Reasons why M&S are in this predicament
Marks and Spencer (M&S) experienced relatively fast growth from its inception until the end of 1998, where an unexpected recession hit it. It was during the recession that the problems of M&S began to surface, with the primary issue being ineffective communication throughout the supply chain. For instance, there was poor communication between M&S and its suppliers. Due to the increase in the production cost within the UK, M&S started compelling its suppliers to shift their production overseas without taking into consideration factors like political stability, and textile import quota (Christopher & Peck 2001). This decision was made independent of the viewpoint of suppliers.
Secondly, there was poor communication between upper and lower-level management in M&S. Children’s clothing was withdrawn from smaller stores, and this resulted in 4% in sales (Christopher & Peck 2001). Last but not least, there was insufficient communication between M&S and its customers. M&S did not have an accurate depiction of what its clients want; for example, it sold clothes that had poor sizing and had a limited lingerie range. The inefficient communication in the supply chain resulted in a “Bullwhip effect” that significantly hampered the system. Concurrently, this led to the recovery strategy having minor impacts on revenue generated.
Effect of increased overseas sourcing on M&S marketplace performance
In the early 1990s, M&S considered and commenced shifting from local to offshore sourcing. Although M&S had reduced the proportion of UK suppliers, it still heavily relied on them to maintain their “buy British” marketing stance. Its strength was grounded in providing middle-class individuals with quality and reasonably priced clothing. However, this market segment was polarized by niche rivals and discount stores.
Therefore, to enhance its consumer value, M&S resorted to reduce the cost-base by coercing its suppliers to outsource from locations with relatively low labour costs. However, increased outsourcing hindered its market performance. For instance, it extended the replenishment lead times; thus, this limited the availability of clothing on showrooms. Dewhirst, M&S’s oldest supplier, highlighted some of the few inefficiencies in the distribution system by stating that Moroccan manufactured goods were being shipped to the UK through France before some were redistributed back to France (Christopher & Peck 2001).
Moreover, M&S lost most of its suppliers since some of them could not afford the huge investments associated with offshore sourcing. Coats Viyella terminated in a 70-year relationship with the company based on the fact that establishing their business overseas would consume a lot of time and investment (Christopher & Peck 2001). Lastly, M&S’s favourable oversea location, Sri-Lanka, was characterized by a textile import quota that had to be considered before sourcing there (Christopher & Peck 2001). However, the management did not recognize the quota until the quota of that year was depleted by June. This led to customs declaration issues.
How M&S can capture the potential benefits of low-cost sourcing whilst still improving responsiveness, given that costs must be reduced
Overseas sourcing is the most common and efficient way for low-cost sourcing. Therefore, to ensure that the risks associated with overseas sourcing are reduced, M&S should establish ways of ensuring that such risks are either eliminated or reduced. For instance, M&S should identify low-cost locations that are geographically closer to the UK, headquarters of M&S, with examples being Poland and Romania. This will reduce replenishment lead times. Moreover, M&S should ensure that it is updated with regards to local restrictions on labour laws and import quota. Lastly, the company should establish and maintain a sound communication system with its suppliers. M&S can use the Electronic Data Exchange (EDI) to create a more-streamlined business communication process.
Effectiveness of the “one-size-fits all” approach to M&S’s supply chain management strategy
The “one size fits it all” approached negatively impacted M&S’s profitability in the late 1990s. Varying customer requirements should result in the introduction of different products and the use of several distribution channels. However, M&S instead homogenized the location where clothing is manufactured. By doing so, M&S strived to build effective processes for their high-volume items to reduce the supply chain costs. Therefore, they risked disappointing customers by inappropriately responding to peaks in demand for slower-moving products. When they took steps to avoid stock-outs, the additional costs had a ripple effect throughout the supply chain.
A sound supply chain system has to be agile; therefore, as competition intensifies, M&S has to think beyond the traditional view of the supply chain, which stresses on operational efficiency and speed. It will need to incorporate a value-creation approach when designing supply chain strategies. Therefore, the alternative supply chain management strategy should combine both value creation and operational supply chain perspectives.
How a total end-to-end supply chain strategy might be developed in M&S
Historically, M&S had a close partnership arrangement with its suppliers. However, after it began outsourcing its products, it started experiencing a negative trend. The primary cause of the negative trend was the inefficient communication system in the M&S supply chain. Therefore, the only way through which a total end-to-end supply chain, that is, the re-establishment of its relationship with the suppliers, can be achieved is through fine-tuning communication.
Moreover, it should also improve communication both within the organization and between them and its customers. A sound communication system coupled with an effective Vendor Management Inventory will result in reduced lead time and cost of inventory, increase in customer satisfaction, improved quality of clothing and overall M&S will remain competitive in the market.
Reference
Christopher, M & Peck, H 2001, Moving mountains at Marks & Spencer, case study. Web.