Supply Chain Management

According to Slack (2007), supply chain is series of operations between origins of

products or services and end customers, which transform (assembly, merging, etc.)
an input (usually raw material) into an output (final products); supply chain
management (SCM) aimed to satisfy end customers needs at competitive cost
through managing these operations to achieve improvement in 5 operations
objectives (speed, quality, cost, dependability and flexibility), make sure each
operations can satisfy its own customers and also end-customers regardless of their
position in the supply chain. SCM involves decisions like what capabilities/operations
should be outsource or develop internally, the location of firms' operations and the
management of overall long-term capacity

In conventional fashion industry, each supply chain members relationship is loose,

they used to run their business separately without information sharing and schedule
production based on their own forecast (Lee and Kincade, 2003); lack of information
sharing on actual demand and operational differences caused long lead time (6
months) and "bullwhip" effect , restrained the launching of new items to twice a
years (spring/summer and autumn/winter) and causing high level of inventory, and
the risk of each chain members' inventory-on-hand become obsolescence is high.
As a result, conventional-fashion player used to practice a push-strategy (due to
longer lead time needed to introduce a new design)
While fast fashion industry practice a totally different approach in managing its
supply chain, the relationship between each chain is close (Barnes and Greenwood,
2006), many players like Zara often act as a supply chain leader to coordinate each
chain, the close relationship among supply chain members not only enhance the

dependability and flexibility of supply chain, it also allow concepts like QR (Quick
Response) and JIT (Just In Time) to be practice throughout the whole supply chain,
and this effectively shorten the lead time from a normal 6 months to 3-6 weeks
(Palladino, 2010).

Fast-fashion player can introduce new design within short period of time (In Zara
case, 15 days) and the "bullwhip" effect is minimized, consequently, inventory level
is low, so as the obsolescence risk. Short lead time allow practice of pull-strategy
(as shorter time is needed to introduce a new design), which allow better respond to
customers' demand (Palladino, 2010; Ghemawat and Nueno, 2006; Slack, et al.,
2007). The make-or-buy decision, location decision and supply chain time
compression concept can be used to further understands the differences and
similarities between this two industry.
The Make or Buy Decision
In SCM, the make-or-buy decision is used by firm to achieve desired supply chain
performance objective, for example, outsource production to reduce cost or retain
production in-house to maintain high quality (Slack, et al., 2007; Hill, 2005). In
reality, company don't usually produce every service and products in supply chain
that it needed to satisfy its end-customers, as Slack et al. (2007) explained, firms
can choose to buy products/services directly through outsourcing or produce the
products/services by itself through vertical integration along supply chain, firm
usually choose to outsource activities which it had no competitive advantage in and
retain activities which it believe are critical to firms' success base on the order
winner and qualifier of competing market.
In the make-or-buy decision, conventional-fashion industry player prefer outsourcing
to leverage the cheap labour & material cost in developing country to keep their
cost low (Lee and Kincade, 2003), however, outsourcing (especially to long distance
countries) significantly increase lead time, longer lead time means that retailer
must forecast the actual demand few months in advance to place order earlier so
that each collection can be place in store on time.

While fast-fashion industry player like Zara had turn the focus from cost to lead time
through vertical integration, short lead time allow retailer to forecast demand closer
to the time it actually occurs (Ghemawat and Nueno, 2006), consequently, the
forecast is more accurate compare with conventional-fashion industry, therefore the
inventory level is significantly lower than conventional-fashion player, the needs to
markdown or write-off item is minimized, conventional-fashion industry player
averagely had to mark down 40% to reduce obsolescence stock (Neuno, 2009;
Gallaugher, 2008) .

Supply Chain Time Compression

Beside the make-or-buy and location decision, operational efficiency is also an
important elements in SCM, in-terms of improving supply-chain performance, as
Towill (1996) suggest, operations efficiency can be achieved through timecompression, which is speeding up the flow of materials and information within the
supply chain, time-compression would not only improve supply-chain performance
objective (cost, speed, quality, dependability and flexibility), it

also had positive

impact towards firms' profitability (Slack et al., 2007; Towill, 1996; Beesley, 1996).
The fashion market is characterized by its short product life cycle, high volatility and
low predictability (Christopher et al., 2004). Conventional-fashion industry player
design their supply-chain to focus on low material and production cost in order to
improve profitability, but at the cost of long lead time; while fast-fashion player
focus is on short lead time, using time compression strategy to improve their
profitability (Slack et al., 2007; Gallaugher, 2008; Towill, 1996).
Lowering material and production cost regardless of increasing lead time greatly
reduce conventional-fashion player profitability, the reduction in profit even offset
the cost-saving in production and material cost (Gallaugher, 2008); as shown by
Towill (1996) in figure 2.1, short lead time can eventually increase firms'
profitability, that's the reason why fast-fashion industry generally can have a higher
profit margin compare with conventional-fashion industry (fast-fashion industry

player sell 85% of their goods in full price, compare with conventional-fashion
industry 65%) (IIBD, 2010).

Improved Profitability

Consider the characteristic of fashion market, long lead time reduce firms' speed to
market new products and make forecasting become more difficult, consequently,

sales is low as they cannot fulfil customers demand on fast and fashionable
products, the mismatch between forecast and actual demand cause high level of
obsolescence inventory, therefore, they had to discount their products to sell
obsolescence stock, greatly reduce their profitability (Towill, 1996; Christopher et
al., 2004; Gallaugher, 2008).

BMW Supplier
BMWs supplier network makes a major contribution to value creation, quality and innovation
and hence to the success of the BMW Group. Suppliers therefore have a significant impact on
our sustainability performance and the sustainable development of society.BMW work with
around 13,000 suppliers in 70 countries.
The key suppliers are

Brembo: Brake calipers

Thyssenkrupp: shock absorbers and suspension parts
BorgWarner: Drivetrain components, such as clutches
Elringklinger: Gaskets and exhaust system components
Mahle: Piston and cylinder components, valve train systems
Bridgestone: Tires
GKN Driveline: Axle assemblies
Delphi: Battery and electric vehicle charger components
Hirschvogel: Wheels
Magna: Body casting stampings

Bajaj Suppliers
Bajaj auto has approximately 198 suppliers for their raw materials.
Some of the key suppliers are:-

JBM : Frames
MRF & Dunlop : tires
Minda : locks & ignition system
Reinder : headlamps & lights
Endurance : brakes, clutch & Cast wheel
Varroc : Plastic parts & Digital Meter
Max auto components : ignition system and switches
Silco cable :wires and cables
Makino industry : Brake shoes . Brake lining, clutch center

As BMW is supplying to 70 countries, it has therefore a large pool of suppliers as

compared Bajaj, which has a smaller pool with around 200 suppliers currently.