[OMGT 2267] Assignment 1 Group 1-Uniqlo-1 PDF

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Assignment 1: Supply Chain Analysis...

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SUPPLY CHAIN ANALYSIS OF UNIQLO Group 1

Abstract The report analyzed the supply chain of Uniqlo based on the data collected from various sources including company report, company website, business reports as well as business case studies

Group 1 – Uniqlo

Table of Contents Executives summary..................................................................................................... 2

I. II.

Introduction................................................................................................................. 2

III.

Nature of Business........................................................................................................ 2

IV.

Overview of Uniqlo Supply Chain.................................................................................3

1.

Planning process:..........................................................................................................3

a.

Research and Development...........................................................................................3 b.

2.

Procurement of material and suppliers’ relationship..................................................4

Production department....................................................................................................5 a.

Production:............................................................................................................... 5

b.

Warehouse and Inventory control..............................................................................6 Sales............................................................................................................................. 6

3.

V.

a.

Retail and Distribution channels................................................................................6

b.

Replenishment.......................................................................................................... 7

Analysis of strengths and weaknesses of the supply chain..................................................8 Strengths...................................................................................................................... 8

1. a.

SPA model................................................................................................................ 8

b.

Total Chain Management system...............................................................................9 Weakness..................................................................................................................... 9

2.

VI. 1. 2.

a.

Globalization issue.................................................................................................... 9

b.

Lack of accessibility and e-retailing operations:.........................................................9

c.

Lack of market-segment responsiveness:..................................................................11 Potential solution:.......................................................................................................12 Globalization issue:.....................................................................................................12

Lack of accessibility and e-retailing operations:................................................................12 3.

Lack of market-segment responsiveness:.......................................................................13

VI.

Conclusion:................................................................................................................ 15

VII.

References:.................................................................................................................16

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

Course Code:

OMGT2267

Course Name:

Business IT and Supply Chain

Lecturer:

Dr. Michael Cheng

Campus:

RMIT Vietnam – HN Campus

Semester:

Sem1 - 2020

Title of Assignment:

Assignment 1: Supply Chain Analysis

Students:

Group 1: Nguyen Quoc Dai (s3678923) Nguyen Tri Dung (s3747272) Le Phuong Anh (s3686776) Hoang Bich An Nhung (s3746852)

Word Count:

3333 words

Date of Submission:

19 April 2020

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

I. Executives summary The purpose of this report is to analyse the supply chain of Uniqlo - a leading company in the fast-fashion industry with its strategic target of providing customer high-quality products at reasonable price. With a business model based on the competitive application of the SPA model, Uniqlo has successfully unified its entire supply chain vertically and avoided a number of threats. Besides the analysis of business models and company’s competitive supply chain, the report also highlights strengths and weaknesses of Uniqlo. In this report, there will be applications of several searching methods with data collected from various sources including company reports, company website, third parties’ business reports as well as case study and online newspaper, in order to provide information for analyzing process. II. Introduction ‘Founded in the late 1940s in Japan, Uniqlo was initially a small division of a larger Japanese men’s clothing retailer’ (Success story n.d). Opening the first store in 1984, Uniqlo now expands its distribution network to more than 15 countries with the total number of stores are over 1300 along with online channels. Uniqlo is famous for its modern styles and high quality ‘basics’ collection and becomes an leading apparel organization in Asia and globally thanks to its unique features and the implication of technologies in every single product such as Heattech, Airism and Ultra Light Down. Despite being the no.1 apparel brand in Mainland China, Uniqlo is currently expanding to Asia, Europe and North America markets. Our report provides analysis of the current supply chain of the company starting from design through production and sale, followed by in-depth analysis of company strengths and weaknesses. In the end, there will be room for possible solutions that will provide Uniqlo more choice of technology solution in the future. III. Nature of Business Contributing to the success is the competitive business model, in which Uniqlo unified three main parts of the supply chain from design, production and finally is sales (Fast Retailing 2020). According to the company website, Uniqlo implements a business model with a purpose to create unique products, which cannot be copied by any competitor. In order to achieve that target, the company manages the whole process from design and planning through retail and distribution. However, the competitive strategy of the company is based on the Lifewear philosophy by producing simple, high-quality everyday clothing in terms of technology, quality, utility and culture. Moreover, with a rapid development of technology, Uniqlo will be able to have more opportunities to involve their customers, who are the center of the company’s business model, in their supply chain in order to immediately meet the demands of customers.

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

IV.

Overview of Uniqlo Supply Chain

Figure 1: Uniqlo supply chain diagram 1. Planning process: a. Research and Development According to Sarma (2015), an analyst from Bernstein Research states ‘What’s different about Uniqlo is that they have chosen fabric, rather than fashion, as the area where they want to excel’ (Sarma 2015). At the beginning of each year, meetings will be held to plan for the new concepts and launching date. Overall, the focus is on developing high-quality fabrics. The R&D department constantly researches the latest in new materials and global fashions which helps Uniqlo develop products to satisfy future customer needs (Fast Retailing 2020). One year before launching intended products, the R&D centers will come up with concepts based on sales date from brick and mortar stores. Then, designers will in charge of preparing samples and send to merchandising to qualify. After refining the color and silhouette several times, the designs will be send for mass production according to Figure 2.

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

To transform to a global brand, Uniqlo works globally with the product development functions based on a global R&D system that links the major fashion cities of Tokyo and New York (Uniqlo, n.d). Talents around the world will be employed to help them to catch up with trends and control the next fashion trend. The R&D Centers in Tokyo and New York manage the collecting and compiling of the job for the latest trends, lifestyles, and materials. The concept determination for each season will be based on the gathered information. In order to understand customer’s expectations and take feedback, Uniqlo and GU service counters are available every day. Customer’s opinions can be gathered via email, telephone, letter, and etc... Since 2011, FR has launched the Customer Satisfaction Web Questionnaire to encourage foreign customers to send comments in their native language before directly transmitting to the Customer Center in Japan. It collects feedback from product sizes, functionality to product features (Fast Retailing, 2013). b. Procurement of material and suppliers’ relationship To begin with, Uniqlo’s strategic plan is determined by considering suppliers with highquality materials which helps Uniqlo differentiate themselves from other competitors. For instance, Uniqlo teams up with a partner named TORAY which is one of a well-known Japanese textile producer to develop their core material by using HEATTECH or Silky Dry technologies (Businesslogistics 2017). Uniqlo also engages in ethical and responsible procurement to make sure that all its products are using environmental-friendly material. For instance, Uniqlo does not use the cotton produced in Uzbekistan since the Government of Uzbekistan illegally used children and forced labor working. The company also works with NGOs to prevent the use of child and forced labor in this country, which addresses sustainability in its supply chain strategy. According to Sarah & Dorothee (2014), the link between Uniqlo and its long-term suppliers is a strategic and trust-based relationship that allow the company to have strong commitments with the suppliers. For instance, it was reported by Sarah & Dorothee that Uniqlo will send an apologize and even compensation for its suppliers if any unwanted situation happens such as miss the lead time or production lost (Sarah, L & Dorothee, B, 2014, p. 28).

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

2. Production department a.

Production: Partner factories

UNIQLO does not own any factories; instead, the company outsources production to partner factories, most of which are in China (with more than 120 factories), in order to cut down on the cost of production (Narita 2015). UNIQLO is enlarging its collaboration with other factories in other Asian countries such as Vietnam, Bangladesh, Indonesia, and India (Hara 2019). UNIQLO’s products are at a reasonable price as the company can purchase garment materials at a lower price due to direct negotiations and mass orders. Quality control The UNIQLO Quality Assurance Committee incorporates its own Global Quality and Safety Standards to secure the quality and safety of its products (Fast Retailing 2018). Moreover, The Product Quality and Customer Care Team Collects of UNIQLO also incorporates feedback from customers in order to respond quickly to any defects of its materials. Lastly, before mass production, UNIQLO relies on the third-party quality and safety inspections to conduct sample tests, which include color fastness - monitoring the durability of dyed materials, and formalin - testing if the chemical causes any skin allergies (Fast Retailing 2018). The Takumi Team is a group of leading experts in Japan’s outstanding textile industry employed by UNIQLO to work with the manufacturers to conduct a careful and thorough examination of product quality and safety (UNIQLO n.d.). With more than 30 years of experience, Takumi Team members share their dyeing and sewing techniques and also provide guidance on keeping product quality and work safety. This, in return, results in greater and improved organizational infrastructure among the partners.

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

b.

Warehouse and Inventory control

In 2018, Fast Retailing collaborated with Daifuku, a logistics firm and also supplier of material handling systems as well as spending around 100 billion yen on automating its current warehouses. By partnering with Daifuku, 90% of UNIQLO’s labor has been cut down in the warehouse, allowing it to perform 24 hours/day (Reuters 2018). Moreover, Fast Retailing Group also cooperated with Mujin, a Japanese technology start-up that develops robots, to design two-armed robots with the 3D vision that have the ability to do things like fold a T-shirt and uses suction hands to pick up plastic-wrapped clothing which previously could only be accomplished by humans (Abrahams 2019). By doing this, UNIQLO is equipping Tokyo’s flagship warehouse with full automation. The new automatic system aims to achieve timely delivery and minimize storage expenses (Doyle 2018). With the robotic system, only a small amount of work needs to be done by employees (Bain 2018). 3. Sales a.

Retail and Distribution channels

UNIQLO is using a decentralized distribution system. As can be seen in Figure 4, UNIQLO does not own any warehouse but rather have a contract with external warehouses. The partner factories will send the materials to the warehouses and then, the warehouses distribute products to UNIQLO’s online and physical stores (Figure 3) (Fast Retailing 2013). UNIQLO has contracts with warehouses in Japan and foreign countries where it is currently operating. This distribution system is effective as it can reduce delivery time and reach customers’ demand faster.

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

As of 2019, UNIQLO is the largest clothing chain in Asia with more than 800 retail stores in its home country Japan (Roll 2019). UNIQLO’s international expansion involves 1,379 stores with 807 in mainland China, Hong Kong, Taiwan; 231 in Southeast Asia and Oceania, 188 in South Korea, 91 in Europe and 62 in North America (Fast Retailing 2020). b.

Replenishment

UNIQLO uses the Just-In-Time inventory procurement to administer sales and trends weekly and order the right amount of garment materials; therefore, help reduce the amount of inventory. Each store’s inventory management is being checked carefully daily by the headquarter, then sales data of each shop is collected to establish an overall database of information which helps UNIQLO track daily unit inventory products, forecast sales and determine future activities of products such as increased orders, discount sales (Alexander 2010). At the store, staffs are provided with a handheld device called Casio IT-300 (Figure 4), to provide real-time information of stock checking and facilitate accessing information such as product descriptions, price information, returns, deliveries and daily sales data (RT Insights

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

2015). UNIQLO also applies technology to facilitate inventory management such as attaching RFID tags to products so when scanning, the system will show which products should be restocked. Hence, this method reduces time on checking inventory (Fast Retailing 2020).

V. Analysis of strengths and weaknesses of the supply chain 1. Strengths a. SPA model As the first company in Japan to incorporate the SPA model into its business model, UNIQLO differentiated itself from other companies by continuously refining its SPA model. UNIQLO as the representative of the second generation of SPA has a successful application and promotion (Tong 2014). This specialized model allows UNIQLO to track business activities from the initial stage of origin up to the point of sale (Ivanov, Tsipoulanidis & Schönberger 2019). With the SPA model, UNIQLO adjusts their production to keep up with the latest trends and reduce store-operation expenses such as rent costs or labor costs. Instead of having intermediaries like the conventional method, the SPA model directly connects production/producers and sales/consumers, allowing the company to be more agile in responding to customers’ needs and fasten delivery time. Besides, the SPA model helps to shorten the average time of inventory turnover days, making UNIQLO a leading company in the clothing industry (Wei 2017). Moreover, as UNIQLO's SPA model can cancel a number of intermediaries and have a direct connection from the production to sales, it is cost-saving which gives UNIQLO a competitive advantage in price. The SPA model also helps to develop better production and marketing plans. Since the SPA allows UNIQLO to directly participate in the operating management of different stores, the company is able to accumulate operating data of each store and the analysis of these data facilitates UNIQLO in understanding consumer behaviors and hence, helps future sales trend prediction (Wang & Li 2018).

[OMGT2267] Business IT and Supply Chain

Group 1 – Uniqlo

b. Total Chain Management system Total Chain Management (TCM) is an enhance system built base on the traditional supply chain management (SCM). According to Wei (2017), the ability of commodity management has been improved by focusing on store sales data, market information collection and analysis. The management meetings will be organized weekly by a team from the marketing and sales planning department as well as store managers. Then, store data which is provided by the POS system will be analyzed in order to determine market demand forecasting, production capacity and inventory. Stores will do their job by only determining their required order, then, the delivery which will be sent to the headquarter and logistics center. It is reported that all stores’ inventory will be tracked weekly by the headquarter, who will promptly transfer the related sales information to the factory in case a shop needs an additional order (Wei, 2017). The factory confirms the color size and other information of the reorder product, makes adjustments quickly with received information and delivers additional orders within ten days. 2. Weakness a. Globalization issue Despite being aspired as a global player, Uniqlo is facing huge problem in expanding its supply chain to global markets. The company is still unknown in Africa, Central America, or South America and its networks and operation activities has been limited in Europe and North America markets (Anwar 2017, p. 31). Consequently, the company has had trouble when bringing its strategy of clothing for everyone to oversea markets. It was reported that the fastfashion giant had failed not only US’s customers but also in other markets such as Hong Kong, Taiwan or South Korea, because of weather sensitivity (Mallory 2016). According to Martinroll (2019), a biggest dilemma that the company created for itself based on the strategy of brand differentiation since the company’s products try to be ‘everything for everyone’. Consequently, Uniqlo’s proudly material...