Managing a Supply Chain in a Clothing Company

A very basic principle in economics presupposes that individuals are rational actors for they use raison d’être before making a decision. Alongside this belief is the assumption that within a market, both the consumer and the producer maximize profits by weighing the costs and benefits of their actions. A simple formula of cost-benefit analysis is thus attained. Needless to say, higher benefits and lower costs signal market actors to pursue an action while lower benefits and higher costs direct them to do otherwise.[1] Guided by these premises, firms will work to achieve the highest possible profit by being efficient-allocating resources appropriately-as well as by satisfying customers. In this regard, one way to look at how firms try to reach competent state is through its operations management or to be more accurate, supply chain management.

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According to Mentzer, by definition, supply chain management is “the systematic, strategic co-ordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole”.[2] Worthen stated that there are five foundations that make up this kind of management and these are: plan; source; make; deliver; and return. Planning is very vital since it lays down the blueprint for all the activities regarding supply chain management. At this stage, a firm could decide on the tactics that it will use in order to make the most out of every transaction. If everything goes well with the plan, then it would be less costly for the company since it would not need to readjust budget as well as other resources. For the next foundation, the source, it is necessary for a firm to select suppliers that are dependable and competent. They are dependable in the sense that they are able to beat deadlines and competent in the way that they are able to produce high quality products given constraints in time. The third central concept which is making includes organizing activities such as the monitoring of worker productivity, quality control and production output. Making also involves the production of final output, assessment, packaging and then delivery. The fourth which is delivery takes account of the means of transporting the products, the storehouse in which it could be stocked up, and a mechanism for receiving payments. And lastly, returning involves getting of defective products from customers.[3]

Although the aim of supply chain management is efficiency, it is inevitable to encounter problems in the supply aspect of the business. The causes of these problems could be divided into two: external and internal. External factors include volume changes; service and product mix changes; late deliveries; and underfilled shipments while the internal parts include internally generated shortages; engineering changes; new service or product introduction; service or product promotions; and information errors.[4]

The company I am managing right now, S;S Inc., deals with the production of clothing apparels. The materials used for the clothes are mainly exported from India since they offer the lowest prices for higher quality materials. These materials are then transported to China where the real production takes place, meaning, the clothes are sewn there. Population in China is booming that is why they have very cheap labor. Taking into consideration market’s law of demand and supply, we could explain why labor is cheap in China. The law of demand and supply states that when the demand for a certain good increases, ceteris paribus, the price of that good also increases. On the other hand, if the supply of a certain good increases, ceteris paribus, the price of that good decreases. If the demand and supply increase at the same rate, ceteris paribus, the price of that good remains the same. If both decrease at the same rate, the same price holds. If the demand increases and the supply decreases, the price increases but if the demand decreases and the supply increases, the price decreases. In the case of China, with the spread of poverty and booming population especially in the peripheral regions, the supply of workers increases at a very high rate. On the other hand, although the demand for workers by local as well as foreign industries is increasing, the rate is slower relative to the increasing rate of supply. Moreover, there are numerous developing countries with huge amount of also cheap labor which compete for the foreign businesses seeking for workers. This context led to the existence of low-wage labor in the country. In any case, the company I am managing targets, as customers, clothing line s that are looking for ready-made shirts, blouses etcetera which they could brand as theirs and then sell to the public.

I have encountered countless problems regarding supply chain management in this company. For instance, there had been cases where in the deliveries were short in number and/or contained defective products. This hindered the company from delivering orders from the customers on time. We had to deliver the products back to China and then wait for several weeks before they could replace everything. These kind of instances are costly in two conditions: time and money. The delivery of incomplete and sometimes defective goods from our supplier in China caused as delay in the provision of service to the customers. Moreover, it caused us to lose one of our new client lowering the supposed income of the company. Not only this, it is very bad for the reputation of the company not to deliver products on time. How could we convince clothing lines to venture with us if they see us as inefficient? Another problem encountered by the company is the abrupt introduction of new clothing trend. Our company designer expected that the current trend would last for about six months but it shocked us to see that after three months, an abrupt change of fashion happened. Stripes and bright colors became the mode instead of the earthly plain colors. The sudden change in the trend was caused by the internationally popular television show based in the United States which has characters portraying the retro and the 90’s look. Since we were expecting the earthly plain colors to be “in” for the next three months remaining, we ordered bulks of clothes that will be sufficient for that span of time. The first three months of the earthly plain colors gave the company a very high profit and even maxed out the inventories in our warehouses. The change resulted to a pile up of huge number of inventories. What the company did was to sell the items at a very low price (50% off) which produced low profit. Because of the change in the clothing style, the company had to order a new set of materials in India and then instruct the suppliers in China of the new style of clothes that they are going to produce. This slowed down the business. Instead of benefiting from the new trend, we were disadvantaged by the lack of information. Another problem encountered by the company was complaints from the customers. Incidentally, some of the packages sent to them were either defective or underfilled. One of these customers even threatened to file a lawsuit against us since the defective boxes caused them one of their loyal clients.

These and a lot more petty problems are encountered by companies like ours. In order to combat these problems, the companies should be precautionary. They should expect that there is a high possibility that something could go wrong in some of their transactions. This is not being pessimistic or untrusting but it only ensures that companies, with this line of thinking, could make mechanisms that will prevent such problems or if ever the problems are inevitable, then in one way or another, the companies will still be prepared. First, for the external problems such as the incompetence of the suppliers, the company should in the very first place have scouted for suppliers with good reputation, those who deliver on time and with good quality. In any case, even the best suppliers are not perfect. This is the point where memorandum of agreements comes in. It is a must in the business world that everybody should be professional. When having transactions, company representatives should use their heads in order to strike deals that will not disadvantage them. For instance, a company could demand that certain beneficial provisions be included in the agreement such as giving sanctions to suppliers if they will deliver late, defective or underfilled packages. Sanctions can include the shouldering of return-to-supplier transportation expenses and since it slowed down the business of the company, fine should be paid by the supplier. Having these kinds of sanctions would be beneficial for both the company and the supplier. On the part of the supplier, these sanctions would encourage them to work at their best. These will also prevent them from committing errors when it comes to supplying products since they always try to prevent the consequences of mistakes. Moreover, they would always be careful during work. This will help them become more efficient and indirectly, it will lead to their better image, thus, they will have more clients. On the part of the company, this would ensure less, if not zero, causes of delay from the suppliers. It is obvious, given the discussion above, that even for externally caused chain management supply problem, the company could still remedy it by proper tactic. For the internally caused problems just like the lack of information, it is necessary for the company to hire its own trend analyst. It is not enough that a company hires designers who pattern the clothes to the latest mode but it also necessary for the benefit of the company to be able to predict when and into what the fashion trend would change. This will help the company estimate the amount of clothing to produce for the current trend and this will give them time to start producing the soon-to-be trend. The company could base their analysis on the popular factors that the generation is into. The company should also start focusing on what generation to target for their market. Focus is necessary so that the company would know where to exert much effort when it comes to analyzing changing trends. It would also be very strategic if the company could get the orders from clients months before so that they would have much time to get them from the suppliers. Moreover, this would ensure that all of the company’s ordered products from the suppliers would be sold. It is also a good idea for the company to espouse new trends. If the company already has a trend analyst, they could predict the next possible trend and it would be profitable for them to be the first to introduce the new set of clothes. Of course, they have to market test the “new trend” first before producing bulks. Lastly, for the problem in delivering defective packages to customers, this could be caused by the earlier problem which is the receiving of defective packages from the suppliers. A precautionary measure has already been discussed above if ever it was truly caused by the suppliers. But in addition, the company could also send monitoring team in the supplier’s warehouses or production place so that the team could look into how the products are packaged and they could detect earlier if there are any damaged products. Within the warehouses of the company, the management could hire or delegate men who will check that all stored products are still in good condition. It is inevitable sometimes that the products are damaged by insects etc. Before delivering products to the customers, the company should also check the packages randomly. It would be tedious and costly, for the company to check the package one-by-one before delivering to the customers so it is practical to have a random checking of the products. By random checking, all of the products would get a 50% chance of being checked. This would neutralize the fact that not all of the products are checked. In any case, random checking gives 50% assurance that damages would be detected, if ever there were any. If delivery of defective products is inevitable, the company could remedy the damage to the customers by offering benefits to those who received damaged products. For instance, the company could set up customer care so that the customers who want to complain could easily inform the company. The company should have a hotline number for easy contact. For the complaining customers, the company could change the damaged product upon the return by the customer. The company could even give additional complimentary items just to pacify the, of course, dissatisfied and sometimes angry customer. This kind of services, by showing that the company cares for its customers, would aim for a smooth relationship with clients especially those who have complaints. This would, in return, give the company a good image. Good image is vital for the company to be able to attract more customers. It is very important to note that companies spend millions for their advertising and advertising aims to give the companies good publicity. What is the use of million-worth advertisement if the company would only get bad publicity due to its bad services that were not remedied. If ever companies, due to some errors, provided bad service for a customer, would not it be great if they do something about it and not just that but they also try to make up for it? So instead of complaining and worst, broadcasting to the media or authorities about the bad service by the company, the dissatisfied customer would appreciate and even laud the company for taking his/her case into consideration and seriously. Let us go back to one of the very basic fact in running a business: customers are important. In the first place, they are the ones keeping the company alive. If they do not patronize products by the company, then there would be no point for the company to exist.

Sometimes although we aim for perfection in our businesses, problems are often inevitable. There are times when the problems are about financing while there are instances when the products itself or the workers and/or employees of the company are just pains. There had been numerous companies that went to bankruptcy due to mismanagement of funds. They could have invested on risky partnerships or ventured on businesses that did not bring profits. Mismanagement of funds could even include misappropriation of the business money. For instance, they could have allocated much of the money on higher wages and incentives for laborers hoping that more benefits would lead to higher productivity. In this case, they quite disregarded investing on capitals and new technology forgetting that in this day and age, it is a must that companies who want to make it big time should acquire the latest technology. Problems on products could be caused by the decrease in the popularity and practicability of using it. It is undeniable that new products are introduced every now and then which leads to the phasing out of older products. New products, aided by the latest technology, more often than not provides more benefits and cheaper price than products introduced, say, a year ago. In any case, if there are problems about funds and products, there surely is a problem regarding workers and/or employees. Sometimes, workers who are unsatisfied with their wages form unions within the company. These unions would then try to paralyze the production by going on strike if the management of the company would not give in to their demands. In any case, the management would try to negotiate by compromising with the union, meaning, they both try to meet halfway and try to defend the stakes of both sides. Most companies, even if they try to, cannot fully give in to the demands of the workers like wage increase at a certain rate and additional benefits. Sometimes companies are maximizing their funds by hiring the most number of workers they need and they could. This is only possible when they provide the laborers with the minimum amount of wage and minimum standard requirement for benefits. If ever they increase the wages at the rate believed rightfully by the workers, holding the revenue and assets of the company constant, then the management would have to lay-off some workers in order to accommodate the demands. Just to reiterate the point, compromise is necessary. In any case, in whatever aspect of the business we are talking, the most important thing is that companies should be proactive. They should have prepared for the expected problems way before. They should also prepare for the unexpected problems and any sudden occurrences. The company should be flexible in order to deal with problems faster and in a more efficient way. To do this, we have to go back to a very basic concept already mentioned above which is planning and another vital concept which is assessing. It is not enough for a company to lay down its vision and mission. It should also include the operationalization of the vision-mission. The company should have a list of ventures to take for the next five years or so. It should also take into consideration its capital investments, expansion etcetera. When it comes to assessment, the company should have quarterly company reports as well as annual reports for their short-term goals. They could also start on every five-year assessment of the company to ensure that both the short-term and the long-term goals are achieved. To make things short, we have to go back to the very basic goal of businesses, to gain profit and to provide quality services. In order to do this, the company should be in a state of efficiency.

Lastly, the success of a company resides on proper knowledge, efficient management and rendering quality services and goods to the customers. The company must be decisive in choosing alternatives for the company to grow. Planning is essential to lay down all possible repercussion on which road the company would take. Customers should be the utmost concern of the company with regard to the operation because the customers or clients are the main reasons why businesses survive. Customer satisfaction is the indicator that a company would make it.

[1] P Samuelson and W Nordhaus, Economics, 17th edn, McGraw-Hill, Boston, 2001
[2] J Mentzer, “Managing Supply Chain Collaboration”, Supply Chain Management,        Sage Publications, Inc., California, 2001 ;http://bus.utk.edu/ivc/supplychain/Readings/Managing%20SC_Collaboration.pdf.;
[3] B Worthen, ABC: An Introduction to Supply Chain Management, CXO Media Inc.,    2007, retrieved 26 July 2007 ;http://www.cio.com/article/40940/ABC_An_Introduction_to_Supply_Chain_Management;
[4] K Malhotra, Operations Management – Processes and Value Chains, 8th edn, Pearson Education International