................................................................5
Outsourcing......................................................................................................................................6
Supply chain relationship: ...............................................................................................................8
Supply chain improvements...........................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
Individual Reflection Report (1)......................................................................................................1
Individual Reflection Report (2)......................................................................................................5
Individual Reflection Report (3)......................................................................................................7

INTRODUCTION
Supply chain management can be defined as management of flowing goods & services
that majorly enclosed with all process where input (raw materials) get changes into final output
(final item). In present business world, it is being found that international market of fashion is
being valued approx 3 trillion dollars. In present report, industry which has been chosen for this
report i.e. Fashion industry. This sector of in all over world consists with a multi billion dollar
business. Industry have kept its focus on selling right clothing product through a process of
creating, making and then selling.
Away with this, it is being given under the stats of Eurostat in which most famous brands
like Nike, Zara and many more has been considered as on brands that comes on top level which
makes them as largest fashion producer. Here, around 30.5 billion dollars was the amount which
was generated by the company in 2015 and consists with a value of more than 105 billion
dollars. Along with this, firms like Nike have kept their focus on countries like United Kingdom,
which is one of leading business firm. Some of main business firms like H&M, ZARA and many
more have been considered as some of major key plays in UK who are already have covered a
good image in United Kingdom's market. Report is going to keep its focus on different issues
and these are : supply chain improvements, Globalisation, Outsourcing, Supply chain
relationships and E-Commerce along with information systems.
Globalisation
Globalisation refers as a procedure of interaction and integration with the people, companies
worldwide. In last few decades globalisation has increased because of the advancement in
technologies. This has increased the global interactions so as its growth in international market
(Christopher, 2016). Through globalisation ideas and thoughts have been exchanged like earlier
nobody was known about smart phone but in today’s scenario with the change in course of time
in every corner of the world every individual knows about smart phones and its usage as well.
Most of the time globalization has worked as a beneficial factor for companies and nation
because it has generated more and more revenues which is making country’s economy very
strong as compared to other firms. The biggest contribution of globalization can be seen in the
fashion industries such as H&M, ZARA, TESCO, etc., through globalization whatever is in trend
it easily become fashion and most of the companies takes advantage of this.
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Thus, it can be said that globalization has provided a platform to different companies who
can now easily establish its business around the world (Hugos, 2018). Although globalization has
provided benefits to the organization but there are some complications as well such as
globalization has failed to manage complications which have gradually pushed towards exposed
to systematic risk. As globalization has provided platform to various companies thus, it has
increased the level of competition and all the firms are formulating strategies and action plan for
becoming one of the leading firms amongst others.
Another factor which is creating risk for companies is globalisation has raised the
expectation of customers as consumers wants something new on a continuous basis. Therefore,
this has created problem for firms in manufacturing goods and services according to the needs
and wants of customers. Therefore, as compared with business globalisation has enabled big
companies in capturing more financial leverages. Apart from this some of the issues are
mentioned below for better understanding:
Ethical Business practices: This is one of the substantial challenge which is faced by
most of the companies because it covers areas like labour, safety of products, regulatory
compliances etc., For example: H&M is a fashion brand for increasing its sales they are giving
bribe to officials so that branding can be done in an effective manner (Mangan, Lalwani and
Lalwani, 2016).
Cultural Rifts: Cultural barriers play a crucial role and in some situation it has acted as a
barrier. Different culture has their own norms and thoughts and they act accordingly. For
instance: There was time when even after globalisation came into being China, has not opened its
door for trading because of which they were one of the least growing nation but as the time
changed in every market one can find products from China.
Globalisation is increasing day by day which enhances chances of increase in growth and
profitability of the organisations. There are certain types of issues which often becomes obstacles
for the company as they are not able to perform their business activities in effective manner. It
has been recommended to business related to fashion industry that they should increase their
product portfolio while they are trading at global level as it helps organisation in influencing
interest of their customers towards the company as they are getting huge number of product
variety in their home country only (Wang, Gunasekaran., Ngai and Papadopoulos, 2016). This
will be helpful for the organisation in increasing its command over customers at global level.
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Along with this, it will also increase profitability of the company too. In addition to this, it has
been suggested to the overall industry who works at global level to work on their R & D
department so that they can understand actual needs and requirements of the operating country
where they expanding their business. This will contribute in enhancing command over customer
base which leads to increase in profitability ratio of the company (Wang and Cullinane, 2015).
Along with this, investment on R&D department gives opportunity to the innovation in
the company. These highly innovative products will ultimately become reason of attraction
towards the customers as well as market place. This will be helpful for organisation in order to
differentiate them self from the competitor company and defeating rival companies who sells
same product in the competitor company. It can be said that it will also reduce cost of the
product too as it is innovated by themselves only in the company. Along with this, innovative
products are mostly liked by the youngsters as they feel happy and satisfied while using it. Apart
from this, it has been also recommended to large scale organization who works at international
level to maintain their pricing policy according to the operating country only asset helps them in
connecting with the new people with economic pricing strategy. It also gives opportunity to the
customers to try new products and services. It can be said that if these customers feels satisfied at
the starting point only then it will retain these new customer for the long duration of time in the
operating country.
E-Commerce:
E- commerce refers to the online business through which organisation sell their products and
services with the help of computer network (Wisner, Tan and Leong, 2014). Now a day,
organisation often uses different e commerce methods in order to promote their products and
services with the huge number of customers. This helps the companies in enhancing sales growth
at market place which directly contributes in the growth of the company too in monetary terms.
It has been observed that e commerce has been adopted by various organisation belongs to each
every sector as well as segments. It had became a recent trend in the fashion industry too as
customers of the companies are happier by buying their favourite products from the online
methods without even visiting the store.
Apart from this, it has been observed that organisation related to fashion industry are now
a day’s facing numerous of issues which affects their relationship with the customers. It also
affects its sales ratio too. These issues arise with organisation because of their less effective
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supply chain management. Electronic Data Interchange refers to exchange of business document
through computer in the electronic format among business partners (Pagell and Shevchenko,
2014). It can also be considered as the process which makes business transaction smoother in
terms of buying and selling of the goods and services. Some of important issues which are faced
by retail industry belong to fashion industries are described as below:
Dependency on EDI (Electronic Data Interchange): This transaction method is highly dependent
on the internet. This is the major issue as it faces problems by customers as well as working staff
of the business organisation. It also sometimes creates problem and confusion among buyer and
seller as they are not able to interact effectively and communicate regarding their work as well.
Confidentiality: E commerce is consist of latest technology in its supply chain system. As
customers of the company are feels less secured while sharing their confidential details with the
customers. This situation occurs because e commerce is completely technology based mode of
exchange of goods services. And with this, it also increases chances of cyber crime as increasing
technology also develops reason for hackers to hack sites and use its confidential information for
unethical purpose. This impact negatively over the using capability of the customers as they are
not able to decide which site is secure for them and which is not.
As per the above stated information about the trend of e-commerce in the retail
industry(fashion industry), it can be said that changes in the ecommerce sector have reduced the
efforts of employees as well as customer related to the same segment. But on the other hand, it
has developed its dependency over the technology (Beske, Land and Seuring, 2014). As per the
observation, it has been recommended to the overall industry to use some of high class
technology which owns ability to data of customers. On the other, it is suggested to the
companies to focus on the satisfaction level of the customers as it is the only tool which will
provide ultimate final benefit to the company.
Outsourcing
When a company signs an agreement with any individual or company to perform the duties that
in-house employees are not able to perform with perfection is called outsourcing. The
responsibilities that are generally outsourced to contractors or third parties comprises of tasks
like call centres duties, payroll, data entry or any other area where these individuals possess
expertise. Companies generally outsource with the aim of saving cost and reducing the stress of
employees of the organisation (Power and Simpson, 2016). While this process helps many
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companies, it causes issues in some enterprises too. Outsourcing is concerned with a long term
partnership with the third party contractor wherein they perform certain duties and tasks that are
assigned to them by original enterprise.
Outsourcing is a strategic tool used by organisations in today’s world to reduce their
indirect and direct costs including capital costs, logistics expenses and taxes associated with the
manufacturing processes (Touboulic and Walker, 2015). This process is not just used for
contracting-out but also widely used as a technique for improving the overall performance of
business by carrying out shifting of tasks, jobs, duties, operations and corporate processes
through an agreement with third party. Thus, outsourcing aids a business entity in creating
additional resources for supply of goods and services, sharing risk, gaining strategic advantage
and attracting and networking with new talents by making its presence global.
Cost reduction:
The basic reason behind businesses outsourcing in today’s world is the objective of
saving costs. But this happens only when the suppliers for outsourcing of a particular task are
less as presence of large number of suppliers would imply that the power of deciding the cost of
outsourcing rest with them. Business entities outsource to save the indirect costs by employing
lesser number of employees which implies lower investment for infrastructure and other needs of
company (Waters and Rinsler, 2014). While some businesses utilise outsourcing as a process for
controlling cost, others just use it in order to transform the fixed cost into variable. However, it is
often seen that the cost after outsourcing of one or more important tasks of an organisation is
more than the original cost without outsourcing.
Strategic Choice:
Another reason for outsourcing is flexibility to enterprise for remaining tasks and
functions of business as the firm only focuses upon the core activities in which they possess an
expertise so as to gain core competence. This is done with the long term goal of growth and
expansion in consideration. This means that they utilise the human and financial resources only
for the execution of core tasks that enterprise possess expertise in and the remaining tasks are left
on the discretion of third party with whom outsourcing contract is entered.
In relation to fashion industry, business enterprises enter these contracts so that they can
focus upon the main tasks. By indulging in outsourcing, companies like Zara can focus upon the
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essential strategy for the organisation at that moment (Mirhedayatian, Azadi and Saen, 2014).
Business entities in fashion industries often engage in outsourcing contracts for reduction of
labour, energy, contribution costs and time and efforts of employees. But outsourcing can pose
risks like compromise with the quality of products, inefficient personnel being involved in
execution of tasks, reduced flexibility, lesser control over decision related to contracted tasks.
Another major issue can be leakage of confidential information of clients. These issues need to
be addressed by big fashion businesses to strive at operational and strategic excellence.
Supply chain relationship:
Supply chain management can be defined as an active management process by which
organizations can handle as well as manage their supply chain efforts. This function is done to
maximize the core value of business for end customers. Along with this, it also helps in
achievement of objectives and gains sustainability for winning a market competitive advantage.
In this regard, companies dealing in fashion industries like ZARA, H&M, TESCO and more,
emphasizes more on supplying every product directly to the end users. Therefore, for this
purpose, these companies realize the benefits and advantages of managing their supply chain.
This would help in developing and maintaining effective relationship with suppliers.
Furthermore, this type of process is totally based on so-called physical and information flows. In
this regard, physical flow covers storage, movement and transformation of raw materials for
manufacturing products (Mirhedayatian, Azadi and Saen2014). It is also as considered as the
most visible aspect of entire process of supply chain management. Other than this, information
flows allow organisations and their business partners who involved within the supply chain for
coordinating each other as well as ensure about efficiency and effectiveness of movement
process.
When companies like H&M, M&S, ZARA and more, operate business at global level
then it would create various problems in managing relationship with suppliers. The reason
behind this is increasing bargaining power of suppliers, because intense competition gives
advantage to them to gain high profitability. As companies are totally depended on suppliers for
getting raw materials and other resources so that demand of customers can be completed on time.
Therefore, it would create various issues in front of fashion industries for managing supply chain
relationship. It is based on usage of supply chain strategies which includes three main
approaches- Agile, Lean and Hybrid. According to opinion and views of Christopher (2016), it
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has evaluated that lean supply chain strategy refers to strategic approach which identified the
value for specific services or products and emphasized on streaming the same for each product
line as well. The main goal of this approach is to give support to value flow and aid customers to
explore value directly from companies (Fernie and Sparks, 2014). Therefore, this approach is
associated with various issues for companies because such organizations are highly dependent on
their suppliers for getting raw materials. There is also some potential risks in business like
workers strikes, delay in transportation and quality errors while delivering products to end
customers and so on. Along with this, issue related to cost of production also rise due to
implementation of lean approach in business. It demands companies to replace all existing
approaches and give training to workers on regular manner. Thus, it would leads to increase in
payroll expenses and long-term debt as well. In context with, clothing leader of UK i.e. M&S use
various supplier locations to supply its products at stores of foreign and domestic marketplace.
This company utilizes entire sorts of transport modes like land transport vehicles, shipping, air
freight and more. For example, In UK marketplace, producers use trucks for delivering trendy
clothes and other accessories in predetermined time. While in rest of the locations of supply
management, where only shipping or air freight transportation can be used, this company used it
in effective manner for delivering raw materials to factories and finished products at retail stores.
Similarly, Agile Supply Chain model is also associated with a number of risks because any
change within supply network leads to huge delays as well as affect delivery process.
Furthermore, this kind of approach also needs full alignment among all business partners, which
quite look difficult when there is large network (Ellram and Cooper, 2014). Fashion industries
and other organizations in UK also deal with various rules and legislation. They must ensure that
products should be of high quality as per promised by business and should be delivered on time.
For operating and running business in many countries requires multi-layered business approach
as well as involve both direct and indirect contracting with suppliers. In addition to that, M&S is
one of those companies which forces effective and good practices among its own suppliers.
According to theory given by Wisner, Tan and Leong, (2014), it has evaluated that hybrid
model is a combination of some practices of lean and agile approaches. It concerns more on
bringing advantages of both strategic approaches into a single integrated supply chain strategy.
But it also includes some potential risks as well. For example: When companies like H&M use
this approach then they have to spend some extra money for completing demand of customers
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and exceed their level of expectations. In addition to this, they have also made some additional
expenses for integration of entire business models within supply chain network. Therefore,
hybrid approach of supply chain management also affects the delivery processes of companies in
a negative manner. This model also seems as vulnerable in terms of availability of products
which rise from lean concept. With respect to ZARA which also deals in fashion industries of
UK, is considered as best company in terms of product quality and services. It has utilized the
hybrid supply chains in successful manner by addressing overall potential risks which may come
due to this approach. For Example: In concern with lean portion, owners of ZARA take
opportunity of using two main centers of suppliers. It gets raw materials and other resources
from China and Indian Market on cheap rates. It enhances the efficiencies of production as well
as gives advantage to gain cost effectiveness also (Schoenherr and Speier‐Pero, 2015).
Similar1y, turning to the agile concept, ZARA Company also relies on building strong
relationship with its suppliers. For reducing their bargaining power, it gives suppliers some part
of profitability to them. By giving profit share to suppliers, it has gained advantage to build long
term relationship with them. This would rise issues which may occur due to ineffective
relationship with them.
Supply chain improvements
In present business world, supply chain improvements are needed for every single
business firm as it majorly aid in whole industry or a specific company of the sector to adapt
business environment on a regular basis which is carrying a rapid changing nature. With the help
of above mentioned information, it has already been identified that fashion industry has carrying
a rapid changing nature. This could create ample number of problem for this industry because
consumer's demands and requirements gets changes on a regular basis. This majorly adds
complexity which needed to be understood in an appropriate manner so that implementation of
new changes can be brought in among supply chain models of fashion industries like Zara,
M&S, H&M and others. With the help of proper investigation, it is being found that there are
ample number of strategies that can be used by a number of business firms in improving their
own supply chain. This depends upon different stages that a chain development is enclosed with
and some of factors in present time are: available resource, capabilities, knowledge and
experience. As given by Bruce (2010), industry (fashion) is consists with a proper dynamic
sector which contains proper changes in every single month or sometimes in days as well.
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On the other hand, it is vital for business firms to focus on these alterations and then
construct a proper structural change management system which could especially raise price
postulation. In other words, fashion industry, specially two different sub sectors like textiles and
clothing, consists with major characteristic short product life cycle, high volatility, high levels of
impulse purchase and low predictability.
Including this, for this industry it is required to develop major need and i.e. following
proper and new trends, this could help them in raising profit margins with the help of
competition. Recommendation which can be given over here is that consumers requirements
through which loyal clients can be secured for a longer period of time (Tseng. and Hung, 2014).
On the other hand, as given by a reportof BBC, Zara is an example of fast fashion
supplier with rapid stock turnover and vertical integration. Zara is maintaining a high level of
communication between managers, labours and customers in order to accomplish production
efficiency.
On average, 50% of Zara products are manufactured in Spain in their own factories, 26%
in the rest of Europe and 24% in Asian countries. With both outsourcing and in-house processes,
Zara achieves the standard of producing more quickly than the competitors and therefore
increase their profitability by controlling design, manufacturing and distribution. It can be said
that other competitors might try to adapt to Zara strategy in order to improve their sustainability.
With warehouses close to the manufacturer plants and with updated automatic systems, the
company saves time in delivering products.
In comparison H&M does not have their own production factories which can lead to a shortage
of production but with 750 suppliers they can offer to the market the necessary products. With
the created goods arrived into their warehouse, management will allocate the specific number of
products for each retail shop. The systems are not often updated, therefore there is a lack of
accessing new and rapid techniques in delivering the products.
Adopting new technologies, using new strategies and maintaining a high level of skilled
employed people, companies will secure their place on the top in the market. It is vital to
understand the new trends, to adopt new strategies and technologies in order to produce what
consumers are expecting to receive (Wang and et. al., 2015).
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