A Presentation On Supply Chain Management At

World Co. Ltd.

By group : 1

2

Company Profile

• Fashion Retailer• Responds quickly to market signals• Gross Margins high• Inventory Turns high• ROE/ ROA low

Q.1 What is SPARCS system? Examine World’s inventory and financial performance to understand how successful the system was.

SPARCS system

• S- Super, P- production, A- Apparel, R- Retail, CS- Consumer satisfaction• Introduced in January 1992, by Hidezo Terai, president of World co. Ltd.• Speedy and responsive supply chain• Basis for promoting SPA (special store private label apparel) business of world co. Ltd.• Helps co. to monitor sales trends and focus on consumer demand to increase efficiency

Inventory And Financial Performance

Inventory turns a year

Gross margin

Company As a whole 5 47%

SPA brand which uses SPARCS system 8.5 47.8%

US Specialty retailers 2.6 41%

‘’The GAP’’ 5 45%

The Limited, Inc. 5.6 37%

Markdown

World Co. 11% of total sales/year

American Women’s Apparel Store 31.8% of total sales/year

Q.2 Examine the features of fashion apparel retailing in Japan. How can a company use its supply chain to compete in this environment?

• One of the largest and sophisticated clothing market in the world

• Fashion and product quality enjoy high reputation

• Products have short life cycles as compared to US

• Highly competitive, locally and internationally

• Three distribution alternatives are available : company owned stand-alone stores, shops in fashion malls and shops within department stores

• Low inventory levels due to short life cycles and uncertain demand

• Historical sales data to identify customer needs• Point-of-sale data from retailers to analyze

purchasing trends• Install systems for efficient and speedy sales ordering

Q 3. Explain how the organization structure at World supported its supply chain strategy. Explain how World used its information systems as key driver to improve its supply chain performance.

• Each of 40 brands targeted a distinct set of customer• Company maintain separate merchandising groups for each of the brand• Learning is high from each other group success and challenges • Review of each of the co’s & competitor’s brand , marketplace at every 6 month• Each group able to keep their brands fresh and exciting• Each group empowered to take Merchandising decision pertaining to its brand which make co quick responsive• Young and talented employee• More promotions opportunity to superior performance

Organization structure World Co. Ltd.

Information System features

• Real time information- SKU (Item/Size/Color by store) on daily basis- Shipment to the stores- Shipment between stores- Shipment back to the distribution center- Accuracy close to 100% during the regular selling season• Semi annual sales at a few larger department stores where items returned to the distribution center are marked 50% off

• Advance fabric Inspection at the factory and availability of CAD facilities.• Proper communication between Merchandisers and factory about actual need of the factory • Database of past trends and requirements• Electronically transfer of measurements and patterns from headquarters to factories• Computer system facilities at factories to make changes in patterns

Q.4 Identify salient aspects of World’s manufacturing process that helped World achieve the desired level of responsiveness in its supply chain.

Manufacturing Process

•Domestic manufacturing•Short lead time•Fast transportation•Close collaboration of design & mfg•2-3 wk replacement•Flexibility of factories•Small batch production

• Maintain relationships with manufacturers through network of business affiliations

• Domestic factories were considered over overseas factories as they could respond quickly

• Factory was informed in advance of fabric and about inspection

• CAD was used to cut the fabric• Maintained an inventory of undyed fabric for faster

response times• Line workers were versatile

• Measurements & patterns were sent electronically from headquarters to factories

• Factory maintained small batch sizes to undertake several different operations

• Major new collections were introduced twice annually

• To preserve brand focus, designers identified with the target customer

• Appropriate mechanisms to link dyeing facilities, suppliers, manufacturers and World in an integrated supply chain

Q.5 Explain the method of initial demand forecast and aggregate demand forecast at World for SKU level forecasts.

Initial demand forecast

• Initial demand forecast for each product, before sales, was derived in two stages:

- First process was to derive aggregate demand forecasts for all SKUs together.

- Second process was to rank the SKUs according to likely demand and combining these ranks with aggregate forecasts to derive SKU level forecasts.

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AGGREGATE DEMAND FORECAST(Higher of the two)

Category SideDistribution Side

Yen Nos

• Sales•Growth Rates•Seasonality•Competition•PESTE

• Brand wise•Chain wise

Store wise

• Heavy/ medium/ light• Knit/ woven• Fabric

Category Sweaters 30 %

Q.6 Explain the Obermeyer Method used at World for SKU level forecasts.

OBERMEYER METHOD for SKU Level Forecast

• To derive demand forecasts• To derive associated standard deviation of demand• “Obermeyer Vote Meetings” – held twice in a year,

where 20 store managers & assistants from all over Japan participated.

• Autumn-Winter collections in June & August• Spring-Summer lines in December & February– Store personal were shown the planned product

and were asked to predict its popularity.

Obermeyer Method Participants• Participants invited to World’s Tokyo office to view

coming line

• Participants almost all women : age 25-29

• Criteria considered while nominating assistant to take part in vote meeting:–Manner of dress,– Fashion sense,– Understanding of the target audience

• 20 women selected from 20 different stores

Assessment

• Women use to assess the garments on the basis of:– Fit and style on themselves as well as peers– Felt and observed the fabric, evaluated weight relative to

requirement of future– Photographed one another wearing next styles– Permitted to share their assessments– Instructed not to discuss the scores given to SKU’s

• Women recorded their thoughts on the “ballots”

Ranking• Based on fabric and colours between 1 to 7, and a

comment section• Separate boxes for ranking style, fabric & colour

• Merchandisers could identify:– Hot fabrics v/s Styles– Colours independent of Style

• After ranking–Weighted-mean score for each SKU– Standard deviation score for each SKU

Results

• Sorting of Product:– Mean score– Standard deviation

• Performing ABCD analysis:– “A” SKUs : Top 10% of SKUs, comprise 40% of sales– “B” SKUs : Next 20% of SKUs, comprise 30% of sales– “C” SKUs : Next 30% of SKUs, comprise 20% of sales– “D” SKUs : Last 40% of SKUs, comprise 10% of sales

Q.7 Explain the Accurate response Approach used for inventory and production planning at World.

• SKU level forecast is used to calculate the amount of materials needed

• Fabric is inspected at factory and relaxed for up to 48 hours• Inventory is kept for quick response• Domestic manufacturers were used to save cost of lead time• Reserved production capacity is kept for unusual demands • Merchandisers’ order 50% of the demand forecast right away• Based on the early sales data, the merchandisers extrapolated

sales data• Depending on the fabric and production available further

orders were placed• Left over inventory is sent back to the warehouses where it is

marked 50% off and sent back to stores

Q.8 Can the World’s supply chain processes be replicated at other apparel companies? Identify features of the supply chain that are, and are not, worth replicating by other companies.

• The process can be replicated to other apparel & non apparel companies having short product life cycle

• Needs to develop an attitude of efficiency

• Can do a cost benefit analysis

Features of World Co.'s Supply chain

• Forecasting new product demand• Initial product ordering logic• Material ordering-staged for use when and if needed• Focus on customer satisfaction and employee morale• Diversified work force•Responsive Process:

- Merchandisers working directly with the factory

- Flexible ordering of products

- Shorter lead time• Great product focus-Very homogeneous target group