OPR 300 Operations Management Common Assessment : Essay Fountain

Question:

Contrast the approaches taken by H&M, Benetton and Zara in managing their supply chains. Consider the following focus points:
1. How do they differ in terms of their approach to design stage of the supply chain?
2. How do they differ in terms of the manufacturing stage of the supply chain?
3. How do they differ in terms of the distribution stage of the supply chain?
4. How do they differ in terms of the retail stage of the supply chain?
5. For each brand, Identify and explain a SCM strategy or trend utilized in its supply chain.
6. In your opinion, which of the three companies have the best SCM and why?
 
 

Answer:

Introduction

Fashion industry has four stages of operation in the form of designing, manufacturing, distributing and retailing, SCM plays vital role in every stage of this industry. The market stalwarts namely H & M, Benetton and Zara have their own unique SCM strategy to enjoy the edge in the competitive world of fashion industry in different level of operation management, as highlighted in the case study named Supplying Fast Fashion. (Basak A, 2014)

H & M puts emphasis on three basic pillars of designing- fashion, price and quality. Through these pillars, buying volumes and delivery dates are being fixed. This brand is insisting on exclusivity rather than standardized trend prevailing in the market. SCM of this company is monitored by more than 100 designers with exclusive contribution by 50 pattern designers for around 100 buyers and a budget monitor.

For Zara, the SCM of designing is maintained with three different functions- the designers, market specialists and the buyers with distinct differentiation of three main product domains- men, women and kids. A system of gathering regular customer feedback for retail stores to explore new designs is essential part of design SCM. The company deploys 300 designers who produce around 40000 items annually and 10000 of them are selected for production. (TradeGecko, 2018)

Benetton is more prone to SCM practice of designing by emphasizing on R & D through its designers. The company had earlier insisted on customized designing as per the needs of geographical areas, but later they have curtailed this practice to ensure designing of generalized product range to have more global customers.

Manufacture Stage

H&M is more insisting in decentralization of their manufacturing process by maintaining balance between production offices and suppliers. They are not inclined to maintain least lead time as quality assurance is the main focus area of the company. (Lopez, 2018)

On the contrary, Zara is mainly insisting on least lead time by concentrating on owned network of SCM stakeholders. In each level of manufacturing operation, Zara uses its own network for supply of raw materials with customization of manufacturing process. (Marah, 2016)

Benetton has cost effective practice of manufacturing by diversifying its production units between Europe and other global stakeholders with standardized mode of operation. The central office at Italy decides the variety and quantity of production for each production centers with good SCM by monitoring the stakeholders for inputs of production process. (Benetton, 2019)

For this stage, Zara and Benetton had followed same route of financing for automated warehouse. Zara was introducing second automated warehouse, while Benetton had introduced RFID tags for its products.

H & M has centralized system of inventory management with distribution network depending upon sub-contractors. (Kondracki, 2018)

 

Retail Stage

Retail stores of H & M and Zara are exclusively owned by the Brand. H & M stores are bigger in size while Zara stores are smaller. Uniqueness of Zara stores is that customers often visit those as Zara keeps exclusive non-recurrent designs which do not stay in the shelves for long.

For Benetton, they have changed their old strategy of maintaining stores run by third party owners. They have converted those small shops by attaching them to Benetton bigger shops to provide better shopping experience for the customers.

SCM strategy

SCM Strategy

company

Stage

 

Design

Manufacture

Distribution

Retail

Zara

Uniqueness prevails with non-recurrent designs with customer segmentation.

Insists on small batches of production with least lead time

Through Automated Big warehouse

Own outlets of Zara Brand

H & M

Exclusivity with three pillars- fashion, price and quality

Decentralized system to maintain quality.

Centralized system of distribution with insistence on sub-contractors.

Own outlets with H & M Brand

Benetton

Insists on R & D by their panel of professional designers.

Insists on domestic and global stakeholders with standardized mode of manufacturing.

Through company owned automated warehouse.

Converting old small outlets to the company owned big outlets.

Recommendations

Although these three brands have their own existence in the fashion industry, scopes are there for development in their operation by adopting proper steps for better implementation of SCM. They should more insist on choosing proper SCM stakeholders for their operation in each level- designing, manufacturing, distributing and retailing operations. Selection of proper stakeholders will encourage more perfection in operation and will lead to more loyal customers with brand awareness.

 

References:

Basak A, M. M. (2014). Supply Chain Management in Garments Industry. Global Journal of Management and Business Research: A Administration and Management , 14 (11).

Benetton. (2019). Sustainable Supply Chain. Retrieved March 22, 2019, from Benetton Group: https://www.benettongroup.com/sustainability/sustainable-supply-chain/

Kondracki, C. (2018, April 5). NextGen Supply Chain: H&M’s low tech approach to inventory management. Retrieved March 22, 2019, from Supply Chain Management Review: https://www.scmr.com/article/nextgen_supply_chain_hms_low_tech_approach_to_inventory_management

Lopez, E. (2018, April 3). H&M’s turnaround runs through its supply chain. Retrieved March 22, 2019, from Supplychain Dive: https://www.supplychaindive.com/news/HM-turnaround-runs-through-supply-chain/520495/

Marah, K. o. (2016, March 9). Zara Uses Supply Chain To Win Again. Retrieved March 22, 2019, from Forbes: https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-win-again/#6534d7361256

TradeGecko. (2018, June 25th). Zara supply chain analysis – the secret behind Zara’s retail success. Retrieved March 22, 2019, from TradeGecko: https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success

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