BUS606: Operations and Supply Chain Management

We illustrate how engineering schools and business schools can use a regional approach in a globalized world, aiming for economic growth. We show that technology and leadership can have an influence on value creation. We regard technology as the main change agent. A focus on technology can also have a positive effect on communication among actors in the business community and in the public sector. At first stage businesses within regions will probably use knowledge on a trial-and-error basis using technology to change routines. In the longer run changes in routines are assumed to lead to strategic change leading to economic growth. More research is necessary to find out more about how actors can co-operate in networks, paying attention to routines. A global focus means that intangible resources become more important moving to a broader approach involving more than economic parameters. Value creation should also have a broad approach involving social as well as economic parameters.

This paper focuses on the DSC in the fashion industry by assessing demand side and supply side of a value chain which is according to Jacobs different perspectives on one chain or value system and the argument is that the distinction provides a clearer view of the structure and operation of DSC. Although distinct they are interdependent and have a great influence on customer service. Customer demands and feedbacks are coming through the demand channel, whereas supply side should consider those as inputs to meet the requirements. Product creation and product demand fulfilment in a company cannot be dealt independently. This is the justification for the DSC where segment specific importance is perceived by others in the supply chain. DSCM requires a veritable collaboration between marketing and supply chain, because as denoted by Lee & Kincade traditionally in the apparel industry, each chain member runs its business based upon separate concerns and interests, sometimes causing conflicts in the relationships with chain partners. The conflicts are not only on supply chain specific issues like performance, quality, economic, logistics., but also other important issues like sustainable production, regulatory requirements, product details.

DSCM tends to amalgamate those individual interests to group interest as Chandra and Kumar states that each member pursues its own goals, objectives, and policies conceptually, independently of the group, but pragmatically in congruence with group goals. The motive of the DSCM is to gain a superior competitive advantage by creating customer value cost efficiently.

Esper et al. also mention that the integration represents a strategic approach to bundling the customer value propositions from both sides to create value in the marketplace. Hilletofth mentions about market orientation, equal importance on demand and supply, value creation, processes differentiations, process coordination, innovativeness, responsiveness and cost efficiency in the demand and supply processes. Market orientation is to some extent evident to the apparel companies (e.g. Zara, Benetton) where the partial SC with own manufacturing integrated into DC that delivers superior customer value cost efficiently. However, a true coordination only possible when demand and supply is equally important for value creation and coordinated accordingly. The partnership is critical to produce a wide assortment of a single style in small quantities which is an essential requirement of present market run by fast fashion strategy. Also there could be additional requirement of small quantity with the successful products. Design is critical driver for the successful operation throughout the chain. Design flexibility can facilitate the supply side activities and provide flexibility and more options. The demand side also in the loop after the manufacturing where it is in between the consumers and manufacturers and issues related to product, quality, delay are needed to be dealt by them. A retailer's DC would consist of assortment planning (deciding what to sell), inventory management (deciding the quantity of supplies needed), and the actual purchase, which together with SC form the DSC.

The development of new, quick fashion appears symptomatic of the transition from a production-driven to a market-driven approach in the fashion apparel industry where the markets have become more varied and faster-changing in the present retail environment. The utilization of agility in supply chain is utilized not only by the fast fashion brands, but it got attracts by almost all other. However, agility should be throughout the chain, i.e. from concept until store. The principle idea is that each organizes their own SC according to the need, product type, and market. The mentioned brands in this study and few brands utilized the fast fashion concept through process differentiation. H and M and Gap introduce 2,000–4,000 new items each year, Zara able to supply new products in each 3-6 weeks, whereas traditionally the fashion chain leading to a new season has taken even about 18 months. Zara has differentiated their DSC exceptionally with innovativeness and utilized responsiveness feature by organizing the DSC where superior customer value is realized. They want to have quick turnover of the goods in store. They have integrated important aspects like material, product group and accordingly they have organized the supply base from near shore or offshore. Other fast fashion leaders like H and M, Gap and Mango have been able to implement the mentioned features without having their own manufacturing facilities, but still being able to deliver their products reasonably quicker. Retailers and brands like Levi's are not following the same method which is seen in recent apparel DSCs, although they are also outsourcing most of their products.Textile-apparel demand-supply chain.

Figure 2: Textile-apparel demand-supply chain

Unfortunately, coordination in textile-apparel SC is still an unresolved question both from the theoretic and practical points-of-view. It is not uncommon that design and manufacturing remains as two different entity where the real co-operation is missing. MacCarthy and Jayarathne apprise that the retailer or brand owner, as the buying entity, is powerful and influences the structure, relationships and operational practices across the network. According to them a typical scenario is that a retailer based in a developed western economy works with a specific prime manufacturer based in a clothing production region in a less developed economy to supply a particular type of garment. Similar scenario also evident among the brands considered in this study which do not own manufacturing and have to rely on the suppliers. In some cases brands even don't know who the producer of their products is and in which condition as some of the brands are sourcing their products through agents who have a supplier network. Because most fashion firms rely on other partners for an important part of their value system, shortening the SC requires increased fine-tuning with these partners. Therefore, to gain a true DSC the interests of all parties should be secured mutually and truthfully which will lead to reconstruct the value chain. The reliance is important for sharing information throughout the DSC.