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Asian Fashion Retailer Seeks KM Advantages    [Date Added : 09/13/2004 ]
Fiscal 2002 spelled trouble for Hong Kong-based casual fashion retailer Bossini. Revenues had shrunk to half of a key competitor's sales and net profit margins were reduced. Lead-time from placing an order at the factories to receiving goods in warehouses stretched beyond 100 days. Most executives would take the standard approach of tackling the problem from a supply chain perspective, but Philip Fung, Bossini's head of IT, human resources and logistics, saw weakness in the supply chain as a symptom of a deeper problem.

Bossini has 300 fully owned retail outlets in Hong Kong, Singapore, China and Taiwan. The fashion chain also distributes its products through authorized dealers and joint-venture partners in the four Asian markets. Its competitors include garment retailers Giordano, U2, Baleno and Hang Ten.

Fung zeroed in on the corporate culture, following directives from company chairman Henry Law, who is a firm believer in Stephen Covey's Seven Habits of Highly Effective People.

"We ought to have a new paradigm, a culture based on transparency and trust," says Fung. At the center of Fung's plan, which was approved by the board of directors, is a process to mine a valuable resource - the knowledge inside the heads of employees.

Fung, who is completing his doctoral thesis on knowledge management and information security at Australia's Macquarie University, says that before knowledge can be extracted, people must stop keeping secrets.

That was why he opted for a culture change campaign instead of technology at the onset of his KM project. His decision wasn't driven by a limited IT budget, but a desire to unearth and transform the processes that drive what people do. The success of the KM venture rests on making the invisible visible.

"A lot of companies start with buying million-dollar technologies such as document-sharing systems. Excitement soon fizzles out, content updating happens only once in a while and the whole project fails," he says.

When Fung talks about KM, he does not use the term in a textbook fashion. His idea of KM includes capturing customer profiles and sharing data with supply-chain partners: "I'm KM-enabling the human resources, IT, CRM [customer relationship management] and SCM [supply chain management] functions."

To kick off the project, he selected eight individuals from the human resources, finance, IT, marketing and retail departments to form a cross-functional KM team. The team underwent a KM diploma course provided by the Hong Kong Productivity Council to learn how to deal with customer data, people competence and transfer expertise.

Applying a KM principle to leveraging connections and networks, Bossini won vendors' and consultants' help in arranging visits to big KM sites around the world to study best practices. Bossini executives visited the operations of the giant clothing retailer Gap in the US, Hyundai Department Store in Korea and Uniqlo, a retailer in Japan.

"It's important to have a benchmark," explains Andrew Ling, Bossini's regional IT manager, who has himself gained a company-sponsored KM diploma.

Specifically, Ling was interested in the selection criteria for technology and implementation partners, how to conduct change management in the company, and the success factors for project implementation.

In another sign of Bossini's commitment to knowledge management, Fung hired an MBA graduate to champion the use of KM culture in all of the company's projects. Fung has set the company a series of three-year objectives aimed at helping close the revenue and profit margin gap with its key competitor. These goals included reducing operating costs as a result of shutting down non-performing stores, stepping up supply chain efficiency and improving customer satisfaction.

Bossini also has introduced After Action Review (AAR), a process for questioning people on their plans, finding out why mistakes occurred, and implementing lessons learned.

Retail managers meet weekly with shop staff to identify fast-moving goods and analyze customer feedback on new products. Personnel from all departments meet monthly to compare sales with projections, plan product replenishment and develop marketing strategies.

"AAR is widely conducted, from the boardroom to the shops," says Fung. "The discipline empowers people with timely information necessary for business plans to be effective."

For example, with up-to-date knowledge of customer preferences, retail staff can display popular merchandise more prominently. If a particular style is slow moving, the purchasing department can immediately halt orders and cut potential losses from excess inventory. Conversely, the stores' hot-selling items can be replenished quickly.

To assess performance, Bossini relies on metrics, such as sell-through rate, number of customer complaints and staff turnover. Key performance indicators are presented in colorful charts so that problems can be identified at a glance. Such data is shared over the company's intranet.

Typically, KM's direct benefits are hard to measure. How do you calculate the value in training an employee? However, good management principles can contribute to tangible business results. As Fung notes: "Overall, business benefits have been impressive."

Besides improving firms planning, budget formulation and control processes, the Bossini has increased store productivity and sales in Hong Kong by 30 per cent since May 2003.

Now that proper management policies are in place, Fung is ready to invest in technology. He has been working with SCM specialist i2 Technologies to develop a prototype to help Bossini plan production and distribution.

Fung's vision is to have everyone along the supply chain, from retail staff to manufacturers and suppliers, coordinating orders in real-time so that popular items do not run out and slow-selling items are not overstocked.

"We need to share information and knowledge and build new business processes together," Fung notes. He also plans to buy a digital content management system for archiving and cataloging project and business data.

According to Fung, his rationale for delaying a central repository project is: "About 80 per cent of knowledge is tacit - people know more than they can tell. Given the fast-changing business environment, I thought it would be better to create a KM culture first so that people could have a proper reporting structure."

("First, Know Yourself," by Irene Tham, MIS Magazine, Asia, August 31, 2004. Copyright 2004 Fairfax.)
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