Md Badrul Alam
A supply chain of any products or services tends to face enormous uncertainties due to the volatility in both demand and supply. However, the extent of unpredictability may even be greater in the apparel industry due to the nature of its products. As the garment industry deals with fashion wears, the demand for the product is likely to vary due to the sudden shift in customer preferences, frequent changes in market trends, and unusual movements of economic conditions. Although all the stages in a supply chain face the burden of uncertainties, the business entities which are in the downstream should absorb significantly higher level of uncertainties compared to those in the upstream. Hence, the global fashion retailers have to assume more risks compared to the manufacturers in Bangladesh, as the former have to assess the market demand and the prevailing market trends in the fashion wears.
The relative upstream position of the Bangladeshi apparel manufacturers may act as a double edge sword. In one way, it helps the local manufacturers face lower uncertainty, but in another way, it keeps them isolated from the actual end users. Obviously, these distant positions in the supply chain may get them unaware of the shifting fashion trends in the global apparel market. Though they are not serving the consumers directly, any demand fluctuation resulting from the changes in customer preferences may travel across the supply chain and negatively affect the upstream manufacturers and their suppliers as well. To improve efficiency and the overall performance of the supply chain, the manufacturers need to maintain a strong collaboration with the global retailers for getting the market insights and future market trends on a timely basis.
Every supply chain should strive towards reducing uncertainties and improving performance by using five supply chain levers namely capacity, inventory, time, information, and price. However, imprudent usage of any lever may reduce uncertainty at the cost of efficiency. Theoretically, flexible capacity, higher inventory level, short lead time, updated information system, and price adjustment may help reduce supply chain uncertainty of an apparel manufacturer. However, it may create disaster if the manufacturer wants to enhance capacity by incurring a significant cost without getting an indication of predictable demands from the global retailers over the upcoming periods. Capacity building falls under the strategic decision of a supply chain design phase, and hence it requires substantial time, efforts, and funds. In case of capacity planning, the local manufacturers must align their decisions with the strategic priorities of the famous global brands.
Holding adequate inventory level may help reduce both demand and supply uncertainties. Sometimes manufacturers tend to overstock inventories fearing the uncertainty of their supply. However, a strong connection with the suppliers of raw materials will help manufacturers keep the appropriate level of inventory, and this will help them to avoid overstocking. Since inventory acts as a significant driver of a supply chain performance, it can be maintained in an appropriate way to keep a balance between efficiency and responsiveness. For example, if a manufacturer gets to know about an imminent supply chain disruption from a trustworthy supplier, then it should keep the higher level of inventory incurring a substantial holding cost. In such a case, the high holding cost may be justified to ensure the uninterrupted operations of the manufacturer. Otherwise, the production might be halted resulting in the failure of customer order fulfilment. If a manufacturer fails to respond to buyers with the timely delivery of the products, then the buyers will get dissatisfied and they may even switch to other manufacturers. Hence, collaborations with suppliers can help the manufacturer to balance between efficiency and responsiveness. Similarly, the buyers can collaborate with the manufacturer by giving predictable demands over the next periods. In this case, the manufacturer gets the opportunity to perform aggregate plan on the inventory, thereby achieving efficiency in inventory management.
Manufacturers can use time as a powerful lever to reduce demand uncertainties. Collaborations with buyers can help a manufacturer to judiciously use time to balance between efficiency and responsiveness in fulfilling the customers’ needs. For instance, a retail brand has been ordering garment wears from a Bangladeshi manufacturer and helping it in achieving efficiency in its operations. However, if any other retailer places an order with lower lead time, the manufacturer can fulfil the order incurring higher costs. To execute the urgent order, the manufacturer needs to prioritize responsiveness over efficiency. In this case, the higher manufacturing costs may be more than compensated by the premium price from the buyer. In fact, the retailer which is in the long-term collaborations with the manufacturer has enabled the manufacturer to balance between efficiency and responsiveness.
Information plays an important role in reducing supply chain uncertainties if it is disseminated from the retailer to the upstream stages uninterruptedly. For instance, American brand Tommy Hilfiger, plans to offer a massive Black Friday Offer of 50% discounts on its popular men’s and women’s garment outfits. The contract manufacturers in Bangladesh should be well communicated with the same. Similarly, the suppliers of the manufacturer must also be communicated to get prepared for any demand spike for the inputs. Unlike the other supply chain levers, information can enhance both efficiency and responsiveness simultaneously. As it is a cross functional driver, various departments of the manufacturer can work together to share the information within the organization to improve efficiency and responsiveness. Appropriate information can help the manufacturer to satisfy buyer needs by fulfilling their quality and other requitements including the shipment dates. More importantly, the information shared between marketing, sells, and operations may help the manufacturer to plan for the operations in a very efficient and responsive manner.
Price can be used to balance between efficiency and responsiveness. If a manufacturer opts for serving a premium retail brand requiring high quality products with complex design, then it needs to be compensated with premium price. As a manufacturer tends to accommodate more uncertainty being responsive to the buyers needs, it will charge higher price. On the contrary, the same manufacturer may focus more on efficiency, when it will attempt to serve a buyer requiring basic garment items.
Collaborations with buyers may also help to predict demand forecasting more accurately. Garment manufacturers usually perform forecasting under their planning phase, which spans from three months to a year. Accurate forecasting can significantly reduce uncertainty in the supply chain. Usually, manufacturers rely on their historical data to predict the upcoming demand for the products. If they only rely on the past demand, then there might be a gross mistake. For instance, recently there has been some major changes in the customers’ preferences in product design. However, this was not reflected in the same quarter’s demand of the previous year. As the retailers can track the customers’ demand for the product more closely, they should share the market information with their manufacturers. Getting the critical market insights from the buyers, the manufacturers can forecast their upcoming demands with more accuracy.
Without collaborations with the other stakeholders in a supply chain, a garment manufacturer cannot reduce supply chain uncertainties by merely investing in the above-mentioned supply chain levers. In fact, strong collaborations with the buyers and suppliers, can strategically guide the Bangladeshi apparel manufacturers to maneuver the supply chain levers for reducing uncertainties and balancing between efficiency and effectiveness.
Md. Badrul Alam is a faculty member at the Institute of Business Administration, Jahangirnagar University and can be reached via email at badrul.ibaju@juniv.edu
