Patagonia Clothing Case Study

Introduction - Patagonia Clothing Case Study

A comprehensive strategy of procurement is defined as a directional roadmap that involves processes and policies about the strategic management of organizational procurement activities. The purpose of this report is to present a strategic analysis of the procurement strategy and function of Patagonia clothing. It is an American apparel retailer, popularly known for its outdoor clothing and multiple sustainability efforts. Brand operates its stores in more than 10 countries, is engaged in the creation of high quality products. It was reported that the global fashion industry has released estimated 1.2 billion tonnes of carbon footprints in the year 2022 and is responsible for 10% global carbon and greenhouse gas emission (Milton, 2022).

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Patagonia’s supply chain process is based on the centralised AI and cloud based networks for the effective supply chain management. On the other hand, procurement process of Patagonia is primarily focuses on the selection of long lasting, durable and sustainable products in order to prolong its product’s use. This report will include strategic analysis of procurement strategies and functions of Patagonia with application of multiple models. Based on the analysis, alternative procurement strategies will be proposed along with the benefits and challenges associated.

Strategic Analysis of Procurement Function andStrategy

In the competitive business environment, Patagonia engages in development and strategic analysis of its procurement functions and strategies to ensure increased success and aims to enhance its value contributions (Ekechukwu, 2021). With the application of different models based on supply chain and procurement process, Patagonia strategically analyses its functions and process related to procurement and supply chain.

Sustainable Procurement Policy Model

Model of sustainable procurement policy aims to integrate specifications, criteria and requirements, focuses on the conservation and protection of soviet and environment as whole. Poddar, (2021) mentioned that policy of sustainable procurement is used by the organisation to ensure effective and sustainable purchasing that reflects the broader objective linked with climate change, economic resilience, resource efficiency and social responsibility. This policy model is applicable and linked with Patagonia’s responsible practices of procurement as it prefers and implements the sustainable procurement practices which reflect its commitment towards society and environment. As per the view of Collins, (2020) this sustainable procurement policy model, also termed as triple bottom line is a holistic approach, guides organization to improve its procurement process and stakeholder’s engagement along within the maximization of brand image and loyalty. For example: with the application of model based on sustainable procurement policy, Patagonia emphasises on the avoidance and mitigation of certain issues related to child labour or unethical sourcing to maintain efficiency and effectiveness of its procurement process (Patagonia, 2024).

The sustainable procurement policy model is applicable in Patagonia through endorsement of highest standards of social, ethical, environmental and economic practices. For example: Patagonia engages in the responsible procurement process related to sustainable sourcing with recycled materials, promotion of safe working and fair wages to labour, preference to local vendors for sourcing of raw materials and aims to reduce its carbon footprints (Lysons and Farrington, 2020). In accordance with the brand’s commitment with standards, this model further guides supplies to aspire same standards within the supply chain operations to maintain effectiveness in the process of procurement. However, Goworek et al, (2020) critically contended that application of this model in the procurement process can disrupt procurement operations due to limited internal resources and high costs, results in minimized efficiency and declined revenue turnover.

Supply Chain Operational Model (SCOR)

This model is designed as per the performance based framework to manage supply chain activities in effective manner. As per the opinion of Agrawal et al, (2021) SCOR model provides a strategic framework for comparing and helps to evaluate activities of supply chain management. This leads to enable brand to identify key areas of improvement and encourages implementation of best supply chain process. For example: Patagonia’s process of supply chain follows the 4-fold approach to meet the standards of souring, quality, environmental and social standards (Patagonia, 2024). It works closely with the quality and sourcing teams for take strategic decision for effective operations of supply chain. Brand implements this approach along with the application of SCOR model for effective maintenance of its supply chain operations.

According to Chen, (2024) SCOR model is based on the five stages that are plan, source, make, deliver and return. This model is termed as effective for the management of supply chain as it addresses, communicates and improves decisions of supply chain among organisation, customers and suppliers. SCOR Model is applied on Patagonia’ supply chain 4-fold approach as it integrates with the benchmarking and decision making process for the supply chain operations. (-Dissanayake and Weerasinghe, (2021) stated that SCOR model establishes the standard method for analysing and evaluation of effectiveness and efficiency to outline key improvement areas within supply chain management. This model is applicable in multiple steps which are as follows:

• Step 1: Plan- First one is based on planning for demand and supply of products. Patagonia implements this step in its supply chain process for the establishment of balance between demand and resource planning to formulate effective decisions along with brand’s stakeholders. Adamkiewicz et al, (2022) analysed that this includes supply chain concerns related to regulatory compliance, inventory, transportation and cost and its alignment with business rules and financial plan.
• Step 2: Sourcing- This step involves sourcing of materials and infrastructure to meet manufacturing requirements with an aim to maximize supply chain and manufacturing efficiency. Patagonia emphasises on sustainable and high quality sourcing of raw material to produce high quality products to meet demands of its customers in effective manner (Muthu, 2020). Moreover, this step guides Patagonia regarding supply chain aspects such as supplier’s network and performance, inventory and supplier agreements.
• Step 3: Make- This SCOR model step emphasises on production and manufacturing of high quality products. Application of this step in its 4-fold approach enables Patagonia to make well informed decisions for effective management of its supply chain operations. Tseng et al, (2022) mentioned that it further includes managing aspects such as facilities, equipment, and transportation and production network within supply chain.
• Step 4: Deliver- This step focuses on component of delivery related to transporting, managing and warehousing of orders. This includes management of supply chain aspects of Patagonia such as exporting requirements, assets, importing requirements, transportation, product life cycle and finished inventories (Todeschini, Cortimiglia and de Medeiros, 2020). Implementation of this step leads Patagonia to improve its supply chain efficiency with fulfilment of customer’s demands on timely manner with smooth streamlining of supply chain operations.
• Step 5: Return-The last step comprises of return, involves handling of defective receiving items from customers. With application of SCOR model, Patagonia prepares efficient systems for smooth handling of returnable products, customer compliant and return of defective products to assure high satisfaction and positive experience among customers (Neumann, Martinez and Martinez, 2020). In addition, as per the 4-fold approach adopted by Patagonia, it emphasises on the maintenance of social and environmental standards within its supply chain activities such as minimized footprints and ensures transparency in its supply chain operations. This leads to deliver return related to increased CSR value and brand image, high profitability and loyalty of customers and suppliers.

Risk Management process

Process of risk management within procurement is primarily based on the potential towards failure within the process of supply chain and procurement. Irfan, Wang and Akhtar, (2020) analyses that there are multiple risks identified within supply chain and procurement process includes quality, compliance, fraud, delivery and cost risk. Patagonia applied this model of risk management process within context of avoidance or mitigation of procurement and supply chain risks. Further, this model is linked with the risk management policy of Patagonia aims to overcome risks related to inaccurate analysis of needs and demand of customers and suppliers, inadequate sourcing and vendor management, inefficient management of supply chain and underdevelopment contract with suppliers (Abdullah, 2022). This process is applied by Patagonia in multiple steps which are as follows:

• Step 1: Identification of procurement risks- Brand’s procurement is associated with multiple risks related to reliability, lack of automation within operations of supply chain, unreliable suppliers, poor procurement planning and inappropriate vendor management and ineffective sourcing. CIPS, (2022) acclaimed that this process enables Patagonia to identify possessed risks to enhance efficiency and competitiveness of supply chain management.
• Step 2: Risk assessment- Poddar, (2021) mentioned that risk assessment assist brand to analyse risks and its potential impact on the supply chain and procurement functions. Patagonia implements the digital tools such as AI (Artificial Intelligence) and Automation within its risk management to anticipate and access potential risks.
• Step 3: Evaluation of risk- This step defined about the estimation of risk and its impact on the concerned areas on the brand. Patagonia evaluated risks based on its likelihood and further estimate about its potential impact by considering qualitative and quantitative costs on the supply chain and procurement process.
• Step 4: Development of strategies- Based on the above risks evaluation, model of risk management assist Patagonia about formulation of effective risks mitigation strategies comprises of leverage of E-procurement solutions and through tracking of supplier’s performance (Collins, 2020).
• Step 5: Implementation of risk mitigation strategies- Application of risk management model through implementation of risk mitigation strategies results in elimination of procurement and supply chain related risks. This ensures smooth supply chain and procurement operations, results in maximization of productivity and competitiveness of Patagonia in global fashions industry.

Porter’s Value Chain Model

This model is a strategic tool for disaggregation of brand to improve its focus on the effective sourcing to enhance its competitive advantage. According to Agrawal et al, (2021) Model of Porter’s value chain enable brand to develop analytical structure that applies to the independent activities of the supply chain operations, starts from sourcing and acquisition of raw material and ends with production of high quality finished products. This model is interlinked with the Patagonia’s Supply chain as it assists the brand to identify linkages or alliance with the suppliers and related discretional activities that has vital contribution in effective management of supply chain operations. Goworek et al, (2020) mentioned that Porter’s value chain model involves five basic activities related to operations, outbound and inbound logistics, sales and marketing and services. With the mentioned following steps, this model is applied by the Patagonia within the context of maintaining its supply chain process. For example: the operational activity within supply chain is effectively managed by Patagonia as it guides brand to take creative and innovative action for selling of goods and for meeting of demands and needs of consumers to enhance brand’s value (Lysons and Farrington, 2020).

In addition to that, the value chain model is implemented by Patagonia in its marketing and sales services through effective maintenance of its relationship with suppliers, adoption of marketing and sales strategies and with the creation of customers’ loyalty through CSR actions within supply chain operations to enhance brand value. Besides that, Chen, (2024) evaluated that Porter value chain model enables brand to emphasise on standard delivery of its products through maintaining efficient operations within supply chain management. This leads to improve satisfaction and experience of customers, leads to promote value and competiveness of brand within fashion industry. However, Poddar, (2021) argued that Porter’s value chain model is heavily relied and oriented with the manufacturing process, leads to supress other functional departments of Patagonia.

Alternative Procurement Strategies

Based on the above analysis, there are multiple alternate procurement strategies that could be adopted by Patagonia in order to improve its supply chain and procurement functions. These strategies are as follows:

Robotic Process Automation (RPA)

This alternate strategy can be adopted by Patagonia, leads to effective management of contract with suppliers, strategic evaluation of supplier’s performance and for effective management of suppliers. Recent technical development in machine learning (ML) and AI can be implemented for improved accuracy saves time and reduces costs within procurement and supply chain process (Dissanayake and Weerasinghe, 2021). Moreover, this procurement strategy will assist Patagonia to adopt efficient routes for delivery of its products and leads to enhance accuracy with automations of tasks related to data entry, inventory monitoring and order processing.

Big Data Analytics

Data analytics plays a vital role in procurement function as it leads to capture, analyse and store information and data related to supply chain and procurement function. Patagonia can adopt technology of big data analytics to drive cost saving, strategic sourcing and to optimize performance of suppliers (Todeschini, Cortimiglia and de Medeiros, 2020). This strategy will unlock valuable and greater insights about procurement operations, leads to improve decision making of Patagonia.

Benefits of recommended transformations (RPA and big data analytics):

Reduced purchasing cycle time

With leverage of advanced technology of Automation, big data and RPA, procurement process becomes standardised, results in minimized purchasing cycle time and reduces costs. Automation leads to eliminate errors, delays, manual tasks and duplication as a result of which efficiency and revenue turnover of the brand is maximized (Chen, 2024).

Enhanced budgetary control

Another advantage is related to improved budgetary control as advanced technology guides brand towards systematic procurement through leverage of advanced budgetary tools. This improves financial intelligence of brand, results in strategic decisions of business reacted to purchase of raw material, transportation and other procurement functions (Neumann, Martinez and Martinez, 2020).

Elimination of administrative errors

Leverage of advanced technology such as big data, AI and RPA minimizes chances of administrative and human errors due to automation of tasks such as data entry, digital invoicing process with suppliers and through digital tracking of invoices. This emerges as potential advantage of the alternate strategies of big data analytics and RPA within procurement function of Patagonia (Muthu, 2020).

Increased buyer's productivity

Emerging technologies helps procurement process to find new growth opportunities and development avenues to drive increased visibility and enhances regulatory compliance. This leads to enhance buyer’s productivity as loyalties and trust of buyers are increased due to improved transparency and visibility in procurement and supply chain operations of brand.

Better information management

Digital technologies comprises of pool of diverse range of information and data related to customers, current trends, threats and opportunities and about external market. This helps business to gain insights with the use of diverse range of information, results in well informed decision making (Abdullah, 2022).

Challenges associated with the recommendation transformation (RPA and big data analytics)

Change management

Leverage of advanced technology does not provide information about change management within organisation. Lack of strategic guidance about adoption of change results in resistance and declined efficiency, emerges as challenge for brand.

Cost of implementation

Another challenge is associated with the high cost of implementation of advanced technology within procurement function of organization. Small and medium sized organisation faced complexities in implementation of advanced technology due to its high cost (Collins, 2020). Further, high cost of maintenance results in increased operational expenses, emerges as limitation of these strategies.

Skill gaps

Implementation of technological advancements required high skilled and professional staff. Due to limited technical skills or lack of professional human resource, organisation can face complexities to fully utilize the advanced technologies in procurement process, emerges as challenge.

Data quality

Big data and RPA possesses certain data quality issues due to its poor quality, inconsistency and duplication. This has adverse impact on the decisions of brand, can lead to decline its productivity and competitiveness.

Regularity compliance

Technology of Big data and RPA plays a vital role in regulatory compliance as it is responsible for maintain privacy and security of supplier’s personal information and sensitive and vulnerable data of organization (Todeschini, Cortimiglia and de Medeiros, 2020). However, cyber threats related to phishing, malware attacks and theft emerges as challenges for brand during its implementation. In addition, non-compliance with governmental and cyber security regulations, polices and standards also emerges as challenge for brand while implementation of alternative strategies of Big data analytics and RPA.

Conclusion

The above report concluded about the procurement strategies and supply chain functions of Patagonia in link with application of different models to enhance efficiency and performance. Sustainable Procurement Policy Model, SCOR model, Risk Management process and Porter’s Value Chain Model was linked and applied in the supply chain and procurement process. These models aimed to enhance brand’s focus towards achievement of objectives and goals through increased efficiency in procurement and supply chain process. Apart from that, alternative strategies related to Robotic Process Automation (RPA) and Big Data Analytics were proposed to Patagonia to optimize supply chain and procurement cost and for real time tracking of supplier’s activities.

References

Books and Journals

• Adamkiewicz, J., Kochańska, E., Adamkiewicz, I. and Łukasik, R.M., 2022. Greenwashing and sustainable fashion industry.Current Opinion in Green and Sustainable Chemistry,38, p.100710.
• Agrawal, T.K., Kumar, V., Pal, R., Wang, L. and Chen, Y., 2021. Blockchain-based framework for supply chain traceability: A case example of textile and clothing industry.Computers & industrial engineering,154, p.107130.
• Chen, Y., 2024. How blockchain adoption affects supply chain sustainability in the fashion industry: a systematic review and case studies.International Transactions in Operational Research,31(6), pp.3592-3620.
• Collins, J.A., 2020. Eco-Publishing in The Book Industry: An Interdisciplinary Case Study with Patagonia Books.
• Dissanayake, D.G.K. and Weerasinghe, D., 2021. Towards circular economy in fashion: Review of strategies, barriers and enablers.Circular Economy and Sustainability, pp.1-21.
• Ekechukwu, D.E., 2021. Overview of sustainable sourcing strategies in global value chains: a pathway to responsible business practices.
• Goworek, H., Oxborrow, L., Claxton, S., McLaren, A., Cooper, T. and Hill, H., 2020. Managing sustainability in the fashion business: Challenges in product development for clothing longevity in the UK.Journal of Business Research,117, pp.629-641.
• Irfan, M., Wang, M. and Akhtar, N., 2020. Enabling supply chain agility through process integration and supply flexibility: Evidence from the fashion industry.Asia Pacific Journal of Marketing and Logistics,32(2), pp.519-547.
• Lysons, K. and Farrington, B., 2020.Procurement and supply chain management. Pearson UK.
• Muthu, S.S., 2020.Assessing the environmental impact of textiles and the clothing supply chain. Woodhead publishing.
• Neumann, H.L., Martinez, L.M. and Martinez, L.F., 2020. Sustainability efforts in the fast fashion industry: consumer perception, trust and purchase intention.Sustainability Accounting, Management and Policy Journal,12(3), pp.571-590.
• Poddar, P., 2021. Integrating sustainability into the Textile Supply Chain-comparing the case of H & M and Patagonia.Scholarly, Aug.
• Todeschini, B.V., Cortimiglia, M.N. and de Medeiros, J.F., 2020. Collaboration practices in the fashion industry: Environmentally sustainable innovations in the value chain.Environmental Science & Policy,106, pp.1-11.
• Tseng, M.L., Bui, T.D., Lim, M.K., Fujii, M. and Mishra, U., 2022. Assessing data-driven sustainable supply chain management indicators for the textile industry under industrial disruption and ambidexterity.International Journal of Production Economics,245, p.108401.

Online

• Abdullah, O., (2022). Tracking the Evolution of Procurement and Where It’s Going Next. Online. Available through: <https://futureofsourcing.com/tracking-the-evolution-of-procurement-and-where-its-going-next/>.
• CIPS, (2022). What are the benefits of strategic sourcing? Online. Available through: <https://www.cips.org/intelligence-hub/sourcing/strategic-sourcing/benefits>.
• CIPS, (2022). What Is Procurement? Online. Available through: <https://www.cips.org/intelligence-hub/procurement/what-is-procurement>.
• Milton, L., (2022). The Carbon Footprint of Clothing industry. Online. Available through: <https://www.goclimate.com/blog/the-carbon-footprint-of-clothes/>.
• Patagonia, (2024). Responsible Purchasing Practices. Online. Available through: https://www.patagonia.com/our-footprint/responsible-purchasing-practices.html
• Patagonia, (2024). Supply Chain Environmental Responsibility Program. Online. Available through: <https://www.patagonia.com/our-footprint/supply-chain-environmental-responsibility-program.html>.

Author Bio

Kennedy Watson   5 years | MBA

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