UNIQLO Should Change its Supply Chain

UNIQLO Should Change its Supply Chain. UNIQLO is a brand operating within the fashion industry where competition is stiff while consumer needs takes center stage right from the design, production, and marketing of products. For UNIQlO, the company has been able to not only survive in the fashion industry but also thrive and become the fourth largest retailer in 20 years. The company’s progress has largely come under the use of the agile supply chain approach where it maintained tight relations with few suppliers. For UNIQLO, this approach was especially effective in the Asian region where it dominated the Japan and Chinese markets. While the supply chain was effective regionally, this approach is likely to be ineffective at the global platform where UNIQLO intends to dominate and compete with industry leaders such as Zara and H&M. UNIQLO’s supply chain used not only in Asia but also in the US and other markets show a slow to market response where goods take too long from the design to the retail phase and this sometimes leads to a mismatch with the consumers’ needs. In line with this, a new supply chain that embodies a fast to market approach and the use of digital technology to monitor progress will oversee the growth and development of UNIQLO.

            The need for a faster to market supply chain comes from the fact that UNIQLO’s current supply chain focuses largely on quality and cost reduction without the regard for the time essence of fashion. As seen from the case study, UNIQLO’s supply chain approach has an emphasis on quality linked to the application of the Kaizen philosophy right from manufacturing to retail. In Shenzen and Shanghai where the company has production offices, the Takumi team would visit the supplying factory twice or thrice per week with a focus on quality control. Throughout the case study, UNIQLO does not seem to apply any strategic approaches linked to the reduction of time from the manufacturer to the retail market. Such is different from its competitors such as Inditex whose supply chain focuses on a reduced time to market approach that involves the production of in-season designs. The approach enables the company to achieve cost advantages through the quick response to consumer needs. With UNIQLO still lagging behind on such areas, this could be a factor that is limiting the company’s growth into a global fashion house.

            Beyond a consideration of time to market, the need for change in UNIQLO’s supply chain also emerges from its kind of relationships with suppliers. The case study highlights the notion that UNIQLO worked towards maintenance of efficiency by bypassing trading companies. The approach saw UNIQLO shed its supplier base where this reduced the number of suppliers from 120 to 40. The rationale behind the approach is that few suppliers and increase in order sizes would lower costs. While this approach has helped lower costs to an extent for UNIQLO, the company would still achieve cost advantages by outsourcing some of its manufacturing aspects and also ensuring vertical integration for some of the vital processes. Outsourcing is an accepted and effective approach to cost cutting in the fashion industry and this has also been adopted widely in the industry. The essence of vertical integration lies in ensuring that the company has tight control over some of the vital processes where this also reduces the time to market.

UNIQLO Should Change its Supply Chain

            Digitization of the supply chain is another recommendation that UNIQLO should follow in maximization of returns within its global market. While UNIQLO has digitized some of its processes such as the collection of data at its point of sale, the entire supply chain does not indicate an inclination towards digital aspects. From the case study, UNIQLO introduced a digitized system where employees would check the price, inventory at hand, as well as item availability in real time. Such forms the only digitized aspect within the company’s supply chain, yet the adoption of digital technology from production to retail can aid in effective and efficient operations in the supply chain. As an example, the company should consider automation of some in-house aspects such as dying and cutting of materials using robots as employed in some Inditex factories. The employment of digital technology can also help directly link consumers to the production process where their needs will define the design and production of fashionable goods for the company. As such, digital technology should be applied in the supply chain.

            UNIQLO’s current supply chain does not maximize on cost advantages and time to market aspects, thus making it essential that the company reorganize its supply chain. From the analysis above, the reorganization should focus on reducing the time to market, employing vertical integration and outsourcing, while also applying the use of digital technologies in the process flow. Importantly, revamping the supply chain in the above approaches will ensure that the company achieves cost advantages and reduced time to market that will propel it into a global fashion company. UNIQLO’s goals of having a global presence cannot be maintained by the existing supply chain processes.     

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