Introduction
Gone are those days when supply chain played an insignificant role in any business. Most of the products were manufactured locally and sold in the local market. During that era of business, making the manufacturing process more effective, efficient and flexible was the primary goal of the business houses. From the first decade of 20th century till up to the 1980s, manufacturing process streamlining through initiatives like Kaizen, Kanban, Six Sigma, and TPM played a big role in the business (Choi, 2012). In the 1980s after the advent of globalization, the way a company produced and sold its product went through a change. For example, the production of a car part that cost $100 in the USA cost only $2 when the job was outsourced to China (Choi, 2012). These low cost manufacturing opportunities forced most of the organizations to manufacture in a location that was different from the market where the product was sold. The retail clothing industry is one the most outsourced industries among all. Almost all brands, bigger or small, starting from Nike to Prima, began sourcing their products from low-cost manufacturing places including China, India, Vietnam, and Bangladesh (Brignall, 2014). This made the supply chain process a complex one for organizations. For a typical retail supply chain, the design happens in a developed country like France and the UK, and then that design is passed on to a supplier who is often based out of China. These suppliers then produce the product in their Chinese manufacturing plants and then use a third party logistic service provider to ship the finished goods to a destination where they will go through quality check and will be stored for a longer period (Vedel and Ellegaard, 2013). Once the demand comes from the retail outlets, these big warehouses will ship the final products to the end customers. In the present retail supply chain, there are a lot of parties whose interests clash with each other. There is almost no clothing retailer that has never faced any issue in the supply chain. Primark Apparel is a clothing retailer based out of Ireland and mainly operates in the UK and Irish market. It has also a substantial presence in markets like Spain, Germany, and Belgium. It has plans to expand into other big markets like the USA. Like any other clothing retailer, Primark also faces an array of supply chain issues. This essay will discuss the three major challenges faced by Primark and how the company deals with those issues. This essay will also provide suggestions about the challenges.
Company Background
Primark was founded in Dublin, Ireland in 1969. It is currently a 100% subsidiary of the Associated British Foods (ABF). The company has about 250 outlets spread across more than 10 countries, mostly in the European regions. Known for selling low-cost clothing products, Primark is a leading organization in the UK in terms of non-luxury apparel (Brignall, 2014). Although the main target customers of the organization are youths below the age of 35 years, it sells all types of products, including kids wear, menswear, homeware, footwear, beauty products and confectionary.
Supply Chain Challenges in Primark
Like any other apparel retailer, Primark is also facing many supply chain challenges. Before 2000, the majority of its customers were based in Ireland and a few in other parts of the UK. Most of the garments were produced locally and sold in the local market. The complexity of the supply chain was low, but since 2000, Primark aggressively started growing not only in Ireland and the UK, but also in the mainland Europe. Also, as Primark was a low-cost brand, it needed to find suppliers based out of low-cost countries in Asia to remain profitable. The sudden growth and global expansion created several supply chain challenges for the company.
Supplier Reliability
Primark is forced to work with suppliers the company is not familiar with. Many of these suppliers often have no past credibility. There is always a chance for the suppliers to default the delivery of orders. As most of the suppliers have no streamlined manufacturing process, there is also a chance of huge variations in the output product quality. It is a challenge for Primark to find suppliers who will not only supply products at a low cost, but also maintain a company qualified product quality level. This has often posed challenges to Primark. As the company tries to reduce cost aggressively, it looks for supplier who will be able to match the low level of cost (Vedel and Ellegaard, 2013). In this process, many a time Primark has ended up selecting suppliers who are unable to supply good quality products on a consistent basis. Often Primark has to cancel contracts with those suppliers within 3 – 6 months of starting a contract. Coupled with this problem, the cost of production in China, where most of the suppliers of Primark are located, is on the rise continuously. So Primark is also forced to look for suppliers in other South East Asian countries and also in other sourcing destinations such as Africa and the Pacific Islands.
Environmental Challenge
Environmental aspect is a new phenomenon in the supply chain. When retail brands like Primark started sourcing from the low-cost Asian countries, it never faced any issue related to the working conditions of labor at the suppliers. Also, products were free of toxicity and recyclable. However, as the awareness of customers grew, they only wanted to buy products that were manufactured in a sustainable way and the product was environment-friendly. As Primark was one of the lowest cost sellers of clothing items, it encountered criticism and questions from different corners. Primark was accused of using child labor in its Bangladesh factory (Brignall, 2014). In fact, the company acknowledged that some of its suppliers were using child labor in the factories, but the company claimed that as soon as it became aware of the issue of child labor, it immediately severed all its ties with those suppliers. In 2013, Primark again faced a huge criticism when a commercial building in Savar, Bangladesh collapsed and almost 2000 people died. Rana plaza that collapsed housed a garment factory of Primark along with several other brands (Brignall, 2014). These incidents not only scarred the image of the company, but also contributed to massive supply chain losses. Because of these issues, Primark had to cancel all the pending orders and search for suppliers anew to replace the faulty suppliers (Brignall, 2014).
High Level of Inventory in the European Countries
Primark mainly operated in the UK and Ireland markets for over three decades before entering the mainland European market. Mainland European markets such as Spain and Germany were different from the UK market. In the UK and Ireland, Primark only sold a few designs at a discounted price. Most of the Primark retail outlets were big in size and situated outside the downtown area to reduce the cost of the rent (Vedel and Ellegaard, 2013). The company started operating with a similar type of model in Spain and Germany. However, in these countries, the buying behavior of the customers was different. The customers of these countries preferred shopping in small neighborhood stores rather than going to shopping malls and discount stores. Though Primark offered their products at a lower price through big outlets, due to the lack of sufficient number of customers, its inventory went up drastically (Vedel and Ellegaard, 2013). In the apparel business, fashion changes frequently. Owing to poor forecasting of demand in this new market and the lack of understanding of the customers, Primark had to dispose of a lot of its inventory.
Possible Solutions for Primark to Manage Supply Chain Challenges
As discussed in the previous section, supply chain challenges for Primark were different from traditional manufacturing companies. The supply chain of Primark was complex in nature, and therefore, it posed several challenges to the company other than the ones discussed above. Primark can take many actions that can improve the supply chain problems and challenges it is facing today.
Supplier Reliability
Like the supply chain of any apparel company, Primark’s suppliers are one of the key elements for its business success. Currently, the company has a process of identifying suppliers in the low-cost countries through the use of third-part agents. The usage of third-party agents reduces the overall cost of due diligence required for identifying the suppliers. Often the requirements of Primark are not conveyed properly to the third-party agents. Also, many a time these agents have personal agenda that gets more priority over the interest of the company. If Primark creates its own team for supplier identification, quality check, and vendor relationship management, then it will have more control over the quality and the manufacturing process of the suppliers. This will not only improve the quality and supply irregularity issue, but will also create a long term supplier relationship through which Primark can benefit in terms of cost as well (Vedel and Ellegaard, 2013). Primark is a volume buyer who does not require different types of fashionable apparel designs for production. Therefore, superior manufacturing excellence is not required from the suppliers. The company should concentrate more on identifying suppliers who can deliver in high volume at a low cost. If Primark is able to establish a long term relationship with its suppliers, then the overall manufacturing cost will eventually come down, benefitting both the company and its suppliers. The relationship between Foxconn and Apple is a good example of this mutual benefit. Over the years, Foxconn has mastered the art of producing similar kinds of products in high volume at low cost. Apple has rewarded Foxconn with more orders for its components. Though Foxconn is unable to make profit through the order of one component, it gets compensated by the volume of orders placed by Apple (Bruce and Daly, 2011). Primark should also tread on the same line to tackle this challenge.
Environmental Challenge
Environmental challenge is a new type of challenge to the companies (Choi, 2012). Primark has already undertaken several measures to address the environmental issue. The first measure undertaken by the company is the creation of workplace environmental policies and implementing them at the supplier locations (Brignall, 2014). It has already issued a warning to its suppliers that any non-compliance will result in the termination of contract. However, the creation of policies does not always ensure compliance. To ensure that all the suppliers adhere to the policies, Primark should create an ad-hoc audit team that will be responsible for conducting random audits at the supplier manufacturing locations. The creation of these new positions may increase the cost for Primark, but this cost will certainly be less than the cost of supplier non-compliance and the ramification of the revelation of such facts by the media.
High Level of Inventories in the European Countries
Forecasting is an important component of any supply chain. Even if the whole supply chain is well-integrated, the company cannot succeed if it forecasts very poorly. Forecast alone can strike a death knell for the whole supply chain (Choi, 2012). Before entering the European market, Primark used to sell only a few Stock Keeping Units (SKU). Also, it operated only in a limited number of stores to which the company could have supplied the products from its two main warehouses located in London and Dublin. Upon entering the European market, the number of central warehouses and retail stores increased significantly. This made the forecasting process by product and location much complex for the company. Primark should use sophisticated IT tools to analyze the past demands and based on the past figures, it should forecast the demands of the future products. Currently, the usage of the IT system, both in the areas of ecommerce and forecasting, is very poor. This is an area that can give a huge leverage in increasing the forecast accuracy, thereby reducing the inventory level at different warehouses.
Conclusion
Clothing supply chains are definitely not the simplest ones. Clothing manufacturing process may not be as complex as some other industries like automobile, but its supply chain is definitely very complex. Primark is no exception. Its suppliers are located in many different South East Asian countries where the company does not have much experience in terms of operations. The main market of Primark is Europe, which is far away from its supplier locations. This has created several supply chain challenges for the company, including supplier reliability issues, environmental challenges, and high level of inventory. The company has already implemented a few measures to address these issues, but it can take further actions such as the creation of a company owned vendor identification and quality assurance team, the creation of an environmental audit team, and investment in IT forecasting tools to improve the forecasting accuracy and reduce the inventory level.
Bibliography
Ahsan, K. and Azeem, A. (2010). Insights of apparel supply chain operations: a case study. IJISM, 5(4), p.322.
Hon Kam, B., Chen, L. and Wilding, R. (2011). Managing production outsourcing risks in China's apparel industry: a case study of two apparel retailers. Supply Chain Management: An International Journal, 16(6), pp.428-445.
Choi, T. (2012). Supply Chain Management in Textiles and Apparel. J. Textile Sci Engg, 02(02).
Bruce, M. and Daly, L. (2011). Adding value: challenges for UK apparel supply chain management – a review, Production Planning & Control, 22(3), pp.210-220.
Ji, X and Chen, W. (2012). Evaluation of Supply Chain Risk and Its Empirical Analysis for Apparel Processing Enterprises. JCIT, 7(14), pp.44-53.
Caridi, M., Perego, A. and Tumino, A. (2013). Measuring supply chain visibility in the apparel industry. Benchmarking, 20(1), pp.25-44.
Zhang, G. and Wang, D. (2011). Cooperative Pricing of Apparel Supply Chain Based on API. AMM, 58-60, pp.28-35.
Social Responsibility. (2014). Primark Apparel. [Online] Available at <http://www.Primarkapparel.com/codeofconduct.php> [Accessed 25 June 2015]
Textile industry: child labor still common. (2015). Fashion United. [Online] Available at <http://www.fashionunited.co.uk/fashion-news/fashion/textile-industry-child-labor-still-common-2013100818674> [Accessed 25 June 2015]
Brignall, M. and Butler, S.(2014). Bangladesh garment factories still exploiting child labour for UK products. The Guardian. [Online] Available at <http://www.theguardian.com/world/2014/feb/06/bangladesh-garment-factories-child-labour-uk> [Accessed 25 June 2015]
Jakhar, S. and Barua, M. (2013). Supply chain agility for firm's performance: a study of textile-apparel-retail supply chain network. IJASM, 6(3), p.215.
Chaudhry, H. and Hodge, G. (2012). Postponement and supply chain structure: cases from the textile and apparel industry. Journal of Fashion Marketing and Management: An International Journal, 16(1), pp.64-80.
Vedel, M. and Ellegaard, C. (2013). Supply risk management functions of sourcing intermediaries: an investigation of the clothing industry. Supply Chain Management: An International Journal, 18(5), pp.509-522.
Guercini, S. and Runfola, A. (2004). Sourcing Strategies in Clothing Retail Firms: Product Complexity versus Overseas Supply Chain. J. Cust. Behav., 3(3), pp.305-334.
Thomassey, S. (2010). Sales forecasts in clothing industry: The key success factor of the supply chain management. International Journal of Production Economics, 128(2), pp.470-483.
