Agile and Quick Response strategies managing the dynamic supply chain of Fashion industry

14868329 Specialist Reading MEPM 2015 Agile and Quick Response strategies managing the dynamic supply chain of Fashion industry

Mona Singh AUT UNIVERSITY

14868329 Specialist Reading MEPM 2015

MONA SINGH 1


MONA SINGH 2

ABSTRACT

Fashion industry is a highly globalised industry across the world, where the designs are made

in one country, manufacturing of clothes takes place in other country and the final products

are been sold in third country. Fashion includes any commodity that represents style and is

present in market for short period of time.

Fashion industry functions on fast fashion scheme. This scheme reduces the practices

involved in purchasing cycle and lead times to bring new fashion commodities in market

thereby satisfying customer needs during peak times. This paper emphasises on crucial

significance and advantages of agile and quick response supply chain management of fashion

firms.


MONA SINGH 3

Table of Contents

1. Introduction 4

1.1 Research Objective 5

1.2 Research Question 5

1.3 Research Methodology 5

2. Literature Review 6

2.1 The aspect of Fast fashion 6

2.2 Agile Supply chain in fashion industry 7

2.3 Detailed SCM in fashion industry 8

2.4 The value of intermediate contractors in fashion supply chain 10

3. Methodology 11

4. Findings 15

4.1 Lohn Concept 16

4.2 High Fashion commodities 17

5. Discussions and conclusions 17

5.1 Indirect origin and globalised fashion SC. 17

5.2 Indirect origin and time reduction in fashion Supply Chain 18

5.3 Indirect origin and complexity in fashion Supply Chain 18

References 19


MONA SINGH 4

Agile and Quick Response strategies managing the

dynamic supply chain of Fashion industry

1. Introduction

Fast fashion is a strategy that gives customer more choices and hence increases the

purchasing frequency of customer. This makes the customer less loyal, more sophisticated in

their tastes and hence preference is given to best products and services available in fashion

market(Purvis, Naim, & Towill, 2013).

As the demand is highly volatile and no single fashion lasts for longer period of time,

therefore agile and quick response strategies are required in order to overcome the highly

variable and less predictable environment. The fashion markets are prone to speedy changes,

hence the market’s profit or loss is largely decided by firm’s adaptability and ability to

quickly respond to customer’s needs. Responsiveness is characterized by short time to

market, incorporating consumer preferences rapidly in design processes, ability to scale the

ups and down of market quickly (Martin Christopher, Robert Lowson, & Helen Peck, 2004).

Previous studies (Fung, Chen, & Yip, 2006) reveals that firms with great degree of

globalisation and fragmentation like clothing & textile, trade contractors play an important

role in integration of geographically scattered supply chain practices. Trade intermediaries

includes activities like sourcing, quality control of the supplier, shipping management, air

freight management and distribution. In order to reduce costs and time in the practices and

increase agility across retailers, there is a need to deploy agile and quick response strategies

across the supply chain network of fast fashion globally.

The paper focuses on agile strategies and quick responsiveness that manages the dynamic

supply chain of fashion industry. The research starts with fast fashion theory and then agile,

quick response strategies are analysed in supply chain of fashion industry.


MONA SINGH 5

1.1 Research Objective

The conducted research is to find the crucial significance and advantages of agile and quick

response supply chain in fashion world.

1.2 Research Question

The paper will be answering two major questions based on the conducted research:

i. How agile and quick responsiveness benefits the supply chain of fast fashion

industry?

ii. What are the implications of implementing quick response strategies?

1.3 Research Methodology

The research includes theoretical survey that involves methodologies like: logical, systematic

and comparative literature study through findings and conclusion based on best practices. The

analysis are based on literature that discloses the significance and concerns related to fashion

industry. The research helps in finding the features of agile supply chain and implication of

implementing responsive strategies.


MONA SINGH 6

2. Literature Review

2.1 The aspect of Fast fashion

Fashion retailers like Topshop, Zara, H&M, Forever 21, and Benetton have reformed the

fashion firm which is now referred to as “fast fashion” (Ciarnienėa & Vienažindienė, 2014)

strategy. As per this strategy the fashion commodities and services are been brought in the

market within 5-6 weeks as compared to industry average of about six weeks (Nagurney, Yu,

Masoumi, & Nagurney, 2013).

Fast fashion refers to a varied formula like:-

• Developed by manufacturing firms who plans to provide proactive services to consumers

in apparel industry.

• Developed by apparel industries that manages the supply chain of textile industry in

order to reduce time to market. It is beneficial for manufacturing firms which are more

reactive than proactive.

• Aimed at accommodating the time interval among product’s design stage and its

availability in market.

• Aimed at accommodating creative phase and design times of product along with the time

required to make the product available in store.

(Sinclair, 2013)


MONA SINGH 7

2.2 Agile Supply chain in fashion industry

Fast fashion is a strategy that reduces the phases involved in purchasing cycle and lead times

to bring fashion products in stores and thereby satisfying consumer demands at peak. Fast

fashion concept was developed in Europe focusing teenage women who prefer trendy, short

cycle and inexpensive clothes.

Agile supply chain has below mentioned characteristics as per (Harrison, Christopher, & Van

Hoek, 1999) :-

• Market sensitive: The trends are connected to end user consumer trends.

• Based on network: Agile supply chain gains flexibility through strength of professional

players.

• Virtual: The supply chain depends on shared data among all partners.

• Process aligned: The process connectivity among supply chain network members is high.

As per (M Christopher, R. Lowson, & H. Peck, 2004) the expansion of

agility in supply chain has led to the emergence of quick response strategies. Quick Response

theory was initially developed by Kurt Salmon Associates (KSA) in US(Ko & Kincade,

1998), where US apparel industry was studied and was found that the time taken to get

apparel product from manufacturing to store was nearly about 66 weeks and the production

time was only 11 weeks (Barnes & Lea-Greenwood, 2006b). The lag in supply chain was

caused by inventory (Hines, 2004), while fabric was considered as a major factor that caused

the delay. Quick Response (QR) is defined as customer directed strategy where the partners

collectively plan that appropriate goods are present in appropriate time and appropriate place

by using IT and adjustable manufacturing to remove inefficiencies from complete supply

chain (McMichael, Mackay, & Altman, 2000). The objective of QR is to shorten the time

span in entire supply chain. The fundamental techniques and approaches implemented in the

improvement stages of supply chain in order to achieve quick response includes:-

• Reducing lead times in material supply

• Reducing lead times in apparel production


MONA SINGH 8

• Innovative relationships with merchandisers.(Forza & Vinelli, 2000)

Agile supply chain are short and based on customer demand. It is information based as

compare to conventional supply chain which are lengthy and includes long lead times hence

are forecast driven (M Christopher et al., 2004).

2.3 Detailed SCM in fashion industry

The fashion retailers not only design commodities with great fashion content as per needs but

also manage adjustable and responsive supply chain which helps them to accommodate new

changes swiftly as per customer demand (fig:1).

Fig 1: Apparel Supply chain (Source: (M. T. Christopher, D., 2000))

The products that involves high fashion content, it becomes crucial to identify market needs.

Since the product cycle is short enough hence agile supply chain is required in order to

deliver the product in time. As the high street retailer is concentrated in UK, that inflates the

competitive pressure including cost, the industry plans to reduce labour costs in apparel

manufacture through global outsourcing (Jackson & Shaw, 2001). Although outsourcing to

regions further away results in broad and complex supply chain thereby causing longer lead

times. Also as per experts, global supply chain maintenance and management is more


MONA SINGH 9

difficult as compare to domestic supply chain (Wood, Barone, Murphy, & Wardlow, 2002)

(Dornier, Ernst, Fender, & Kouvelis, 1998) and less agile (Jin, 2004). There may be unseen

costs related with global suppliers like inconsistent exchange rates that affects the

performance of supply chain in fashion industry(Martin Christopher et al., 2004).

Subsequently, firms operating in fashion sector utilise both domestic and offshore suppliers

(Masson, Purvis, & MacKerron, 2007), that allows the firms to give a customised reply to the

customer demands. (Jin, 2004) reports that in agile and lean related world, it becomes

critically important to quickly respond to changing needs of customer in order to sustain

competitive advantage in the market.

Fig 2: Contrast in product life based on fashion content (Source:(Forza & Vinelli, 2000))

The above diagram represents the fashion commodities with variation in fashion content

level. The shelf life of basic products increases and the physical costs represents major

portion of total potential costs. In labour intensive industry, the production choice is

developing and undeveloped countries where low income is there (Sen, 2008). In the basic

product category the initial orders constitute of about 60% -100% of complete order resulting

into high inventory holding costs (Subrahmanyan, 2000). In high fashion product category,

that has short life cycle and high market mediation costs, retailers follow responsiveness

while deciding the source (Sen, 2008).


MONA SINGH 10

As per Christopher (Martin Christopher et al., 2004), the retailers needs to behave like

network orchestrators working as a close team for a particular period of time which will

eventually be dispersed and new team will be made for next play. The highly complicated

networks are less reactive and need additional resources along with right efforts to coordinate

the activities (Meepetchdee & Shah, 2007). The larger variation in supply chain network may

improve the depth of agility in product range but it leads to more complexity in structure

which counters agile supply chain and other performance aspects (Milgate, 2001)& (Prater,

Bichl, & Smith, 2001a). Due to cost management (Doyle, Moore, & Morgan, 2006), the

offshore sourcing is a necessity (Ohmae, 1989). The international agile supply chain are now

complicated, dynamic systems that includes greater time lags and contrast in transmission

(Prater, Bichl, & Smith, 2001b). The supply chain becomes complex due to long distance that

results in increase transportation and hence lead times thereby decreasing the demand

forecast reliability (Stank, Daugherty, & Ellinger, 1999). This results in ambiguity in

production chart, supply orders and tendency to meet customer demand(Swenseth & Buffa,

1991). Since high coordination and more business processes and information required in

order to make decision this results in high cost in highly complex environment (Meepetchdee

& Shah, 2007). Network complexity in fashion industry results in various problems which

impacts the performance of supply chain globally.

2.4 The value of intermediate contractors in fashion supply chain

The global supply chain of apparel industry have more than one intermediate contractors

hence increasing the complexity of network suppliers (Popp, 2000). These contractors act like

a bridge among wholesalers in developed countries and manufacturers in developing

countries. These contractors helps in providing relevant information about global markets in

sourcing and cut down cost via effective management (Fung, Chen, & Yip, 2007). The

additional layer of intermediate contractors benefits the supply chain in following mentioned

ways:-

• The efficiency of exchange process increases due to time addition, place and utility

possession.

• Adjusting the errors by performing sorting and assorting.

• Act like market agents to make adjustment in transactions.


MONA SINGH 11

• Facilitate searching process by customers thereby reducing the cost involved in

transportation, inventory storage, order processing.(Alderson, 1954)

Transportation includes search, arbitration, monitoring & application cost (Williamson,

1985). Globally the search costs is usually high and also the arbitrary costs due to cultural

and language barriers. There are two opposing views in the literature on intermediate

contractors exchange relationships. As such there are no studies to link intermediate

contractors with supply chain. This research paper focuses on filling gaps.

3. Methodology

The characteristics of an organisation that implements agile strategies reflects flexibility(M.

Christopher & Towill, 2001). Agile supply chain management in fashion industry focuses on

responsiveness. As the fast fashion industry demands quick response in delivery of the

products to the stores, hence these agile and quick response thinking is beneficial for the

industry thereby meeting the demands of the consumers which are less predictable. The

characteristics of agile supply chain are mentioned in below table.

Characteristic Interpretation

Market conscious SCM has the capacity to read and respond to actual demand.

Virtual IT is used to share information among customers and suppliers

which creates a virtual SCM.

Process integration Shared information is fully leveraged through process

integration among supply chain partners.

Network-based The partners in supply chain provides great network which act

as fourth ingredient of agile SCM.

Table 1: Characteristics of Agile Supply Chain (Source:(M. Christopher & Towill, 2001; M. T. Christopher, D.,

2000)


MONA SINGH 12

As per (Barnes & Lea-Greenwood, 2006a), Fast fashion depicts following characteristics

Fig: 3 Features and propensity of fast fashion (source: (Ciarnienėa & Vienažindienė, 2014))

Successful retailers are those who have the capability to reply to constantly changing

customer needs by reducing the lead time. Retailers do not prefer inventory stock, instead

they closely work with manufacturers that can swiftly provide them new commodities.

Therefore more suppliers are required in the supply chain that can feed larger diversity of

style demanded by customers. Phases like commodity development and quality control are

removed from SMC processes in order to swiftly response to customer needs.

Fast Fashion

Networks & Partners

Changing logistics

Short Production Runs

Elimination of stages

k &

Suppliers under pressure

Retailer Power Consumer

Driven


MONA SINGH 13

The crucial lead times which must be maintained by companies to strongly compete in

fashion industry includes:-

• Market Time: Time taken by the company to analyse the favourable market

circumstances and converting it into commodity or service and delivering in market.

• Serving Time: Time taken by the company to analyse consumer’s orders and bring the

final commodity to store satisfying the consumer.

• Reacting Time: Time taken to adapt business output in response to changing customer

needs.(M Christopher et al., 2004)

Source: (Ciarnienėa & Vienažindienė, 2014)

The conceptual model represented above depicts agile and responsive fashion SCM.


MONA SINGH 14

The region for sourcing has also emerged with fast fashion industry. As per (Barnes &

Lea-Greenwood, 2006a), Turkey has developed to be a forceful region for fast fashion

commodities due to its geographical location.

Source: (James, 2006)

Retailers blend orders from Far East and Turkey, thereby utilising suppliers from Turkey.

The trends change at a rapid rate and retailers who showcase long production runs have low

demand. Therefore supply chain source has shifted from China which prefer long run

production towards more adjustable and small run production. As there is more pressure

now suppliers, hence there is innovation in shipping technology and if the production

orders are urgent air freighting is used in order to avoid delay in market.

Quick Response has emerged as a strong operation strategy (Lowson, 2002) which fascinates

for two reasons. Firstly, the capability to confront complexity involved in fashion logistics

and second as a procedure to confront shift towards global outsourcing from low wage

countries that helps in cost minimisation and resulting into effective supply chain.

The new technology implemented results in optimal performance in agile supply chain

networks of fast fashion industry. The main principle of QR is aligning industry processes to

demand. All the processes in the organisation should be paced to customer demands and

changing trends. Goods and services are produced and delivered in capacity and variety that


MONA SINGH 15

matches the needs of the market. Hence it becomes crucial to understand the strategic

understanding of demand drivers and appropriate connection with supply. The strategies

needs to be implemented at supply chain networks which leads to effective distribution of

product. Time plays a strategic role in QR operation. Demand based on time needs special

assessments as to where the consumers can be served. Quick and correct adaption to market

change is the most important factor of QR. Information is constructing factor for effective

QR. Hence accurate information flows and timely flows ensures fast and correct results

minimising waste and costs.

4. Findings

The complications related to global manufacturing and constant demand to reorganize the

supply chain structure can be overcome through intermediate contractors. These agents have

access to number of domestic supplier’s networks in the region they served that helps in

employing extra manufacturing volume (fig:4).

Fig: 4 SCM networks before and after utilising intermediate contractors (source: (Purvis et al., 2013))

In such structures, direct sourcing of material occurs due to long-term relationship with

network partners thereby making the supply chain adjustable and responsive meeting the fast

fashion supply chain. The fabric and information flow is represented below in fig: 5.


MONA SINGH 16

Fig:5 Global sourcing through contractors (source((Purvis et al., 2013))

4.1 Lohn Concept

This concept was utilised to source mid fashion commodities from suppliers originated from

Eastern Europe. The contractors source all fabric material which will be utilised in

manufacturing of particular commodity and deliver the material to manufacturer’s facility

(Fig: 6)

Fig:6 Lohn concept (source: (Purvis et al., 2013)

The Lohn sourcing concept utilised low budget suppliers with defined capacity resulting in

more flexibility in supply chain.


MONA SINGH 17

4.2 High Fashion commodities

The high fashion commodities experience very short span of shelf lives (3-6 weeks).

Therefore the retailers have to be excessively agile in grabbing new trends, designing new

commodities and delivering in the market. Sometimes the retailers prefer global outsourcing

as compared to local producers due to lack of experienced manufacturers. In order to reduce

risk, less capacity is delivered frequently. This demands higher flexibility from supplier’s

network and rise in dynamic capacity management.

5. Discussions and conclusions

5.1 Indirect origin and globalised fashion SC.

The research conducted in past, highlights that the organisation’s inefficiency to relocate

production from one place to another and constrained capacity resulted in less flexible supply

chain globally (Radjou, 2002). Therefore higher flexibility will provide intensive capacity

usage. The greater level of responsiveness is possible through intermediate contractors who

helped the retailers by providing required information in global situation. These contractors

have detailed information about finance, management and technical capacities of individual

manufacturers in the local area along with extra capacity if required at short notice. Their

information helps in speeding up the production by integrating production structure that is

hugely segmented.

Also, the intermediate contractors provide the retailers, the capability to coordinate among

different firms and thereby enhancing the economies. Due to the contractors order

consolidation from consumers before initiating request with manufacturer along with orders

consolidation with various manufacturers before shipping items to UK, a large amount of cost

was saved. Based on study (Klein, Frazier, & Roth, 1990; Shin, 1989) the contribution of

contractors is associated with risk involved in exchange rates.


MONA SINGH 18

5.2 Indirect origin and time reduction in fashion Supply Chain

In order to achieve quick response, the retailers require suppliers that have the ability to

manufacture the required commodity along with logistic knowledge about various items

required for the final product. Hence advanced intermediate contractors are required that can

subcontract the orders to other local industry. These contractors offer assistance to the

retailers by bringing experts from clothing manufacturer, dyer, fabric manufacturer etc. This

results in shorter lead time, high delivery speed, increased confidence and other crucial

factors to gain a competitive advantage in the market.

5.3 Indirect origin and complexity in fashion Supply Chain

The literature review highlights that there are benefits from the cost structures but the global

SCM turns out to be much more complicated to manage(Doyle et al., 2006; Vokurka,

Choobineth, & Vadi, 1996). According to the findings various issues related to supply chain

have been resolved after employing intermediate contractors. These contractors helps in

filling gaps between potential buyers and suppliers (Nayyar, 1990).

Hence it can be concluded that global, agile and quick response supply change is becoming

the requirement of time as the consumers are now more demanding in terms of cost, quality

and service. It has been observed by retailers that overseas contractors have the ability to

manage different forms of sourcing, manufacturing, production, delivery that require high

agility and quick response while retailers prefer direct sourcing with steady demand.

In future, there is a necessity to examine the complex communications that occur among

various stages of supply chain and among contractors that are involved in particular market

sector. Further researches that addresses the scope to which intermediate contractor

relationships could facilitate greater flexibility in SC would be beneficial.


MONA SINGH 19

References

Alderson, W. (1954). Factors governing the development of marketing channels. Barnes, L., & Lea-Greenwood. (2006a). Fast fashioning the supply chain: shaping the research

agenda of Fashion Marketing and Management. Barnes, L., & Lea-Greenwood. (2006b). Fast fashioning the supply chain: shaping the research

agenda. Journal of Fashion Marketing and Management. Christopher, M., Lowson, R., & Peck, H. (2004). CREATING AGILE SUPPLY CHAINS IN THE FASHION

INDUSTRY. Christopher, M., Lowson, R., & Peck, H. (2004). Creating agile supply chains in the fashion industry.

International Journal of Retail and Distribution Management. Christopher, M., & Towill, D. (2001). An Integrated Model for the Design of Agile Supply Chains.

International Journal of Physical Distribution and Logistics Management. Christopher, M. T., D. (2000). Marrying the lean and agile paradigms. Ciarnienėa, R., & Vienažindienė, M. (2014). Agility and Responsiveness Managing Fashion Supply

Chain. Dornier, P. P., Ernst, R., Fender, M., & Kouvelis, P. (1998). Global operations and logistics: Text and

case. Doyle, S., Moore, C., & Morgan, L. (2006). Supplier management in fast moving fashion retailing. Forza, C., & Vinelli. (2000). Time compression in production and distribution within the textile-

apparel chain. Integrated Manufacturing Systems. Fung, P., Chen, I., & Yip, L. (2006). Relationships and performance of trade intermediaries. Fung, P., Chen, I., & Yip, L. (2007). Relationships and performance of trade intermediaries: An

exploratory study. Harrison, A., Christopher, M., & Van Hoek, R. (1999). Creating the Agile Supply Chain. Hines, T. (2004). The emergence of supply chain management as a critical success factor for retail

organisations. Jackson, T., & Shaw, D. (2001). Mastering fashion buying and merchandising management. James, G. (2006). Geographical location. Retrieved from http://ngkids.co.nz/ Jin, B. (2004). International Journal of Operations & Production Management. Klein, S., Frazier, G., & Roth, V. (1990). A transaction cost analysis model of channel integration in

international markets. Ko, E., & Kincade, D. H. (1998). Product line characteristics as determinants of quick response

implementation for US apparel manufacturers. Clothing and Textiles Research Journal, 16(1), 11-18.

Lowson, R. (2002). The implementation and impact of operations strategies in fast-moving supply systems. Supply Chain Management: An

International Journal. Masson, R., Purvis, L., & MacKerron, G. (2007). Managing complexity in global agile supply

networks. McMichael, Mackay, D., & Altman, G. (2000). Quick response in the Australian TCF industry: a case

study of supplier response.

http://ngkids.co.nz/


MONA SINGH 20

Meepetchdee, J., & Shah, N. (2007). Logistical network design with robustness and complexity considerations.

Milgate, M. (2001). Supply chain complexity and delivery performance: An international exploratory study.

Nagurney, A., Yu, M., Masoumi, A. H., & Nagurney, L. S. (2013). Fast fashion apparel supply chains. In Networks Against Time (pp. 117-139): Springer.

Nayyar, P. R. (1990). Information asymmetries: a source of competitive advantage for diversified service firms.

Ohmae, K. (1989). The global logic of strategic alliances. Harvard Business Review. Popp, A. (2000). Swamped in information but starved of data: Information and intermediaries in

clothing supply chains. Prater, E., Bichl, M., & Smith, M. (2001a). International supply chain agility: tradeoffs between

flexibility and uncertainty. Prater, E., Bichl, M., & Smith, M. (2001b). International supply chain agility: tradeoffs between

flexibility and uncertainty. Purvis, L., Naim, M. M., & Towill, D. (2013). Intermediation in agile global fashion supply chains. Radjou, N. (2002). Executive overview: Adaptive supply networks. Sen, A. (2008). US fashion industry: A supply chain review. Shin, K. S. (1989). Information, transaction costs, and the organization of distribution: the case of

Japan’s general trading companies. Sinclair, M. (2013). ZARA concept in oxford street London. Retrieved from

http://www.mensfashionmagazine.com/zara-concept-store-oxford-street Stank, T., Daugherty, P., & Ellinger, A. E. (1999). Marketing/logistics integration and firm

performance. Subrahmanyan, S. (2000). Using quantitative models for setting retail prices. Swenseth, S. R., & Buffa, F. P. (1991). Implications of inbound lead time variability for just in time

manufacturing. Vokurka, R. J., Choobineth, J., & Vadi, L. (1996). A prototype expert system for the evaluation and

selection of potential suppliers. Williamson, O. (1985). The EcoNomic Institutions of Capitalism,. Wood, D. F., Barone, A. P., Murphy, P. R., & Wardlow, D. L. (2002). International logistics.

http://www.mensfashionmagazine.com/zara-concept-store-oxford-street

Documents

Agile and Quick Response strategies managing the dynamic supply chain of Fashion industry