Fast Fashion

Introduction The clothing industry, as one of the most globalizes industries in the world (Fibonacci et al 1994), is currently undergoing a restructuring, especially the fast fashion sector. Fashion markets are synonymous with rapid changes and short product life cycles. Therefore, changes in consumer demand for newness and fashion trend force the emergence of fast fashion' strategy in retailers like Ezra and H;M and shifts in the focus of competitive advantage from price towards quick response.That is to say, clothing firms, which are adopting global or offshore sourcing strategy, are not noninsured to have more competitive advantages as before. However, the question is: should fast fashion retailers adopt quick response strategy instead of overseas sourcing strategy immediately, or adopt both strategies? In the first section, a literature review of the nature of fashion market and related arguments will be introduced. The overseas sourcing strategy and the quick response strategy w ill be explained with examples of existing clothing firms in the second and the third section.The fourth section will compare and contrast the advantage and disadvantages of these two strategies. Combining theoretical knowledge with empirical case studies, it is argued that companies could reach the maximum profit by adopting overseas sourcing strategy as well as quick response strategy. 1 . Literature Review Fashion retailers, such as Ezra, H;M, Benton and Marks ; Spencer have revolutionized the fashion industry by creating a concept of fast fashion'.The change in the culture of fashion from haute couture to fast fashion has attracted numerous researchers to identify and explore the nature of fast fashion market (Tokomak 2008, p. 22, Christopher et al 2004, p. 367, soul and -raccoon 2008, Tactile et al 2008). Accordingly, short life cycles, rapid prototyping and high volatility are identified as the key features of the fashion market. Compared to other industries, apparel product m anufacturing has unique features, for instance, numerous SKIS (stock keeping unit) in a season, hard to estimate customers' demand and wide range of products for basic to fashion items Non 2004).All these unique characteristics require a different approach to production sourcing, Soul and Turn-on (2008) pointed out that fast fashion retailers prefer using an opportunity-pull approach to the traditional designer-push model. By adopting the new approach, retailers could respond to the shifts in the market as quickly as possible. As a result, the more continuous production schedule (eight to twelve fashion ‘seasons') has substituted for the traditional two to four ‘seasons' calendar (Tactile et al 2008, p. 264, Dickens 2011, p. 316).In relation to global production networks, Dickens (2011) identified the ‘core' of a global production network as the circuit of four basic operations, which refers to inputs, transformation, distribution and consumption. Theoretically, th e quicker the production circuit flows, the higher the gross margin the company can gain. When we apply the theory into the clothing industry, the cost of production and the speed to response to changes in consumer demand are equally important. Both of them could contribute to the flow of production circuit.Since numbers of studies have elaborated the benefit of production relocation, the implementation of quick response strategy by fashion retailers has attracted the interest of researchers in recent years (Bristle et al 2003, Perry and Shoal 2000, leer and Bergen 1997). However, results of an exploratory study (Bristle et al 2003) shows that the advantages of quick response strategy have not been fully understood by fashion retailers. They tend to implement quick response strategy for internal supply chain management.Moreover, leer and Bergen (1997) tried to use formal model to examine the impact of quick response strategy on fashion retailers. Although there is companies already adopted both strategies, limited attention has been paid to the combined effect of these two strategies by researchers. Hypothesis: In an era of fast fashion, companies that adopt both global sourcing strategy and quick response strategy have better chance to succeed in the fashion looting market. 2. Cost, the most basic consideration. In order to have higher profit margin, one of the most effective ways is to cut down production costs.In view of the low labor cost in developing countries, global sourcing seems to be a good choice to reduce costs. With the development of global production networks and the increasing competition, fast all fashion clothing firms have shifted their manufacturing operations to low lost locations over the past decades. The shifts in the Shares manufacturer Levi Stratus's global strategy could vividly demonstrate how global sourcing strategy works and affect its supply chain. At first, the company was created in the USA.As it developed and became a global company, they began to employ workers all over the world. However, in face of fierce competition, Levi Strauss started to shift its operation to lower-cost countries in the late sass. By the year 2003, Levi Strauss closed the last four plants in North American and ‘has become an entirely offshore producer' (Dickens 2011 p. 318). The German fashion company Hugo Boss also provides similar example. In face of high production cost, namely high labor cost in domestic market, more and more fashion retailers choose to outsource their production.Moreover, some fast fashion retailers even have no manufacturing competency (Tokomak 2008). The representatives of this kind of retailers are Gap, H&M and Mango. As they do not own any factories, the only way for them do produce their products is outsourcing. The success of these retailers without factories proves the feasibility of global sourcing strategy. By contrast, when most retailers were busy outsourcing their production to lower cost countries, some fast fashion retails still insist on domestic sourcing strategy, for instance, Ezra, Benton and Marks & Spencer.They held the view that ‘market legibility and lean inventories may be more important than cheap labor' (Tokomak 2008). However, could efficiency really overcome the lost in higher production cost? Maybe no one could answer this question. If we take Ezra as an example and find out where Ezra produce the products, we could develop our own view. As a Spanish company owned by Inedited, Ezra produce its products mainly in Spain and Portugal (Wood 2010). Whereas their competitor found suppliers from worldwide low-cost countries, Ezra choose to produce products near its domestic market.That maximizes time efficiency. In fact, the unit labor costs in these two countries were low enough in the sass (Tokomak 2008), therefore, there is no need for Ezra to outsource its productions to other locations. It has the similar competitive advantage as other companies have, besides, by domestic sourcing and producing Just-in-time, Sara's production cycles are much faster than its competitors. In this respect, it is better for Ezra to adopt the domestic sourcing strategy. However, recent years, the geography of Sara's production network has become diverse.Ezra started to outsource and 34 percent of its production was carried out in Asia (Dickens 2011). Similar situation have also occurred in Benton and Marks & Spencer. On one hand, the unit labor cost among European countries has increased in recent years. On the other hand, the supplier firms in countries like Turkey, India and Asia have gained the ability to meet the higher requirement of flexibility and speed. It is inevitable for fast fashion retailers sourcing from these countries. However, companies should also be aware of the potential risks and hidden cost brought by overseas sourcing.Global sourcing strategy requires close coordination of R&D, manufacturing, and marketing activities on a global basis. Managing geographically separated R&D, manufacturing, and marketing activities, those companies face difficult coordination problems of integrating operations and adapting them to different legal, political, and cultural environments in different countries (Daniels et al 2013). Furthermore, separation of manufacturing activities involves an inherent risk that manufacturing in the value chain will gradually becomes neglected.Such neglect can be costly as continued involvement in manufacturing tends to lead to pioneering product design and innovation over time. An effective global sourcing strategy calls for continual forts to streamline manufacturing without sacrificing marketing flexibility. 3. Time, the growing consideration. With the wide spread of fast fashion' principle, fast fashion retailers are aware of the importance of efficiency. They notice that consumer demand is changing more rapidly and customers more discerning about quality and choice.Although a substan tial cost advantage can be gained by adopting overseas sourcing strategy, it cannot compress time in the supply system. To solve this problem, companies tend to choose the quick response strategy, which focuses on providing shorter lead times. According to Bristle et al (2003), quick response strategy was first developed as a result of the need to compete with offshore manufacturers in the USA. The quick response strategy emphasizes on flexibility and product velocity and relies on a measure of trust in sharing information (Barnes and Lea-Greenwood 2006 p. 63). In addition, while maximizing the diversity of products, quick response could minimize lead-times, expenditure, cost and stock of inventory. Quick response is not merely about reducing lead-time by the use of domestic or nearby sourcing strategy, it also involves the ability to gather latest information and use real-time data to understand the needs of the consumers. To some extent, quick response help to shorten the product cycle times and decrease risks and inventories at each stage of manufacturing and retailing operations.The Spanish Ezra, as mentioned before, is ‘an excellent example of a vertically integrated retailer using quick response methods' (Bristle et al 2003). Despite successful application of the concept â€Å"fast fashion† in H;M and Top Shop, Ezra utilizes the â€Å"fast fashion† strategy in all aspects dominant, fast fashion in Ezra meaner, within only two weeks from concept to sales faster than any other company. Unlike most of its competitors, Ezra still produces most of the products in Spain and Portugal and only outsource basic items in lower cost countries.By adopting quick response strategy, Ezra focused on creating a short, flexible, tight and innovative supply chain and tried to balance the higher labor cost by shorter (3-6 weeks) lead times. As a result, Sara's short deliveries have made it ‘as much as 12 times faster than the competition' (Newsweek 2001, p. 36, cited in Tokomak 2008, p. 30). Ezra launches almost 11000 new products in a year, which meaner the update speed is about two or three times a week. In 2005, sales grew by 21 percent over the prior fiscal year in Ezra, which makes Inedited ahead of H&M for the first time (Daniel et al 2013).The good result indicates that domestic sourcing still works as long as the company finds out a way to compensate for the losses in production cost. Having witnessed the successful experience of Ezra, competitors started to follow the lead of Ezra. For instance, Benton now replenishes stores once a week, Forever 21 Inc. And Unique are able to get new products in store thin 6 weeks (Ordered and Johnson 2008). Another example that worth to be mentioned is the Next brand in the ELK. Base on the quick response strategy, the company uses a limited edition approach to accelerate the update speed.Moreover, in order to respond to the changes in demand as soon as possible, next has even purcha sed part of a multi-national clothing supplier to enable constantly changing ranges by reducing lead time (Bristle et al 2003). As we can learn from the case studies, time becomes a priority consideration in the fashion market. The adoption of quick response method should be able to make manufacturer to ‘adjust the reduction of different styles, colors and sizes in response to retail sales during the season' (Seen 2007). 4.Comparison between overseas sourcing strategy and quick response strategy One of the biggest differences is that overseas sourcing strategy uses cost as a competitive weapon while quick response strategy uses time. As we known, both cost and time are the keys for retailers to gain more market share and profit; The dilemma for fast fashion companies is: Whether fashion retailers should outsource production overseas for lower production cost or keep manufacturing nearby to facilitate speed. As highlighted earlier, the fashion market is volatile and unpredictab le.Quick response strategy emerges in such an environment. Compared to overseas sourcing strategy, which faces long transport times and difficulty in controlling over production, quick response strategy enables retailers to cope with uncertainty or changes in the fashion market. On the other hand, although domestic sourcing provides companies from paying for higher logistic cost and other hidden costs, offshore sourcing secures lower cost inputs, (Christopher et al 2004). It is argued that fast fashion companies need to adopt strategies that optimally mix overseas sourcing ND quick response to win the market.The changes occurred in Marks & Spencer over these years could help us understand the advantages and disadvantages of both strategies. As a major British retailer, it chooses to use local suppliers for decades. However, in face of the downward pressure on price, it abandoned its domestic sourcing strategy and started to relocate production overseas (Christopher et al 2006). Acco rdingly, the average hourly labor cost in the I-J is nine times higher than in Morocco and even nineteen times higher than in China, Pakistan and Indonesia.After adopting oversea suppliers, Marks & Spencer on noticed that they overlooked the related problems, such as the cost of transportation, the need to forecast styles, colors and volumes in advance and the risk of stock inventory. Facing the challenge of adopting global sourcing, Marks & Spencer tend to use â€Å"dual supply chains†. By combing global sourcing strategy and quick response strategy, â€Å"fashionable items† are manufactured in locations with a journey time no more than four days.For â€Å"basic items†, for which demand is easier to be predicted, Marks & Spencer continue producing them in lower cost locations (Christopher et al 2006). Likewise, Ezra has also adopted both strategies for its supply chain. Today, price is no longer the determined factor that concerned by customers. Many companies consider not simply price but also quality, reliability, and technology of components and products to be procured. These companies design their sourcing decision on the basis of the interplay between their competitive advantages and the comparative advantages of various sourcing locations for long-term gains.By contrast, they care more about the quality, design and the level of popularity. Therefore, companies have to find the balance between cost and time. If fast fashion tillers make good use of these two strategies, like M&S and Ezra did, the negative effect could be covered to a large extent. Conclusion Volatile markets, short product lifestyles and high product variety are the characteristics of today are clothing industry. This essay mainly discusses the adoption of two common strategies- global sourcing strategy and quick response strategy, in fast fashion clothing sector.Although most companies already have chosen outsourcing strategy to maintain the competitive advantage, t he nature of today's fashion market forces companies to consider the importance of speed and flexibility. The analysis of both strategies with the help of real companies' experience shows that both of them have positive and negative effects on fast fashion retailers. However, overseas sourcing strategy and quick response strategy are not mutually exclusive. In practice, the successful examples of M&S and Ezra have proved the feasibility of combing global sourcing with quick response strategy.