|Module Number: MO0358 | |Strategic Supply Chain Management | |(Individual Project) | INTRODUCTION 1. 1 Objective “Supply chain management = Order to Cash. As my group project is about Burberry supply chain management so I would like to further explain it here and show you how Burberry successes after apply supply management. 1. 2 The Background of BURBERRY
BURBERRY is established in London, United Kingdom in 1865 by Thomas Burberry. The Business concept of Burberry is “Fashion & Luxury”. At the end of 2007, Burberry started supply chain management in their business and hope that can delivered luxury and lifestyle product to customers at more than 208 concessions within department stores and digital commerce, plus 44 outlets and 192 mainline stores over the world and Burberry employs more than 30,000 people to operate the business smoothly.
Burberry offers fashion for women, men, and children, also sells their own-brand beauty, cosmetics and perfume. Burberry has own factory at London Castleford but just produce trench coat and some core items. And now Burberry buys its goods from around 100 independent supplies, mostly in Asia and Europe. Burberry corporate with suppliers to develop long-term, sustainable social and environmental standards in the factories for produces Burberry high quality products. Burberry reaches the customers through two sales channels: stores and online.
The store is the most important for Burberry as the customers can see the product, try it on and feel the products. Burberry is expanding their business new offerings and via new channels such as internet/ online business, the advantages of offering new channel are customers able to shop online, it can to let customers have the freedom of choice to choose the sales channel that suits customer best at that moment. Burberry stores are spread all over the world. It can be found in United Kingdom, Europe, North America, the Middle East and Asia.
And according to their annual report China will be their very critical regions for their business so Burberry plans to establish more stores in China in the coming year. Burberry is growing not only by turning to customers in new stores and new places. It is at least equally important that the company continually develops. Their fashion categories are including menswear, womenswear and childrenswear. Fragrance & beauty category was in the leading position of the Asia market two years ago. Accessories category contains eyewear, scarves, watches and bags. Supply chain management
According to Mentzer, et al (Ballou, 2004), “Supply chain Management (SCM) is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purpose of improving the long-term performance of the individual companies and the supply chain as a whole “(p. 5). In order to balance end customers’ demands and the hit for profitable growth, Burberry has moved aggressively to build an efficient and successful supply chain management an efficient and successful supply chain management system.
It must have five basic components that are considered and acted upon. These components can help to enhance revenue, control costs and asset utilization as well as customer satisfaction. They are including planning, sourcing, make, delivery, and return which is same as the supply chain of Burberry flows from ideas and design, production, distribution centre, call-off, store, finally to the customer. In this paper, each of these components will be discussed in the following paragraphs. 3. 0 Planning First step of supply chain management is planning .
The planning component is critical to the success of a good supply chain management system. Therefore, from Burberry year annual report, we can see Burberry do reviews their brand performance of business each year and well plan for next year. Also they will review by each season to make sure everything planned are on tracked. Refer to Burberry 2007 annual report we noticed they mentioned will start supply chain management and also put a lot of money to buy SAP system as their only platform of their system in order to bring Burberry business to globalization.
It shows the main objective to any strategy a business industry chooses should be to have materials available at all times in order to ensure the smooth flow of care for their business while keeping costs under control. At the beginning of season, Burberry sourcing team and product development, quality control, designer , merchandising planning and buyers will have big meeting to review what the trend is , product and material will be launched for next season in order to plan the strategy.
Buyer also will give souring team an approximately order quantity for souring team to give factory in order to prepare raw material, trims… etc , to shorten lead-time and to have materials available at all times in order to ensure the smooth flow of care while keeping costs under control. 4. 0. Sourcing 4. 1. Raw material Burberry applies cost management and quality control monitor in their supply chain system; Cost is the key factors determining Burberry more successful in the fashion changing market. ” The raw materials are sourced locally in different regions for example: China, Korea, Thailand and Japan.
Benefit is can save the transportation cost and expenses with similar quality. Burberry souring team will negotiate the cost with supplier by using long term business, letter of credit and payment in time in order to make sure they can have better price to hit target. However, product quality will be enhanced in terms of through sourcing better production technologies and new materials internationally. The purposes of sourcing are to know or explore more new suppliers with advanced Garment Production System/ Technology which able to accelerate the production speed so that shorten the lead-time.
In addition, that strategy can stimulate the inter-specific competition among the existing suppliers by the importing new suppliers. Existing suppliers will contact Burberry actively and offer the attractive conditions with the aim of getting Burberry orders. That is the most effective method controlling the price and maintains the high product quality of global souring 4. 2. Quality Control Burberry is a luxurious brand in fashion industry and in order to maintain high quality products to their customers, all suppliers and manufactures are needs to meet AQL (Acceptable Quality Level) standard with 2. requested by Burberry. AQL 2. 5 means if an order is 10,500 units, they want a 2. 5 AQL they can have 14 defective units or less from the 315 that they inspect. Moreover, suppliers need to submit lab test report to prove quality sell to Burberry are good and no harm for customer . To provide good quality material for making high quality final goods, Burberry based on china garment rules and international standard to make a standard and all supplier need to follow it to do the testing, if fail in the testing result, suppliers and manufacturers might be cannot carry on or allow to process orders in the next season.
Burberry QC team will also regularly by month or by week to inspect supplier and factories in order to make sure their provided product can meet Burberry standard. However, even AQL (Acceptable Quality Level) standard with 2. 5 and lab test report applies on all Burberry products and AQL 2. 5 is very high standard but still have defective items can be found . 5. 0. Make Under supply chain strategy, the process of “Make” is to provide high quality products in lower cost, so that Burberry can save the cost to gain more profit. 5. 1. Co-markership
Burberry has their own standard on selecting raw material suppliers, which also limited the number of suppliers, this can help them to have a better control on the product quality. Burberry has more than 200 independent suppliers for outsource the production. Burberry has good reputation in maintaining the relationship with all suppliers, by producing Burberry luxury product, stable order volume, guarantee payment and letter of credit etc. Furthermore, Burberry always communicates and reviews the action plan with suppliers every season.
To enhance the relationship with suppliers, the key factor is to have a good coordination and linkage with them. Burberry frequently provide training program for vendors, in order to maintain their production standard. What is more , Burberry has a regular appraisal to suppliers, which provide feedback to suppliers for better improvement. The production sites of Burberry are global sourced from over the world such as China, Turkey, Thailand, Macau, Singapore, Portugal, Romania and Hong Kong.
The advantage is to essentially cut down the labor expenses, with the bulk production so that enhancing Burberry at the competitive position in the global fashion Industry by maximizing the margin of profit to the fashion business. For selecting new vendors/suppliers for cooperate business, Burberry has carries out auditors (internal and external) to evaluate the supplier’s qualification before cooperating The criteria including lead time, quality, quantity, safety, guarantee, availability and flexibility etc, especially Corporate Social Responsibility (CSR) standard.
Any supplier cannot approve by Burberry CSR team, Burberry will not allow that factory to produce their product to ensure Burberry product meet on high quality and corporate social responsibility. However, Burberry is not easy to find qualified supplier because Burberry respect the rules and some developing countries cannot meet Burberry regulation such as safety working environment, labor children, illegal pay and abuse , these problems are always found in these countries.
Moreover, safety working environment, healthy and compliance with local environmental legislation also are the other challenges for Burberry because they found that most developing countries do not formulate the occupational safety and health regulation and environmental organization. These countries do not install the legitimate fire device in the factory or build up a health and safety working place for the staffs, it absolutely disobey the rules of Burberry. Brand image will be also affected by these negative news.
When souring new supplier Burberry facing the political environment problem. For example in Thailand, they do not have a stable business environment. The anti-government demonstration caused the Bangkok city in turmoil. It made factory cannot ship out any goods from the airport. As long as riddled with corruption, unstable public security, terrorism and robbery always happened. We can see that these factors might not provide stable business environment for producing Burberry product. And Burberry also will consider kind of factors to choose supplier.
To solve these problems, I would like to suggest Burberry don’t put all orders in 1 supplier in order unstable conditional happen again. The fighting sources with competitors as also one of the challenges for Burberry as Burberry share some factory‘s capacity with others fashion brand for example: Polo Jeans, Armani exchange, Marks and Spencer, Gap and J. Crew etc. Therefore, Burberry needs to keep a good relationship with all suppliers to ensure sufficient providing source. 5. 2. Outsource Burberry has 3 global licensing agreements of fragrance and beauty (by interparfums), watches (by Fossil) and eyewear (by Luxottica).
In order to make sure the quality of non-apparel products are in a high standard, all licensing can provide professional knowledge and technology of product and it can helps Burberry reduce cost on innovation for non-apparel products. Burberry sourcing teams, quality control teams and CSR team work closely with these partners on product development, quality control, CSR, marketing and distribution activities, and will conduct regular reviews to ensure compliance with the term of its license agreements.
Outsource for Burberry is very important because Italy’s fragrance and beauty is expertise because they have long history in this field so it is the best in the world, the eyewear technology in Guangdong, China is the best and reasonable. Hence, Burberry enables to sell the licensing to them in order to maintain better quality. 5. 3. Information System – SAP According to Burberry globalized organization, Burberry has 444 worldwide retail shop and over 31 countries operation. Therefore, different parties will create a lot of information of product.
Burberry supply chain system is a technology that to improve information to become more systematic. Started from 2008, SAP is the only system platform for Burberry; it can help to collect information, data and share within the organization. It also can monitor the delivery schedule to ensure everything are on tracked. SAP system is the market and technology leader in business software solutions, providing comprehensive business software through SAP applications, services and support. SAP can manage system and analysis at the same time, It helps Burberry to draw data and use this platform to do an analysis of brand performance.
This information can help making decision by the management team to increase competitive advantages, such as production life cycle analysis, raw material forecasting, marketing planning and inventory review. So that everything can be counted and measured by using SAP system. Famous and international company would prefer using SAP system, as these company has different branch office over the world. By using SAP system can help they no limitation on different district. 6. 0. Delivery Transportation is one of the main processes of delivering and distributing goods.
It may involve more than one place during the transportation, such as place to store and place to sell. 6. 1. SAP system In Burberry, SAP provides a systematic format to handle information transmission, and it brings a dramatic impact to Burberry. For example, SAP system has an accurate control on the raw material lead time, which means factories have plenty of time on mass production; consequently, it reduces shipment delay. Furthermore, due to the well control on the production period, Burberry has plenty of time to ship the goods by sea instead of air.
The most obvious outcome is the reduction of logistic cost. 6. 2. DHL 3rd party Moreover, Burberry is in collaboration with DHL 3rd party global to in charge of final goods delivery. They are responsible to collect final goods from different factories, and providing direct delivery service to relative DHL Global center (UK, USA, Spain ,HK), then they distribute the goods to local retail stores. Due to this professional & tailor-make service provided by DHL, Burberry reduces the need for warehousing at destination, which means this part of expenses can be reduced.
Even though worldwide retail shops and operation offices are closed after work, DHL can provide 24 hours logistic services and its reliable customs clearance, which can help to speed up the delivery process, so it can secure the delivery time. For example, new product can be launched in the retail store in time, quick move inventory to distribution centers by special requested. 7. 0. Return Nowadays customer would like to have a pleasant shopping experience, they all don’t like to return to retail outlets or companies. Customers want to have sales approaches, lowest price and friendly service for every product.
Consumer prefers more and would like to shop at one stop shopping centers. Burberry is using some of the supply chain techniques to cut costs like given vendor to manage the inventory by using inventory tracking and sales in individual stores and cross-docking fast-moving items. Now, Burberry has more convenience, selections, and reasonable price 8. 0. Conclusion In my opinion , Burberry applies “supply chain management” is a important and correct direction because it can offers a great deal of benefits including sourcing , reduce cost , quality control, product category and quality advantages to Burberry fighting with its competitors.
In refer to Burberry annual report, their business are going up and up. It is very vital for Burberry continuously maintaining high reputation . As well as Burberry are facing some competitions in sourcing suppliers directly , so needs to find others or potential suppliers to cooperate To ensure the good relationship between supplier with better price, Burberry should keep the stable and regular ordering in long term. This could highly enhance its bargaining power.
In order to having the good quality and lowering the cost (to enjoy more profits) at the same time, Burberry need to do more research on finding good suppliers and manufactories in different countries. Even it has long historical experience; Burberry should keep doing research and catch up with the new/ latest trend Burberry also need to shorten the lead-time from the process of supply chain progress . In order to meet the demand and needs in the future. I think that Burberry need to shorten the lead-time of manufacturing and transporting time such as pre-book some raw material.
In constant, the challenges of global sourcing are some uncertain factors need to be manage and consider in selecting the suppliers from different country, e. g. political environment, country’s textile quotas and exchange rate. To manage those risks, the top management requires long term perspective in defining the company’s goal and strategy. In order to implement global sourcing successfully, it also requires the experience and commitment of the management in managing the risks and understanding the foreign regulations.
In addition, H outsources all the production to over 200 suppliers, Burberry needs to maintain the good and long-term relationships with all the existing suppliers. Despite it is rich in challenges and difficulties when conducting sourcing globally. Social Responsibility is one of indispensable factors to be considered. Balancing Social Responsibility and Business Benefits is the real challenges for Burberry If Burberry does not manage its supply chain correctly, it would lose profits because they are providing products at lower costs than its competitors, so they must also receive lower prices from its suppliers.
Therefore, the supply chain of every company should not be overlooked as it may lead to a loss in profits, revenues, and even the company itself. 8. 0. Reference Burberry Group Plc. (2012, Nov 09). Retrieved from Burberry – Iconic British Luxury Brand Est. 1856: http://www. burberryplc. com/ Chan, Chi Kin, and Lee, H. W. J. Successful Strategies in Supply Chain Management. Pennsylvania: Hershey, 2005. Chopra, Sunil and Meindl, Peter. Supply Chain Management: Strategy, Planning, . New Jersey: Upper Saddle River, 2007.
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