SUPPLY CHAIN
Martin Mendelsohn
OVERVIEW
Effort was divided in the past year between consolidation of the process changes made during the past two years and preparation for another wave of process changes. All this activity has the ultimate objective of achieving improved stock turn and in order to bring this about, the group is striving to create a world-class model of supply chain management. In the work done so far fundamental aspects of the business as it had traditionally been conducted have already been challenged and, where necessary, changed.
Measurable progress in this ambitious project is shown by the fact that the volume of stock held in the group’s eight distribution centres (DCs) at the year-end was 64% lower than at the end of the previous year. This was almost entirely the result of improvements in process efficiencies.
Various initiatives were employed to achieve this reduction. Among them were improving the rate at which stock is processed through the DCs, changing planning cycles to accommodate shorter throughput time and implementing a conformance programme to ensure that suppliers deliver merchandise when and where it is required. The beneficial results which are to be brought about in the longer term include a more efficiently co-ordinated order management cycle and the ability to react with speed and precision to changes in buying patterns, which are in effect dictated by changes in fashion. The final result, to be achieved in progressive steps over a number of years, is intended to be substantial improvements in rates of stock turn and correspondingly increased levels of profit.
GROUP SUPPLY CHAIN INITIATIVE
Good progress has been made in the group’s four original projects and many of the project elements have been fully adopted by the trading divisions. Every trading division has integrated the supply chain strategies into its own corporate strategies and reports on progress on a monthly basis.
The original four projects are as follows:
Supplier relationship management
Reliability of the supply of merchandise is critical in achieving all of the supply chain objectives. Numerous process changes have been implemented to bring about desired changes in behaviour:
- A more rigorous sign-on process is now in place for suppliers. All potential new suppliers are directed to the Group Merchandise Procurement division, which screens them and recommends action to the internal buying division.
- An audit process for suppliers has been piloted with five of the group’s top suppliers. Details of this process will be finalised in the next year.
- An in-house quality measurement system has been developed and has been integrated with the supplier scorecard. This system measures adherence by the supplier to the group’s performance standards – including ethical, labour and environmental issues – and enables better reports to be provided by the quality assurance team.
- Reporting on delivery conformance and on cost recovery has been in place for the past six months and has yielded a 10% improvement in logistical conformance.
- A supplier scorecard has been piloted and will be rolled out to all local and international suppliers from July 2010.
This increasingly rigorous assessment of both potential and existing suppliers will yield greater reliability, improved risk management and better-informed sourcing decisions.
Pipeline
The group is strategically well positioned to take advantage of local sourcing through vertical integration of its manufacturing wing, the TFGA division. The operational capability of TFGA has been further enhanced and a comprehensive measurement system has been firmly established.
While pre-season lead times have been further reduced by 10% in the past year and now stand at 130 days, the focus has also moved towards in-season trading on a commercial basis. It is believed that both of these initiatives are critical in better responding to consumer demand.
The group’s fabric management process has also been substantially enhanced through tighter controls. The structure has been reviewed and supplier measurement systems have been put in place. Further gains are envisaged in decoupling strategic fabric procurement from garment styling, to support in-season trading. Targets are being reviewed and reset for March 2011 forward.
Lead time
This project focuses on the logistical processes between supply and delivery to store. Lead-time gains already achieved have been consistently maintained over the past 12 months and the main elements are fully operational and are entrenched in standard operating procedures. This project will now focus on only those specific elements where further time can be saved.
Replenishment and holdback
The clothing divisions have continued to manage the process of obtaining replenishment items by the use of technology which limits opportunities to maximise the benefit of replenishment programmes. A new forecasting and replenishment system is in the process of being procured.
With the roll-out of the new warehouse management system, part orders can now be allocated selectively with a view to maximising allocation efficiency. This will ensure that the distribution of each order aligns more closely to consumer demand. The Markham and exact! divisions are piloting this process and initial indications are that there have been improvements in sell-off rates.
