Fast Retailing (UNIQLO)

Fast Retailing created by Hisako Mori Yanai and later succeeded by Tadashi Yanai to
become a truly global company with a strong brand ,organizational culture and network.Fast
Retailing acts as a holding company for various brands under its umbrella including UNIQLO ,
GU ,Theory ,Comptoir des Cotonniers ,Princesse tam.tam and J Brand The company vision is to
achieve a top tier global company statues in the apparel manufacturing and retailing industry.Its
early days saw it focused on organic growth by building stores in their home country, Japan,
which now has 750 stores and counting. From the year 2000 onwards ,to achieve high sales and
profitability growth Fast Retailing adopted an aggressive growth strategy with new stores
opening in China,European,SouthEast Asia and the USA along with the acquisition of brands
listed above.

One of the main global challenges facing Fast Retailing in terms of inventory
management is the handling of a global supply chain along with distribution of products and
services across different regions.The transportation cost ,warehouse operations and setting up a
proper communication channel with suppliers and retailers cost puts a high financial burden on
the company.As a fast fashion retailer , the ever changing fashion trends makes it hard for the
company to have a long lead time as the lack of products in the store will result in higher loss of
overall sales rate “The apparel and textile sector is characterized by a short product life cycle,
high volatility, low forecasting and high levels of impulse buying. This last aspect is related to
cost reduction and its impact on consumer behavior. These consumers are migrating from high-
cost, sophisticated products to classic products that are not too sought and consumed “.( Bruce
& Daly, 2011 ).It is also harder to forecast the inventory needed in each store as according to
(Choi et al.2014) , “aligning the forecast of demand for each Stocking Keep Unit (SKU) in each
store is a difficult task due to changes in consumer preferences, product information failure; very
low demand forecast; lost sales -prices reduced by companies to increase sales; seasonality;
weather-related contingencies and competitors' actions.”It is particularly hard to predict
inventory needed as models and sizes vary so much and consumers’ tastes change a
lot.The much higher selling price of apparel compared to its production cost is due to reducing
the opportunity costs involved in not having the particular item in stock Overstocking also an
issue as unsold items will take up the already limited store space and give a bad impression on
the overall brand image. “In many clothing retail stores, an important source of negative
customer experience stems from customers who have identified a specific article they would like
to buy, but then cannot find their size on the shelf/rack” (Zhang and Fitzsimons 1999). This will
cause the company to heavily discount poor selling products and at the same time having to deal
with shortages in popular items..

Company Practices

Fast Retailing is considered as a Specialty-store of Private-label Apparel (SPA), therefore,

and as implement a high degree of control on its supply chain extends from design to
manufacturing, and retail. The SPA model involves the procurement of raw materials, production
planning, development and manufacturing, as well as distribution and inventory
management.This model allows the company to maintain a stable production by matching sales
with production schedules.The SPA modal allowed the company to cut out the middleman
therefore able to reduce the overall price of their products.It also allows the company to have
complete channel control therefore ensuring product quality and delivery time.The access to the
operating data of each store allowed the company to understand comphenresively the shopping
behaviour of consumers therefore giving higher accuracy to predict future sales.This SPA model
which has translated into strong supply chain management allowed the company to develop a
competitive advantage over their competitors.

Another company practise is Quick Response which places great “importance to

flexibility and speed in delivery, to meet the demands of a dynamic, volatile and highly
competitive market.It aims to improve inventory management through lead time reduction”( Choi,
2013 ). The company is able to achieve this by continuously putting out new products in the
market,having an agile process of production and distribution,a high inventory turnover and high
focus on identification of trendsTo be more particular the company is adopting a strategy
called fast fashion where higher turnover inventory and the latest fashion trends are
necessary.The company has invested in information technology which help to integrate internal
and external information with tools suich as Enterprise Resource Planning (ERP) and also to
partner up with other companies to use tools such as Collaborative Planning, Forecasting and
Replenishment (CPFR) and Vendor Managed Inventory (VMI) With this QR practise it allows
the company to have a short lead time as production is performed as close to the actual demand
and additional production to started when necessary

Strength

The internal attributes and resources that leads to a successful outcome is considered a
strength of the comapny.As a SPA , Fast Retailing is able to maintain control over their
production ,quality and inventory control.The company sends skilled workers weekly to check
factories to discuss production status ,quality issues and resolve any production issues The
company also monitor its sales therefore they are able to maintain an optimum level of inventory
and dispatching inventory when necessary.This allows the company to avoid inventory buildup
and achieve a greater customer satisfaction level. .The overlap of company operational details
allows the company to detect any quality issues and direct it to the responsible production
department for further review.The final outcome is Fast Retailing is able to achieve easier access
to financial resources ,greater store operations know-how , better production management and
planning and achieve low cost production systems.

Weakness

A company weakness is said to be their internal attributes and resources that work against
a successful outcome.The weakness of Fast Retailing is due to its aggressive growth the
company has not been able to apply local management control to their operation.The reason is
there are unable to build a top class global supply chain due to lack of factory networks and
distribution centres.Fast Retailing has a geographically dispersed operation as designers are in
Tokyo, New York and Paris; manufacturing departments are in China, headquarters is still
located in Japan making the response time long. This operational issues in its supply chain is
affecting its ability to convert the investment done in the inventory and has a tendency to pile up
too much inventory as the expand.As the main production and distribution hubs are located in
China there is a big lag time between production and sales which is due to the distance therefore
requiring Uniqlo to produce earlier to be able to sell to their stores in the USA and Europe in one
or two months time.This resulted in wasted time shifting inventory around and mobilizing a large
scale labour force which increased the expenses of the company.

The company is unable to meet the demands of USA customers as all manufacturing
facilities are located in Asia.For that purpose, the organization needs to find the warehouses at
the overseas location to maintain the supply chain process (Fahimnia and et al., 2015).Retailing
is unable to local cutting ,dyeing and sewing makes them unable to meet the short life cycles of
their products.They also have trouble accessing raw materials as they are unable to negotiate
properly with global material manufacturer to obtain mass volume orders at a lower cost , higher
cost of transportation and also the inability to tap into a cheaper labour force in the production
country

Opportunity

Opportunities are external factors that a company can obtain a n advantage from.The
opportunity that presents itself to Fast Retailing is the adoption of technology in their inventory
management process.Although the retail industry is still a labour intensive industry, the company
can invest in tech technological innovations that can increase automation.”This automation
process can help in order processing, costing analysis, order tracking, material management,
reporting and connectivity” (Hong Kong Productivity Council, 2004) The investment in
technology will also enable the company to collect large amounts of customer data therefore able
to predict trends and production demands.The investment to automated warehouse functions will
enable the company to address problems in labour shortages ,storage cost and also lags in
delivery.It will alow the employees in the warehouse to reduce the labour time involved in
repetitive data handling and offer a better handling, scenario analysis, process performance
evaluation, and improvement. Investment in computerised sewing machines to make rough
sketches, printing detailed designs and storing of information for easy retrieval.achieves will lead

to better productivity and reduced training time for employees. RFID technology
also can be implemented that will allow the company to make accurate daily sales forecast ,plan
and produce its products in real-time pursue more thorough SKU management and local store
management

Threat

Threats are External factors that could jeopardize the company's ability to achieve success. The
major threat that Fast Retailing is government laws and policies across different regions and the
ever fluctuating currency rate.Governments are known to protect their domestic companies from
imports from industrialized countries therefore subjecting the companies to various tax laws and
restrictions in investment in the particular country. For example, the Chinese government does
not allow the overseas organization to improve the business by using their sources utilizing the
network (Wang and et al., 2016).Customs clearance required for cross border transfer are subject
to change at any possible moment therefore there is a lot of uncertainty involved.Johnson and
Scholes (2002) relate that “strategic positioning is an imperative in realising the strategic
capabilities of organisations. “ The labour and material cost could change in accordance to the
performance of the yen against the currency of the host nations which provides a great
uncertainty in predicting cash flows and the economic conditions of the country.
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