UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
Sunderland Business School
Level: 2 Module: UGB233 Operations Management
Assignment Code: UGB233 2009/10 Module Leader: Dr Tie Xu
Issue date: 8th March 2010 Return date: 19th May 2010
Contribution to unit assessment: 70 % of overall mark
Subject: Individual analysis of Marks & Spencer
Background: See attached case study material
Notes:
1. Minimum of 1500, maximum of 2000 words.
2. The assignment must be presented in a form that complies with the basic conventions of a report
format (see Guide to Basic Study Skills).
3. An electronic copy of your assignment has to be submitted to Turn-It-In via Sunspace also by the
hand-in date on 19th May 2010!
4. You need to write down your seminar tutor’s name on the hand-in form!
The questions are:
1 Identify and explain the different customer needs of which the three M&S clothing ranges
aimed to serve? Assume that the Perfect and Classic ranges serve essentially the same
customer segment.
2 Identify and explain the order winners and qualifiers for these three different clothing
ranges at M&S (Fill in the following table as part of your answer).
3 Apply the polar diagram to analyse and compare the different operations
performance objectives for these three different clothing ranges at M&S.
Perfect
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
Assignment presentation and assessment
The assignment should be presented in the form of a report not to exceed 2000 words.
The criteria for assessing the report will be:
Report presentation (20%)
The extent to which the assignment represents an effective report. This will be judged on:
Appearance: Is a word count included at the end of the report? is it within the specified
amount? Is the text double spaced?
Structure: Does the report follow the conventions of the format? Does is have a clear
introduction, explaining how it answer the questions? Do the sections of the report develop
ideas in a logical sequence? Are diagrams or other subsidiary information shown in
appendices?
Spelling and grammar: Are all words spelled correctly and is the meaning of sentences clear?
Referencing: Have appropriate references been included in the report. Has a recognised
referencing system been used for notation? (see relevant section in the Guide to Basic Study
Skills)
Use of relevant theory (40%)
Has the right theoretical content been chosen as the basis for answering the questions? Is
there evidence of the use of course notes and books? Is the theory that is selected significant
to the questions?
Analysis (40%)
This measures the extent to which students develop a structured argument for the points they
make, by combining relevant theory with the information provided in the questions.
Any work submitted is subject to the University's rules and procedures governing
infringement of assessment regulations.
Moderated by: Tom Cuthbertson
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
The criteria for grading the assignment will be:
First (70-100%):
Authoritative grasp of the concepts, methodology and content introduced through the module;
applied all relevant theories implied by the guidance questions; all of the main features of the
case drawn out and additional original insights which add to the analysis of the case; ideas
reflecting depth and confidence of understanding of case issues; clear, concise presentation of
ideas making good use of the conventions of a report format.
Upper Second (60-69%):
Sound level of understanding based on competent grasp of relevant concepts, methodology
and content introduced through the module; applied most of the relevant theories; all of the
main features drawn out; coherent, well structured report.
Lower Second (50-59%):
Applied the main frameworks; demonstrates a coherent response to the case issues; most of
the key pints correctly analyzed; the underlying logic of analysis is sound and so the report.
Third (40-49%):
Applied some of the main frameworks; some of the main features of the case brought out
correctly; some flaws in the structure of the report (e.g. re-open analysis in conclusions;
mixing up conclusions and recommendations)
Fail (0-39%):
Some knowledge of main concepts but major omission and/or misunderstanding. Structure &
nature of the report is overly descriptive. Arguments poorly supported and little or no analysis
and reflection. Considerable limitations in ability to perceive the linkage between theory and
practice.
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
Case Study: Marks & Spencer
Source: R Johnston, S Chambers, C Harland and N Slack Cases in Operations Management, FT Prentice Hall; 3rd Ed, 2003.
Introduction
Marks & Spencer (M&S) is a leading retailer of clothing, food, homeware and financial services. Around
10 million customers per week are served in around 300 UK stores. The company was started in
1884, when Michael Marks (a Russian-born Polish refugee) opened a stall at Leeds Kirkgate Market. By
1997, M&S had grown into an international group with an annual sales turnover in excess of £8 billion -
combined with one of the highest net margins in retailing.
M&S experienced a wrenching time since those glory days, having become highly vulnerable in its core
customer base - women aged between 35 and 55. The very advantages that M&S had painstakingly
built up became liabilities in the market downturn of autumn, 1998. For example, lengthy supply chain
procedures meant that the company was buying 9 to 12 months ahead of the market. Traditionally
M&S bought twice a year for spring and autumn with phased buying in between - that is, there were
just two main sales `seasons' per year. Nimbler competitors exploited many seasons per year for
fashion items at one end of the market, and everyday low pricing that M&S could not match at the
other. The M&S counteroffensive took a long time to formulate. Luc Vandevelde, the third CEO in as
many years, said in his annual review to shareholders in 2001:
‘...we have been able to conduct a thorough strategic review. Although some of the decisions we've taken
are painful, they are necessary if M&S is to return to growth, and they will improve our ability to compete
and respond more quickly to operational demands.'
As part of this strategic review, the UK retail management team, led by Roger Holmes, developed
an operational plan that envisaged building on the strengths of M&S and exploiting new growth
opportunities. A key part of the recovery plan included major improvements in product appeal,
availability and value in order to rebuild relationships with the core womenswear customer base.
A former supplier’s view
Many of the `painful decisions' related to Marks & Spencer's traditional UK supply base, which had been
decimated in the scramble to reduce costs. In some ways, this had made the slowness to respond to market
changes even worse. A former employee of a former M&S supplier, which has now closed most of its UK factories,
commented on the recent changes:
'Three years ago M&S operated a very standard, very formalised route from order to contract, production
and distribution. Each item had to have an M&S garment number as identification all the way through
production, which precluded suppliers from manufacturing items for other retailers. More recent supplier
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
rationalisation has changed this approach, but it is still very formalised and in reality a more informal approach is
taken on a daily basis to actually get things done.'
Much of the manufacture of M&S products had been transferred abroad. There is very little capital expenditure
in clothing. Typically, raw materials account for 50 per cent of the product cost, and labour for 30 per
cent. Labour costs were much cheaper in countries like China, Cambodia and Bangladesh, but this has
had a significant impact on lead-times: it takes four to six weeks to ship from the Far East. Airfreight is
used sparingly, as it has not been possible to get the type of costs required for routine airfreight.
When buying standard ranges there is a balance between buying few colour ranges at higher
volumes, or more colours at lower volumes. Combinations add to complexity: if there are eight colours and
eight sizes, there are 64 stock keeping units (SKUs) in the range. M&S bought in a ratio across sizes based
on sales history, but actual sales in a season - especially colours - were difficult to forecast. Responding
to changes in volume and mix in the marketplace was difficult enough for the ponderous M&S
systems, but the company's insistence on a single brand brought further problems:
'M&S procedures do not allow flexibility for short lead times. Had they agreed to sub brand in the past, it
would have been possible to produce to different quality standards for different product ranges.'
New product development was also slow and costly. All suppliers were asked to develop all ranges - M&S
would then decide who would manufacture what and where. This increased development costs all round.
The company has become more skilled at assessing supplier capabilities in advance. Suppliers who are lowcost
producers receive orders for commodity products, while those with strengths in product or
material development receive orders for more innovative lines.
Improving the supply chain
M&S identified opportunities to reduce supply chain costs substantially, and achieved targeted savings of £120
million in 2000. The priorities were to eliminate duplication and to increase transparency. Some of the savings
were achieved by using fewer suppliers and by working more effectively with them. This enabled M&S to get
goods to the shops faster and to respond more quickly to emerging customer demands. By reestablishing
closer working relationships with its supply partners - historically a unique strength - M&S wanted to
achieve further improvements in quality, value, product appeal and availability.
Using information about customer preferences, buyers were better able to give suppliers the information
needed to be more flexible and efficient in production. The company admitted that the speed of the
changes made, and the replacement of a major supplier, did create availability problems in the
autumn and spring of 2000/2001 - particularly in knitwear and lingerie. A focus on the 500 best-selling
products, particularly basic items like socks and knickers, sought to ensure that customers noticed an
improvement in availability.
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
Improving the segmentation of clothing
M&S has concentrated on regaining the loyalty of its core customers, who prefer classically stylish clothes. In the
past, the company had resisted splitting its traditional St Michael brand name, preferring to leverage the
power of a single name that became synonymous with the company. As part of its new plan to segment
products across different lifestyles, the company recognized that this was no longer tenable. For example,
George Davies was appointed to design and supply a collection for the fashion conscious woman.
Davies had risen to fame as a result of making the retailer Next well known on the UK high street with his
innovative designs and methods, and by his subsequent success in developing the George range of clothing at
Asda supermarkets. His sub-brand at M&S was labeled per una, and 50 selected M&S stores were laid
out by lifestyle to give impact and clarity to the display. Supply chain issues were also attended to.
'per una is "ring fenced" within the M&S system so that the range can be produced to a different standard. This
enables George Davies to achieve a four-week turnaround.'
Another range called The Autograph was created by top designers to offer fashion items at High Street
prices. A compromise was reached in sourcing this range, which was originally produced in UK factories but
moved to Portugal. This had the benefit of cheaper labour costs than the UK and shorter lead-times than the
Far East.
M&S also planned to regain the confidence of its customers in the quality and fit of its clothing. It chose to
sharpen pricing by rebalancing the price structure and by extending the range of entry prices. The aim was
to deliver 'inspirational quality at great value'.
Womenswear ranges for autumn 2001
M&S further segmented its womenswear products to appeal to different lifestyles by introducing a
number of ranges and sub-brands in addition to per una and The Autograph, including The Perfect
Collection and The Classic Collection.
The Perfect Collection
The Perfect Collection focused on classically stylish merchandise for core customers. There are 60 lines
for women and men which 'return to basics', and they include plain, white shirts, black roll-neck
sweaters and jeans. With many items machine washable, non-iron and tumble-dry friendly, they're
aimed at the customer with a busy lifestyle who is looking for quality and value at a reasonable price. The
brochure described them as 'timeless essentials that you can wear with just about anything'.
The Classic Collection
The Classic Collection was aimed at the more mature customer, and the advertising concentrated on
design, comfort, long-lasting style and versatility -'Every piece in the Classic Collection is designed to
skim and flatter the natural body shape, whatever your size'. The Classic Collection is a range of smart,
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
elegant clothes, made from high-quality fabrics at value-for-money prices. 'It's a timeless collection that
reflects your style and finesse, and not just the latest fashion.'
The Autograph range
The category manager, Liz Alcock, states: 'The Autograph philosophy is to bring cutting-edge
design to a wider audience within a unique environment'. Like per una, The Autograph label, which was
launched in the spring/summer 2000 range, was made available in selected stores only. M&S recruited
some of the best designers in the business - such as Julien Macdonald, Philip Treacy and Sonja Nuttall - to
create womenswear, menswear and accessories collections. For example, Philip Treacy's hat collection
was launched in 15 M&S Autograph boutiques nationwide in March 2001 and comprised 18 hats and
10 bags with no more than 60 of each color way and style. Autograph brings top designer collections to
M&S customers at high street prices, within a designer boutique environment.
per una
This high-quality range was designed to appeal to broad catchments at competitive prices, and was
launched in September 2001 into selected stores. The target customers were fashion-conscious women
aged between 25 and 35, sizes 8-18. The aim was to provide 'superb designs at very affordable prices'.
George Davies controls the supply chain, including sourcing and merchandising as well as control of the
look of the selling space in store. In the brochure, he says per una embodies principles of 'the highest
quality materials ... designs inspired by the very latest trends ... limited editions ... individual cuts for every
size ... fanatical attention to detail ... ease of shopping'. The 300piece collection was sourced from 90
suppliers from Hong Kong to central Europe. Production runs were short with no repeats, and speed of
reaction was important to ensure that goods made it from design concept to shop rails in weeks not
months.
In Marks & Spencer Magazine, September 2001, George Davies was quoted as saying:
'I know women don't want to see loads of the same thing around. It's OK for plainer pieces, but if it's distinctive,
they want it to be rare. Which is why we'll have a series of limited-edition: items introduced throughout the life of
a three-month collection - so buy them because they won't be in store for long.'
Unlike other ranges in store where up to 20 of a style can be seen together, per una items were presented in
small numbers, making each style 'special' and more exclusive. per una was 10 per cent more expensive
than the M&S main range. However, the rollout programme had to be scaled down because the company
could not keep up with higher than expected customer demand.
Customer comments
Two M&S customers were asked: 'What are you looking for?' and 'What is important to you
when considering buying a standard item or a high fashion item?' The first was a smartly dressed lady,
aged 54, who said:
UGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10
'For a standard item it's important that my size is available but quality and price are also important. In terms of
quality, a jumper, for example, must be value for money, wash well and not require specialist washing
(hand wash or dry clean!). For a premium item I don't want to be wearing something that is instantly
recognisable as M&S - if I'm paying a premium price, therefore, "exclusive" design is a must. Quality is also
important if I'm paying a higher price, as it must be well made and expected to last.'
The second customer, a fashionably dressed lady, aged 33, was asked the same questions, and said:
'I get very frustrated if an item is not available in my size. I am annoyed when I find that it is only currently in stock
in sizes 8-10 as the larger sizes have sold out. They never seem to have enough of the bigger sizes. For a
standard item I expect value for money and a "reasonable" quality - colour not to fade and it won't
shrink when washed. Availability of a variety of colour shades for a shirt or jumper is helpful but not a
key driver (size availability is key). For premium/high-fashion items, quality is not as important to me as
design. If it's a high-fashion item I expect to wear it only a few times before replacing it. I would not make a
specific trip to a store to buy such an item from M&S (unlike a standard item). It would tend to be more of an
impulse purchase.'
Case Questions:
1 Identify and explain the different customer needs of which the three M&S clothing ranges aimed to
serve? Assume that the Perfect and Classic ranges serve essentially the same customer segment.
2 Identify and explain the order winners and qualifiers for these three different clothing ranges
at M&S (Fill in the following table as part of your answer).
3 Apply the polar diagram to analyse and compare the different operations performance
objectives for these three different clothing ranges at M&S.
Perfect
Source: R Johnston, S Chambers, C Harland and N Slack Cases in Operations Management, FT Prentice Hall; 3rd Ed, 2003.