Un descontrol ideacional

The previous section focused on describing how intermediaries act as coordinating hubs, identifying spare capacities in a timely manner, integrating information and material flows and synchronising supply chain activities. We also identified a significant alternative and different set of players that we have called Integrated Service Providers. These were very large organisations offering full in-house services from new product development through manufacture to logistics and delivery to the retailer’s warehouse. For example, one such Chinese integrated service provider employed over 4,000 people and produced over 1.5 million garments a month in a vast 180,000-square-meter

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facility. It also had similar facilities in other Asian counties and was the largest apparel manufacturer listed on the Hong Kong stock exchange. It was here that we found the most advanced production facilities, a world away from the often very basic facilities we saw in some of the smaller manufacturers.

The company differentiated itself through a "design-to-store" business model committed to take full product ownership, from the design stage until the products reach the stores, although in reality this meant the retailer’s distribution centres. The partnerships with customers/suppliers could start from the very beginning of the product life cycle, spanning the entire supply chain from product development, research and laboratory centres, multi-product and multi- method production lines, advanced inventory and warehouse management systems that allowed flexibility and multi-faceted packing capabilities, and logistics services with customer integrated IT systems that tracked the products from the production floor directly to customers’ distribution centres.

Customers could get assistance in any area of product development including product design, raw material selection, and sample development. The objective was to simplify and shorten the product development cycle and with the integrated service provider this could be completed in less than a week. The ability to make changes quickly and at the last minute, complete product samples and then begin full production runs much faster allowed fashion retailers to get new styles into stores faster. Samples, for example, could be developed for the European retailers in 24 hours.

‘They may sit in our dedicated office, they work with our merchandisers, and then develop what they want, and then take the sample when they go back to their office. All this while others come to Asia, shop around, look for suppliers, and then chase them up to get a first sample, second sample and so on. This is a big improvement. Because otherwise it would take them weeks just to get a sample’ (Integrated Service Provider).

For full orders, manufacturing lead times varied, depending on volumes, product complexity, level of service required. Orders coming from retailers with which they had long partnerships in place got priority over those from ‘on-off’ customers. There was no minimum order quantity and volumes of 200-300

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items per order were the norm. For these volumes, production could be completed in 2-3 days once the raw materials had been received, to give somewhat shorter overall lead times than the intermediaries could manage. The customer was allowed to, and indeed did, make as many changes as it wished, up to the point where the raw material had been cut.

Normally, fabric suppliers were nominated by their customers, but since the integrated service provider had taken a proactive approach in servicing their customers, it also provided them with choices of such suppliers. The process called for accreditation, which meant the supplier had to be able to meet specified quality standards. Different raw materials had different lead times, with knitted products being mostly purchased from stock while woven products would take longer longer. The raw material lead time would, however, never exceed more than 3 to 4 weeks if it was made to order. The same situation applied to trims and accessories. Standard products, like simple, basic buttons, with no special marking or design could be obtained in 2 to 3 days, as they were made to stock by most of the manufacturers. Other had longer lead times, as the fabric needed to be ready first and the accessory manufacturer would dye the product according to the fabric colour. In this case the entire process might take another 1 to 2 weeks.

Most of the garment manufacture took place in-house. Autonomous production cells, state of the art equipment and well trained personnel gave the enterprise the flexibility required, with change-overs taking just over an hour.

If extra capacity was required or if the customer wished to, production could be outsourced to partner-manufacturers located both in China and in the nearby countries. In an effort to assist their customer further in their search for low cost manufacturing locations, the integrated service provider actively invested and helped develop apparel producers in locations such as the Philippines, Taipei, Honolulu, to where it could easily switch production for high volumes, long lead time products. Quicker but more expensive than the intermediaries, and always offering better quality because of the superior facilities and training, they did offer the view that they would in future prefer to outsource much of their in

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house manufacturing capability, while still retaining the focus on the design to store capability.

The company also offered to their big customers the option of locating a permanent office on their premises, to which it would dedicate teams of designers and engineers. Big Western retailers had their new product development offices permanently located on the integrated service provider’s (ISP) facilities. They could select the services they wanted from a local ‘supply chain menu’, keeping designers close to production and supply base and, as such, cutting development time and improving communication. This also allowed the company’s employees to learn about client expectations for materials, styles and costs. The retailers thought of the ISP as their own manufacturing division, and in order to make this concept work visibility and trust were needed from both parties. As such, the integrated service provider had two main types of customers: those for which it had dedicated production facilities, from which it asked for a minimum advance commitment, and those that were using the rest of the available capacity. They wouldn’t pre-book capacity in advance for these customers, however, those with which it was working with on a frequent basis would be given priority.

Of course, different customers operated in different ways, with some contacting the ISP only after the final product sketch had been completed and the fabric and accessories suppliers selected, and they would only request the manufacture of the product and delivery to a specified location once production was completed.

‘We have to buy materials from this, accessories from this. No choice, we just follow the instructions’ (Integrated Service Provider).

On the other hand, some customers would come along with an ‘idea’ of a new product and request assistance from new product development to final delivery. These were the customers for which the integrated service provider felt it would add the most value, cutting the completion of an order, from concept to store, from what used to be 20 weeks or even longer to just over 4 weeks, depending, of course, on the volumes requested, type of delivery, etc.

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Once production was completed, it would be delivered to Hong Kong, from where it was shipped or flown to its final destination. The company did own its own logistics capability, including trucks used for local deliveries and three 737 cargo plains flying between Hong Kong, Japan, Taipei, Honolulu, where some of their customers and suppliers were located. They also had shares in some companies transporting between Hong Kong and China, their most frequent route, and also outsourced to external companies. A Hong Kong distribution hub was also owned, which was used as a consolidation point before delivering further. Advanced technology such as RFID tracking tags were tested here with some of their main customers, to increase visibility along the supply network. In an effort to assist even further their customers, a Fabric and Trims Innovation Centre (a collection of latest development samples from 16 partner textiles and accessories manufacturers) and a Design and Research Centre (a team of graphic and fashion designers and trend ‘spotters) had been set up. Here, customers could get assistance in any area of product development including product design, raw material selection, and sample development. The objective was to simplify and shorten the product development cycle even further. Cost analysis facilities were also available, in which industrial engineers can calculate total supply chain costs, costs of adjustments, etc. A Fabric Testing centre was also developed. If the average product development time used to be over a month, with the integrated service provider this could be completed in less than a week.

The ability to make changes quickly and at the last minute and complete product samples and then full production runs much faster by using the integrated service provider allowed fashion retailers to tackle one of their biggest weaknesses: getting new styles into stores faster.

6.7. Summary

This chapter has presented an overview of supply chain management practices adopted by the companies under study. These findings will be further analysed against the framework developed in Chapter 3 in the following chapter.

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