"Moving Mountains at Marks and Spencer"
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TBS908 Supply Chain Management Assignment 2 "Moving Mountains at Marks and Spencer" Marks & Spencer Situation Analyse and Suggestion Present by Alfred Yeung (2898354) Business Advisor, Global Logistic Contents Contents 1 Introduction 2 Background 3 Reason of Current Situation 5 Affect of Overseas Sourcing 9 Preparation of Overseas Sourcing 12 Supply Chain Management Strategy 14 Strategic Alliances 17 Conclusion 19 Reference 20 Introduction Marks and Spencer as the internationally well known department store, was once represented the 'quality, service and value for money' and having turned in record profits for 1998. Marks and Spencer's supply chain management strategy "Partnership Approach" was a textbook favourite and the topics of numerous magazine articles. Suddenly things shifted dramatically, Marks and Spencer was no longer the high expanding and the leading retail company. The fast changing market environments turned Marks and Spencer in very bad situation, the profit drop, customers' dissatisfaction, and suppliers' relationship broken. This report is going to study the following questions: 1. What is the reason for the current situation at Marks and Spencer? 2. Has increased overseas sourcing helped or hindered the marketplace performance? 3. Given that costs must be reduced, how can Marks and Spencer capture the potential benefits of low-cost sourcing whilst still improving responsiveness? 4. Is the current 'one-size-fits all' approach to supply chain management strategy the best way forward for the company or there are better alternatives 5. How a total end-to-end supply chain strategy might be developed at Marks and Spencer? Background Marks and Spencer was formed in 1894 by Michael Marks and Tom Spencer. Marks and Spencer started as a 'Penny Bazaars', and in 1920s the company tried to buy directly from the manufacturers rather than through wholesalers, which led to ultimate success that few rivals could match. In 1926, Marks and Spencer was floated on the London Stock Exchange. In the late 1920s, Marks and Spencer registered the St. Michael trademark, and gradually to remove the manufacturers' own brands from the products in Marks and Spencer.
"High volume, low-price warehouse clubs and discounters were doing well, so were the higher priced low-volume designer labels." [Martin Christopher and Helen Peck, 2001] In other words the challenge was to find ways to enhance consumer value. Marks and Spencer's response to this was to reduce its cost-base by forcing that its suppliers source more of their products from locations where labor costs are low. "First suppliers were warned of the need to become more price(s) competitive. Inevitably this would involve switching a greater proportion of production overseas. M&S had already indicated its intention to reduce UK sourcing to under 50% within the next few years, urging its largest suppliers to relocate production to low-wage economies...Sri Lanka had been identified by M&S as the preferred location, though South Africa and Cambodia were also seen as attractive alternatives." [Martin Christopher and Helen Peck, 2001] The potential for cost reduction through this process was impressive, at least theoretically. First of all the problems of overseas sourcing for Marks and Spencer is that there is a real risk that replenishment lead-times maybe significantly extended. "Dewhirst, M&S's oldest supplier...though this itself had highlighted inefficiencies in M&S's distribution system, for example, Moroccan made goods were traveling to the UK via France before some were distributed back to France." [Martin Christopher and Helen Peck, 2001] Secondly, overseas sourcing to low labour cost location has to take the potential risk of low quality and less efficient working practices. Due to the education level of the low labour cost countries are usually low, the concept of quality are low. Also, the efficiency is not high due to the absent of the techniques required. The third problem among overseas souring is the resistance from the supplier. As mention above, overseas sourcing involved huge investment, not each an every supplier can afford. For Marks and Spencer's suppliers, one of the "Big Four", Coats Viyella announced that terminated the 70 years relationship with Marks and Spencer.
Conclusion For Marks and Spencer to get out of today situation, communication is playing the essential role. No matter what types of implementation, resistance always there; but communication can not only eliminate the resistance but, maybe enhance the implementation. Marks and Spencer as advised, must improving its communication channels, with the customers, within the company and with the suppliers. Based on the communication, the strategic alliance is approaching to success. This means the cost of inventory will be lower, the products' quality will be enhance, the lead time will be reduced, the profit will be increased, the customers' satisfactory will be higher, and at last the company will be more competitive. The day of Marks and Spencer a by-word for "Quality, Service and Value for Money" is coming back very soon. Reference 1. Marks and Spencer, 1997, "Annual Report 1997" 2. Marks and Spencer, 2000, "Annual Report 2000", p 15 3. Martin Christopher and Helen Peck, 2001, "Moving Mountains at Marks & Spencer" 4. Kate Rankine, 4th November 1998, "Marks & Spencer suffers consumer bloodbath", The Dailey Telegraph/FT World Reporter. 5. Kate Rankine, 15th January 1999, "Marks and Spencer City with profits alert...", The Dailey Telegraph/FT World Reporter. 6. Fraser Nelson, 16th July 1999, "Marks and Spencer fails the knickers test", The Times, p 29 7. Jane Simms, 1998, "Top Marks", p. 26 8. Ian McConnell, 9th September 1999, "Baird fires on M&S", The Herald, p21 9. Kate Rankine, 7th September 2000, "Coats tears M&S deal into shreds", The Daily Telegraph/FT World Reporter 10. Hau L Lee, V Padmanabhan, and Seungjin Whang, 1997, "The Bullwhip Effect in Supply Chains", Sloan Management Review, p 97 11. PricewaterhouseCoopers, 2004 "Sourcing Overseas for the Retail Sector" 12. Roger Clarke, "Electronic Data Interchange (EDI): An Introduction", http://www.anu.edu.au/people/Roger.Clarke/EC/EDIIntro.html (1998) 13. Kate Rankine, 7th July 2000, "M&S racks up on clothing sizes", The Daily Telegraph/FT World Reporter 14. Lauren Mills, 2000, "M&S tells suppliers to cut prices", Sunday Telegraph 15. Lauren Mills, 2000, "M&S suppliers fight demand to cut price", Sunday Telegraph 1
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