Different types of productrequire different supply chain approaches. There is the ‘one-time’ product wherethe customer knows this is a fashion item and if he wants it, he knows he need to buythere and then as he is unlikely to find it in the shop the next time he goes. There isthe seasonal re-order product where the consumer feels he will be able to go back and buymore, and then there is the perpetually replenished item which he would expect to findalways on the shelf. With each, one needs to continuously review the order frequency,forecasting approach, materials purchasing and stock holding, finished goods stock levels,batch/lot size, lead times, etc, to see where improvements can be made. For any reductionin lead times to be effective one needs to make staged commitments and share the risk,starting with capacity and raw materials. Internet technologies should be used to shareinformation rather than to exchange information as happens with EDI. Co-operation isneeded in the supply complex between partners with complementary skills and this leads tothe need for partnerships.
The industry is now in aposition where the consumer is spending less, and to make profits, the retailer isincreasing product variety, design variety, cutting costs and inventory, and reorderingonly what he has sold, and the supplier is cutting and sewing off shore, responding toimmediate changes in production, and becoming an importer.
For a style to be boughtits design and subsequent development have to be right, as does the costing. If it is not,both the supplier and customer will be in trouble. The price is always agreed before theproduct goes into manufacture. In practise, as Derek Jones pointed out, there are threecases when you place an order. One, you got everything right and balanced and everyone ishappy, a rarity! The second is where the retailer pays too much for the garment. As longas the retail price point is right and the garment is of good design and fit, it willsell, so no problem. The situation the retailers need to fear is where the price to thesupplier is set too low, especially if overseas production, because as soon as thesupplier realises he is making a loss he will inevitably cut every corner known to man,and when the container arrives it will be full of rubbish garments and be too late torectify.
Thus Derek pointed out thattools to help costing, product development and technical specification are becomingincreasingly necessary, as are, of course, good effective and integrated MIS systems.
In a 1997 KPMG survey ofcompanies with experience of introducing new MIS systems it was found ‘whilecompanies are happily installing systems, right, left and centre, they are not realisingany benefits from them’. JBA, explained Simon Hallam and Aileen Henchion, have thusgone back to basics to prevent this scenario happening to their customers.
The Supply Chain Councilwas established in 1996, with many International Blue Chip companies as members, toaddress the needs of effective supply chain management, with planning central to sourcing,manufacturing and delivery. A detailed Supply Chain Operations Reference (SCOR) Model hasbeen developed by the council mapping business needs and activities, breaking these downinto the underlying process categories, elements and their associated links. From these,templates of best practice and benchmarks from which the customer can choose objectivesfor Best-in-Class performance have been developed. JBA have used these as a basis fordevelopment of their software to ensure their customers do achieve measurable benefits.
As Tim Lincoln, an IBMsupply chain strategy consulting principle pointed out, the supply chain is a complex setof trading relationships aiming to meet demand for availability, choice and price andthere is growing awareness that the extended supply chain can be a source of competitiveadvantage. Due to increasing pressure from the market, external forces and internalstructural changes, the supply chain network of the clothing group has become more complexover recent years. The under performance and the excessive resources within the processesare broadly due to the lack of “process-oriented” management. Preliminaryinventory analysis suggests high stock levels are largely due to inappropriate,inconsistent policies and disciplines across the business units. 33% of the resourcesallocated to supply chain processes were identified as non value adding.
To counteract this, heexplained, we are seeing the emergence of extended enterprises forming supply networksenabled by advanced technology. The Internet and related technologies will have a majorimpact on the sharing of information and knowledge. These technologies can be used forcommunication within an enterprise, across enterprises, and between enterprises andconsumers and are already being used to enhance supply chains. The lower cost of web-EDIallows access to smaller companies and markets where EDI hasn’t penetrated and theyenable, for example, a move from EDI batch processing to real-time unstructuredinformation, new marketing channels and opportunities, expanding geographic/globalboundaries, customer intimacy and mass-customisation, increased customer power, and withservice level expectations rising, increased levels of responsiveness.
Today, trading partners areworking together collaboratively to enable supply chains. In the future, extendedenterprises will combine to form supply networks with the advent of “pervasivecomputing” – computing anywhere, anytime. To become part of an extended enterprise,companies must share and use knowledge between enterprises. An efficient logisticsoperation means having the right goods in the right place, at the right time, in the rightquantity, at the right quality, at the right price. For this to be really effective alllinks of the supply network need the right information, in the right place, at the righttime, in the right quantity, at the right quality, at the right price.
To provide a practicalexample Chairman of Simon Jersey Simon Mole provided experiences from his company. Fouryears ago they linked their French, Dutch and Spanish distributors directly into theircentral AS400 system in Accrington UK to provide instant information on availability ofstock and most importantly, on-line ordering. However, to do this the cost was high andtherefore only viable for the larger export distributors. The hardware for eachdistributor cost £10,000 plus the services of IBM global network are required. Linerental is £43,000 for three countries. However, by using the Internet, he explained, allhis distributors will need is a pc, modem and Internet explorer to get into the SimonJersey web site and order the stock they need for the cost of a local telephone call.
Next month DHL, one oftheir more demanding accounts, will be accessible through the Internet. They supplying25,000 DHL staff in 106 countries with uniforms selected from a customer specificcatalogue containing 54 styles. In Scandinavia, in winter, loading trucks in the middle ofthe night requires warm clothes, the opposite for equatorial countries. By April 1999Simon Jersey are hoping to make their whole catalogue available through the Internet withdirect ordering.