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Running Head: SCM and Impact of Brexit

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Topic: Supply Chain Management in the Irish textile and apparel retail sector and Impact of Brexit on SCM

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Running Head: SCM and Impact of Brexit

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Analyse data from the SCM operations of several Irish retail businesses active in the apparel industry. Introduction As a direct consequence of systemic developments in the international economy, supply chains have become increasingly complex. However, they have become increasingly automated as businesses outsource main supply chain functions. Such two aspects have made SCM a more powerful determinant of competitive advantage than ever before. In several aspects, Ireland has distinctive interaction with the SCM in the apparel retail market, which is influenced by the Brexit. In this article, it is clarified how the apparel market and the SCM in Ireland have had an impact due to Brexit. This is the reality, Ireland is particularly vulnerable to Brexit (Sweeney, 2018). Supply Chain Management (SCM) A supply chain is characterized as a group of three or more entities (organizations or people) precisely concerned with the upstream and downstream flows of commodities, services, capital, and/or data from a supplier to a client. SCM requires conventionally separate resources to describe to a management accountable for planning the entire materials procedure, and also requires combined connections with suppliers over multiple tiers. SCM is a concept, “whose basic purpose is to coordinate and administer the sourcing, flow, and inspection of supplies using a total systems perspective across numerous functions and different tiers of suppliers (John T. Mentzer, W. D. J. S. K., 2010.). Factors of Supply Chain Management (Herath, January 2016) Lean Manufacturing (LM) It is recognized a premise for producers to design their operational forms in a different mode, particularly from a view point of amplifying the worth for customers (Rose et al., 2011). Principally, LM is designed in a manner that it eliminates the surplus and the non-value adding activities in fabricating processes (Shah and Ward, 2002).

Running Head: SCM and Impact of Brexit

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Agile Manufacturing Surviving in a chaotic business environment is a challenge for associations as they need to comprehend unpredicted changes and reactions properly. According to Goldman and Nagel, 1993, see agile as integrating customary innovations (e.g. leads time, Quick Response (QR), Just-in-Time (JIT), Radio Frequency Identification Technology, Co-Managed Inventory) and ways of organizing production frameworks. Additionally, a business-wide capability that grasps hierarchical structures, information systems, logistics forms and in distinct, mind-sets of the individuals (Christopher and Towill, 2001). Agile or Lean Christopher (2000) focused on the significance of distinguish ―leanness‖ and agility of hierarchical supply chains. Though these two terms encompass a close relationship with each other they are two dissimilar concepts as described by Christopher. He further depicts that the decision of agile or lean depends on the measurements of variability and variety of demand conditions in the market. Figure I: Agile or Lean

Source: Christopher, 2000

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Figure I outlines the taxonomy which guides firms to choose agile or lean proposed by Christopher. According to this figure, lean is apt for firms which manufacture high volumes in a low assortment and conventional environments. Agility works with the firms which create low volumes in highly volatile environments with high diversity. Being Fit or Lean? Ferdows and Thurnheer in 2002, created a model of assembly fitness, based on a combination of lean, agile and other industrialized techniques. According to the model, every organisation looking for manufacturing fitness should have three characteristics:  Concentrate on synchronized development of numerous production capabilities.  Ensue a series of activities whereby every action leads to the easy implementation of the succeeding activity.  Asset distribution is undertaken first for progressing scheduled capabilities and then following capabilities. Irish Apparel Retailers’ SCM Practices Dunnes Stores Dunnes Stores is an Irish global retail chain that basically offers food, clothes and domestic wares. Additionally, its main buyer base is in Ireland, the chain also has operations in Spain, and formerly in England and Scotland. The layout of the chain's stores consist of on a grocery superstore operating beside a clothing/textiles store. Though some provisions contain only textiles, whilst some contain only a hypermarket. (UTC; 2020) Dubarry of Ireland Dubarry of Ireland is an Irish-owned company with a collection of quality performance footwear, clothing, leather products and adornments. Built up in 1937, Dubarry markets a variety of sailing and state footwear and clothing for both women and men. This incorporates waterproof, Gore-Tex-lined performance sailing boots and

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leather wreathe shoes. The head office of the company is at Ballinasloe, County Galway, Ireland. More than the years, Dubarry has extended its global sourcing system and now works closely with an exclusive group of dedicated production partners around the world (Universal Time Cordianated; 2019). Portwest Portwest is a worldwide producer and wholesaler of workwear, safetywear and PPE which built up in 1904. Portwest has developed into a worldwide business with seven distribution centers located in the UK, USA, Australia, New Zealand, UAE, Panama, Ireland and Poland having staff over 130 countries. Employing over 4000 individuals worldwide, Portwest has a group of world class architects. Market pioneers in security, Portwest’s award winning team is continuously investigating the latest patterns and innovations which effect new collections and products (UTC; 2019). Supply Chain Network Structure of Brands According to Carugati et al., 2008, the market characteristics of the apparel business: brief product life cycles, high instability, low consistency and high level of stimulus purchasing, highlight the significance of shorter lead times, so that rapid response has been a key matter in the industry. Lopez and Fan explained in 2009, clothing retailers that are incapable to pursue fashion trends underperform. The reasons of the success of above brands are information technologies, innovated styles, fine pricing policy, shorter lead times, qualitative vertical integration and target market. Table I. showing the supply chain network of above brands which have far more similarities than differences (Herath, January 2016). Table I: Supply Chain Network Structure Structural Dimensions Vertiscal Complexity

Dunnes Stores, Dubbarry of Ireland, Portwest Fabrication, source of basic materials,

Horizontal Complexity

distribution, retail  Upstream network: All own main dealers and hundreds of minor suppliers

manufacturing,

Running Head: SCM and Impact of Brexit

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Manufacturing network: All own production destinations and system of subcontractors

Geographical Complexity

 Downstream set of contacts up to 130 stores Suppliers, subcontractors production poles and retail points all over the world (Spain, England, Scotland, UK, USA, Hungary, UAE, Australia, New Zealand, Panama, Ireland, Poland) and

Relational Complexity

selling focuses in more than 130 countries  Possesses the significant stages (raw materials, capital intensive production performance, trade) in the supply chain network 

Externalisation of workers intensive activities to a system of subcontractors

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Extremely forced retails network (wholly owned megastores and franchised provisions)

Source: Romano, 2009 In above table, all companies are presenting a high intensity of forward and backward integration and also a hybrid supply chain structure. More capital intensive forms like dyeing and cutting are carried out in-house whilst workers concentrated processes are performed by a network of subcontractors. Though, according to Romano, entire system presentation a superior level of downstream integration.

Supply Chain Network of Irish Apparel Retailers (Joel D. Wisner, 2004) Lead-Time Reduction in Supply Chain

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Lead-time reductions can decrease the price of manufacturing operations as it lead-times influence on approximately all cost of an organization’s operations (Hari et al., 2012). Leng and Parlar in 2009 explained, lessening lead-times can bring the benefits of precise estimations, inferior protection stocks and lower levels of out-of-stock objects and smaller regulate sizes which manage to diminish the finished product stock levels. All the above brans used the latest tecchniques like JIT, ERP, MRP which effectively diminish the time taken to design methods and decisions in the supply chain. QR strategy facilitates a highly responsive supply chain especially in fashion industry. So, above brands make huge investments in CAD, CAM and ICT to implement QR which play an essential role to reduce the time and delays in production. Unusual demands owing to fashion patterns and seasonality is a common and challenging instability in the textile and clothing industry leading to higher expenses and lower profits. Adaptable connections between manufacturers and suppliers can enhance profits via common understanding. Value Added along Supply Chain Supply chains are profit generating as they attach a sequence of organizations, capital and information streams included in the formation and delivery of worth to the customer. They more suggest that value creation along a supply chain is in itself an economical competitive gain. Lean manufacturing is used by above brands for reducing the waste which enhances the value of goods. Similarly, the new techniques like ERP, MRP and Justin-Time lowers the defective rates of products and make the vertical operations smooth and reliable. According to Jiang et al., in 2010, reliability tests must be carried out to choose honorable suppliers so that the superiority of goods and services offered by them remains at on advanced standard. As well as Quesada et al., said in 2012, accomplishing a high quality product at the least possible price, superior proficiency and output increase the functioning of an association. Thus, using the updated methods, above brands sustain their supply chain in more than 130 countries. The modern techniques play a vital role in sustaining the value chain of these very nicely (Herath, January 2016).

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Direct and Indirect Relationships with Retail Buyers Strategic alliance or ventures do not always beneficial but the formal connections and deals may improve the supply chain performance. Information transformation is highly important for conveying the business data across the world. The direct connections between buyers and suppliers have significant role in enhancing the sale globally (Cristea and Oregan, 2011). Dunnes Stores, Dubbarry of Ireland and Portwest build a strong intermediaries structure by using one of the following approach for global supply chain; (Cheng and Fung, 2013)  Hold some trust with suppliers and clients and some flexibility upstream.  Preserve high dependence with suppliers and customers. Compensate for low flexibility upstream with the firm‘s own adaptable responses.  Keep low dependence with suppliers and customers This helps to minimize the risk and improve the relationship between supplier and buyer. This cut the higher costs from one buyer or supplier to another which leads to a trustworthy connection and superior gain worldwide (Comiskey, 2013).

To ascertain ‘successful’ responses to the problems caused by BREXIT on SCM by Irish apparel retail operations What is BREXIT? A portmanteau of the terms "Britain" and "Exit," "Brexit" was taken as a metaphor for the idea that Britain should withdraw from the European Union and adjust its partnership with the economic, defense and migration bloc. Amid a UK-wide referendum in June 2016, of which 52% voted to leave and 48% opted to stay in the EU, the British Government officially declared the exit of the union in March 2017, beginning with the Brexit process (Mueller, 2020).

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Brexit Exposure: Close Ties Leave Ireland Vulnerable The UK's departure from the EU would be especially difficult for Irish companies. Being Ireland's main trade partner in the EU, the UK accounts for 14 per cent of our overall exports and 26 per cent of imports. Nevertheless, this headline publicity does not reflect the significance of this exchange to the broader economy. Such exports are concentrated in central, employment-intensive sectors with footprints in all regions. The consequence of any major disturbance may be extreme. (McCoy, 2018) Trade Exposure Though Irish industry has made strides in diversifying to other markets in recent years. The two-way exchange between the United Kingdom and Ireland contributes to about € 60 billion a year. Following Figure II is showing the contribution of Irish businesses to the UK; Figure II: Percentage of Irish Exports Going to the UK

Source: McCoy. 2018 As per Figure II, Ireland is a significant destination for products and services in the United Kingdom; it is the fifth biggest trade partner in the United Kingdom, but Brexit is a problem for Irish supply chain management.

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Shared Labour Market Both Ireland and the United Kingdom have stated in advance of formal negotiations that they are determined to avoid a return to a difficult land border. Nevertheless, preserving the free movement of citizens while retaining certain EU freedoms may face major difficulties in itself. Shared Consumer Market Ireland's unique relationship with the United Kingdom goes beyond trade and a common border. Our interconnected roots, popular vocabulary, proximity, the influx of individuals and social media have, among other aspects, encouraged a cross-pollination of concepts and differences in history, customer preferences and worldview. Some of the UK's more popular labels work in Ireland and are noticeable in cities and towns around the world. Connectivity The United Kingdom plays a crucial role in linking Ireland to the rest of the world. Key transport, electricity and digital infrastructure routes link up Ireland to the United Kingdom, but also provide valuable links to EU markets and beyond. . The Irish economy is 85 per cent reliant on the United Kingdom for our energy needs. Legal and Policy The UK has been a especially powerful partner in agreements and decision-making in a broad spectrum of fields, while Ireland has also gained from exposure to UK decision expertise and its strategic scope and experience.

Potential Impacts of BREXIT on Irish Apparel Retail Sector and Supply Chain Management

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Supply Chain Both the United Kingdom and Ireland are part of the Common Market and the European Customs Union, facilitating free flow of products. The implementation of trade barriers and border checks is more possible. If introduced, they would have a significant effect on Irish firms owing to their dependency on the UK sector for raw materials; heavy export rates, low profit goods; and closely interconnected cross-border supply chain (McCoy, 2018). Tariff on Trade (SCM) The worst-case situation will be the implementation of VAT and duty on commerce between the United Kingdom and Ireland without a free trade deal. The EU specific foreign tariffs currently imposed by the EU to all third countries vary from 0 per cent for cotton, 11.5 per cent for clothes, 25.6 per cent for sugar and confectionery to 45 per cent for some dairy goods. The overall tariff would rely on the commodity and the result of the talks, but industries with thin margins and large level of exchange with the United Kingdom are especially vulnerable to potential barriers to exchange. Non-Tariff Barriers However if a free trade deal is to be concluded between the United Kingdom and the EU, a sort of customs barrier would be needed to maintain the legitimacy of the European market and to conform with the laws of the arrangement, such as conformity with legal requirements, marking regulations and rules of origin. It may present major technical obstacles, disrupt trade and contribute to business costs. Demand for New Capabilities Businesses who may not now have in-house customs and trade experience may need to explore whether to improve this capacity, along with any program, process and control improvements that could be required. Restrictions on the flow of products and resources can also have consequences for aftercare support and reverse

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logistics costs, distribution times – particularly for time-sensitive deliveries – and treatment of goods transiting through the UK. Following Figure II showing the impacts of Brexit on retail sector of Irish brands. A small amount of high street labels trade in both the United Kingdom and Ireland. Many of them are Ireland-based, although a limited number of popular Irish companies have retail networks in the Ireland. Many other Irish retailers are selling that online platforms to the United Kingdom. Several large companies often run all-island enterprises and utilize allisland supply chains that are tightly connected with the UK. Figure III: Brexit Impact on the Retail Sector

Source: McCoy. 2018

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The Irish retail industry is one of the biggest employers in the world, with 275,000 workers employed in the business. The plurality of retail businesses (90 per cent) are tiny Irish-owned companies, of which 77 per cent are family-owned. Thus, Brexit has serious impact on the Irish retail market and its supply chain management. Assessing Impact and Planning its Response for Supply Chain Management This is obvious if and whether that has had an effect on the flow of products, facilities and individuals between the United Kingdom and Ireland. Businesses ought to understand not just whether tariffs and duties might have an effect on their cost structure and overall profitability, but also what infrastructure would need to be placed in position to help the customs barrier and how the existing supply chains are streamlined in the light of the possible effects of the Brexit. Irish planned options for optimizing supply network for duties and border control. The 'first choice' policy solution to Brexit is to reduce losses by the optimal result of EU-UK trade agreements, although it will be difficult to prevent some degree of regulatory divergence. With a view to mitigating the country's economic loss to Irish GDP, the best possible scenario of trade negotiations for Ireland would be a treaty with a suitable balance of legal rights for all groups and with the following key elements: (Professor Alan Mathews, 2018) 

No tariffs: stop implementing any duties on potential EU-UK imports – duty-free on all goods

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Broad quotas: if such duties exist on agricultural items, fairly large tariff quotas will be enforced to reach the anticipated future rates of exchange.

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Low border costs: EU-UK border costs on both sides can be reduced by utilizing state-of - the-art equipment and processes, through the usage of approved economic operators to reduce border costs.

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Land bridge transit: plans will be made to ensure undisturbed transport to ...