Md.

Sanuwar Rashid PhD Candidate University of Auckland Title of Research proposal:

Research on Product Specific Sourcing Strategies with respective logistics supports to foster the execution of Demand Driven Globalized apparel supply chain management: leading to the success measure of fashion retailing business.
Introduction: As we are now in twenty first century, all retail segments are facing new challenges: perhaps the fashion industries are going to face the most critical situation. Hot trends are created overnight; consumer preferences change frequently, moreover assortment and SKU maintain is the tough job but these are essential for remaining competitive in market. To cope with the demand of fundamentally changing global competition, supply chain partnering issues gaining attention (Knorr et.al., 1992). Analysis by Robert O Knorr - on different sourcing strategies and supply chain excellence- emphasized on new kind of trust based relationship between the manufacturer and the retailer and on redesigned business processes throughout the entire supply chain. Various studies have been conducted to indicate the components of product specific sourcing strategies. (Foirito et. al., 1995). Developed countries belong to devolving countries for manufacturing their textile and clothing related product. Therefore, the various brands of developed countries emerge as branded marketer or brander retailer rather than being branded manufacturer. To make their business process fair and systematic, they use to follow different type of strategies on the basis of product type, lead time, costing and the forecasting of upcoming season. Whatever the considering factor is, the goal and vision is the customer satisfaction for every fashion companies. Customer satisfaction is that matter which is not only related with profitability but also the long term reputation of the company belongs to it (Dag Erricssion, 2003). Aims & Objectives of Research: Since the industrial revolution in early 19th century, we have touched the milestone of modernism. And from early modernism to post modernity, industries have gradually moved towards consumers need and wish. As an example, we can recall the memory of T-model Ford car having only black color. Henry Ford wrote in his autobiography Any customer can have a car painted any color that he wants so long as it is black. Nowadays, consumer deserves to have things as per his wish. It means that mass marketing is replaced by mass customization. Therefore, the demand driven supply chain issues are gaining the attention of scholars which is not limited into grocery sectors anymore. I wish to dig deeper in my doctoral research on the following areas: Investigation on the approach of supply chain, whether it is lean agile or leagile, while

the product is specified by fashionable or functional clothing products and accessories. Western counties use to source their products from offshore region or nearby region. For two different choices, respective sourcing strategy will be Tradition or Quick response. What is more, Vendor manage inventory can also be a choice for short term or seasonal business. There is a scope of research on how these approaches of supply chain can be synchronized for the optimization of the performance of retail business (eg: service level). Investigation on the critical success factors of fashion retailing while the product is specified by their life cycle (short/ relatively long) and its correlation with different approaches of supply chain. There is a huge scope of research on how the success measures, coupled with the demand driven supply chain approach, can optimize the business performance of fashion retailing(eg: sell through%, lost sales). Investigate on the utilization of Logistics activities for respective sourcing strategies and define the correlation between Inventory value and GMROI of fashion industry. eLogistics activities like RFID, EDI are becoming the subject for effective information flow while the sourcing is done from far east. How effectively we can mange the lead time in supply chain and incline the supply chain as per the demand observed by POS data is also a concern of this research. From retailers point of view, this research can focus on some trust based relationship which I mentioned in introductory part, for example, Category Management. For a smooth supply chain, there should have balance of power between retailers and his supplier. There is a scope of investigation of how category management can play an effective role to create a win-win situation for the business partners of supply chain and dig deeper to reveal if there is more appropriate management strategy. Literature Review: The traditional method of marketing which was largely forecast based, is no longer viable to us. Traditionally, what a apparel company sought to do is sort of plan ahead, pile up inventory and then just seat back and waiting for customer demand. But in this new environment the regular basis supply of product in market is emphasize enough to retain its sales opportunity every time. Non availability means that in the event of non supply the particular sales opportunity is lost forever (Ericsson, 2003). Therefore over the time, evolvement of business process and its activities has gradually been inclining towards customer demand (Lowsen et al., 1999).

Figure 1: Transformation of marketing strategy in response to consumer demand (Dag Ericssion, 2010). Nowadays, in order to be able to realize the real value system of apparel Supply chain, we have to shift from the supply chain management to demand driven supply chain management (Ericsson, 2003). Traditionally the value system was only designed with a chain of arrows horizontally from raw material to end consumer and feeding back an opposite arrows from end consumer to source for information flow (Fig. 2).

Figure 2: Traditional Supply Chain as well as value system (Jacobs, D., 2006; Debasish, D., 2003)

Globalize apparel supply chain: The objective of supply chain management (SCM) is to make supply to meet demand (Fisher, Aman, 1996). SCM is the collection of actions required to coordinate and manage all activities necessary to bring a product to market, including procuring raw materials, producing goods, transporting and distribution the goods and managing the selling process (Abend, 1998). Global competition, faster product development, flexible product sourcing systems and a great variety of products have contributed to the increase of uncertainty in the market. No doubt it has been the consumer who has enjoyed the benefits to this development, while manufacturers and retailers are having problems in predicting future demand and meeting the market prices.

Figure 3: A schematic view of general globalized apparel supply chain (source: Abend 1998) Product specific approach of supply chain: The success and failure of supply chains are ultimately determined by the response of end consumer. Getting the right product at the right place at right time to the consumer is the main challenge for supply chain. So to avoid the difficulties & to make the target easy, two approaches of SCM are available. For high volume & low variability product, Lean approach is appropriate & the low volume product having high variability is subjected for Agile approach. Another approach is the combination of Lean & Agile, named as Leagile. Forecasting of fashion trend is another important matter for gaining customer satisfaction. Therefore, taking predictability into consideration with its consecutive lead time, three approaches of supply chain with four different strategies has been brought out:

Figure 4: Three approaches of supply chain with four different tactics (Mason, 2000). CODP as per product types: Spanish giant ZARA is a good example to understand the hybrid strategy of supply chain management where customer order decoupling point (CODP) make the process flexible. The placement of this point in supply chain initiates to bring different strategies like, auto replenishment, postponement or any sort of trade off. ZARAs rapid growth & ongoing success is a proof to its ability to establish agile supply chain which still incorporates many lean characteristics. The pursuit of this hybrid strategy has enable ZARA to develop one of the most effective QR system in its industry.

Figure 5: Hybrid approach of supply chain for flexibility and impose postponement (Waters, 2009).

Sourcing Strategies: Up front sourcing: It is even known as traditional sourcing while long lead time is counted. The reason of why the European marketer deals with up front sourcing is the cheap manufacturing cost and availability of resources. But this strategy is responsible for high forecast error. Therefore, this strategy is rather suitable for functional clothing products rather fashionable items. Lead time is approximately 24 weeks.

Figure 6: General flow of traditional sourcing which count 24 weeks as process lead time (Mattila, 2004). Quick Response: The branded retailers of western market need to consider higher lead time to upload their product per season in retail shops while they do the sourcing of their product from off shore. As the forecasting of demand trend is virtually impossible, there is a high risk of stock out of any particular product rapidly for consumer preference. And if the replenishment requires long lead time, customer demand may not exist up to then. In this paradigm, Quick Response (QR) methodology shows us the way to overcome the barrier like lower service levels and ensure the fewer lost sales and better end of season markdown performance (Foirito et. al., 1995; Birtwistle et al., 2006).

Figure 7: Supply Chain tends to be demand driven to react quickly to consumer demand

(Birtwistle, 2006)

Every fashion products has a bar code which disclose the specification of product while it is scanned in point of sales (POS). Therefore, in a specific season, retailers know which products are going to be stock out due to excessive customer demand. Via of eLogistics, for example, EDI, RFID etc, retailer can place the order to manufacturer to get the product again to refill his shelf. In general, trendy and fashionable products leads to higher forecasting error. Therefore, it is the tactics of marketer or retailer to select the manufacturer from local or neighbor countries. So that, they can get the product with in few days after placement of new orders. The lead time for QR strategy is two to four weeks while a fashion season stays for three to four months. Vendor Managed Inventory: According to this strategy, some of the seasons goods are delivered at the start of the season and replenishment orders are usually made weekly on the basis of re-estimation or re-order algorithms (King, Hunter, 1995 and 1997). In some basic apparel articles, such as hosiery, VMI may work well. The supplier is actually managing the customers inventory on his behalf and refills the shelves according to demand. Due to very low fashion content, there is no danger of producing the wrong items. With more fashionable goods the vendor (manufacturer) faces the same forecasting problems as the retailer with conventional up-front buying. Critical Success factors: To offer a perfect synchronized environment to the customer, there are some factors to be considered when the planning and designing has been done for a upcoming season. This factors are known as critical success factors for the fashion retailer as the Gross Margin Return on Investment (GMROI) is influenced by these factors. These factors are interdependent on each other: 1. Upfront/ Replenishment mix: During the start of a particular season, all products are available in retail shop irrespective of where it is produced, whether far east or near by region as the order is placed earlier by considering the lead time. But some products are going to stock out due to excessive customer demand. Then the issue of replenishment comes forward. As the product design, material specification has already been done, replenishment requires only the production duration and if the production is conducted with near by manufacturer, then the newly lead time will be maximum two to four weeks. Therefore, the replenishment tactic ensures fewer lost sale and better service level.
2. Offshore and nearby sourcing: As we described earlier, for functional products where the

demand trend is predictable and demand variation is less, offshore sourcing could be the best practice. But in nearby sourcing, the lead time is reduced and retailer or marketer have the opportunity to manipulate the product design and some other specification. Even in the season, they can modify some specifications of garments as per the feed back of customer.
3. Process Lead time: From the starting stage of idea generation done by fashion designer,

lead time is counted. The following figure will give a idea of lead time. As per the figure, it is clear that transportation is the main differential factor for offshore and nearby sourcing

strategy. Material purchase and product design also have a impact on how long or short the lead time will be.

Figure 8: The aggression of value added activities generates the lead time (Hypothesis by author)
4. Forecast accuracy: When a buyer makes a purchase plan for the season he tries to forecast

the demand as accurately as possible. The error can be positive or negative and it can be specified for example as 30% meaning that 30% of total item brought exceed the demand while, at the same time, 30% of items bought short. The positive error results in unsold goods that are later sold at mark-down prices. The negative error causes stock outs and lost sales which do not appear in the profit and loss account, but rather represents the lost sales potential. A survey carried on 16 fashion companies of Scandinavian region expressed the tremendous influence of forecast accuracy on their sourcing strategy. For Up-front sourcing, the forecast accuracy is +33/-18 while In season or QR sourcing initiate 5% forecast error (Mattila, 2010). This research may also have a provision to recommend the forecast accuracy for different sourcing strategies for Australian region. Success measure for fashion retailing: Now, we will have a look on the factors which are treated as the outcome of fast fashion business. And the positivity of these outcome express how successful a product is, for a specific selling season. To cope these measure with supply pipeline, they are divided into two subgroup: Potentiality measure: a. SKU range: Stock Keeping Unit ( SKU ) is a term referring to one product on style, color and size level, i.e. the basic item in stock management as well as in sales. SKU range means the assortment of different SKUs bought for a season.
b. Service level: Service level indicates what proportion of the full SKU range bought

for the season is available at store. A service level of 90 % means that 90 % of all the different SKUs bought for the season are available through-out the whole season. It means also that at the end of the season 90 % of SKU range is left over and will have to be cleared through mark-down sales

c. Lost sales: The negative error of forecast accuracy denote lost sales percentage. Due to

excessive demand from customer side, particular SKUs are quickly sold out. Therefore, the percentage of sales lost due to stock out is described by lost sales. Performance measure: a. Sell through %: The percentage of goods sold at first price is expressed as sell through %. For example, if the forecast error is +30%, it does mean that 70% of total goods sold at first price where no mark down is occurred. b. Gross margin: The ratio of gross profit and total annual sale is known as gross margin(GM).
Gross Mergin=Gross profitAnnual Sales 100

c. Stock turn:
Stockturn=Annual SalesAverage Inventory Value 100 d. Gross Margin Return on Investment (GMROI): GMROI=Gross MerginAverage Inventory Value 100

Methodology: A deep study on recent articles written by the scholars in reputed journal series like Emerald, Elsiver, Springer etc is concerned to cope with todays trend of clothing related business. In this sense, qualitative method is the best way to find out the answer of question cited on problem discussion part. Interview of personnel from branded fashion retail chain those who maintain up scale and/or promotion driven retail business. It is important to conduct specific case studies on fashion retail chain and on their suppliers for getting access to their operations management to have a insight of their supply pipeline. This research study also should be capable of implementing its proposition to those retail chain to understand how effective the out come is. Outcome: The bottle necks of fashion chain will be identified and the research will propose the effective solution to smoothen the flow of supply chain. The outcome of this research will mention the standard value with deviation of critical success factors for different sourcing strategies which will be a assistance to guide fashion retailer to pose according to his customers demand.

To avoid the blurring situation of intensely competitive market, fashion company should have the supply chain from raw material sourcing to retail shop with information visibility. Increased information visibility among supply chain participants will help all parties to optimize forecasting, maintain better inventory level and obviously ensures the cost reduction by asset utilization. This research brought out a road map for fashion business to approach for information visibility in supply chain. The generation of CPFR and its effectiveness could be a inspiration in here. The cost and risk reduction theory Knit now dye later is perceptively works on United Color of Benetton. The case study on some fashion retailing chain will identify decoupling point and propose postponement in a certain stage of supply chain which will not only effective but also reduce the supply chain complexity.

Conclusion: The effort, I have given here to present a research proposal, is solely based on the intention to conduct a deep study on the supply chain and its complexity, flexibility to deliver right product at the right time in the right place. Though the proposal heavily emphasize on fashion retailer and his supply partners, there is no way to think that they can guide customer as per their strategy. What is more, it is last tier customer or consumer to whom the whole supply chain from raw material sourcing to product uploading to retail shop should be inclined. Therefore, upon acceptance of this proposal by the world leading university University of Auckland, a consistent effort will be given as per the direction of supervisor to incline the supply chain of textile and clothing business towards consumers satisfaction.

References: Abend, J. 1998. SCM Is Putting a Buzz In Industry Ears, Bobbin, May 1998 Birtwistle, G., Fiorito, S., Christopher, M.,Supplier perceptions of quick response systems, Journal of Enterprise Information Management; Volume: 19 Issue: 3; 2006; Pp: 334-345. Dag Ericsson (2003). Supply/Demand Chain Management the Next Frontier for Competitiveness. In Global Logistics Waters, D. (ed) Fiorito, S., May, E., Straughn, K., Quick Response in retailing: components and implementation, International Journal of Retail & Distribution Management, 1995, Vol. 23, No. 5, 12-21. Dag Erricssion (2010), Class lecture on Supply and demand chain Management, The Swedish School of Textiles, University of Boras, Sweden. Debasis, D; Supply Chain Management- An Integrated Solution to Apparel Industry, Journal of Apparel Association, July-August, 2003 Ford, Henry and Crowther, Samuel (1922), My Life and Work, Garden City, New York, USA: Garden City Publishing Company, Inc, Fiorito, S.S., Giunipero, L.C. and He, Y. (1998), Retail buyers perceptions of quick response systems, International Journal of Retail & Distribution Management, Vol. 26 No. 6, pp. 237-46 Fisher, M. Raman, A. 1996. Reducing the Cost of Demand Uncertainty Through Accurate Response to Early Sales, Operations Research, Vol. 44, No. 1 January-February, 1996 Knorr, R., and Neuman J., Quick Response Technology: The Key to Outstanding Growth; Journal of Business Strategy; Volume: 13 Issue: 5; 1992; Pp: 61-64. Rachel Mason-Jones, Ben Naylor and Denis R. Towill (2000). Lean agile or Leagile matching your supply chain to market place. INT. J. PROD. RES., VOL. 38, NO. 17, 4061- 4070 Mattila, H. 2004. Moldova Trade Diagnostic Study Textiles and Apparel Case Study, The World Bank, Report No. 30998-MD, Washington DC Mattila, Heikki (2010), Class lecture on Fashion Logistics, The Swedish School of Textiles, University of Boras, Sweden. Lowson, B., King, R., Hunter, A., Quick Response: Managing the Supply Chain to meet Consumer Demand, 1999, Wiley, Chichester. Jacobs, D; The promise of demand chain management in fashion; Journal of Fashion Marketing and Management; Volume: 10 Issue: 1; 2006; Pp: 84 96. Donald Waters, Richmond, Parkes, Wright(2003). Development and trends in supply chain management. Global logistics and distribution planning. 1-20.