Supply chain management of uniqlo

Uniqlo's global supply chain management practices and their impact on the company's global business strategy...10 1.. Supply chain components Supply chain activities: Businesses particip

Ho Chi Minh University of Banking



SUPPLY CHAIN MANAGEMENT

OF UNIQLO GROUP 6

Students: Huynh The Danh 050609211863

Ngo Nguyen Cat Tranh 050609212275 Phan Ngoc Uyen Nhu 050609211055 Ngo Nhu Ngoc 050609210882 Mai Ngoc Thuy An 050609211810 Nguyen Thi Kim Ngan 050609212056

Class: MAG307_2311_9_TA_L23

Lecturer: Ph.D Nguyen Thi Thanh Nhan

Ho Chi Minh, January 2024

I Theoretical basis 3

1 Basic concepts 3

2 Supply chain components 3

3 Stages of supply chain 4

II Introduction 4

1 About Uniqlo 4

1.1 Vision and mission 5

1.2 Logos 5

2 Brief history 5

III Supply chain management of Uniqlo 6

1 Planning process 6

2 Procurement 6

3 Production 7

3.1 Associated factories 7

3.2 Quality assurance 7

4 Warehouse and Inventory Management 8

5 Channels of Retail and Distribution 10

6 Replenishment 10

IV Uniqlo's global supply chain management practices and their impact on the company's global business strategy 10

1 Upstream logistics and management activities of Uniqlo’s supply chain 10

1.1 Uniqlo fabric supplier selection index system and evaluation criteria 11

1.2 Uniqlo’s Manufactures 11

2 Downstream operational and management activities of Uniqlo’s supply chain 12

2.1 Distribution channels and management 12

2.2 Operational activities 13

V Evaluation 16

1 Pros 16

2 Cons 16

2.1 Lack of market-segment responsiveness 16

2.2 Globalization issues 17

3 Cause 17

3.1 Pros 17

3.2 Cons 18

VII Suggestion 19

1 Lack of market-segment responsiveness & Lack of differentiation 19

2 Limited brand awareness 19

3 Supply chain issues 19

4 Globalization issues 20

VIII Conclusion 20 References

ANALYSIS THE SUPPLY CHAIN MANAGEMENT

OF UNIQLO

I Theoretical basis

1 Basic concepts

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a

customer request The supply chain includes not only the manufacturer and suppliers,but also transporters, warehouses, retailers, and even customers themselves Withineach organization, such as a manufacturer, the supply chain includes all functionsinvolved in receiving and filling a customer request These functions include, but arenot limited to, new product development, marketing, operations, distribution, finance,and customer service

Supply chain management is the systematic, strategic coordination between

businesses in the supply chain, to maximize customer value and improve long-termperformance, achieving sustainable competitive advantage sustainability of individualcompanies and the supply chain as a whole

2 Supply chain components

Supply chain activities: Businesses participating in any supply chain must makedecisions individually and collectively regarding their activities in the following 5areas:

Production – What products does the market want? Production refers to the

capacity to produce and store products Production facilities include factoriesand warehouses Question: How to maximize the balance between flexibleresponse-ability and production efficiency?

Goods stored – type of goods, quantity?

Warehoused goods help businesses or the entire chain react flexibly to marketfluctuations To ensure efficiency, storage costs need to be as low as possible

Location – where are the goods produced and stored?

Is the geographical area chosen to locate factories and distribution locations ofthe supply chain Location decisions are strategic because they directly affectsales and revenue, costs, and supply chain performance

Transportation – how to transport goods?

Transportation refers to moving everything from raw materials to finishedproducts between different locations in a supply chain Flexibility andproductivity depend on the chosen means of transport

Information – how much information needs to be collected and shared?

Information is the foundation for making decisions related to the above foursupply chain activities Information is used for the following two purposes:Coordinate daily activities between fields: production, warehoused goods,location, and transportation Forecasting and planning.

3 Stages of supply chain

II Introduction

1 About Uniqlo

Uniqlo is a fashion brand founded by Tadashi Yanai in Japan He inherited hisfamily's fashion store in 1984 10 years after taking over Tadashi Yanai, he turned hisfather's fashion store into a famous fashion chain with more than 100 stores spreadacross Japan In 1984, after becoming president of Uniqlo, Yanai went on to open anew store called Unique Clothing Warehouse in Hiroshima, later called is Uniqlo.Uniqlo is one of the fastest-growing clothing brands, with a strong presence not only

in the Asian market but globally The Uniqlo brand is present in most major cities and

is known for producing high-quality clothing for all audiences This business is knownfor its knitwear made from high-quality materials and at reasonable prices, attracting alarge number of potential customers From just a small store, Uniqlo is now on parwith famous global fashion brands such as H&M, Zara, and other brands

Uniqlo's main slogan is "Made for all", one of the special points that make Uniqlo'smarketing strategy successful in Vietnam and throughout Asia

1.1 Vision and mission

2 Brief history

2.1 Achievements

● Rapid growth: Uniqlo has become one of the fastest-growing fashion brands

worldwide, with significant expansion of its stores and sales network

● Product quality: Uniqlo is famous for providing high-quality products and

simple, sophisticated designs This quality has helped them win the trust ofcustomers and create a community of fans around the world

● Innovation in material technology: Uniqlo regularly invests in research and

development in material technology, such as Heattech and AIRism fabrics, tocreate smart, comfortable, and convenient fashion products

● Effective advertising strategy: Uniqlo's advertising strategy, especially its

creative and unique advertising campaigns, has helped them attract attentionand create strong awareness in the minds of customers

● Commitment to sustainability: Uniqlo has made a commitment to

sustainability through implementing strategies such as reducing waste, usingrecycled materials, and implementing meaningful social campaigns

● International expansion: Uniqlo has expanded its operations globally,

opening stores in many countries and regions, from Asia, Europe, to NorthAmerica

III Supply chain management of Uniqlo

1 Planning process

"What's interesting about Uniqlo is that they have selected fabric, rather than fashion,

as the area where they want to thrive," said by Sarma (2015)

Meetings will be held at the start of the year in order to plan the launch date and newconcepts The goal is to create high-quality fabrics overall

Uniqlo operates internationally with product development functions based on aworldwide R&D system that connects the two major fashion centers of Tokyo AndNew York in order to become a global brand (Uniqlo, n.d) Based on sales data frombrick-and-mortar businesses:

● The R&D department is continually looking into the newest global trends andinnovative materials to assist Uniqlo in creating goods that will meet the needs

of customers in the future

● R&D centers will develop concepts one year prior to theintroduction of targeted products The task of preparing samples and deliveringthem to merchandising for approval will then fall to the designers The designswill be given to mass production after numerous iterations of color andsilhouette refinement

Every day, Uniqlo and service counters are open to listen to customers' demands andaccept comments Customer feedback can be obtained by phone, email, letter, andother methods Since 2011, FR has promoted the Customer Satisfaction WebQuestionnaire, which collects feedback and various data, including product sizes,functionality, and features, and encourages foreign customers to providecomments in their local tongue before sending them directly to the CustomerCenter in Japan

Japanese textile companies.To ensure that all of its goods are created usingecologically friendly materials, Uniqlo also engages in ethical and responsibleprocurement.

3 Production

3.1 Associated factories

Uniqlo does not own any manufacturing plants, instead, they hire partner factories toproduce goods Since 2018, Uniqlo has started doing business in Vietnam and iscurrently the purchasing partner of 45 garment factories here

To reduce production costs, the company outsources production to partnermanufacturers, most of which are based in China (China has more than 120factories) Uniqlo is partnering with a growing number of factories in other Asiancountries, including Vietnam, Bangladesh, Indonesia, and India Uniqlo products arecheap because they can buy clothing materials at low prices through directnegotiations and bulk orders This helps Uniqlo provide products to the Vietnameseand global markets and helps Vietnam become the group's second-largest productionbase

3.2 Quality assurance

UNIQLO commissions pre-testing of all materials by third-party organizations andothers at the sample production stage and again before mass production to confirmquality and safety Advanced tests include formalin and color fastness tests

● Color fastness test: Tests designed to measure the fastness of dyed products

● Formalin: Extremely small amounts of formalin (or formaldehyde) aresometimes used by clothing manufacturers as an anti-shrink agent, an anti-wrinkle agent, and a softener during processing

However, this chemical has been known to cause eczema, rashes or skin allergies insome individuals UNIQLO also conducts pre-shipment inspections before finishedproducts are sent from the factory, including checking for needles or other dangerousitems Third-party entities also perform some checks before shipping We alsocommission similar third-party safety and quality testing at G.U Co., Ltd To ensurethe quality and safety of its goods, the Uniqlo Quality Assurance Committeeincorporates its own Global Quality and Safety Standards To quickly resolve anymaterial defects, the Product Quality and Consumer Care Team also collects customerfeedback.

Last but not least, Uniqlo uses third-party quality and safety testing to ensure thatchemicals are randomized before mass production, including official tests toDetermine whether the chemical causes an allergic reaction We are conducting anexperiment Test color fastness and monitor the authenticity of dyed fabrics, whetherleather or not Takumi Group is an expert group comprised of leading Japaneseexperts in the textile industry, and we work with manufacturers to carefully andthoroughly investigate product quality and safety Our Takumi team members, withover 30 years of experience, will discuss dyeing and sewing methods and provideadvice on how to maintain product quality and workplace safety Thanks to this, theorganizational infrastructure of our partners develops and becomes better

4 Warehouse and Inventory Management

● Warehousing

Previously, UNIQLO's Ariake warehouse in Tokyo, Japan was always filled withworkers busy checking and packing orders Since 2016, Japanese engineering andlogistics consulting firm Daifuku has agreed to help "automate the Ariake warehouse"

of Fast Retailing in Tokyo to cut inventory and production management time andboost online business activities In addition, UNIQLO and DAIFUKU also cooperate

in the field of logistics UNIQLO realized that old logistics activities were ineffective,they wanted to have a warehouse that was constantly developing, highly labor-savingand applied the most advanced technology available UNIQLO's automated Ariakewarehouse is used exclusively for online shopping

UNIQLO automatic warehouse equipment: Fast Retailing's $865 million globalinvestment project aims to better exploit the fast-growing e-commerce sector.Automated warehouses will help fulfill online orders even faster

After the handshake with DAIFUKU, 90% of UNIQLO's staff was cut while goodswere still in stock, helping UNIQLO's warehouse operate 24/7, warehouseproductivity increased 80 times, and transportation efficiency increased 19 times

warehouse efficiency increases by up to 3, training costs will be reduced by 80%, and100% accuracy in automated RFID is achieved.

Furthermore, to expand the alliance, In 2019 Fast Retailing signed a global strategiccooperation agreement with MUJIN Inc., a Japanese manufacturer of intelligentindustrial robot control robots, and Exotec Solutions SAS, a supplier of French robotsolutions FastRetailing partnered with MUJIN to create a Robot that can detectobjects based on 3d Vision and can neatly place items into boxes without damage

It can see and move without repetitive programming and can preventmistransportation by automatic inspection using 3D camera automatic inspectiontechnology to scan and record the contents of each package row The machine canalso take completed forms and place them into individual packages It can alsocalculate how to arrange packages into boxes with almost zero error

● Inventory Management

Since 2014, RFID technology has been applied in UNIQLO's supply chain EveryUNIQLO product has an RFID tag from the production stage This technology helpsUNIQLO manage inventory-keeping units (SKUs) effectively UNIQLO uses accuratereal-time sales data to adjust incoming shipments, reducing production rates of low-volume items and increasing production of high-volume items

In addition, product prices change daily according to regularly updated sales If anitem does not reach its target sales, the item's price will be lowered If the pricereduction increases sales, the price is adjusted upward again and if sales reach thetarget, it is returned to the original price

All these efforts help UNIQLO increase store availability, customers can find theitems they want easily, while UNIQLO can reduce inventory levels and save costs.UNIQLO cooperates with Google to exploit and use Google Workspace - a secureproductivity and collaboration application environment for businesses These toolshelp UNIQLO link their manufacturing facilities, warehouses, stores and globalheadquarters in a unified and efficient manner With Google tools, UNIQLO can build

a management process that supports rapid assessment, decision making andimplementation of business strategies UNIQLO uses Google Cloud in its AIapplication to help them analyze large amounts of customer data to forecast customerneeds

Besides RFID technology, UNIQLO also uses a Just-in-Time (JIT) manufacturingstrategy UNIQLO analyzes weekly sales patterns and changes orders with factories

based on that UNIQLO is able to change orders thanks to its long-term relationshipswith suppliers and partner factories.

For example, if UNIQLO sees a sharp decline in sales of an item, the company willstop production and use that part of the material to make another product; If sales ofknitted scarves decline, that wool can be used to make another sweater

Thanks to this strategy, UNIQLO has been able to reduce inventory costs because theyrarely have over-orders At the end of each season, UNIQLO sales staff and themarketing department work together, coordinating promotions to help reduceremaining inventory

5 Channels of Retail and Distribution

The largest clothing retailer in Asia in 2019 is Uniqlo, which has more than 800 storesusing the JaA decentralized distribution method used by Uniqlo Although it hascontracts with external warehouses, Uniqlo does not own any warehouses.Warehouses will transfer goods to Uniqlo's online and physical stores after receivingsupplies from partner factories There are partnerships with warehouses in Japan andother countries where Uniqlo currently operates This distribution system is effectivebecause it can speed up the monitoring process (Roll 2019) One-third of Uniqlo's1,379 stores are located outside Japan, including 807 in Hong Kong, Taiwan, andmainland China, 231 in Southeast Asia and Oceania, 188 in Korea, 91 in Europe, and

62 in North America

6 Replenishment

To manage weekly sales and trends and order the right amount of fabric for clothing,Uniqlo uses just-in-time inventory purchasing Each store's inventory management iscarefully reviewed daily by headquarters, and sales information from each store isthen aggregated to create a comprehensive database of information that helps Uniqlotrack merchandise The unit's regular inventory, sales forecast, and prediction of futureproducts activities such as increasing orders and discount sales Casio IT-300 is amobile device that store staff can use It provides real-time information on inventorycontrol and helps you easily access information such as product descriptions, prices,returns, deliveries, and daily sales figures