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4.8.1. Globalisation as a Barrier to Agility in the Fashion Industry

Developing agile, demand driven networks able to constantly adapt to changes in the market place is becoming difficult with the continuous shift of garment and textile manufacturing away from the UK to low-cost production locations such as South-East Asia, Eastern Europe, Central America, Northern Africa, etc. Retailers now have access to a much larger supplier base, offering not only low labour costs, but also a highly skilled work force and proximity to developed textile industries (Buxey, 2005).

However, previous studies have highlighted that the major trade-off in global sourcing is between the responsiveness of the supply chain and its cost efficiency. Agility is very difficult to achieve as far as global sourcing is concerned (Jin, 2004). Given the need for speed and agility in the fashion industry, time expansion of the supply chain is not only undesirable, but results in an erosion of competitive advantage and, as such, the significance of technological developments as a means by which both cost benefits and time gains can be achieved has been the subject of much recent literature (Perry and Sohal, 2000; Birtwistle et al., 2003; Christopher et al., 2004). Christopher et al. (2004) furthermore, caution that there may exist hidden risks associated with offshore suppliers, such as unstable exchange rates and inflexibility, which can ultimately affect the efficiency and effectiveness of fashion supply chains

The dilemma is that global sourcing can reduce the production cost, but cannot simultaneously ensure agility. Therefore, apparel manufacturers need to establish strategies that optimally mix global sourcing and domestic sourcing to achieve agility and cost benefit simultaneously. Jin (2004) notes that in a lean

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retailing world, agility, the ability to respond quickly to changing customer needs, has become a critical factor in sustaining a competitive advantage. Lean retailing makes manufacturing firms that utilise a global sourcing strategy face the dilemma of balancing the benefits of cost effectiveness with the benefits of agility. That is, by sourcing globally, firms can reduce production costs, but may not be agile enough to meet retailers’ needs on a timely basis.

Figure 4.1. has illustrated that the apparel products have varying levels of fashion content, which will determine their season length. This will ultimately impact on where retailers and, further up the supply chain, their manufacturers and fabric providers, will source their products from. At one end, for basic products, with longer shelf lives, the physical costs are likely to represent a major part of the total potential costs. Like most of the labour-intensive industries, a natural choice of production venue is the developing or underdeveloped countries, where wages are substantially lower (Sen, 2008). Due to the long replenishment times, Subrahamayan (2000) highlighted that initial orders constitute anywhere between 60% to 100% of the total order in a given basic product category, leading to large inventory holding costs. At the other extreme, for high fashion products with much shorter life cycles and higher market mediation costs, the retailers will seek responsiveness when making their sourcing decisions. This will give domestic manufacturers a huge advantage (Sen, 2008).

As such, companies operating in the fashion sector may use a combination of domestic and overseas sources of supply, which would allow them to provide a customised response to the needs of the marketplace. However, this would dramatically increase the complexity of their supply networks, which might affect the extent to which the agile supply chain practices identified in Chapter 3 have been adopted.

4.8.2. Network Complexity as a Barrier to Agility in the Fashion Industry

In search of the right set of skills and cost saving opportunities, the sourcing network of clothing retailers is now spread over a large range of countries and

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regions. Corroborated with the rapidly reconfigurable nature of the clothing supply networks and arm’s length relationships discussed in the previous sections, this raises the particular issue of complexity in the fashion supply chains and its possibly negative impact on managing the supply network and fostering collaboration and information exchanges between the network players.

The literature supports the view that the more complex the supply chain, because of the large number of different suppliers used in a global sourcing context, the less adaptable it becomes. While a larger and more varied supply network may be sought to improve the product range dimensions of agility, this leads to increased complexity which is counter to improving supply agility and other aspects of supply performance (Milgate, 2001; Prater et al., 2001). The shift to offshore sourcing, according to Ohmae (1989), is a necessity born from the ongoing need for cost management (Doyle et al., 2006). However, in doing so, the supply chain, while benefiting from advantageous cost structures, becomes increasingly complex to manage, not least in respect of supplier selection, evaluation and management (Vokurka et al., 1996; Doyle et al., 2006; Cebi and Bayraktar, 2003). Prater et al. (2001) highlighted the fact that international supply chains are now complex, dynamic systems that are subject to large time-lags and variability in delivery. Complexity may also arise here from physical distances. Long distances usually increase transportation and order lead times (Stank, 1999) and decrease the reliability of demand forecasts (Ho, 1992). This, in turn, increases the uncertainty with respect to production schedules, orders to suppliers, and the likelihood of meeting demand (Swenseth and Buffa, 1991).

In Chapter 3, the importance of process integration to enhance agility was highlighted. Controlling the interface between textile suppliers, offshore manufacturers and domestic retailers goes beyond mere logistics management, adding complexity to otherwise discrete firm specific activities (Taplin, 2006). Highly complex logistical networks potentially imply that more resources and effort are required to synchronise and coordinate activities within the network (Meepetchdee and Shah, 2007). And as greater levels of coordination and more information and business processes for decision making will be required, this

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also implies higher costs under higher complexity (Meepetchdee and Shah, 2007).

Some authors have advocated a range of approaches to solving this issue, for example focusing on reducing supply complexity by restructuring the supply chain (Prater et al., 2001; Hoole, 2005), trying to manage it better (Meijboom, 1999) which might require the implementation of costly coordination mechanisms (Prater et al., 2001), or simply trying to avoid it altogether (Christopher, 2004). However the geographic separation of the supply chain elements, increasingly prevalent in international operations, and the very wide network supplier base required, may challenge these approaches. It follows that the supplier network complexity in this industry presents a series of problems that might impact on supply chain performance, particularly collaboration and communication between the network players. Indeed even before widespread off-shoring in the fashion industry became apparent, studies reported, as highlighted earlier on, that this was already a major issue in the industry.

Prater et al. (2001) conclude that in supply networks exposed to a high level of vulnerability, their inherent complexity essentially limits the degree of agility that they can and should attempt to achieve. While some previous research deals with complexity issues pertaining to general logistics (Harland, 1996; Lamming et al., 2000; Choi and Hong, 2002; Danese et al., 2004), the results of that research are not always applicable to planning an agile international supply network.

It follows that in order to be successful in the market place, fashion retailers have either opted to reduce the level of complexity and uncertainty of their supply networks, or identified mechanisms through which they can increase their speed to market while managing increasingly complex, global networks.

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4.9. Summary

The role of this chapter was to provide an overview of the UK fashion sector and supply chain management practices that have been adopted by the sector. The main research question was also introduced here (‘How do companies operating in the UK fast fashion market sector achieve high levels of agility?), as well as some of the challenges anticipated in answering it, such as the fact that the sector is characterised by extensive globalisation and high levels of supply networks complexity, which have been previously reported as acting as a barrier to agility.

The following chapter provides an overview of the methodology adopted in order to answer this thesis’ research question.

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