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The effects of procurement and
production flexibilities and supply chain agility on firm performance in the
fashion industry.

Introduction:

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It is becoming clear that the changed
conditions in the global marketplace demand a much more agile response from the
organizations and their partners in the supply chain. The period when
production was moved overseas, so business can take advantage of cheap labour
is coming to an end, because fast fashion starts competing not only on price
but also on time.

Fashion products are
the most peculiar ones having a short
lifecycle, their sales are comparatively low while the demands are volatile.
Fashion products are created to grab the momentary attraction of the consumer.
As fashion varies rapidly so their saleable time span is also low, only some
months or weeks. The demand for these
products is not stable and influenced by latest trends introduced in movies, events,
by celebrities or any show. The fashion industry is growing eventually and
inclining towards globalization. The extent of competition in this industry is
relatively high.

The fashion benefactors
face a lot of challenges when their
practices focus on low prices and high
response rate to meet up the market demands. The fashion vendors face huge difficulties in selecting the right
products to target their customer’s needs
and wants according to the season and other factors (latest movies, celebrities
trends, events). The only way solution to
this problem lies in understanding the market intensively and delivering them
at the right time. for instance, garment
manufacturers will understand the new market trends in offseason and launch their products one month
before the arrival of the season to gain
competitive advantage. Along with in time delivery the management needs to
survive in the rigid environment, for that purpose they need to develop
effective supply chain strategies which deliver products quickly.  An improved supply chain agility and speedy
response rate will enable the retailers
to survive and cope up with the industry.

For formulating
effective procurement system, certain reforms existed aiming to develop them
functionally strong. This system has undergone
the legal framework for maintaining effectiveness. In successful organizations, the need for well-established
procurement system is becoming an essential factor in performing delivery operation effectively.

 

During the economic or financial or any other crisis, the
organization strive to survive by reducing the costs, in that condition
procurement department plays an important
role to achieve strategic objectives and stabilize the performance of the firm.

 

Being close to the customer has always
been a goal of any market-oriented business, but in fashion retailing it is
vital. Successful fashion retailers capture trends as they emerge using a
variety of means. Point-of-sale data is analysed daily and is used to determine
replenishment requirements where the intention is to continue to make the
product available. Often though the selling season is only intended to be short
and product will not be replenished, in such situations the data is used to
analyse trends.

Product and technology life cycles are
likely to continue to shorten, while demand will be increasingly difficult to
forecast. Decision about raw materials must be taken long in advance and still
remain the most risky part of agile supply chain. Customer behaviour has
changed and nowadays buyers want to see frequently new stile Fashion products are the most peculiar ones having a short
lifecycle, their sales are comparatively low while the demands are volatile.

This is clearly result of the new buyers
behaviour, clothes are not used anymore to protect body from cold, but to
accompany a persona style and support aimed personality appearance. All these
facts play a key role in the new relationship between retailers, suppliers and
consumers. Supply Chain Management (SCM) is the success factor in fast fashion
business. It deals with suppliers, with supplier’s suppliers, with customers
and sometimes even customer’s customers. It looks at the process from raw
materials origin to customer consumption. The output of supply chain is not
just a physical product, but a combination of time, place, form and function of
a product/service proposition. In the fashion world, where companies are
competing on time (time-to-market) the need of new abilities are raising.
Agility is such an ability that responds rapidly to unpredictable changes in
demand.

Agile Supply Chain ASC is a “quick
response, describe shorter, more flexible, demand driven supply chains. ASC is
driven by information such as market data and information-sharing between
businesses in the supply chain. In agile supply chains, the visibility of
information allows the supply chain to become more responsive to changes in
demand in the market place”

Agile supply chain has a number of
characteristics. Specifically the agile supply chain is:

· market sensitive – it is
closely connected to end-user trends

· virtual – it relies on
shared information across all supply chain partners

· network-based – it gains
flexibility by using the strengths of specialist players

· process aligned – it has
a high degree of process interconnectivity between the network members

In an agile network, process alignment is
critical and is enabled by the new generation of web-based software that
enables different entities to be connected even though their internal systems
may be quite different. Now it is possible for organisations that are
geographically dispersed and independent of each other in terms of ownership to
act as if they were one business. In the fashion business there can often be
many different entities involved in the process that begins with product design
and ends with the physical movement of the product onto the retailer’s shelf.
Co-ordinating and integrating the flow of information and material is critical
if quick response to changing fashion is to be achieved. In conventional
fashion supply chains, it can take twelve months from product design to the
final sale. By contrast by creating ‘virtual teams’ across the network where
information is shared in real-time, a much higher degree of synchronisation can
be achieved

 

Fashion products
are created to grab the momentary attraction of the consumer. As fashion varies
rapidly so their saleable time span is also low, only some months or weeks. The
demand for these products is not stable and influenced by latest trends
introduced in movies, events, by celebrities or any show. The fashion industry
is growing eventually and inclining towards globalization. The extent of
competition in this industry is relatively high.

The fashion
benefactors face a lot of challenges when their practices focus on low prices
and high response rate to meet up the market demands. The fashion vendors face
huge difficulties in selecting the right products to target their customer’s
needs and wants according to the season and other factors (latest movies,
celebrities trends, events). The only way solution to this problem lies in
understanding the market intensively and delivering them at the right time. for
instance, garment manufacturers will understand the new market trends in offseason
and launch their products one month before the arrival of the season to gain
competitive advantage. Along with in time delivery the management needs to
survive in the rigid environment, for that purpose they need to develop
effective supply chain strategies which deliver products quickly.  An
improved supply chain agility and speedy response rate will enable the
retailers to survive and cope up with the industry.

The procurement
system endeavors with multiple changes across the world. They changed from
responsive activity to strategic type. To cope up with the growing procurement
activities and improved procurement performance. For formulating effective
procurement system, certain reforms existed aiming to develop them functionally
strong. This system has undergone the legal framework for maintaining
effectiveness. In successful organizations, the need for well-established
procurement system is becoming an essential factor in performing delivery
operation effectively.

During the
economic or financial or any other crisis, the organization strive to survive
by reducing the costs, in that condition procurement department plays an
important role to achieve strategic objectives and stabilize the performance of
the firm.

The procurement
system should also be based on the value of money and the time value of money
to identify the depreciation or fulfillment of costs in the specific time
period while purchasing any asset. They need to understand the optimum mixture
of lifetime cost and fulfillment of the customer instead of initial price. In
order to acquire organizational objectives and goals the procurement system
must be effective and efficient and should have a supportive relationship. An
effective procurement manager will view the potential niches of the market and
design unique and innovative source models which support them to leverage their
cost structures. In every organization, there are certain standardized
procurement procedures for the purchase of goods and services. These standard
procedures cover all the characteristics and prospects of the procurement
cycle, such as recruiting the supplier, selecting of the vendor, cost
negotiations, contract discussions, order placements, payment schedules and
delivery services.

The effect of
procurement can be identified by understanding the extent to which the
procurement system is achieving their goals and objectives with minimum costs.
The main aspects of procurement performance are effectiveness and efficiency.
Procurement effectiveness is the span to which the past goals and objectives
are being acquired. Means the connection of actual and planned performance of
an organization. Whereas, procurement efficiency is the connection between
planned and actual resources to understand the goals and objectives and the
activities related to them.

The coherent methods of performance of the
procurement function in public entities, particularly in developing countries,
has never been as sound as it is now. Delaying will worsen the already
deteriorating performance, loss of professionals, and organisations will
continue incurring unnecessary costs. However, it is important that appropriate
performances are implemented. It should not be any performance. The issue of
basing on financial performance and neglecting or ignoring non financial
performance is not helping the procurement function because only partial
performance is considered.

Procurement
efficiency is the relationship between planned and actual resources required to
realize the established goals and objectives and their related activities,
referring to the planned and actual costs. As a result, supplier performance is
the most important procurement performance driver. Measuring procurement
performance is important as the purchasing department plays an ever
increasingly important role in the supply chain in an economic downturn.  Reduction in the cost of raw material and
services can allow companies to competitively market the price of their finished
goods in order to win business. An obvious performance measure of the success
of any purchasing department is the amount of money saved by the company.
Procurement department, like all other departments in a company, is an element
of the overall organisation, which must contribute to the achievement of the
corporate goals. Thus a clear link between the corporate strategy and
procurement strategy is crucial to understand, follow 4 and implement in each
function and action.

Procurement
has always been integral to the performance of an organization. However,
Operational Efficiency Operational efficiency is the capability of an
organization to deliver products or services to its customers in the most
cost-effective manner possible while still ensuring the high quality of its
products, service and support. It is often achieved by streamlining a company’s
core processes in order to more effectively respond to continually changing
market forces in a cost-effective manner. In order to attain operational
efficiency an organization needs to minimize redundancy and waste while
leveraging the resources that contribute most to its success and utilizing the
best of its workforce, technology and business processes. The reduced internal
costs that result from operational efficiency enable a company to achieve
higher profit margins or be more successful in highly competitive markets.
Operational efficiency looks at an organization’s capabilities and performance.
It denotes the organization’s ability to minimize waste
of inputs and maximize resource utilization so as to deliver quality, cheaper
products and services to their customers.

Though
operational efficiency is driven by operational aspects of human resource
management, supply chain management, quality control management, technology
deployed etc, it is also a function of both customer satisfaction and public
perception.

 

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