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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
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Marks & Spencer (M&S) is a leading retailer of clothing, food, homeware and financial services. Around10 million customers per week are served in around 300 UK stores. The company was started in1884, when Michael Marks (a Russian-born Polish refugee) opened a stall at Leeds Kirkgate Market. By1997, 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 corecustomer base - women aged between 35 and 55. The very advantages that M&S had painstakinglybuilt up became liabilities in the market downturn of autumn, 1998. For example, lengthy supply chainprocedures 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 inbetween - that is, there werejust two main sales `seasons' per year. Nimbler competitors exploited many seasons per year forfashion items at one end of the market, and everyday low pricing that M&S could not match at theother. The M&S counteroffensive took a long time to formulate. Luc Vandevelde, the third CEO in asmany 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 theywill improve our ability to competeand respond more quickly to operational demands.'As part of this strategic review, the UK retail management team, led by Roger Holmes, developedan 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 viewMany of the `painful decisions' related to Marks & Spencer's traditional UK supply base, which had beendecimated in the scramble to reduce costs. In some ways, this had made the slowness to respond to marketchanges 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 routefrom order to contract, productionand distribution. Each item had to have an M&S garment number as identification all the way throughproduction, which precluded suppliers from manufacturing items for other retailers. More recent supplierUGB 233 OPERATIONS MANAGEMENT
COURSEWORK ASSIGNMENT 2009/10rationalisation has changed this approach, but it is still very formalised and in reality a more informal approach istaken 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 expenditurein 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, Cambodiaand Bangladesh, but this hashad a signific