Tuesday, February 12, 2013

Why Metersbonwe can't copy Zara phenomenon in China

From this week’s reading, “Building a flexible supply chain for uncertain times” and “Ten ways to improve inventory management”, clothes inventory issue in one of China’s largest apparel companies Metersbonwe has come to my mind. Because according to last year’s financial report of Metersbonwe, the company’s inventory grew to 473.3 million which is accounting for 83% of its net assets.   
Metersbonwe is a loyal learner of Zara in China, trying to copy Zara’s success in China. However, it’s not as fast as Zara. What’s more, the value of those inventories, lying in the warehouse, decreases every day in the fast fashion industry. From the view of management, Metersbonwe has not learned from Zara how to attain low inventory in the condition of fast supply chain. After reading our articles, I’d like to analyze why Metersbonwe is not a good imitator from following two aspects.
Information acquisition
To establish a responsive, fast and flexible supply chain is not only the business of operating department. Some companies recruited leaders from production, procurement, logistics, and sales to discuss and make decisions of supply chain together in order to optimize the supply chain. By doing this, the supply chain is healthy, and has a reasonable basis from comprehensive information throughout company and customers.  
Metersbonwe has a severe problem in information communication. One critical reason is that Metersbonwe applies franchises plus directly-manage stores sale chain, and the number of franchises is about 80% out of total store number. Compared with leading fast fashion companies such as Zara, H&M and UNIQLO which only has directly- manage store, it’s much more difficult to get information from sale channels. Obviously, it will be very complicated to manage, and the response to volatility will be slow. For example, Metersbonwe changed a lot on women’s clothes design in 2011 autumn, which was not accepted by franchises however. The order was very few, but the sales department reported good sale performance. Because of this very lack of communication, they can’t make the right decision in ordering raw material and so on.
On the other hand, Zara very focus on exchanging information throughout every part of Zara’s supply chain. They insert layers of bureaucracy that can communicate between departments and are designed to make information transfer easily. Market specialists are in constant touch with store managers and provide quick feedback about new designs and give possible market prices.
Dealing with bullwhip
In Metersbonwe sale architecture, franchises intensify the bullwhip effects. Franchise is an additional component in bullwhip chain if compared with directly-manage stores. Information distortion is even more amplified in this architecture.
At the meanwhile, Zara keeps constant flow of updated data which mitigates the bullwhip. As far as I know, communication and comprehensive investigation is the best solution to deal with bullwhip effects.  In this way, Zara avoids overproduction and maximum their production effects.
Except for two aspects above, Metersbonwe still has other supply chain management problems which are also mentioned in “Ten ways to improve inventory management”. When Metersbonwe stores 160 million dollar inventories, They still haven’t come up with any effective discount sale, and exacerbated inventory pileup. This indicates that they don’t have action plans that curb more excesses from being created.

In the article " Cleaning the Crystal Ball", the author claims several common understanding which may lead to wrong forecasts, including average is not reliable and crowd can make better forecasts than experts. Some opinions are novel to me, but the author still doesn't provide some definite methods and principles when forecasting. So if the average is not the estimator, which or which range should be? And I don't believe crowd can make better forecasts just because they don't know much about statistic methodology and will think about drivers behind the events.

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