[BUS 667] Operations Management

Report On

New Look: Competing Through the Design-Supply Chain Interface

Prepared by: Aysha Mohamed M80001042 Mouza Al Nuaimi M80001056 Ola Al Muhairi M80001061 Prepared for: Dr. Marc Poulin Date: 30 June 2011

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How can New Look maintain/improve its competitive position in the challenging retail climate of 2008? Just like many other businesses, the fashion industry has continued to compete in a tumultuous environment where they are continuing to come up with new strategies that will help them to reconfigure their supply chains through the use of consolidation centers and globalization. While their home base is still in the United Kingdom, New Look, the third largest fast fashion retailer, was able to save close to 60 million pounds when it opened up its consolidation centers in Singapore and Turkey. Changing from a product centric approach to a customer centric strategy enabled New Look to provide significant gains in transportation economies and to distribute their products more effectively. When the CEO Phil Wrigley took over New Look in 2004, he restructured New Look to take advantage of globalization and shift from using a product centric strategy to a customer centric strategy. The customer centric strategy involved opening up two consolidation centers in Turkey and Singapore, which helped New Look enable its suppliers to match demand and reduce the risks that are often inherent in supply chain execution. Retailers need to be concerned about the distribution of their products from raw sources to stores as a finished product. Customer-centric businesses are often able to close some of the gaps between the supply of raw materials to the finished product especially in the distribution to store or consumer. One of the clear advantages of New Look is its continued improvement of its product design capability in-house and aligning it better with its supply chain. Always essential to their strategies of being one of the most innovative fast fashion retailers in the United Kingdom and abroad, New Look has continued to pride itself in being able to produce the latest Catwalk fashions in a little over 8 weeks, but now New Look is set up to reduce that time. The design teams at New Look furthered this goal by considering the logistical implications of designs and identifying efficient modes of transport as they relate to their consolidation centers in Turkey and Singapore. Instead of keeping them separate, New Look continues to use cross-functional teams that incorporate into their design stage the sourcing of raw materials, the designing of the product, and the manufacturing of the product. This cross-functional strategy continues to help New Look reduce the
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inefficiencies in their supply chain by reducing inventories at the points of interface between supply chain and other operational functions. Still, the strength of New Look continues to be its ability to turn Catwalk fashions into fast fashions at an incredibly quick turn around time with the additional advantage to the consumer of affordable pricing and a wide range of available sizes (even plus sizes for teens and adult women). New Looks fast and flexible approach and its affordable prices to its clientele make it mandatory for the company to utilized the best customer centric strategies that takes advantage of cross functional strategies at the design stage and efficient transport economies at the distribution state. As a result of Phil Wrigleys leadership starting back in 2004, New Look has taken advantage of its global expansion to utilize effective strategies that reduce costs at all operational stages. New Looks product and global expansion that enabled them to distribute clothing in stores across Europe and the Middle East, has also been very much a part of their customer centric strategy that continues to create efficient distribution and supply chain practices.

Comments: As you could see from my comments, you are still not answering the question of the case study. All the sections I highlighted in yellow are examples of you restating what they are actually doing. The last few sentences reveal a bit more about your opinion but again, theres little support. You havent added any other element they could do to improve their competitive position. If their objective is to increase speed and reduce costs, what have we seen in class that can help them? (like lean manufacturing for speed, reduced wip) Any IT software to increase speed, reduce costs?

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BUS 667

In times of recession, the growth slows down and it even challenges the survival of the business, it is commonly observed that businesses which experience high rate of growth are effected the most because lots of money is invested in expansion to nurture growth and gain more market share which makes the business more vulnerable to liquidity and solvency problems due to low level of revenue. During the recession phase it is observed that people are not interested in spending their money specially on luxurious items and prefer to buy cheap items to save as much earnings as they can. It was notably observed during the recession in 2008-9 that the retail sector did not get effected much, rather if benefited from the recession. In its report by the BBC on the subject it was mentioned that the reason for the retail sector not being effected was that it could customize its product mix according to economic situation of the world and respond to the customers demand quickly.

As New look women wear has almost all of its functions inhouse(like designing and manufacturing) and has self owned retail shops so it can assess the environment, market demand and than modify its internal processes to maintain or if effectively assessed and implemented can move ahead of its competitors. Following are the recommended steps which are than explained along with the elaborated recommendations using different models like PESTEL analysis, Porters Five forces, Porters value chain, Product Life Cycle model. 1. 2. Analyzing external environment to identify opportunities and threats. Comparing those opportunities and threats against its capabilities and identifying its own

strengths and weakness. 3. Measuring the competitive capabilities of itself and than comparing them with the

requirements to survive in the recession period.

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ANALYZING EXTERNAL ENVIRONMENT: PESTEL ANALYSIS POLITICAL: Chinas accession to the WTO has promoted a free flow of foreign trades by removing all

barriers encouraging Western companies, like newlook, to make way into the worlds most profitable market encompassing over 1.3 billion people (Straits Times, 2010).

Promotion of free trading blocs by governments to benefit from globalisation has been

presented in the literature (Lynch, 2003). Immersion of 10 further countries into the European Union (EU ) took place in 2004 promoting trade between Western and Eastern European countries (BBC, 2009). This can help Newlook to persue its goal of expanding globally and challenge its rival brands.

ECONOMIC: Economic factors are a matter of concern for Newlook since they impact directly on the

buying behaviour of customers. Although the UK economy was declared officially under recession in 2008, the governments substantial reduction in interest rates helped to minimise further rises in unemployment during 2009 (Euromonitor, 2010). As a result of this, the spending power of consumers is again on a steady rise as they are more confident about their current financial situation. However, there is still a lot of financial uncertainty meaning that consumers are likely to spend less on premium products, as Newlooks design and manufacturing functions are inhouse so it can respond to this by designing and manufacturing clothing which is less expensive and attractive. SOCIAL: An analysis of the UK population shows that there are more retired people than children

representing the Baby Boom generation (Herald Scotland, 2010). The ageing population is discouraging for Newlook as its targeted market is clothing for young generation . So its decision to expand globally should be to countries where the rate of younger generation is high as they are also fashion conscious. It
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has nevertheless been predicted that the ageing population would find online shopping more convenient. However, small deliveries are considered to be ineffective and expensive. TECHNOLOGICAL: One of the key macro-environmental variables that have directly influenced the supply

chain, operations and processes of retailers is technology. Subscriptions to the Internet have grown by over 50% and it has been estimated that the Internet is being used by 70% of the population in the UK (Office for National Statistics, 2010). Newlook should consider selling its products online, which can help it to increase its revenue in time of recession.

Loyalty programs should be introduced through information technology which would

discourage customers from switching over to their competitors.

ENVIRONMENTAL: Environmentally friendly, reduced packaging is being promoted by the G overnment. It has been found by the Office for National Statistics (2010) that the percentage of consumers using reusable bags has risen from 71% to 74% and that those trying to cut down the number of plastic bags they take from the shops has risen from 65% to 68%. This assists in reducing the overall cost of Newlook. LEGAL: Drawing upon the Low Pay Commission Report (National Minimum Wage, 2009), the 2008 and 2009 combined up-ratings have resulted in an increase in the minimum wage of 15.5%. This will result in an increase of operating costs of Newlook.

INTERNAL PROCESSES: VALUE CHAIN ANALYSIS: In times of recession the businesses mostly focus on cost reduction. However this cost reduction should not be through sacrifice in quality. One can say the recession phase is an opportunity for
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businesses to think over efficiency of their internal processes and to erode off un useful activities which create costs. Inbound Logistics Operations Management Outbound Logistics Marketing and Sales Services

PORTERs FIVE FORCES: IDENTIFYING SOURCES OF COMPETITION Bargaining Power of Suppliers:

Bargaining Power of Buyers:

Threat of Entrants (Barriers to entry):

THREAT OF SUBSTITUTES:

Competitive Rivalry:

Conclusion:

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