Application of Information Engineering to Application of Information Engineering to model the complex supply chain model the complex supply chain

relationship for a textile and clothing relationship for a textile and clothing industry in Hong Kong/Chinaindustry in Hong Kong/China

Jimmy K.C. LamJimmy K.C. Lam

Institute of Textiles & ClothingInstitute of Textiles & Clothing

The Hong Kong Polytechnic UniversityThe Hong Kong Polytechnic University

AgendaAgenda IntroductionIntroduction What is Information Engineering ?What is Information Engineering ?

– Information PyramidInformation Pyramid– Four Stages of implementationFour Stages of implementation

The StudyThe Study The ResultsThe Results

– Current business PracticesCurrent business Practices– Critical Success factorsCritical Success factors– Application PortfolioApplication Portfolio

ConclusionConclusion

IntroductionIntroduction

Hong Kong is one of the leaders in the world of Hong Kong is one of the leaders in the world of textile and clothing and the industry accounts for textile and clothing and the industry accounts for one-third of local output and employed over one-third of local output and employed over 324,000 people in about 30,000 industry in 1997.324,000 people in about 30,000 industry in 1997.

However, the global market has become more However, the global market has become more competitive and with the relocation of many competitive and with the relocation of many manufacturing establishment to other regions, manufacturing establishment to other regions, activities like sourcing, quality assurance and activities like sourcing, quality assurance and development of textile products are becoming development of textile products are becoming more and more important.more and more important.

IntroductionIntroduction

In 90’s “world class” organizations purchase, In 90’s “world class” organizations purchase, produce, move and market goods and services produce, move and market goods and services on a global basis meeting customers’ needs in a on a global basis meeting customers’ needs in a timely, cost effective way.timely, cost effective way.

To remain competitive, good Supply Chain To remain competitive, good Supply Chain Management (SCM) is vital.Management (SCM) is vital.

Information EngineeringInformation Engineering

The application of an interlocking set of formal The application of an interlocking set of formal techniques for the planning, analysis, design and techniques for the planning, analysis, design and construction of information systems on an enterprise-construction of information systems on an enterprise-wide basis or across major sector of the enterprise.wide basis or across major sector of the enterprise.

Unlike software engineering, which applies structured Unlike software engineering, which applies structured techniques to one project, information engineering, techniques to one project, information engineering, applies structured techniques to the enterprises as a applies structured techniques to the enterprises as a whole, normally with automatically tools.whole, normally with automatically tools.

Information PyramidInformation PyramidCharacteristicsCharacteristics IE applies structured techniques on IE applies structured techniques on

an enterprise-wide basis, rather an enterprise-wide basis, rather than on a project-basis;than on a project-basis;

IE processes in a top-down fashion;IE processes in a top-down fashion; As it progresses through these As it progresses through these

stages, IE builds a steadily evolving stages, IE builds a steadily evolving repository of knowledge about the repository of knowledge about the enterprise, its data model, process enterprise, its data model, process model and system design;model and system design;

IE identifies how computing can IE identifies how computing can best aid the strategic goals of the best aid the strategic goals of the enterprise.enterprise.

Four Stages of Information Four Stages of Information EngineeringEngineering

Stage 1: Information Strategy PlanningStage 1: Information Strategy Planning– Concerned with top management goals and critical success Concerned with top management goals and critical success

factorsfactors

Stage 2: Business Area AnalysisStage 2: Business Area Analysis– Concerned with what processes are needed to run a selected Concerned with what processes are needed to run a selected

business area; how these processes interrelate;business area; how these processes interrelate;

Stage 3: System DesignStage 3: System Design– Concerned with how process are implemented and in what Concerned with how process are implemented and in what

procedureprocedure

Stage 4: ConstructionStage 4: Construction– Code generation, prototypingCode generation, prototyping

The Four Stages of Information Engineering

The StudyThe Study

A listed company in Hong A listed company in Hong Kong Stock Exchange with Kong Stock Exchange with 450 retails shops in China 450 retails shops in China and close to 200 Australian and close to 200 Australian sales outlets selling young sales outlets selling young causal wears was selected.causal wears was selected.

The operation covers a) The operation covers a) apparel retailing; b) trading apparel retailing; b) trading and merchandising; c) and merchandising; c) garment manufacturing and garment manufacturing and d) fabric production.d) fabric production.

The IE model was used The IE model was used to firstly strategic to firstly strategic overview the current overview the current business operation and business operation and secondly a detail secondly a detail business analysis on business analysis on current problems and current problems and improvement areas. (The improvement areas. (The first and second layers of first and second layers of pyramid)pyramid)

Data CollectionData Collection The studies was carried out in Hong Kong/China from Jan-The studies was carried out in Hong Kong/China from Jan-

July 2000 and the data collection is done in three phases.July 2000 and the data collection is done in three phases. Phase One : Understand the existing mode of operation of the Phase One : Understand the existing mode of operation of the

EnterpriseEnterprise Phase Two: In depth interview of its senior executives in Phase Two: In depth interview of its senior executives in

different organization units on 1) goals and problems different organization units on 1) goals and problems analysis; and 2) critical success factors.analysis; and 2) critical success factors.

Phase Three: Brainstorming exercise for the Enterprise to Phase Three: Brainstorming exercise for the Enterprise to access the technology impact to the business operation in the access the technology impact to the business operation in the coming three to five years.coming three to five years.

Data AnalysisData Analysis Business Systems Planning (BSP) and Critical Success Business Systems Planning (BSP) and Critical Success

Factors are used as a portfolio of information for data Factors are used as a portfolio of information for data analysis.analysis.

Business Systems PlanningBusiness Systems Planning is a structured interview is a structured interview technique developed by IBM on identifying the problems technique developed by IBM on identifying the problems and decisions associated with an organization process and and decisions associated with an organization process and determine what information is needed to address them.determine what information is needed to address them.

Critical Success FactorsCritical Success Factors focus on key performance areas focus on key performance areas that must be function effectively for the organization to be that must be function effectively for the organization to be successful and associated information requirementsuccessful and associated information requirement

Business Systems PlanningBusiness Systems Planning

Problems Solutions Information

Longreplenish-ment cycletime inretail

Need tounderstandcurrentorderfulfillmentin supplychain

Orderfulfillmentperformancein each unit

Critical Success FactorCritical Success Factor

Critical SuccessFactor

Information

Reduce Inventorylevel of retail shop

Point of sales dataaccessible bymanufacturers

ResultsResults

Current Business Practices and EnvironmentCurrent Business Practices and EnvironmentCritical Success FactorsCritical Success FactorsApplication PortfolioApplication Portfolio

Current Business PracticesCurrent Business Practices Apparel RetailingApparel Retailing

– Apparel spending in China is still high (up to 20-30% of average Apparel spending in China is still high (up to 20-30% of average income).income).

– However, consumer behaviors among different provinces are very However, consumer behaviors among different provinces are very diverse. Eg. Shanghai and Guangdongdiverse. Eg. Shanghai and Guangdong

– Fashion trend in China is roughly a year behind the West.Fashion trend in China is roughly a year behind the West.

– Replenishment is normally take 3 days using services similar to Replenishment is normally take 3 days using services similar to Federal Express/DHLFederal Express/DHL

Trading and Merchandize ProcurementTrading and Merchandize Procurement– Complex tasks to co-ordinate different manufactures for the same Complex tasks to co-ordinate different manufactures for the same

orderorder

– Normally takes 75 days to produce a woven products and 50-60 days Normally takes 75 days to produce a woven products and 50-60 days for knitwear productsfor knitwear products

Current Business PracticesCurrent Business Practices Garment ManufacturingGarment Manufacturing

– Need to source more suppliers to ensure timely material Need to source more suppliers to ensure timely material delivery and more buyers to fill up the spare capacitydelivery and more buyers to fill up the spare capacity

– Difficult to maintain single partnership relationshipDifficult to maintain single partnership relationship

– Garment quality in term of workmanship is a common Garment quality in term of workmanship is a common production problem. production problem.

Fabric ManufacturingFabric Manufacturing– The most important task is to get the suitable level of stock and The most important task is to get the suitable level of stock and

in the right item for garment manufacturingin the right item for garment manufacturing

– Accurate forecast of the market demand is necessaryAccurate forecast of the market demand is necessary

– Information is collected from sales and practitioners in the Information is collected from sales and practitioners in the industry.industry.

Critical Success FactorsCritical Success Factors

Apparel RetailingApparel Retailing– Brand NameBrand Name

– InventoryInventory

– Shop ImageShop Image

Trading and MerchandizingTrading and Merchandizing– Competitive price, quick response and punctual deliveryCompetitive price, quick response and punctual delivery

– Value added customer serviceValue added customer service

– Bar code and scan and pack service.Bar code and scan and pack service.

Critical Success FactorsCritical Success Factors

Garment ManufacturingGarment Manufacturing– Quota PriceQuota Price

– Delivery on timeDelivery on time

– Competitive costCompetitive cost

– Good relationship with forwarderGood relationship with forwarder

Fabric ManufacturingFabric Manufacturing– Fast and accuracy deliveryFast and accuracy delivery

– Accurate InventoryAccurate Inventory

Application PortfolioApplication Portfolio Based on the above information strategy planning and Based on the above information strategy planning and

business area analysis, it became obvious to reduce business area analysis, it became obvious to reduce inventory turnover time so that unnecessary financial inventory turnover time so that unnecessary financial “wastage” can be recovered.“wastage” can be recovered.

At present, the inventory turnover for the Company is 90 At present, the inventory turnover for the Company is 90 days while the benchmarked best practice in the industry is days while the benchmarked best practice in the industry is about 45-50 days.about 45-50 days.

The reasons are due to inability to use existing sales and The reasons are due to inability to use existing sales and market information about current consumers’ buying market information about current consumers’ buying behaviors, buyers’ preferences, fashion trend and feedback behaviors, buyers’ preferences, fashion trend and feedback on the effectiveness of marketing strategy.on the effectiveness of marketing strategy.

Application PortfolioApplication Portfolio

Sales AnalyzerSales Analyzer– to recognize the best seller in the shop/region, to recognize to recognize the best seller in the shop/region, to recognize

the poor performance item; support comparison of sales.the poor performance item; support comparison of sales.

Sales Forecast and Planning SystemSales Forecast and Planning System– provide summary of performance in the past buy plan; provide summary of performance in the past buy plan;

support forecast of sales catalogue based on past support forecast of sales catalogue based on past performance, current trend and budgetperformance, current trend and budget

Logistics Control on Sales Operation SystemLogistics Control on Sales Operation System– link with warehouse system to support inventory link with warehouse system to support inventory

information, provide analysis for possible routes of goods information, provide analysis for possible routes of goods transfertransfer

ConclusionConclusion

This paper discusses the methodology, characteristics and This paper discusses the methodology, characteristics and implementation stages of IE and a implementation stages of IE and a textile/clothing/trading/retailing complex organization was textile/clothing/trading/retailing complex organization was selected for studies.selected for studies.

The current business practice and trend, critical success The current business practice and trend, critical success factors were identified and results were formulated in a set factors were identified and results were formulated in a set of application portfolio to minimum stock out and increase of application portfolio to minimum stock out and increase stock turn over for the Enterprisestock turn over for the Enterprise

The IE methodology proved to be useful in studying the The IE methodology proved to be useful in studying the complex supply chain with its enterprise-wide approach.complex supply chain with its enterprise-wide approach.