...The case of Zara – The Postponement strategy I) Introduction In order to compete in the world of rising globalization and shortening of product life cycle nowadays, firms have to deal with the demand for increasing product variety to meet the diverse needs of customers. Mass customization has become a requirement for many businesses especially in the dynamic, fast-changing industries. However, the more product varieties, the more difficult it is to forecast demand, control inventory and manufacture. Therefore, some innovative companies have integrated “postponement” strategies with their supply chain operations to gain control of product variety proliferation. Zara is one of the most successful fast-fashion chains in the world, which is famous for its ability to keep itself up to date with fashion trends and the incredibly short time to introduce new products. In order to react quickly to fashion changes and consumer demand, Zara maintains extremely efficient supply chain operations. By properly designing the product structure and the manufacturing and supply chain process, Zara can delay the point in which the final products assume their specific characteristics, thus raising the flexibility to handle the changing demand for the multiple products. This is known as the “postponement” approach. In this paper, we will analyze how Zara achieves mass customization through “postponement”, with a particular focus on the supply chain structure, relationship and enabling activities...
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...more difficult, manufacturing complexity upsurges, and after-sales support gets more challenging. Mass customization is a manufacturing process that combines the flexibility of customised product variety, along with the low cost leadership of economies of scale. 2. BACKGROUND OF STUDY To the problems thrown by mass customisation, many solutions exist. One solution that pioneering firms have utilised is the influence of product and process designing. This is rendered possible by incorporating design in their supply chain operations, to seek control over product variety expansion. Design has always been viewed as a central driver of manufacturing costs. As high as eighty percent of the manufacturing cost is decided by the design, or the process through which the product is to be developed. Therefore, design can be leveraged to solve the problem of mass customization (Martin M., W. Hausman, K. Ishii, 1998). By cautiously designing the manufacturing and supply chain processes and the product structure, firms can postpone the point in which the finishing nature of the merchandise is to be determined, thereby increasing the flexibility to tackle varying demands for the multiple products. This...
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...becomes more difficult, manufacturing complexity upsurges, and after-sales support gets more challenging. Mass customization is a manufacturing process that combines the flexibility of customised product variety, along with the low cost leadership of economies of scale. 2. BACKGROUND OF STUDY To the problems thrown by mass customisation, many solutions exist. One solution that pioneering firms have utilised is the influence of product and process designing. This is rendered possible by incorporating design in their supply chain operations, to seek control over product variety expansion. Design has always been viewed as a central driver of manufacturing costs. As high as eighty percent of the manufacturing cost is decided by the design, or the process through which the product is to be developed. Therefore, design can be leveraged to solve the problem of mass customization (Martin M., W. Hausman, K. Ishii, 1998). By cautiously designing the manufacturing and supply chain processes and the product structure, firms can postpone the point in which the finishing nature of the merchandise is to be determined, thereby increasing the flexibility to tackle varying demands for the multiple products. This methodology is termed as...
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...noopurJournal of Fashion Marketing and Management Emerald Article: Postponement and supply chain structure: cases from the textile and apparel industry Hassan Chaudhry, George Hodge Article information: To cite this document: Hassan Chaudhry, George Hodge, (2012),"Postponement and supply chain structure: cases from the textile and apparel industry", Journal of Fashion Marketing and Management, Vol. 16 Iss: 1 pp. 64 - 80 Permanent link to this document: http://dx.doi.org/10.1108/13612021211203032 Downloaded on: 19-12-2012 References: This document contains references to 19 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 704 times since 2012. * Users who downloaded this Article also downloaded: * Hassan Chaudhry, George Hodge, (2012),"Postponement and supply chain structure: cases from the textile and apparel industry", Journal of Fashion Marketing and Management, Vol. 16 Iss: 1 pp. 64 - 80 http://dx.doi.org/10.1108/13612021211203032 Hassan Chaudhry, George Hodge, (2012),"Postponement and supply chain structure: cases from the textile and apparel industry", Journal of Fashion Marketing and Management, Vol. 16 Iss: 1 pp. 64 - 80 http://dx.doi.org/10.1108/13612021211203032 Hassan Chaudhry, George Hodge, (2012),"Postponement and supply chain structure: cases from the textile and apparel industry", Journal of Fashion Marketing and Management, Vol. 16 Iss: 1 pp. 64 - 80 http://dx.doi.org/10.1108/13612021211203032 Access...
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...1. Why can the current movement toward supply chains be characterized as a revolution? Traditionally firms felt the need to cooperate with their supply chain partners. However the association was limited to an acknowledged dependency and institutional specialization. There was a lack of commitment primarily due to lack of high quality information. However during the last decade, rapid advancements have taken place in the area of information technology. This has enhanced the speed of obtaining and sharing of information between the supply chain partners and consequently increased the level of collaboration within the traditional distribution channel. This process was accelerated with the Internet and worldwide web explosion. With this arrangement, managers were able to reduce non-value-added services, duplication, and redundancy between the consecutive stages of order fulfillment process. Moreover the managers began to believe that such sharing could beneficial for the partners. These efforts to extend and leverage the operating range of the individual firms have propelled the manifestation of collaborative supply chains. This transformation has been so rapid and abrupt that it could be labeled as a revolution. 2. Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding similarities and differences. Traditional distribution channels typically had an order fulfillment time of 15-30 days. But if something went wrong, this...
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...1. Why can the current movement toward supply chains be characterized as a revolution? Traditionally firms felt the need to cooperate with their supply chain partners. However the association was limited to an acknowledged dependency and institutional specialization. There was a lack of commitment primarily due to lack of high quality information. However during the last decade, rapid advancements have taken place in the area of information technology. This has enhanced the speed of obtaining and sharing of information between the supply chain partners and consequently increased the level of collaboration within the traditional distribution channel. This process was accelerated with the Internet and worldwide web explosion. With this arrangement, managers were able to reduce non-value-added services, duplication, and redundancy between the consecutive stages of order fulfillment process. Moreover the managers began to believe that such sharing could beneficial for the partners. These efforts to extend and leverage the operating range of the individual firms have propelled the manifestation of collaborative supply chains. This transformation has been so rapid and abrupt that it could be labeled as a revolution. 2. Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding similarities and differences. Traditional distribution channels typically had an order fulfillment time of 15-30 days. But if something went wrong, this...
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...Supply Chain Management Assignment ON BULLWHIP EFFECT AND DELAYED DIFFERENTIATION Submitted to Prof Dr. P.R.S.Sarma Submitted by VENKATA RAJA GOPAL RACHERLA Regd. No.: 1226109236 SEC-B MBA (IB) - 2009-11 1 INDEX S No. I 1 2 3 Topic Bullwhip effect Introduction Explanation Causes of Bullwhip Effect Possible Remedies The Bullwhip effect in the electricity sector Conclusion Postponement or Delayed Differentiation Page no. 3 4 4 5 4 5 6 7 6 II 1 10 11 12 Introduction 2 Forecasting uncertainty 14 3 The long-term potential 16 2 THE BULLWHIP EFFECT 3 1. Introduction The bullwhip effect is the magnification of demand fluctuations, not the magnification of demand. The bullwhip effect is evident in a supply chain when demand increases and decreases. The effect is that these increases and decreases are exaggerated up the supply chain. The essence of the bullwhip effect is that orders to suppliers tend to have larger variance than sales to the buyer. The more chains in the supply chain the more complex this issue becomes. This distortion of demand is amplified the farther demand is passed up the supply chain. Proctor & Gamble coined the term “bullwhip effect” by studying the demand fluctuations for Pampers (disposable diapers). This is a classic example of a product with very little consumer demand fluctuation. P&G observed that distributor orders to the factory varied far more than the preceding retail demand...
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...Postponement is a business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. An example of this strategy is Dell Computers' build-to-order online store. Among the earliest reference to the concept was in a paper by Zinn and Bowersox in the Journal of Business Logistics. They highlighted five types: Labelling, Packaging, Assembly, Manufacturing and Time postponements. Postponement in SCM Postponement is a concept in supply chain management where the manufacturer produces a generic product, which can be modified at the later stages before the final transport to the customer. Take for example an umbrella manufacturer who does not know what the demand will be for different colored umbrellas. The manufacturer will manufacture all white umbrellas and dye them later when umbrellas are in season, and it's easier to predict demand of each color of umbrella. This way the manufacturer can stock up on white umbrellas early with minimal labor costs, and be sure of the demand before he dedicates time and money into predicting the demand so far in the future Postponement is a business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. An example of this strategy is Dell Computers' build-to-order online store. Among the earliest reference to the concept was in a paper by Zinn and Bowersox in the...
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...Stains | 6,000 | | Joiners | 900 | Work in Process | Frames | 6,000 | | Drawers | 4,000 | | Panels | 30,000 | | Chests | 13,200 | | Tables | 8,100 | Finished Goods | Chests | 150,000 | | Coffee Tables | 70,000 | Total | | 363,800 | Inventory turns = 3,700,000/363,800 = 10.2 Days of supply ------------------------------------------------- 363,800 (3,700,000)/(365) = 35.9 10-6 Delph Manufacturing Company Supplier 1 Raw Materials | $ 275,000 | Work in Process | 62,000 | Finished Goods | 33,000 | Total | 370,000 | Inventory turns = 8,360,000/370,000 = 22.6 Weeks of supply ------------------------------------------------- 370,000 (8,360,000)/(52) = 2.3 weeks Supplier 2 Raw Materials | $ 870,000 | Work in Process | 550,000 | Finished Goods | 180,000 | Total | 1,600,000 | Inventory turns = 14,800,000/1,600,000 = 9.3 Weeks of supply ------------------------------------------------- 1,600,000 (14,800,000)/(52) = 5.6 weeks Supplier 1 has the best supply chain performance according to inventory turns and weeks of supply. The company might also consider different suppliers SCORcards and/or metrics in comparison with one another. 11-14 “For some manufacturing companies, transportation costs can be as much as 20% of total production costs and run as high as 6% of revenue. For some retail companies primarily involved in the distribution of goods, like L.L. Bean...
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...sourcing Global manufacturing Global distribution . dealing with foreign . facility location . local content regulations suppliers . coordinating networks . managing global . managing international of plants distribution logistics . coordinating networks . managing risk . managing risk of R&D facilities . operations in other countries Page intentionally left blank. Class: 2a Type: Lecture Supply Chain Management & Service The goal in this part is to introduce the two main sections of the course, international manufacturing and international service. For manufacturing we start with the simple proposition that decisions about our company’s competitive strategy leads to a supply chain strategy which then leads to a supply chain structure. We provide a strategic framework that can be used to analyze design, planning, and operational decisions in a supply chain. This framework focuses on supply...
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...Case 10: Ford: Supply Chain Strategy I. Introduction/Background Ford Motor Company is widely regarded as one of America’s premier automotive manufacturers and the second largest industrial corporation in the world, with operations in over 200 countries. Ford was established by Henry Ford in 1903, and is still standing strong today. Although Ford has significant revenues from its financial services, its core business is the design and manufacturing of motor vehicles. Due to overcapacity within the automobile industry, Ford developed a restructuring plan called Ford 2000 that focused on globalizing corporate organizations and taking advantage of economies of scale. Ford 2000 completely re-engineered several of Ford’s key processes including the Ford Production System (FPS) and Order to Delivery (OTD). FPS was created to convert Ford’s supply chain from a push strategy to a pull strategy. To increase supply chain efficiency, Ford aimed at reducing the number of suppliers that had accumulated over the years. Ford accomplished this by developing a closer, long term relationship with fewer suppliers referred to as “Tier 1” suppliers. These suppliers would provide complete vehicle subsystems for Ford. Tier 1 suppliers work closely with several Tier 2 suppliers who provide the components for the Tier 1 subsystems. Another initiative taken by Ford to improve their supply chain was the Ford Retail Network. This helped reduce competition among its dealership in the same region...
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...What is Supply Chain Management (SCM)? • Boundary Spanning Nature of SCM Introduction to Supply Chain Management • The Rise of SCM • Characteristics of a Competitive Supply Chain • Trends in SCM • Careers in SCM and Professional Organizations • Review Copyright 2011 John Wiley & Sons, Inc. 1-1 Copyright 2011 John Wiley & Sons, Inc. 1-2 What is Supply Chain Management? Supply Chain Management (SCM) is the design and management of flows of products, information, and funds throughout the supply chain Supply Chain Stages A typical supply chain may involve many different trading partners, called stages Stages may include: – Suppliers – Producers – Wholesalers/Distributors – Retailers – Customers Copyright 2011 John Wiley & Sons, Inc. 1-3 Copyright 2011 John Wiley & Sons, Inc. 1-4 SCM Activities SCM activities include: • Coordination – coordinate the movement of goods, services, and funds through the supply chain Managing Flows Through the Supply Chain Managing Flows of Products, Information, and Funds: • Flow of Products – from the beginning to the final customer – Reverse Logistics • Information Sharing – share forecasts, point-of-sale data, planned promotional campaigns, and inventory levels • Collaboration – jointly plan, operate, and execute business decisions as one entity Copyright 2011 John Wiley & Sons, Inc. 1-5 Copyright 2011 John Wiley & Sons, Inc. 1-6 1 10/15/2012 Managing Flows Through the Supply Chain...
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...How can design for logistic concepts be used to control logistic costs and make the supply chain more efficient? The three components for design for logistics are: 1. Economic packaging and transportation 2. Concurrent and parallel processing 3. Postponement/delayed differentiation By packaging the product so that more products can be shipped and stored more efficiently will lower transportation costs and storage costs. Concurrent and parallel processing focuses on modification of the manufacturing process with the desired out come of shorter lead times, improved forecasting and reduction of safety stock requirements. Design for delayed differentiation can be used to address the uncertainty in final demand, even if forecasts cannot be improved. What is delayed differentiation and can Hewlett-Packard use delay differentiation to address the problem described in the case? The Institute of Supply Management’s glossary of key supply management terms defines delayed differentiation as: The strategy of producing and shipping generic products as far down the supply chain as possible before customer-required customization is added. This process would help lessen lead time and the amount of safety stock required by the European DC. By shipping a generic product and allowing the DC to assemble the appropriate power supply module and package it with the working printer and manual in appropriate language, would allow the European DC to have the appropriate inventory...
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...strategic initiatives from our list include the following: 1. Efficient Consumer Response (ECR): Lean Manufacturing Japan (2008) stated that ECR “is a strategy to increase the level of services to consumers through the close cooperation among retailers, wholesalers and manufacturers. Lean Manufacturing Japan (2008), also stated that “ECR reduces the opportunity loss, inventory level, and entire cost, increases monetary profitability by sharing the purpose of customer satisfaction. 2. Just – in – Time (JIT): simply means getting the right quantity of goods at the right place and right time and it originated from Japan after World War II by Toyota Motor Company (Reid & Sanders, 2007). There are three elements of JIT which are: Just in time manufacturing, Total Quality Management and Respect for people. 3. Lean System: Also known as Just – in – Time. Lean simply means the elimination of waste, with perfect quantity to meet demand instantaneously. Lean has four elements which are: Customer focus, synchronized flow, behavior and waste elimination (Slack &Lewis, 2011). Lean operations help to reduce cost, gives higher quality, reduce lead time, increase productivity and reduce amounts of waste (Wikispaces, n.d) 4. Agile Operations: is the ability to react and adapt to the changes in demand and supply situations in a supply chain (Sehgal, V., 2010). 5. World Class Manufacturing (WCM): It is the best practices which can be use to describe best manufacturers (Hosseinie et al. 2012)...
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...2014/11/20 Why do we need inventory? 1 WE IE Managing economics of scale in a SC Cycle inventory (Ch 11) Managing uncertainty in a SC Safety inventory and risk polling (Ch 12, 13) 2 WE IE 1 2014/11/20 Managing Uncertainty in a Supply Chain — Safety Inventory Chapter 12 Wen‐Chih Chen Dept. of Industrial Engineering & Management National Chiao Tung University, TAIWAN 3 WE IE Safety Inventory Safety inventory is carried to satisfy possible demand that exceeds the amount forecasted. 4 WE IE 2 2014/11/20 Determining the Safety Stock Level Safety inventory uncertainty uncertainty Supply Demand Performance: availability (responsiveness), costs (efficiency) 5 WE IE Key Decisions What is the appropriate level of product availability? How much safety inventory is needed for the desired level of product availability? What actions can be taken to improve product availability while reducing safety inventory? 6 WE IE 3 2014/11/20 Measuring Product Availability Product fill rate (fr) % of product demand satisfied from product in inventory % of orders filled from available inventory % of replenishment cycles that end with ALL customer demand being met Order fill rate Cycle service level (CSL) 7 WE IE Measuring Demand Uncertainty : avg. demand @ period i : standard deviation (標準差) of demand (forecast...
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