Tuesday, February 21, 2012

How much can you set free your supply chain management?

In this week, we are talking about lean manufacturing and therefore I learned a few interesting concepts. For example, “Push” and “Pull”. "Push type" means Make to Stock in which the production is not based on actual demand. "Pull type" means Make To Order in which the production is based on actual demand. Supply chain models of "Push type" and "Pull type" are opposite in terms of a demand and supply relationship. "Push type" is represented by "Make to Stock" (MTS) in which the production is not based on actual demand and "Pull type" is represented by "Make To Order" (MTO) in which the production is based on actual demand.

As technology increase, the supply chain management is transforming from the traditional "Push type" to modern "Pull type". Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes. Therefore, unlike the Push-type method it is not based on demand forecast. In this way, inventory could be kept to a minimum amount and products can be supplied with short lead times and at high speed. [1]

Basically in my understanding, the core idea of this new lean thinking concept is about flexibility. It emphasis on how quick a company could react to the changeable market and customer demand and what techniques this company could use to achieve its goal. Especially in a high pace industry, for example, fashion this ability of quick react is like the water to a person that could decide the company’s fate of death.

In an article I read online called “Zara Clothing Retail Model Based on Lean Inventories and Market Flexibility Could Change the Future of Manufacturing”, the author points out that with shorter lead times, Zara can ship fewer pieces, in a greater variety of styles, more often and they can more easily cancel lines that don't sell as well, avoiding inventory backlogs. The fact is because Zara only takes less than two weeks for a skirt to get from Zara's design team in Spain to a Zara store in Qatar or Paris or Tokyo, as much as 12 times faster than the competitors, who are dealing with a complex global network just to make a simple shirt, in a process that could take up to eight months from the design stage to the store. [2]

However, in management, loose in one side means tight on the other. The success of Zara is due to their strict controlling on all the steps of manufacturing clothes: from design to fabric to manufacturing, distribution and sales so that they can cut costs and make huge gains in speed and flexibility.

Similar to Toyota’s case, Zara also has a rule to require all work to be highly specified as to content, sequence, timing and outcome. For instance, each of the sale person and manager in every store is required to constantly talking to its customers and listening to their feedback. [3] They need to zap orders on customized handheld computers over the Internet to Zara headquarters based on what they see selling. What is more, they draw upon customer comments, or even their idea of new styles that a customer might like to wear or could be copied to Zara’s stores. While stores provide valuable front-line data, headquarters plays a major role in directing instore operations. Software is used to schedule staff based on each store’s forecasted sales volume, with locations staffing up, say at peak times such as lunch or early evening. The firm claims these more flexible schedules have shaved staff work hours by two percent. This constant refinement of operations throughout the firm’s value chain has helped reverse a prior trend of costs rising faster than sales. [4]

Nevertheless, it is said that freedom never comes free in this high competitive society. Other costs will be gained to meet this need. For example, Zara need to invest on its technology to achieve this quick point-to-point communication. The question for a company to consider when they trying to choose their strategy is whether the benefits outweigh additional cost and reform risks? After all, the lead manufactory may not be suitable for everyone. What kind of companies or industries do you think that are not suitable then? Can you think of any?

[1] Imaoka, Zenjiro. "Understand Supply Chain Management through 100 Word." Push-Pull Manufacturing. KOUGYOUCHOUSAKAI. Web. 21 Feb. 2012. <http://www.lean-manufacturing-japan.com/scm-terminology/push-pull-manufacturing.html>.
[2] "Zara Clothing Retail Model Based on Lean Inventories and Market Flexibility Could Change the Future of Manufacturing." AllBusiness.com. Dun & Bradstreet. Web. 21 Feb. 2012. <http://www.allbusiness.com/construction/4266194-1.html>.
[3] Ho, Matthew. "Lean Fashion—Zara." 25 Apr. 2011. Web. 21 Feb. 2012. <http://inspiredworlds.com/2011/04/25/lean-fashion-zara/>.
[4] Devangshu, Dutta. "Retail @the Spend of Fashion." Third Eye Sight, 2002. Web. 31 Jan. 2012. <http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf>

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