Merchants of Prato Case Study

Merchants of Prato Case Study Supply Chain

The Merchants of Prato: Supply Chain

The purpose of this work is to perform a sample case analysis of the case expressed in "The Merchants of Prato." This case essentially is in relation to Information Technology, Supply Chain Management and Knowledge Management. The supply chain structure currently in existence in Prato will be described as well as defining the difference in the structure from those defined in figures 1-2 and 1-3 of the Handfield and Nichols text. The work will examine the possible role for information technologies into an organization structure such as those which existed in Prato as well as explaining the procedures for development and implementation of such technology. Issues will be identified which will be important for consideration in the design of information technologies in the organizational and supply chain structure of Prato. Finally, the role of knowledge management initiative in Prato will be identified if this possibility realistically exists and the methods for development and deployment of a KM initiative in Prato will be described.

Introduction:

Prato is located in a region that is said to be "in a socially and economically homogenous geographical area in Tuscany" which is in "North-Central Italy approximately 30 kilometers North-West of Florence. " Kiman et al. (2004) This region is known for its industry in wools and was also known to be an industry that originated in sharecropper farmer customs or the "mezzabi" who not only farmed but also gained income through "sheep shearing and wool processing." Kiman et al. (2004)

I. Organization and Commercialization of Prato:

The wool industry started with modest resources but son became "an extensive network of a large number of small firms" Kiman et al. (2004) with each of these entities having a different area of specialization in the process of taking wool and processing it into cloth products. Eventually the wool supply was known to have run short and innovation led to the textile industry procuring used cloths which would be recycled into raw materials and then used again in the industry. The city was known at the citta' delgi stracci which means "city of rags." Kiman et al. (2004)

The trend in the region after the 1930's and under the reign of Mussolini was toward that of centralization which was referred to as an "autarchic" policy. However, upon democracy being restored in 1948 the family business gained momentum again. The Prato system is one of "production through a network of small specialized firms." Kiman et al. (2004) The most recent statistics provided by Financial Times in 1994 state the "existence of approximately 8,500 small firms." Kiman et al. (2004) According to the stated information "47%" of the firms "employ fewer than 10 people" and another 40% of the firms are employing less that 50 individuals. The survey further shows that "Prato is the single biggest agglomeration of the textile manufacturing facilities in Europe with a turnover close to ItL 6,500 (U.S.$4.65 billion)" Graham (1994) as cited by Kiman et al. (2004).

Presently the industry of Prato is geared toward the fashion industry's high and middle sector and is no longer relying on recycling of cloth and utilizes natural and synthetic fibers as well. Innovation is key in the industry as well as flexibility due to the changing needs and demands in the fashion industry. The area is well infiltrated with CAD - Computer aided design use. The Praetorian industry is a type of value chain but is also inclusive of the concept known as "value-added partnerships." In the Prato region the family owned businesses market their goods through small companies or impannatores and the value chain is distributed between the companies in the region with the impannatore easily able to post and change production orders to add or remove production capacity." The impannatore is the provisionor of access to global markets. Kuman (1996).

II. The Difference in the Praetorian Industry and figures 1-2 and 1-3 of Handfield and Nichol's text:

Handfield and Nichol's text demonstrate a system with an external downstream supply chain that is inclusive of all the downstream distribution channels, processes and functions that are transversed in the product having reached the customer. The supply chain is a steady and reliable as well as predictable model in both figures 1-2 and 1-3. The system of Prato is one of a "closed management system" in that the impannatores are "well-identified firms that manage the relationships of final marketing." The impannatore holds the authority and power to change the flow of orders as well as the orders themselves at a moment's notice. Figure 1-3 is more likely to offer an example of the Praetorian system because the new forms of interorganizational relationship have been included in this model. In fact this model is considered to be that of the "ideal" system in knowledge systems.

III. Knowledge Management Systems in Prato:

Therefore the supply chain system of Prato is one that would benefit from institution of what is called a "Virtual Enterprise" which is an enterprise relying on a "stable network of partner firms from which they can rapidly create temporary projects....one partner can be a member of several parallel projects and two firms can simultaneously be partners in one project and competitors for another." Katzy (1999)

Due to the power of the impannatores to make changes so rapidly the knowledge management systems most suited to the Prato industry would be that of the Virtual Enterprise due to the flexibility in the system. The virtual enterprise is utilized in the business environment where opportunities of business change quicker than adaptation can be accomplished by the organization. Virtual Enterprise management and the specialization applied creates strategic options in the environment of the impannatore-based marketing system.

According to a report by "IST Results" the distributed supply chain in the textile and clothing sector present complications. However IST Results suggests a XML-based communication solution called Moda-ML. Moda-Mo is a peer-to-peer exchange framework which doesn't require "middleware" for enabling exchanges and is said to offer the benefits of being easily set up with a very low technological threshold that is scalable and is free and public as well. The system can be embedded in other solutions and does not require royalties.

However, due to the social and business integration in the society/industry of Prato's industrial district there exists "economic relationships that are based on social rules and traditions as well as the strength of social ties among individuals within and across organizations," a "strong mix of competition and co-operation among firms, where relationships generally have a long length" and an "equal distribution of the power among district firms, with an important role played by third parties" as well as the "aggregation an spatial proximity as well as the shared languages as elements able to support rapid information diffusion, facilitating knowledge sharing and innovation process." (Becattini, 1991) as cited by Chiarvesio (2003)