Introduction
In the current business world where firms are striving to achieve a better brand recognition and market competitiveness, the concept of supply chain management is of considerable significance. According to Jones and Riley; “Supply chain management is defined as an integrative approach dealing with the planning and control of the materials flow as well as information from suppliers to end-users” (Piotrowicz & Cuthbertson, 2015, p.226). An efficient supply chain management can benefit organisations to reduce lead time and to achieve an uninterrupted flow of production processes. Today, it is a challenging task for business houses to maintain an efficient supply chain because it consists of a broad network of suppliers and sourcing partners. Hence, modern businesses have recognized the fact that building and maintaining strong supplier relationship is vital to enhancing the efficiency of the supply chain. To what degree and how firms must integrate with their supply chain partners is a topic for discussion. In the business environment and research context, this concept is generally regarded as supply chain integration. This is essential to minimize certain risks associated with business operations. The concept of supply chain integration is currently considered to be an integral part of the supply chain management. According to Zhao and Huo et al (2011), supply chain integration (SCI) can be defined as “the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intra- and inter-organization processes”.
This paper will critically analyse the supply chain management operations of Hugo Boss.
A brief overview of Hugo Boss
Hugo Boss AG was founded in 1924. It is a German based luxury fashion company which is styled as BOSS. The organisation was established by Hugo Boss, and is currently headquartered in Metzingen, Germany. The company has been successful throughout its long corporate history of 90 years and has an operational presence in over 100 countries with more than 5,500 retail points of sale. The company is well known for its product diversification capabilities that facilitate the production of high quality fashion apparel, shoes, and accessories for men and women. Production leadership, operational excellence, and great market knowledge have assisted the organisation to confront market competition over the years and expand its markets quickly. The company has two well-reputed brands such as Hugo and Boss and five subsidiary lines including Hugo Boss Black, Boss Green, Boss Orange, and Boss Selection. The Huge Boss has production locations in several countries including Germany, Poland, Italy, and United States.
Hugo Boss: Supply chain management
Considering the huge size of the Hugo Boss, it is particularly important for the company to pay specific attention to supply chain management so as to improve its market operations and to enhance value chain efficiency. Hugo Boss top management has taken numerous efforts over the last few decades in order to strengthen the firm’s supply chain operations. In an attempt to enhance its supply chain efficiency, the Hugo Boss management adopted the Supply Chain Operations Reference (SCOR) model, which is a management tool used by business concerns to improve and communicate decisions relating to supply chain within a company and with other stakeholders such as suppliers and customers. The SCOR model is organised around five key supply chain processes including plan, source, make, deliver, and return’ (Kersten, 2010, p.59). The three pillars of the SCOR model are process modelling, performance measurement, and best practices (Ibid). A key feature of the SCOR model is that it gives particular emphasis to risk management in the supply chain. The three pillars of the SCOR model enable the organisation to form a ‘systematic and effective perspective on risk’ (Ibid). To illustrate, the process modelling pillar of the SCOR can assist the Hugo Boss management to make certain that all key activities in the supply chain are identified, thus leading to the development of a reliable basis to define and address risks comprehensively. The second pillar, performance measurement, may aid the management to evaluate the long-term implications of different supply chain activities once they get exposed to risk.
Finally, the best practices suggested by the SCOR model are also beneficial for the management to identify potential mitigation efforts that are needed to curb supply chain risks. A vital feature of the SCOR model is that it greatly enables the Hugo Boss management to obtain a great understanding of the business processes needed to meet customer needs effectively. It is interesting to see that the Hugo Boss management relies extensively on the SCOR model to enhance the supply chain efficiency of its business.
As part of enhancing the efficiency of its supply chain management, the Hugo Boss’ senior management pays particular focus to optimising the firm’s planning and sourcing processes because the top management believes that this approach is effective to attain production capacity for required volume timely and affordably (Management Report). To acquire these skills and capabilities, the Hugo Boss management has invested notably in improving the electronic communication between the company and the suppliers over the last few years with the ultimate objective of enhancing transparency across supply chain (Ibid). Over the last few decades, the organization has taken specific efforts to achieve supply chain optimization so as to increase the firm’s competitiveness in the global marketplace. In addition, the Huge Boss management has introduced a pilot program to improve the lead time and thereby enhance the supply chain efficiency. As part of this programme, the organisation changed the order frequency from monthly to weekly from a subset of body-wear NOS items (Maria, 2014). The outcome of this order frequency change was significant as it led to a four weeks reduction in total lead time. The combined use of the SCOR model and the pilot programme has assisted the company to improve product availability, inbound transport costs, warehouse operations, and sales operations notably.
For a huge multinational business enterprise like Hugo Boss that has a strong global presence, it is necessary to develop a standardised and well co-ordinated sourcing and production processes so as to achieve market success. Currently, Hugo Boss’ own factories account for the production of nearly 20% of its product line whereas the remaining 80% is manufactured by independent suppliers. It is important to note that the organisation produces a significant percent of its traditional clothing so that it can gain considerable expertise and promote the optimization of quality and product availability.
The company has chosen different locations for the manufacture of different product items so as to take advantages of the quality and cost efficiencies of materials and labour. For instance, the firm’s manufacturing facility at Izmir focuses on the production of suits, trousers, jackets, and women’s clothing whereas the organisation manufactures suits for the American market in its factory in Cleveland (Management Report). The Hugo Boss management strongly thinks that strategic management of the supplier network is a crucial factor affecting the market competitiveness of the business. As of 2011, the company worked with over 320 suppliers for dealing with contract manufacturing and merchandise (Ibid).
The strategic supplier relationship assists the organisation to achieve optimised capacity utilisation and thereby to meet growing sourcing requirements resulting from increased demand. The firm’s sourcing activities are distributed over a global network of suppliers so that the Hugo Boss management is able to diversify its operational risks effectively. In addition, this strategy benefits the company to limit its dependence on individual sourcing partners and/or manufacturing companies. To make it clear, the largest individual sourcing partner of Hugo Boss accounts for only 8% of the total sourcing volume of the company.
Interestingly, the Hugo Boss follows a set of well-defined technical production criteria for choosing suppliers. The most important criterion of the organisation is suppliers’ levels compliance with quality and workmanship requirements. In addition, the Hugo Boss management specifically considers the financial background, cost structure, innovation, and other existing standards of suppliers while choosing sourcing partners. The company also examines whether the supplier adheres to social and environmental standards set by International Labour Organisation (ILO) and United Nations (UN). This business enterprise also considers the supplier’s worksite safety policy as a criterion for commencing business relationship with that supplier. The Hugo Boss’ top management asserts that close supplier relationship is a key constituent of effective supply chain management (Management Report). Recognising this need, the company pays particular attention to creating and maintaining supplier relationships in the long-term. In addition, the management closely works with its suppliers to maintain production expertise and high quality for which Hugo Boss products are well-known worldwide (Ibid). Evidently, this close co-ordination with suppliers greatly benefits the Hugo Boss to shorten the lead time notably and thereby to ensure timely delivery of products and services as requested by customers. To illustrate, the product development process integrates technical production considerations at an earlier stage of manufacturing. Finally, the organisation receives feedbacks from suppliers so as to develop high quality new designs. According to the Hugo Boss top management, constant efficiency improvement efforts in close co-operation with suppliers are vital to fight cost overruns in sourcing processes, specifically relating to higher labour costs. The Hugo Boss’ policy in this regard is to promote optimal capacity utilisation through taking efforts to reduce complexity in collection and other supply chain processes(Ibid). It seems that the organisation has reduced the complexity in collections by a third in the past few years with intent to enhance efficiency in sourcing. In addition, the four-collection cycle introduced recently by Hugo Boss helped the company to enhance the efficiency of sourcing activities and thereby to promote optimised capacity utilisation at suppliers.
Similarly, it is vital to note that the organisation gives great emphasis to quality management, which is recognised to be a key part of the supply chain management (Ibid). As product quality is the major factor that helped Hugo Boss to be successful throughout its corporate history, the company invests significantly in quality enhancement and the firm’s quality management starts right at the point where the product is created. It is identified that manufacturing companies commonly maintain standardised quality and processing manuals that specifically describe requirements. In the same manner, the Hugo Boss also keeps a process manual that documents key processes relevant to quality at the firm’s own factories. The company regularly upgrades its process manual subject to ISO 9001 certification. For the last several years, the organisation has been paying specific focus to the automation of manufacturing processes wherever it is feasible economically so as to achieve the high quality standards (Management Report). In addition, the company promotes fixed controls at certain process steps so as to make sure that its production processes are in strict compliance with accepted manufacturing standards. The company personnel perform random check of individual processes regularly so as to make certain that quality is not compromised at any stage of the manufacturing process. As the firm’s inspection processes are backed by extensive hardware and software systems, the organisation is able to achieve a higher degree of standardisation and to perform an electronic analysis of the outcomes. It appears that extensive reliance on advanced technologies benefits the organisation to limit the chances of production errors to a great extent and to achieve optimum utilisation of resources. In addition, this approach is helpful for the company to deal with quality assurance effectively and to ensure that customer needs are met adequately and properly.
Conclusion
Marketers today consider the current business environment a favourable situation to expand their businesses. However, since the degree of competitive rivalry is being triggered by technological innovations, the level of market competition in all business sectors is very high. Today, operational success of a business is increasingly linked to the supply chain performance the firm. Therefore, managements take great efforts to improve their supply chain activities. Management professionals today believe that long-standing relationships with suppliers, customers, and employees are vital to establish an efficient supply chain. Strategic relationship with supply chain partners is possible only if an integrated supply chain is available.
When it comes to decision making, it seems that the Hugo Boss promotes dissent and constructive criticism to form well informed decisions. The company has even included dissent as a key value in its guidelines to ensure the authenticity and viability of decisions made. The Hugo Boss’s decision making process is significantly influenced by a set of predetermined criteria. Sustainability is one of the strategic decision making criteria of the company and it also takes into account production quality, security of supply, price credibility, and innovation strength while making decisions. Finally, the Hugo Boss management focuses extensively on quality management because a high quality produce line has assisted the organisation to be successful throughout its corporate history.
Bibliography
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