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INTRODUCTION

The fashion industry has undergoneconsiderable change over the years,with increasing global competitionand the move towards a global supply chain impacting on lead timesand supply chain management. The fashion retail buyer plays animportant role in this processthrough supplier selection and product decision-making, and therole is changing from purely operational to much more strategic.

Retailing is tougher now thanever before. There is growing competition from new entrants to themarketplace. Consumers also wantgreater choice, with more productoptions being replaced more frequently, resulting in reduced product lifecycles. Also Consumerswant a more exciting shopping experience with innovative stores,imposing increased operating costson the retailer. On top of this addshrinking margins and higher mark-downs, and the future looks bleak forretailers.

SUPPLY CHAINS IN RETAIL

The supply chain in the textilesindustry is complex. Often the supplychain is relatively long, with a number of parties involved {8}.Consequently, careful managementof the supply chain is required inorder to reduce lead times andachieve quick response highlightingthe need to use an approach, such asagility. The Institute of OperationsManagement Retail Special Interest

Group recommends that retailersneed to ensure that they find theright balance between price, inventory,agility, adaptiveness, innovation andcost cutting to maximise success intoday’s competitive marketplace.New products should be tested in themarket, and winners identified. Two-way collaboration with the supplychain needs integrating into sourcingprocesses, and forecasting needs tobe a critical process that is reviewedmonthly WITH the supply chain. Theoutcome for replenishment is rapidresponse, with winning productsbeing identified and sales maximised,and unsuccessful products deletedwith minimal mark-downs andexcess stock.

It is common practice for retailersto deal with manufacturers, with centralised buying and considerablenegotiation on prices, quality and delivery schedules {4}. In addition, in many chains there is an intermediary – often an import or export agency – acting as a significant figure within the chain {15}.The addition of the intermediary hascome about as a result of increasingglobalisation within the industry.Globalisation of the textile andclothing supply chain is currentlyintensifying, with many companieseither sourcing components fromoverseas, or moving manufacturingto countries with lower labour costs{8}. In addition, the fashion industryis characterised by a number offactors, namely a short lifecycle, highvolatility, low predictability, and highimpulse purchase {7}.

Managing relationships withcustomers and suppliers is a keyissue in effective management of thesupply chain. However, the textilesindustry tends to be dominated at theend of the chain by large, powerfulhigh-street retailers with multiple,often internationally located outlets.Further back down the chain, themanufacturing sector of the industryconsists of large numbers of smallcompanies with a limited amount ofpower. Although it may be arguedthat partnership agreements existbetween these companies in the textiles and clothing industry, it isquestionable whether these are actually partnerships with benefits for all parties, or whether these are a means by which the retail sector isable to exert power over the smallersuppliers in order to push downprices {2}. With the intensification ofglobalisation and the quest to achievegreater profits through reduced purchase prices the industry hasmoved away from partneringbetween organisations {8}.

A number of strategies have beenemployed in the textiles and clothingsupply chain, in order to improvesupply chain management, includingquick response and accurateresponse {5}. JIT (just-in-time) isalso common in textiles and clothingand is the delivery of finished goodsjust in time to be sold throughout the supply chain. To counteract thethreat of the increasing number ofimports and levels of overseas sourcing, the UK industry needs toconcentrate on quick response

Operations Management inthe Retail Sector; The Strategic Response

methods such as flexible deliverythrough domestic sourcing, reducedlevels of stock within the supplychain, and increased net margins {2}.

The lean, agile and leagileapproaches to supply all effectivelysequence and manage the manufacturing process in order toreduce lead times. Key to this isimproved customer order demandmanagement and a reduction inwasteful activities. This is crucialbecause in all enterprises there is afinite amount of resource available.Consequently scheduling for shop floor control in a productionenvironment has become focussedagainst wastage in manufacturingand supply. This is particularly relevant to the textiles and clothingindustry, in response to increasedcompetition and compounded withsmall businesses where the problembecomes more acute with lessresource available. The challengeenterprises face is to either focus on speed and efficiency through the supply chain to replenish a pre-determined stockpile, or to produce exact quantities in responseto servicing customer orders effectively. The research illustrateshow companies in the sector manage to service the demands of speed and efficiency whilstresponding with flexibility todemand fluctuations.

OPERATIONS MANAGEMENTIN RETAIL

In recent years there has been a shifttowards low wage countries for themanufacture of consumer goods withproducts sourced from the Far East,and also from Italy, Portugal andTurkey. Companies are taking advantage of lower priced productsfrom overseas in an attempt toimprove competitiveness, anddiscounts can be between 15% and35% for products sourced from Asiaand Africa {10}. Often this decision ismade without consideration of thetrue costs associated with such amove {11}. Long lead times meanthat companies have to rely heavilyon long-term forecasts, which may beunreliable. It is estimated that levels of merchandise sold at mark-down price has grown to in excess of 33%, and that one in three customers is unable to find the goods required in stock. It is estimatedthat errors of pre-season forecastsmay be as high as 50%, and that in comparison forecasts based onobservations of 20% of sales haderrors as low as 8% {11}.

Companies in the fashion industryare increasingly using time as afactor for enhancing competitiveness.In addition, reductions in lead timefacilitate companies in addressing an increasing demand for variety.Development cycles are becoming

shorter, transportation and deliverymore efficient and merchandise ispresented ‘floor ready’ on hangersand with tickets attached {3}.

But errors in forecasting canresult in lost sales and excess inventory. Products where demandcan be accurately predicted should bedifferentiated from those wheredemand is difficult to determine, andforecasting and sourcing strategiesshould be applied accordingly {11}.Consequently the role of the buyingteam is essential to a retailers’ success.

Abernathy {1} proposes a model for a lean management of the supply chain for the textiles andclothing industry (Figure 1). Heargues that lean retailers requirerapid replenishment of products, and shipments need to meet strictrequirements in terms of the delivery times, order completenessand accuracy. Key to this is the use of bar codes, EDI and shipmentmarking.

The supply chain in the textilesindustry is complex, with many different parties being involved. For example, many manufacturerssell products to agents, who then sell on to retailers, so often there isnot a link directly between themanufacturer and the retailer.This use of third parties is

prolific throughout the chain.Fashion and textiles is a volatileindustry, and getting the right product in the right place at the righttime can be difficult to achieve {6}. As a result relationships betweenorganisations are an essential aspect of supply chain managementas they facilitate transfer communication within an industryoperating on a global basis. Within a textile and clothing supply chainwith an intermediary, barriers tocommunication can be easily recognised, as there is a third partyin the chain controlling informationtransfer. This has the effect that,rather than add value to the chain,the intermediary is adding cost.These costs can be found in terms of distance, culture, volatility, and can relate to both supply anddemand {15}.

Figure 1

Lean retailing-apparel supplier relations (Source: Abernathy (2000)

Apparel manufacturer

Apparel plant 1

Apparel plant 2

Apparel plant n

Retail store 1

Retailstore 2

Retailstore 3

Retailstore n

Retailer

Manufacturersdistribution centre

Retailers distributioncentre: cross docking

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THE RETAIL MARKETPLACE

Fast fashion has become an important factor within the UK clothing industry, and the objective of getting clothing to stores withinthe smallest lead time possible is ofparamount importance to companies.This has resulted in an increasingnumber of ‘seasons’, and shippingtimes from suppliers needs to betaken into consideration at sourcing{12}. Retailers are now moving asmuch of their sourcing away from theFar East, where shipping times canbe as long as six weeks, to EasternEurope, where shipping times can beas little as 2-3 days. However, fastfashion does not apply to the wholerange in stores, and as much as 80%of goods may be core, basic continuitylines, with fast fashion accounting forup to 20% {12}. Zara is an importantexample of a fast fashion retailer,with rapid stock turnaround and vertical integration creating greatercontrol over product lifecycles.

The fashion retail market hasbecome increasingly turbulent overthe years. Grocery retailers are moving into apparel retail, sellingbranded goods at discounted pricesby taking advantage of the grey market {14}{12}{13}. This has resulted in the clothing retail marketbecoming split into a number of segments – luxury, high street, and supermarket/ out-of-town discounter. Asda and Tesco are at the forefront of this move and areinvesting heavily. In 1999 Asda salesof George apparel saw an increase of16% on the previous year. Retailersare beginning to develop newapproaches in order to remain competitive against such moves byretailers. 2000 saw the introductionof the Per Una range by George Davisinto Marks and Spencer stores world-wide. The use of designer ranges forhigh street stores is a growing trendwith Debenhams, Marks and Spencerand New Look all taking advantage ofconsumer pre-occupation withdesigner brands. The entrance ofsupermarkets into the clothing market has increased competitionand redefined how customers shopfor clothing, with time-starved customers able to purchase cheap

fashionable clothing as part of theweekly shop, rather than visiting thehigh street.

THE FUTURE CHALLENGE

The key to a successful future forretailing is to optimise the businessplan, optimise the total value chaincost, and to build trust and under-standing in the supply chain throughsharing risk, and increasing thebenefits for all through improvedcommunication. The Institute ofOperations Management RetailSpecial Interest Group has broughttogether a number of practitioners,consultants and academics to shareand develop the benefits that arederived from adopting a strategicresponse to this exciting operationsmanagement challenge.

The contribution that can bemade from the application of operations management tools andtechniques is considerable. Theprocess of moving product inresponse to actual or perceived customer demand is well defined inthe manufacturing context. The challenge is to transfer the underlyingprincipals to the retail context that is characterised by volatile demandpatterns, short life cycles, cost versus replenishment times issuesand service operations managementinfluences on a global scale. Thewhole retail process is driven by customer service, normally seen as stock availability in store that is linked to brand or category management focussed not just oncustomer satisfaction of the salestransaction but more importantly onfuture customer retention. Operationsmanagement is the vehicle to consistently and reliably deliver theserequirements to the end customer,the consumer to persuade them toreturn to the retail outlet for their subsequent purchase. This is a fragile choice that is vulnerable tomarketplace changes and pressureswhere only those recognising thelarge contribution made by operations management will prosper.

REFERENCES

1. Abernathy, “Retailing and SupplyChains in the Information Age”,

Technology in Society, Vol 22,(2000) pp 5-31

2. Bhamra T; Heeley J; and Tyler D;“A Cross-sectional Approach toNew Product Development”, TheDesign Journal, Vol 1, Issue 3,(1998) pp 2-15

3. Birtwistle G; Siddiqui N; andFiorito S, “Quick Response:Perceptions of UK FashionRetailers”, International Journalof Retail and DistributionManagement, Volume 31, number 2, (2003) pp 118-128

4. Bruce M and Moger S;“Dangerous Liaisons: AnApplication of Supply ChainModelling for StudyingInnovation within the UKClothing Industry”, TechnologyAnalysis and StrategicManagement, Vol 11, No 1 (1999)

5. Chandra C; Kumar S; “AnApplication of a System AnalysisMethodology to Manage Logisticsin a Textile Supply Chain”,Supply Chain Management, anInternational Journal, Vol 5, number 5, (2000), pp 234-244

6. Christopher and Peck, “FashionLogistics”, Logistics and RetailManagement Insights intoCurrent Practice and Trendsfrom Leading Experts, Chapter 5,pp 88-109, Ed Fernie, J andSparks, L, Kogan Page Ltd,London, UK, (1999)

7. Fernie J. and Sparks L; (eds.),“Logistics and RetailManagement Insights intoCurrent Practice and Trendsfrom Leading Experts” KoganPage Ltd., London, UK. (1998)

8. Jones R; “UK Clothing Industryand Market – An Update”,Journal of Fashion Marketingand Management, Vol 4, No 2,(2000) pp 182-187

9. Jones; “The Apparel Industry”,Blackwell Science, Aylesbury(2002)

10. Lowson R; “Analysing theEffectiveness of European RetailSourcing Strategies”, EuropeanManagement Journal, Volume19, Number 5, (2001) pp 543-551

11. Mattila H, King R and Ojala N;“Retail Performance Measures