Fashion Value and Supply Chain

-Role of Designers, Manufacturers and Retailers.

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 Raw materials Manufacturer/ Designer Distributor Retailer Customer

Upstream Downstream

Classic textile Business Process:

Design

Purchas e Raw Mat

Mfg

Dist

Sell

Discoun t

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

SUPPLY SIDE

DEMAND SIDE

Supply Chain achieves

+
The right The right

+
The right

+
The right

+
The right

+
The right

=
Higher

Product

Price

Store

Quantity

Customer

Time

Profits

Flow in a Supply Chain

Material Information

Supplier
Funds

Customer

The flows resemble a chain reaction.

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 N-Tier Suppliers Suppliers MEXICO Logistics TEXAS Distributors US 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
Replenishment Cycle

Distributor
Manufacturing Cycle

Any cycle 0. Customer arrival 1. Customer triggers an order 2. Supplier fulfils the order 3. Customer receives the order

Manufacturer
Procurement Cycle

Supplier
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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, Manufacturing and Replenishment cycles
Customer Order Cycle

PUSH PROCESSES

PULL PROCESSES

Customer Order Arrives Push-Pull boundary

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Role of Designers, Manufacturers and Retailers.

Demand Creation & Forecast

Distribution

Customer

Product Development

Inventory Management 13

Demand Creation and Forecast (Marketing + Merchandising)

Actually this answers the basic Question What is to be supplied and how much Its the first step where a retailer can go wrong even after having the best SCM systems, processes and practices in the world

Demand Creation is done by the by the marketing team through effective advertising and promoting the product.
Forecasting is mostly done by the buyers and merchandising team, it studies the past selling data and generates the forecast for the future. Buyers/Merchandisers also identify the upcoming trends and pass on the information to the design team to 14 incorporate it in the seasons line.

Product Development and commercialization ( Designers)

Once the retailer knows what is it that the market wants it needs to create options that can be commercially exploited It is imperative that the products on offer are differentiated from those available already. The retailer can show value attributes, packaging and price to make the offer attractive The designing of new products or creative adaptation is done by the design team. Once the proto types are ready and the pricing strategy is in place one needs to find ways to optimize production and take advantage of scale.
Creative Design Preliminary Designs Final Product Design

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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 wear 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 17 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

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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Case Study

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.

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Zaras 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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How they do it ?

Discuss the role of the designing , marketing and merchandising team.

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ZARA design process:

Crative

Preliminary
Designs COPY and SIMPLIFY

Design

Final Product Design

OUTSOURCE
and SCAN

ADAPT and 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 Purchase Step 3: Final Raw Mat Design of next batch

Step 2: Simplify hits & produce library of designs

Mfg

Dist

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. What about the Madonna concert example?

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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Fleet GraphicsPromotion and Logistics in action !!!!

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