1. Operations Management in
the Retail Sector;
The Strategic Response
INTRODUCTION Group recommends that retailers Managing relationships with
need to ensure that they find the customers and suppliers is a key
The fashion industry has undergone
right balance between price, inventory, issue in effective management of the
considerable change over the years,
agility, adaptiveness, innovation and supply chain. However, the textiles
with increasing global competition
cost cutting to maximise success in industry tends to be dominated at the
and the move towards a global
today’s competitive marketplace. end of the chain by large, powerful
supply chain impacting on lead times
New products should be tested in the high-street retailers with multiple,
and supply chain management.
market, and winners identified. Two- often internationally located outlets.
The fashion retail buyer plays an
way collaboration with the supply Further back down the chain, the
important role in this process
chain needs integrating into sourcing manufacturing sector of the industry
through supplier selection and
processes, and forecasting needs to consists of large numbers of small
product decision-making, and the
be a critical process that is reviewed companies with a limited amount of
role is changing from purely
monthly WITH the supply chain. The power. Although it may be argued
operational to much more strategic.
outcome for replenishment is rapid that partnership agreements exist
Retailing is tougher now than
response, with winning products between these companies in the
ever before. There is growing
being identified and sales maximised, textiles and clothing industry, it is
competition from new entrants to the
and unsuccessful products deleted questionable whether these are
marketplace. Consumers also want
with minimal mark-downs and actually partnerships with benefits
greater choice, with more product
excess stock. for all parties, or whether these are
options being replaced more
It is common practice for retailers a means by which the retail sector is
frequently, resulting in reduced
to deal with manufacturers, with able to exert power over the smaller
product lifecycles. Also Consumers
centralised buying and considerable suppliers in order to push down
want a more exciting shopping
negotiation on prices, quality prices {2}. With the intensification of
experience with innovative stores,
and delivery schedules {4}. In globalisation and the quest to achieve
imposing increased operating costs
addition, in many chains there is greater profits through reduced
on the retailer. On top of this add
an intermediary – often an import purchase prices the industry has
shrinking margins and higher mark-
or export agency – acting as a moved away from partnering
downs, and the future looks bleak for
significant figure within the chain {15}. between organisations {8}.
retailers.
The addition of the intermediary has A number of strategies have been
come about as a result of increasing employed in the textiles and clothing
SUPPLY CHAINS IN RETAIL
globalisation within the industry. supply chain, in order to improve
The supply chain in the textiles Globalisation of the textile and supply chain management, including
industry is complex. Often the supply clothing supply chain is currently quick response and accurate
chain is relatively long, with a intensifying, with many companies response {5}. JIT (just-in-time) is
number of parties involved {8}. either sourcing components from also common in textiles and clothing
Consequently, careful management overseas, or moving manufacturing and is the delivery of finished goods
of the supply chain is required in to countries with lower labour costs just in time to be sold throughout the
order to reduce lead times and {8}. In addition, the fashion industry supply chain. To counteract the
achieve quick response highlighting is characterised by a number of threat of the increasing number of
the need to use an approach, such as factors, namely a short lifecycle, high imports and levels of overseas
agility. The Institute of Operations volatility, low predictability, and high sourcing, the UK industry needs to
Management Retail Special Interest impulse purchase {7}. concentrate on quick response
24 CONTROL Number 8 2004 iomnet.org.uk

2. methods such as flexible delivery OPERATIONS MANAGEMENT shorter, transportation and delivery
through domestic sourcing, reduced IN RETAIL more efficient and merchandise is
levels of stock within the supply presented ‘floor ready’ on hangers
In recent years there has been a shift
chain, and increased net margins {2}. and with tickets attached {3}.
towards low wage countries for the
The lean, agile and leagile But errors in forecasting can
manufacture of consumer goods with
approaches to supply all effectively result in lost sales and excess
products sourced from the Far East,
sequence and manage the and also from Italy, Portugal and inventory. Products where demand
manufacturing process in order to Turkey. Companies are taking can be accurately predicted should be
reduce lead times. Key to this is advantage of lower priced products differentiated from those where
improved customer order demand from overseas in an attempt to demand is difficult to determine, and
management and a reduction in improve competitiveness, and forecasting and sourcing strategies
wasteful activities. This is crucial discounts can be between 15% and should be applied accordingly {11}.
because in all enterprises there is a 35% for products sourced from Asia Consequently the role of the buying
finite amount of resource available. and Africa {10}. Often this decision is team is essential to a retailers’
Consequently scheduling for made without consideration of the success.
shop floor control in a production true costs associated with such a Abernathy {1} proposes a
environment has become focussed move {11}. Long lead times mean model for a lean management of
against wastage in manufacturing that companies have to rely heavily the supply chain for the textiles and
and supply. This is particularly on long-term forecasts, which may be clothing industry (Figure 1). He
relevant to the textiles and clothing unreliable. It is estimated that argues that lean retailers require
industry, in response to increased levels of merchandise sold at mark- rapid replenishment of products,
competition and compounded with down price has grown to in excess and shipments need to meet strict
small businesses where the problem of 33%, and that one in three requirements in terms of the
becomes more acute with less customers is unable to find the delivery times, order completeness
resource available. The challenge goods required in stock. It is estimated and accuracy. Key to this is the
enterprises face is to either focus that errors of pre-season forecasts use of bar codes, EDI and shipment
on speed and efficiency through may be as high as 50%, and that in marking.
the supply chain to replenish a comparison forecasts based on The supply chain in the textiles
pre-determined stockpile, or to observations of 20% of sales had industry is complex, with many
produce exact quantities in response errors as low as 8% {11}. different parties being involved.
to servicing customer orders Companies in the fashion industry For example, many manufacturers
effectively. The research illustrates are increasingly using time as a sell products to agents, who then
how companies in the sector factor for enhancing competitiveness. sell on to retailers, so often there is
manage to service the demands In addition, reductions in lead time not a link directly between the
of speed and efficiency whilst facilitate companies in addressing manufacturer and the retailer.
responding with flexibility to an increasing demand for variety. This use of third parties is
demand fluctuations. Development cycles are becoming prolific throughout the chain.
Fashion and textiles is a volatile
industry, and getting the right
Figure 1 product in the right place at the right
time can be difficult to achieve {6}.
Lean retailing-apparel supplier relations
(Source: Abernathy (2000)
As a result relationships between
organisations are an essential
aspect of supply chain management
Apparel as they facilitate transfer
manufacturer Retailer
communication within an industry
operating on a global basis. Within
a textile and clothing supply chain
with an intermediary, barriers to
Apparel Retail
plant 1 store 1 communication can be easily
recognised, as there is a third party
Apparel Manufacturers Retailers distribution Retail in the chain controlling information
plant 2 distribution centre centre: cross docking store 2
transfer. This has the effect that,
Apparel Retail rather than add value to the chain,
plant n store 3
the intermediary is adding cost.
These costs can be found in terms
Retail
store n of distance, culture, volatility, and
can relate to both supply and
demand {15}.
CONTROL Number 8 2004 iomnet.org.uk 25

3. THE RETAIL MARKETPLACE fashionable clothing as part of the Technology in Society, Vol 22,
weekly shop, rather than visiting the (2000) pp 5-31
Fast fashion has become an
high street. 2. Bhamra T; Heeley J; and Tyler D;
important factor within the UK
clothing industry, and the objective “A Cross-sectional Approach to
THE FUTURE CHALLENGE New Product Development”, The
of getting clothing to stores within
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paramount importance to companies. retailing is to optimise the business (1998) pp 2-15
This has resulted in an increasing plan, optimise the total value chain 3. Birtwistle G; Siddiqui N; and
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times from suppliers needs to be standing in the supply chain through Perceptions of UK Fashion
taken into consideration at sourcing sharing risk, and increasing the Retailers”, International Journal
{12}. Retailers are now moving as benefits for all through improved of Retail and Distribution
much of their sourcing away from the communication. The Institute of Management, Volume 31,
Far East, where shipping times can Operations Management Retail number 2, (2003) pp 118-128
be as long as six weeks, to Eastern Special Interest Group has brought 4. Bruce M and Moger S;
Europe, where shipping times can be together a number of practitioners, “Dangerous Liaisons: An
as little as 2-3 days. However, fast consultants and academics to share Application of Supply Chain
fashion does not apply to the whole and develop the benefits that are Modelling for Studying
range in stores, and as much as 80% derived from adopting a strategic Innovation within the UK
of goods may be core, basic continuity response to this exciting operations Clothing Industry”, Technology
lines, with fast fashion accounting for management challenge. Analysis and Strategic
up to 20% {12}. Zara is an important The contribution that can be Management, Vol 11, No 1 (1999)
example of a fast fashion retailer, made from the application of
5. Chandra C; Kumar S; “An
with rapid stock turnaround and operations management tools and
Application of a System Analysis
vertical integration creating greater techniques is considerable. The
Methodology to Manage Logistics
control over product lifecycles. process of moving product in
in a Textile Supply Chain”,
The fashion retail market has response to actual or perceived
Supply Chain Management, an
become increasingly turbulent over customer demand is well defined in
International Journal, Vol 5,
the years. Grocery retailers are the manufacturing context. The
number 5, (2000), pp 234-244
moving into apparel retail, selling challenge is to transfer the underlying
6. Christopher and Peck, “Fashion
branded goods at discounted prices principals to the retail context that
Logistics”, Logistics and Retail
by taking advantage of the grey is characterised by volatile demand
Management Insights into
market {14}{12}{13}. This has patterns, short life cycles, cost
Current Practice and Trends
resulted in the clothing retail market versus replenishment times issues
from Leading Experts, Chapter 5,
becoming split into a number of and service operations management
pp 88-109, Ed Fernie, J and
segments – luxury, high street, influences on a global scale. The
Sparks, L, Kogan Page Ltd,
and supermarket/ out-of-town whole retail process is driven by
London, UK, (1999)
discounter. Asda and Tesco are at customer service, normally seen
as stock availability in store that 7. Fernie J. and Sparks L; (eds.),
the forefront of this move and are
is linked to brand or category “Logistics and Retail
investing heavily. In 1999 Asda sales
management focussed not just on Management Insights into
of George apparel saw an increase of
customer satisfaction of the sales Current Practice and Trends
16% on the previous year. Retailers
transaction but more importantly on from Leading Experts” Kogan
are beginning to develop new
future customer retention. Operations Page Ltd., London, UK. (1998)
approaches in order to remain
management is the vehicle to 8. Jones R; “UK Clothing Industry
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consistently and reliably deliver these and Market – An Update”,
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subsequent purchase. This is a 9. Jones; “The Apparel Industry”,
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fragile choice that is vulnerable to Blackwell Science, Aylesbury
with Debenhams, Marks and Spencer
marketplace changes and pressures (2002)
and New Look all taking advantage of
where only those recognising the 10. Lowson R; “Analysing the
consumer pre-occupation with
large contribution made by Effectiveness of European Retail
designer brands. The entrance of
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supermarkets into the clothing
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