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Supply Chain Collaboration in Textile and Apparel Industry

adv-07

Israt Jahan Eusha, Research Assistant

The impact of supply chain management is increasing day by day as business is becoming more and more competitive. As profit margin is shrinking specially in the apparel manufacturing industries, managers are looking for more and more options to explore that add to their profitability. Supply chain collaboration or SCC can be such a tool that can optimize systems and minimize costs in business operations. This article describes what SCC is all about and analyses a case study from Vietnam.

What is SCC or Supply Chain Collaboration

SCC or Supply Chain Collaboration is a supply chain strategic tool which is implemented for creating a seamless & synchronized Supply Chain, increasing responsiveness & performance and satisfying customers based on mutual goals & trusts and shared risks & rewards.

There are 3 types [3] of SCC,

The type 1: Multiple organization form partnership while coordinating activities and planning for a limited period of time.

The type 2: Multiple organizations not only coordinate together but also integrates all their activities.

The type 3: Multiple organizations integrate to a certain level. Each consider the others as extensions of their own firm.

screenshot-29Collaboration is the most difficult part of supply chain. Supply Chain Collaboration or SCC has the most unsatisfactory track records among all the Supply Chain strategies because only 35% collaborations were moderately successful.

SCC is considered to be difficult because it requires two major aspects. They are:

  1. internal collaboration of an industry 2. Continuous improvement.

SCC in T&A industries

The industry type plays a vital role in implementing supply chain practices. According to Supply Chain strategists the supply chain of Textile and Apparel industries are:

  • The longest,
  • Most fragmented,
  • Inflexible and
  • Buyer driven commodity chain

Reasons behind the characteristics of the Supply Chain of T&A industries are:

  • Short product life cycle,
  • High demand uncertainty and
  • High volatility

Therefore, the T&A Supply Chain Collaboration requires to be responsive & efficient through collaboration & effective communication.

SCC Case

ABC – Joint Stock Company (real name hidden for privacy purpose) is one of the leading firms in Textile and Apparel industry. The firm we are talking about is a CIM or Cut, Trim and Make firm which can be understood from the diagram stated below:

Fig: Main modes of production [2]

OBM = Original Brand manufacturing, ODM = Original Design Manufacturing, OEM/FOB = Original Equipment Manufacturing/ Free On Board, CMT = Cut Make Trim Fig: Main modes of production [2]

CIM contributes in the lowest added value in the global apparel value chain. Thus the company has shifted from CIM to FOB to increase value adding and competitiveness. Also it has implemented SCC or Supply Chain Collaboration. Lean is applied at the beginning and ERP is established for 3 years based on the framework of SCC. The framework includes individual functional software modules.

Now we might assume that the firm could have produced unique products and services, superior quality, cost competitiveness, enhanced delivery performance, managed assets in better way and created superior channel relationship. In reality none of these happened. The firm decided to go for external collaboration before doing internal collaboration thus collapsing the SCC.

Reasons of the failure of SCC in ABC – Joint Stock Company

The firm we are discussing about is a part of the Vietnamese textile and apparel industry. Vietnam has been one of the six leading clothing exporters[1] in the world since 2012. This industry is contributing 8% of the GDP. 25% of the workforce in the industrial sector comes from this industry while creating 2.5 million jobs in Vietnam. Being in a successful industry wasn’t enough for ABC- Joint Stock Co. It faced multiple problems in different sectors.

The modules created by ERP or Enterprise Resource Planning work separately resulting in lack of ‘Information & System Integration’ and ‘Scientific Management’.

In Sales Department, no information about production capacity was obtained from the production department. That’s why sales department carried out wrong negotiation with the buyer about the delivery time. This communication gap resulted in late delivery of the order.

In Production Department, no information about actual quantity and planned quantity were discussed before the end of a working day. Even things were sorted out the next day. This caused huge WIP or work in process in the inventory.

Lack of Scientific Management resulted in no statistical methods in monitoring of quality of the product, line balancing and performance indicator. Thus the firm was not being able to conduct self-inspection. The representative of buyer needed to pay visit to maintain the SCC as an external collaboration. Thus the lack of internal collaboration and absence of cross-functional communication resulted in ABC- Joint Stock Co. losing big customers.

Overcoming obstacles to successfully implement SCC in T&A industries of Bangladesh

In Supply Chain, there is only a single source of finance flow- the end consumer. This single source has led to the ‘Single Entity’ concept of Supply Chain which is a very useful foundation for supply chain integration & collaboration or SCC. If we want to implement SCC in Bangladesh, the country being the world’s second-largest apparel exporter while contributing 80.7% of the total export earnings in exports and

12.36% of the GDP [7], we may follow the following pathway:

Considering SCC as a project and employing a Project Manager with the support of top management

Project manager will create an integrated project based matrix structure

Project manager will remove conflicts among different functional groups such as sales department, production department, lean department, ERP department etc.

Project manager will appoint different software and monitor their activities as well

Tools for Quality of Product [4]: Cause and effect diagram, Check Sheet, Control chart, Flow Chart, Histogram, Pareto chart, Scatter Diagram etc.

Software for Line Balancing [5]: Arena, Extend, Flexsim etc.

KPI [6]: Factory Efficiency Percentage, Man to Machine Ratio, Cut to Ship Ratio, Order to Ship Ratio, On Time Delivery Rate, Average Style Change over Time, RFT Quality, Quality of Production, Downtime Percentage etc.

External agreement exists among buyer and company price, quality, quantity and due date. To successfully accomplish the external agreements implementing SCC will be much convenient. For this, internal agreement within different functional groups must be made by creating a mindset of sharing resources, cost, benefit & risks under the supervision of the SCC Project Manager.

SCC implementation will make the textile and apparel industry able to conduct self-inspection to get, satisfy and increase big customers. Thus, on time delivery, good quality percentage and efficiency in operating system will be established.

References:

[1]https://www.etextilemagazine.com/en/top-10-exporting-countries-of-textile-and-apparel-industry.html

[2]https://www.semanticscholar.org/paper/Supply-chain-collaboration-%E2%80%94-A-case-study-of-and-Ho-Kumar/e7a1f61ba263c1d1a090e260b1446a8766853063/figure/0

[3]https://www.slideshare.net/SannidhiJoshi/performance-improvement-of-fashion-industry-through-the-supply-chain-collaboration

https://en.wikipedia.org/wiki/Textile_industry_in_Bangladesh