Marks & Spencer: A Case Study on Supply Chain Management Strategy

Why is M&S in this predicament?

Why is M&S in this predicament?

Has increased overseas sourcing helped or hindered their marketplace performance?

Given that costs must be reduced, how can M&S capture the potential benefits of low-cost sourcing while still improving responsiveness? Is the current one-size-fits all approach to supply chain management strategy the best way forward for the company, or are there better alternatives?

Advise M&S on how a total end-to-end supply chain strategy might be developed. Submit your answers in a Word document. After you have completed the assignment, use the “Next” navigation button at the bottom of the page to view the Marks & Spencer Solution Case Debrief. You will not be able to view the page until the case study assignment has been submitted.

Marks & Spencerís partnership approach to supply chain management had made it a textbook favorite and the subject of numerous magazine articles, almost all of them complimentary. But how had things slipped so far without anyone noticing and, importantly, what could be done to put things right?

The case examines the events leading up to the retailerís fall from grace, its managementís efforts to put things right and the results of their endeavors. It leaves the reader to identify the pitfalls in the course of action taken and to recommend what changes might be made to retrieve the situation.

We had exceptional success with velvet, chenille, fleece and ësoft touchí fabrics. In each case close links with fabric suppliers and garment manufacturers meant we could reactswiftly within the season to maximize strong early sales. We meet modern demands for comfort and convenience with our growing use of stretch, non-iron and stain-resistant fabrics. Our technologists continue to work in partnership with fabric and garment suppliers to deliver the highest possible quality and performanceî [Marks & Spencer Annual Report, 1998]

M&S designed most of its clothes in-house before putting the designs forward to favored manufacturers along with notoriously strict specifications regarding the finished product. The manufacturers provided dedicated facilities for M&S who required suppliers to refrain from bidding for work from other clients. The closepartnerships arrangements also alleviatedM&S of the need to allocate resources of its own to technological research and development activities. Instead, the retailer relied on its trusted suppliers to put forward their most recent innovations ñ often allowing M&S exclusive access to technological breakthroughs. Decades of experience had taught the suppliers that their reward for servicing such a demanding client was a culture of continuous improvement within their businesses and the loyalty of M&S through good times and bad.

Has increased overseas sourcing helped or hindered their marketplace performance?

In the summer of 1998, the companyís reputation for supplier management was stronger than ever, prompting academics and journalists to single out the relationships between M&S and its suppliers as a role model for British industry and as possibly ìthe only true partnerships in [UK] retailî ii.

We encourage our suppliers to invest to our mutual benefit, innovation comes from sharing our knowledge as a retailer with their knowledge in production, distribution, logistics or information technologyî. [Keith Oates, Deputy Chairman and Managing Director, Marks &Spencer, July 1998]

Improving distribution efficiency through information technology was high on M&Sís strategic agenda in 1998. In the stores, trials of a new EPOS system for the UK and Western Europe were underway. Decisions were taken to minimize non-selling activities in store by preparing stock in warehouses, increasing paperless transactions and consolidating administration regionally. Beyond the UK and Western Europe, franchise operations were also moving towards standardized operating systems.

We are substantially increasing investment in information technology to drive sales, enhance customer service and improve efficiencyÖTechnology is central to delivering the services that customers want. For example in-store ordering, whereby customers can have any St. Michael product delivered to their local store within48 hours, now represents 3.5% of our salesî. [Annual Report 1998]

With consultants appointed to deal with the reshaping of the overseas supply chain, M&Sís logistics team were able to turn their attention to an on-going review of its distribution arrangements for the UK and Ireland. In June 1999 it announced that two of it leading third party logistics suppliers - Exel Logistics and T&B - had formed a joint venture ëJoint Retail Solutions Ltdí (JRL) specifically to service M&S. The new venture allowed the former competitors to retain their existing business and win business from other rivals with a new five year contract. JRLís 250 vehicles would replace the fleets of all five of M&S distribution contractors, though responsibility for running of the distribution centers would

JRL would collect all boxed and hanging garments and non-foodhousehold items from suppliers, delivering them to distribution centers and then on to M&Sís stores in the UK and Ireland. The agreement would allow M&S to squeeze out further costs and environmental benefits. In four years the retailer had already cut by 40% the number of trucks used to move clothing and general merchandise to its stores with, it was claimed, no reduction in service. The ventureís formation was heralded as one of the few pieces of good news in an otherwise dismal year for M&S.

Sir Richard Greenbury chose to retire in June 1999, on the eve of the annual shareholders meeting. Profits had plummeted and although Salsbury and his array of management consultants were pushing through the most radical shake-up in the companyís history, rumors were circulating that M&S had become a take-over target.

Salsbury outlined his proposed recovery program to shareholders in the companyís 1999 Annual Report.

1. We must create clear profit centers with simpler management structures, faster decision-making and distinct targets for shareholder value.
2. We must change the way we buy goods, both in the UK and overseas, by giving our selling and marketing functions more say in what we offer.
3. We must restore profitability overseas by reorganizing our local businesses to serve their local customers.
4. We must build on the success of our financial services business.

In short we must aim every part of our organization towards the customer it servesî. The financial services business was one of the strongest elements in M&Sís portfolio and the in-store M&S account card remained popular with 5.2 million account holders. ëClear profit centersí translated into a fundamental reorganization of the business, into five distinct operating divisions ñ UK Retail, International Retail, Financial Services, Property and Ventures. For the first time the colossal UK retail business was to be managed as a whole rather than along product lines. Central management was to be ëstreamlinedí giving store and regional managers more control over operating decisions. Meanwhile, the organizationís knowledge of its customers was to be pooled into a single central marketing group. The newfound customer focus catapulted marketing concerns up the management agenda. The new department would help to ensure:

• Better ranges at local store level with more consistent availability of popular items.
• Better use of customer information, whether from charge card and mail order databases or sales reporting systems, to target promotions more effectively.

Having recently joined the companyís global logistics team (with responsibility for its clothing range), you have been asked to familiarize yourself with the supply chain situation and prepare a summary report for the new director of logistics. The document must identify key areas for attention and offer your suggestions as to how they might be taken forward as part of the on-going reorganization of the companyís global logistics. In particular, you are asked to address the following questions:

1. Why are M&S in this predicament? Has increased overseas sourcing helped or hindered their marketplace performance?
2. Given that costs must be reduced, how can M&S capture the potential benefits of low-cost sourcing whilst still improving responsiveness?
3. Is the current ëone-size-fits allí approach to supply chain management strategy the best way forward for the company or are there better alternatives?
4. Advise M&S on how a total end-to-end supply chain strategy might be developed.