gucci group assgnment

8/2/2019 Gucci Group Assgnment

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NATIONAL INSTITUTE OF FASHION TECHNOLOGY

ASSIGNMENT ON PRODUCT DEVELOPMENT AND QYALITY ASSURANCE

TOPIC:-COMPARATIVE ANALYSIS OF PRODUCT DEVELOPMENT OF AN

INTERNATIONAL AND DOMESTIC BRAND

&

SUBMITTED TO:-

MR.DIBYENDU DUTTA

SUBMITTED BY :-

VISHWAJEET BHARTI

ROLL- 25,MFM


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Gucci Group: a brief overview

Gucci Group, with consolidated sales over 3.2bn, is a world-leading, multi-brand company in the fashion

business. In addition to the core Gucci brand, the Group incorporated other leading brands such as Yves

Saint Laurent, Sergio Rossi, Boucheron, Bottega Veneta and Balenciaga together with designer brands

such as Alexander McQueen and Stella McCartney (exhibit 1). Leather goods, and in particular bags and

accessories, represented the traditional core business of the group, with a growing presence in ready-to-

wear clothing and shoes. The major distribution channel is directly operated stores (DOS), which

contributed roughly 50% of Group turnover. Gucci is a global company, with Europe accounting for just

over 40% of sales: the USA, Japan and Rest of the World each contribute roughly 20% (exhibit 2).Gucci

Group was founded in 1923 by Guccio Gucci, and developed rapidly after World War II to become

internationally known as a luxury brand. In the 1970s, arguments and legal disputes within the Gucci

family brought about a rapid decline in fortunes. At the end of the 1980s the company - in spite of the

entry of the Arab investment group Investcorp was in poor shape financially. The famous brand was

also suffering because of the extensive practice of licensing. Starting in 1994 under Domenico De Sole,

Gucci underwent a rapid turnaround process. This painful experience not only aimed to cut costs and

locations, but also to build a modernized company. Thanks to the cheerful contributions of Creative

Director Tom Ford, it also built a renewed brand. Within a five year period, De Sole together with Tom

Ford as stylist, Renato Ricci as head of human resources, Bob Singer as chief financial officer and James

McArthur as director of strategy and acquisitions managed to increase company sales almost four

times (table 2). The turnaround gave Gucci a leading world-wide position, allowing the company to

return to positive earnings and then to finance a strong acquisitions campaign and moved towards the

present multi-brand configuration. The major acquisition was Sanofi Beaut. This company owned YSL

licences and comprised two major divisions: YSL Couture for Yves Saint Laurent ready-to-wear and YSL

Beaut for cosmetics and fragrances. The traditional Gucci fashion and accessories division accountedfor the largest part (54%) of group revenues, and of the margins (240%). However, the newly acquired

brands allowed the group to nearly treble its sales in the 5 years from 1999 (1174m) to 2004 (2,544m).

Following acquisition of Gucci group by Pinault Printemps-Redoute (PPR) in May 2004, a new

management team led by CEO Robert Polet was set up. PPR started investing in Gucci in March 1999 in

order to help Gucci management to face up to a hostile takeover bid by LVMH, one of its strongest

competitors. On September 10th 2001, following a settlement with LVMH, PPR increased its interest in

the company to 53%2. In April 2004, following a strategic investment agreement with LVMH, PPR

offered to purchase all Gucci public shares. After the acquisition, PPR started de-listing Gucci shares

from the New York Stock Exchange and Euronext Amsterdam in July 2004. Gucci Group is now the pillar

of PPR Luxury Goods division. While very international in its presence, its management and itsownership, Gucci was still rooted in Florence, and in the craftsmanship strengths of the Tuscany region.

All of its traditional leather production (bags and accessories) was carried out in the Florence region by a

network of more than 600 small to medium sized firms. While the re-launch of Gucci Group was led by

Tom Ford and its successful commercial future depended heavily on the collections designed by the new

creative directors , part of Guccis success has also been due to its ability to deliver promises made at

fashion shows, respecting both strict delivery times and high quality standards. The need for an agile


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supply chain is crucial in the fashion business because a high variety of articles must be managed within

strict time constraints. Most fashion companies renew 60-80% of their range each season, so they must

develop several thousands of new articles each year. The selling period is quite short, and requires strict

compliance with the fashion show calendar - with no possibility of running late in developing a new

collection. After an introduction to key business processes in the fashion business, we focus especially

on the Gucci supply chain. In addition to a successful marketing effort in repositioning its brands and

collections, Gucci has been able to restructure its supply chain to achieve agility, while preserving its

traditional Craftsmanship.

Key business processes in the fashion business

Fashion activities are centered on seasons and collections. Traditionally, a company in the

Fashion business presents at least one collection in both of the classical seasons

(winter/autumn and spring/summer). Most fashion companies - while keeping the official

accounting and legal/fiscal reporting according to the fiscal year - focus management

accounting and control mainly on seasons. Seasons are the key reference point for evaluating

company competitiveness and profitability. Results each year are in effect the sum of the

contributions of the collections for each season. Each season a fashion company needs to re-

invent itself by renewing around 60-80% of its range. The manufacturing process cannot be

planned in advance in detail, as only a small proportion of production comprises classical

articles where sales history has been established. It is therefore risky to plan large lots of new

items in advance when sales of lines, colours and finishings can be very different from those

originally planned. Supply chain agility is important in order to avoid stock-outs on the one

hand, and mark-downs on the other. The season is planned and controlled by 3 key business

processes:

collection preparation: definition of the prototypes, production of pre-industrialised small

quantities (the samples) for use at fashion shows

sales campaign order management: collection of orders from the fashion shows,

agents,distributors and other sources.

production planning: formulation of the production plan based on pre-season sales plans

updated as the sales campaign unfolds.

Exhibit 3 shows key stages in collection preparation and production planning, and how they

interface with budgeting and control.


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1. Collection preparation

Collection preparation is a key activity for competitiveness both in terms of sales potential and

in terms of costs (it involves up to 5-7% of the total collection costs). Collection preparation

comprises two major phases with different outputs:

- prototypes: unique elements aimed to express the fashion/style of the new collection that

can be made either by an external or an internal design workshop;

- samples: small lot productions aimed to transfer the prototype ideas into a pre- industrialised

product in terms of bills of material and process cycle.

In the prototypes phase, the goal is to prepare new models for the target market. Creativity of

the stylist is the key input, but effectiveness of the process has become increasingly important -

as indicated by a growing use of dedicated CAD systems. These support the design phase while

automatically generating the bills of material. The CAD system can also define part of the

production cycle - the fabrics cutting phase. In the prototyping phase the goal is to achieve a

mixed yet balanced set of offerings for a new collection. The stylist has to look at fashion trends

and at the previous parallel season sales statistics in order to select prototypes that match the

market target. Moreover the stylist and the product manager have to manage all the elements

that determine the standard cost. For example, they have to balance cost of leather, fabrics and

accessories with the cost of manufacturing cycle. Where necessary, these costs can be tuned by

transferring production to subcontractors in a region with lower costs, or by substituting

specified materials with lower priced ones. After an analysis at the level of the single item, the

whole collection is revised in order to establish a balanced offer for the sales campaign interms of target prices, standard costs and gross margins - with the goal of achieving the overall

season budget. In the samples phase, the goal is to obtain a small production lot of

industrialized products. This helps to develop the new collection to be presented to potential

customers, and to define the industrial process for large-scale production. Management of the

collection sample orders covers - in a very short time and in very small quantities - the whole

business process from bill of materials definition to production order launch to physical

distribution to showrooms and agents. Sample orders are critical because they are made of

small orders with a large number of parts to be delivered in a very short time - in spite of their

new bill of materials. The bill of materials and the process cycle of the samples are normallydifferent from normal production, because during this phase the emphasis is on shortening the

throughput time rather than on reducing costs 4. Moreover, preliminary bills of material and

process cycles are fine-tuned for reliable production based on samples production, with the

support of suppliers and subcontractors.


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2. Sales Campaign Order Management

Collections presentation at the fashion shows represents completion of the collection

preparation phase, and start of the sales campaign. Between the two phases, there is often a

two-week overlap where - based on the preliminary collection editing and review product

managers decide modifications to collections and cancellations. The sales campaign normally

lasts from 4 to 6 weeks, and involves orders acquisition from the various distributors and Gucci-

owned shops and from boutiques via agents. Each collection is brought to the sales campaign

having been assessed in terms of its potential and accompanying sales target. Incoming orders

during the sales campaign create a rolling sales target revision. These ongoing adjustments in

turn impact on production planning. The order portfolio is developed during the sale campaign,

and after the sales campaign has finished, it is frozen in order to specify the overall production

plan, process capacity and materials availability. Because of the short delivery window, many

articles cannot be further replenished after closure of the sales campaign, because additional

materials cannot be procured within the time available.

3. Production planning

Production planning starts with overall goals from the season budget based on characteristics

of the collection presented and historical sales trends. Such an overall budget determines

initial purchases of inputs (i.e. yarns for the textile manufacturers and fabrics for the clothing

companies). Initial purchases are made al buio (in the dark), as they are based on Gucci

forecasts with no market input. These purchases can reach up to 30-40% of the overall planned

requirements, and mainly address items and colours that are very likely to be ordered andproduced. For the most extravagant items and colours, purchasing normally takes place only

after order receipt. Once the sales campaign has started and customer orders are coming in,

Gucci makes a weekly updated projection of the campaign result (the so called projected

results). New purchasing orders are issued, and old ones are modified or cancelled. At the end

of a sales campaign, Gucci has a complete view of the order portfolio. This is, however, subject

to cancellations and modifications from customers. The orders portfolio is the basis for the final

purchase orders to material suppliers and subcontractors. As materials are received (such as

yarns for textile companies and fabrics for clothing companies), Gucci launches production

orders. These can be either for an internal department or - more frequently - for externalsubcontractors. All purchasing and production phases in the fashion chain need to be managed

in an agile way because they are as fragmented and changing as the unfolding season itself.

Production planning therefore needs to take into account:

launch of production orders through a long production cycle that is distributed across many

suppliers (for example, 3-4 months for fabrics and 1-2 months for leather)


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optimisation of work phases by grouping production batches of different items wherever joint

processing can be done

flexible rescheduling of work assignments due to cancellations, modifications and new

commercial priorities.

Because of these challenges, textile and fashion companies do not generally use an integrated

program such as MRP for planning purchasing and production. Instead, they prefer to have

programs dedicated to each phase, including manual interventions at different steps of the

process. Examples of such manual interventions are purchase orders at the beginning of each

season, and decisions on priorities for launching production lots. Flexibility of the non-

integrated planning programme, which allows suppliers to respond quickly to market requests,

limits their capability to control the whole process. This makes calculations of order delivery

dates more uncertain. Fashion companies have different production planning approaches

based on their Customer Order Decoupling Point (CODP, exhibit 4). This represents the pointwhere production is no longer generic, but becomes dedicated to a specific customer order. In

a Make to Order (MTO) regime, the CODP is positioned before the beginning of the first

transformation process. In Make to Stock (MTS), the CODP is located after the end of the last

transformation process. In form postponement (FPp), the CODP is at the semi-finished product

stage. Here, the product is in generic form to ensure that final manufacturing is performed to

specific customer order. Most companies work with a system that is a hybrid between FPp and

MTO. This means that enterprise software needs to be able of supporting alternative CODP

configurations. FPp is used for final assembly of products that are only completed after

customer order confirmation, including special processing like the customer tag or particularpackaging. Production up to the CODP is carried out as if for stock (based on the total volumes)

and differentiated only in the final phases. Such an approach is used mainly for classic items,

especially when fabrics or knitted items can be colourised after the CODP.

MTO is the most popular regime for fashion items because as it is possible to follow customer

requirements and trends, thereby limiting the risk of building up stocks that may not sell. This

may be specially important if a new model is very innovative. Even in this case, however, part of

the purchasing commitment to suppliers is made on the basis of forecasts. This is because the

supply lead time for both yarns and fabrics (P time) would be much longer than the required

customer order lead time (D time). If production is de layed until customer orders are received,

allocation to specific orders can be changed if a quality problem has taken place or commercial

priorities have changed. Few fashion companies use MTS, because it requires production of

finished items for the warehouse without a link to customers orders. While MTS regimes are

feasible for classic, long lifecycle items, they are too risky for most fashion items because

unsold stock at the end of season has to be discounted.


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The order portfolio is frozen at the end of a sales campaign, and an overall production plan

defined by considering process capacity and material availability. Normally the processing

capacity is not a problem as the company can look for additional subcontractors if necessary.

However, material availability within the requested timing can be a problem. This rough cut

plan enables a fashion company to approve production so that it is possible to concentrate on

execution without distractions from changes in the order portfolio. Inevitably, there will be

day-to-day requests for cancellations and additional orders throughout the season.

A further element of complexity is caused by the need to carry out planning and execution for 3

seasons at the same time. For instance in February 2004, operations managers have to:

Work with the design and product development for the preparation of the Spring/Summer

2005 collection;

Work with the marketing and commercial on closing the sales campaign for theAutumn/Winter 2004 collection;

Work with suppliers and distributors for completion of production and shipments of the

Spring/Summer 2004 collection.

This often creates difficult trade-offs in resource allocation between urgent tasks (deliveries for

the current season) and future tasks (support for the new collections).

Guccis agile supply chain

Pressures that characterise the fashion business are accentuated in a leading company such as

Gucci. Product churning creates particularly difficult challenges. While the average competitor

carries over 30% of product lines from one season to the next, Gucci carries over just 10%. In

other words, 90% of Gucci products are new each season. Moreover, Gucci presents specific

collections to the market on given events. There are roughly thirty events per year for the

Group as a whole, including Cruise 5 , and Mens and Womens fashion shows. Gucci presents

targeted creations at each of these events. The company develops 18,000 prototypes/year

(including single pieces for public relations purposes), and manages some 4,000 different stock

keeping units (skus, which allow distinctions to be made between product ranges, materials

and colours). Managing such a wide product portfolio with short product lifecycles to tight

collection deadlines is the core operations capability at Gucci. The importance of this capability

is recognised by assigning the operations task, excluding worldwide distribution, to a dedicated

company - Gucci Logistica. Gucci Logistica employs 320 people and is structured around five

major areas: materials research & development, operations, technical management, production

and costing6 (exhibit 5).


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Materials R&D: is a department of 30 people - much larger than the industry norm - dedicated

to the development of new materials and production processes. The department has achieved

important results in water jet leather cutting, nest optimisation, and specially treated crocodile

and buffalo leathers. It is also involved in looking at long term fashion trends to identify future

materials and to experiment in collaboration with qualified raw material suppliers.

Technical management: is responsible for technical definition of the product. It supports

designers from early phases of collection preparation (from initial samples to prototypes and

models), and is closely involved in events coordination. On the basis of feedback from stylists

and the market, it engineers the collection models and defines the rules for quality assurance of

finished products .

Operations: is responsible for raw materials purchasing (including hardware like buckles and

buttons), managing suppliers, definition of time and methods for production and internal raw

materials cutting.

Production department: is responsible for order fulfilment through planning and controlling

production. While most production activities are outsourced, production department plays a

key role in monitoring workflow progress across the supply chain. The department is

responsible for order handling, procurement. (on the basis of the confirmed orders),production

planning and production follow-up.

Costing: develops costs for a collection, based on planned material usage from the bill of

materials and labour methods Exhibit 6 summarises the main activities, dates and

responsibilities for launching a new collection. Agility in the supply chain begins at the start preparing the prototypes. Technical management is involved from the stylists drawing.

Prototypes must be supplied within two weeks from receipt of design. These prototypes are

considered both in terms of style and of manufacturing methods and costing. On this basis a

limited number of samples is prepared within a week. At the fashion show the company

presents the sample items, having defined a cost price list. Once the new collection has been

presented, there is usually a week for fine tuning the actual items that will be presented for the

sales campaign. During this period, some items are cancelled and others modified, cost

adjustments are made and the definitive price list prepared. There is then a two-week sales

campaign, where both internal and external purchasers meet to decide their orders. At the endof the sales campaign, orders are collected and consolidated. If an item fails to collect a

minimum number of orders, it can be removed from the collection. Some purchase orders will

already have been made by Gucci on its supplier network. These orders are based on

preliminary bulk orders from Gucci internal merchandising.


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However it is only after the sales campaign has been closed - and the order portfolio frozen -

that the detailed production plan is defined. Depending on timing of the order and on the

destination, a delivery window is fixed for each collection. Customer orders are aggregated into

production orders, and operations has to honour the agreed delivery windows by allocating

materials and manpower to the different production orders (exhibit 7). Production activities controlled and coordinated by Gucci Logistica - are carried out by a broad and flexible supply

network both for materials/components production (from leather tanning to metallic

accessories) and for end products preparation and assembly10. All end- product suppliers of

leather bags and accessories that represent the majority of Gucci division turnover are based in

the Florence region. The supply network comprises more than 600 firms with an overall

employment of roughly 4,000 people.

The Gucci supply network is based on two tiers, with 70 first tier suppliers and roughly 500-600

second tier companies. There are three categories of first tier supplier:

Partners: selected suppliers that work 100% for Gucci with a 3-year contract. Gucci has a

commitment for minimum annual turnover and volume levels. Partners are often supported

financially for investments in machinery and product development, but Gucci does not acquire

shares in any of them. There are 7 major partners that are fully involved in Gucci operations,

starting from modelling (modelleria) for sample preparation.

Integrated suppliers: suppliers who work for Gucci 70-100% of their sales turnover, who have

no exclusivity agreement, and who have a contract horizon of 24 months. These suppliers are

involved on the basis of target production volumes, with actual orders periodically revised on

the basis of sales campaign results 11.

Others: suppliers that work on 6-12 months assignments in order to provide the required

supply chain flexibility. Gucci maintains a list of suppliers who are pre-qualified to the necessary

level of product complexity and competencies. Such suppliers can support a peak of demand

for a given product line/model in a very short time. All relationships between Gucci and first tier

suppliers are governed by formal contracts even if relationships between parties have to

comply with the pressures of fashion seasons and the need for informal co-operation. Gucci

meets partners and integrated suppliers at least twice a year in order to explain targets for the

next season, and to explain the wider context in terms of models and volumes.

Gucci has full visibility of second tier suppliers: each sub-supplier has to be evaluated and

approved by Gucci for both QA and security reasons 12 . However, daily management of second

tier suppliers is the responsibility of first tier suppliers. Gucci doesnt track order progress, nor

does it carry out regular QA of second tier suppliers. Sub-suppliers performance is already


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included in the duties of first tier companies. On average, each first tier supplier has 8 to 10

sub- suppliers and their relationship is long-term. Gucci always buys materials, and sends it to

suppliers for processing while maintaining ownership (conto lavorazione). The process is

optimised by Gucci time and methods engineers, who provide suppliers with precise bills of

material and process specifications. Such a strong emphasis on operational issues is importantconsidering the craftsmanship characteristics of the network: sub-suppliers are often family

businesses that are manned by the owners relatives.

Gucci also employs inspectors who in addition to regular QA visits support suppliers when a

new product is launched and who supervise early deliveries13. While such a decentralized

network allows Gucci a high level of flexibility, it requires significant coordination efforts.

Production planning involves allocation of production activities to the supply network that must

allow for capacity constraints and minimum contractual assignments, together with individual

competencies and costs.

Management of the supply chain is centred on a MRP system that is launched every two weeks.

Gucci planning carries out a pre-production simulation so that planners can check availability of

components and processing times at suppliers, and then define production quantities. Loading

at suppliers can subsequently be changed by up to 15%. By mid 2003, Gucci developed an

inter- organisational system that links it to its ten top suppliers. A more extensive inter-

organisational information system (Cross Information System) will allow full visibility over

progress of each production order and is scheduled to be installed by early 2006. Supply chain

responsiveness is closely monitored in terms of the ramp-up speed in supplying distributors and

shops with the new collection items. Deliveries to worldwide points of sale across the seasonare monitored by Gucci management not only in terms of schedule completion at the end of

the season, but also in terms of monthly progress. Early availability of products in the shops

means increased chances of selling the goods. Last year Gucci thanks to tighter management

of the supply

chain succeeded in improving product availability while increasing sales volumes. Product

availability at the end of the season increased by 7-10% on average, with a remarkable increase

to an average 40-50% in first month availability (exhibit 8). Agility in the inbound supply chain

allows for both accuracy and speed in the distribution process. As soon as they are ready at

supplier warehouses, parts are transferred to the consolidation centre in Florence the same or

the following day. Deliveries are consolidated and then sent to the global distribution

warehouse in Bioggio in Switzerland15 . Within a week from completion of the production

process, goods arrive at locations around the world. In the event that production quantities

originally scheduled are not met, or that sales increase in an unforecasted way, a

merchandising team decides how to allocate the quantities available between retail stores.


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Prior to this, Gucci Logistica teams are encouraged to find a way of satisfying market demand.

An example of the pressures that arise happened in the spring of2003 with the success of the

chain bag line.Managing a shortage in chain bags The chain bag line has been a success story

in the Gucci leather goods range. Chain accessories used for the chiusura (the bag fastner),

together with the GG logo, have made them a sales hit (exhibit 9)

. According to the different collections, the chain bag family can comprise 15 to 20 basic

models. But each basic model can be offered in different shapes (such as top handle, mini bag,

evening, hobo), different materials (for example leather, python, silk, velvet and shammy), and

different colours (such as black, beige, flame red, palm green and African violet). In the 2005

collection, the chain bag family was made of 17 basic models, with 166 variants in total In

September 2005 Vivencio Fernandez de Aragon (Gucci Logistica general manager) and Karl

Hofer (Gucci Production Manager) had to come to terms with the strong commercial success ofthe new line. The final forecast - based on actual sales - was almost twice the original.

Continuing hot sales meant that market demand was still higher than the additional re-order.

To avoid missing such an opportunity, Vivencio and Karl had to react quickly in order to produce

and distribute more product. To proceed effectively they had to look at the sales trend and the

stock levels of each SKU, taking into the account the following data:

Sell-out: actual sales in the shops since the beginning of the season campaign;

In DOS and warehouse: stock immediately available for sale, either in the stores or in

warehouses nearby;

In transit: quantities that within 5 days will become stock available in the shops;

On order: quantities that will be delivered to the DOS/warehouses within 45 days. The data for

four of the ten models in the chain bag line are analysed in exhibit 1118.Considering that

logistics and production lead times are on average 10 days and 55 daysrespectively, and

thatthere are 130 days left of the sales campaign (50 days of the 180 dayshave already passed),

Vivencio and Karl have to decide the re-order strategy for the current season19.

They issued a production order 20 days ago, as shown in the exhibit. Now that they have

received all the requested materials from the leather suppliers, they are going to send them to

the production suppliers. In doing so, they could modify the model mix partially with respect to

their original order. While modifying the model mix, they have to consider:

- That they have to maintain the total volumes of the different types of leather, as these

quantities are already in house


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- That they have a constraint on the accessories/finishing and that they cannot increase the

original on order quantities by more than 15%. Moreover - in order to avoid a high stock of

accessories and finishing - the company has a rule not to go beyond a 15% change in order

quantities.

In order to simplify the calculation of different model mixes, we assume that:

- all these bags have roughly the same shape and that the quantity of leather required by each

model is roughly the same;

- all these bags have roughly the same retail value and therefore there are no priorities in

regular replenishment of any model 20. Moreover Vivencio and Karl have to decide whether to

issue the new order for additional production immediately, or whether to postpone such a

decision for 5, 10 or 20 days to obtain better visibility on the market trend and actual sales.

They know that it takes 65 days in total before the new ordered items will be available in the

shops and that because of the supply contracts they will have only one re-order opportunity

(this one, either today or delayed in the future). They are also considering that 20 days after

their new order, they will be able to modify the model mix with the same constraints they are

facing today on the on order items.

Vivencio and Karl will have to start thinking about how to proceed with the new season which

partially overlaps this one - in terms of initial quantities and optimum stock levels. They face

two scenarios in regard to the next season:

The chain bag will be a lasting success with the same or even higher sales;

The chain bag will behave according to the more usual short life cycle that characterises the

fashion business. After a rapid start-up phase, sales will stabilise in the second half of the

season and start declining in the next, as new models prove to be more popular. In order to

proceed with their decision, they start from marketing department forecasts. They must also

consult with marketing on issues such as feedback on product assortment strategy and the

possibility of recovering stock-outs.

With these data on the table, Vivencio and Karl will decide this afternoon the re-orders they are

going to request for the different items, and will also start to consider the next seasons

collection. They are only too familiar with how difficult it is to forecast in the fashion business -

and conversely, how agility across the whole supply chain is key to their plans.


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Introduction to Van Heusen

Van Heusen is the worlds largest selling dress shirt and premium business wear brand. It was

introduced in India in 1990 by Madura Garments and since then it has been Indias fastest

growing lifestyle and apparel brand. It is positioned as a corporate formal brand and targets theIndian corporate executives. Van Heusen is known to incorporate the latest and most

contemporary international style in its range of products Collection in VH includes formal Ts

collection, the Innovative strike collection and the latest mettle collection. Range of products in

VH includes shirts, trousers, outwear, knitwear apart from an extensive range of accessories like

innerwear, neckties, belts, bags, shoes and cufflinks. VH is priced one shade lower than Van

Heusen as it targets middle to senior level executives. Currently VH is Rs.225 cr. Brand and sells

1.5 million garments a year.

It caters to the premium executive wear segment. Van Heusen garments are balanced and

sophisticated with a high quality finish. It caters to the premium segment in formal corporate

wear and is foremost in launching new and innovative collections. Van Heusen has a collection

of intelligent shirts (Oxyrich collections). Van Heusen is now coming up with an Innerwear

range in India.

Sub-brands of Van Heusen

Van Heusen has the following sub-brands:

Van Heusen Man Van Heusen Woman V Dot


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Product development stages:

Design is only one part of product development. Designers or Merchandisers have an idea for aproduct that they think others will buy. When they transform this idea into a product, they have

designed the product. So, for an apparel product, design means that they have chosen the

materials, the styling characteristics, and the means of putting it together.

Understanding the customer needs

Idea generation or design

Product concept: adding value to theproduct

prototype development

Optimizing product design for production

Commercialization

Product maintenance andExtension


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It often takes more than one try to make the product exactly like the idea they had in their mind.

These trials are called prototypes. After each trial, they test the prototype and maybe even ask

others to try it. All these steps make up the design process. (The design process is covered in

more detail later in this module.)

Product development is much more than the design of a product. Product development is a

process of continuous idea generation designing multiple prototypes to represent multiple

ideas developing a product concept that is valuable to the customer and helps to identify

competitors commercializing the product by preparing and costing it for volume

production and sales to many customers.

The product development process also encompasses the business part of design. It makes design

a commercial enterprise, setting the design process and product design evaluation within a

business context. It asks questions such as:

Is the design compatible with the other products in my business?

What products in the market does it compete with?

How many people might consider buying it (or, how large is its target market)?

Should the product design be adjusted for volume production? If so, how?

How can the product be improved after introduction to add value or to sell cheaper?

How long will people buy the product? What is its potential life span?

The product development strategy at every stage should reflect the company's business plan and

core mission. For example,

If the plan positions the business as the low cost producer of screen printed T-shirts, then

the product development process should focus on low cost design and production.

If the business plan is to be the technology leader in outerwear, then technical fibers,fabrics, and clothing structures should be the main product development consideration.

If customer service is the business plan's competitive edge, then the product should

inspire loyalty between customer and designer.


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TIME AND ACTION PLAN

Time and action calendar defines the ideal time /date/ period within which the major activities ofan assignment should occur against a scheduled delivery window/deadline.- It is basically a

planning process for any activity to be performed, it is a management tool which is being used


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for allocating time and following the same for the whole activity. It needs to be interactive so

that in case there is a change in the time frame of any particular activity it. can be revised as perthe new schedule. Working within a time and action is important as it ensures that the

production/shipping takes place within the time constraints and with out undue airfreight of piece

goods or merchandise. It provides the buyer direction to the progress of workflow in order to

provide proper co ordination between the buyer and the various-departments in the organization.

The time and action of any purchase order is determined by the following factors:

Fabric processing lead times (weaving, dyeing and printing).

1. Fabric approval time (lab dips, strike-off, desk looms etc.)

2. Garment spec approval (proto sample, salesman sample, size set, pre- production, bulkproduction and shipment sample)

3. Trims and accessories sourcing , approval (interlining, sewing/embroidery thread, fusing)

4. Transit time of raw materials

5. Production lead time

6. Transit time of finished goods to port of exit.Based on above factors, to make the concept of time and action calendar clearer, given below is

an example of a particular P.O.


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TIME AND ACTION PLAN

Purchase order received for 20,000 pieces of men's short sleeve, knit T-shirt in five sizes.

OPERATIONS /DATE WISE PLANNED DATE ACTUAL DATA

Lab dip submission

Lab dip approval

Knit down submit

Knit down approval (new York)

29th January 2003

1st-feb

3rd-feb

5th-feb

2nd-feb

4th-feb

5th-feb

ORDER CONFIRMATION DATE 15-feb 12-feb

P 0 date (45-60 days before shipment)

Order trims

Expected trims in-house date (diff. For diff. Trims)

Trims approval date

Bulk yarn order

k /d in actual color submit (15 days after yarn

order)

Approval for the above (N Y or local )

Fabric test submission

Approval for the above ( I T S test labs)

Garment test submission

Approval for the above (I T S)

Size set submission

Approval for the above

20th-feb

20th-feb onwards

5th-march

7th-mar

12-15-feb

1-Mar

7th-mar

2-Mar

7th-mar

8th-mar

13-Mar

15th-mar

17-Mar

22-Feb

22nd-feb

5th-march

7th-mar

7th-feb

25th-feb

1-Mar

26th-feb

1st-mar

28-Feb

3rd-mar

not required

not required


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Pre pro. Submission

Approval for the above

Yarn dispatch start date

Yarn dispatch close date

Fabric knitting start date

Fabric knitting close date

Fabric dispatch start date

Fabric dispatch close date

Cut-trigger date-approved for cutting

Cutting start date

Cutting close date

Sewing start date

Sewing close date

15th-mar

20th-mar

5-Mar

20-Mar

8-Mar

28th-mar

15th-mar

3rd-april

18th-mar

19th-mar

30th-mar

20th-mar

3rd-april

8th-mar

13-Mar

10-Mar

25-Mar

13-Mar

28-Mar

20th-mar

3rd-april

29th-mar

30th-mar

10th-april

31st-mar

15th-april

EX-factory date

EX-country date

9th-april

15th-april

16th-april

27th-april


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EXPLANATION OF TIME AND ACTION PLAN

The parameters defined by the export house to source fabric: - Fabric content, Weight, Count,

Price, Width, Construction Other Factors: - Flammability, ph values, Bursting strength, seam

strength, Dimensional stability, Colour fastness, Pigment appearance, Scam durability. Fabric

Quality approval has to be taken into consideration like Weight, Count, Content, Feel

The fabric swatch is submitted to the buyer for approval. Once the approvals are completed, final

order for fabric is placed. Wherever the fabrics have to be sourced from nominated sources, the

fabrics are ordered without going through approval Process as buyer approves the same directly

with the supplier.

1. The procedures for fabric approvalFirst is the desk loom approval in which the fabrics count& and construction is checked and then

comes the lab dips which the colourfastness, dimensional stability and weight per' meter square

are done in-house. Then these report i.e. desk loom approval and the Lab dip are submitted to thebuyer on a proper format for approval. Buyers do have their own standard laboratories from

which certification are essential. All submits are pre-screened it the local office prior to dispatch

to the head office for final check Once all the desk looms/ strike off/ lab dip is approved, the

fabric order is placed for the approve colours/patterns.

Fabric testing report:

Desk looms sent for approvals are tested normally for the below given parameters:

Name of the supplier.

SampleDescription.

Tests

Color fastness to Rubbing, Dry, Wet

Color fastness to washing at -Change in shade

Count & Constructions:

Warp/inch, Weft/inch

Weight per Meter Square:, Afterwash. 'Before wash

Dimensional stability: Warp, Weft, PH' value.

Lab test is done on the rating scale and there is the minimum specification attached to it and it

should in between that limits and has to be signed by the lab in charge. The Merchandiser shouldconfirm with the buyer the light option, which has to be used for the lab dip.

2. Procedures for trim approval:Trims are the accessories embellishments used in the making of a garment excluding the main

body fabric. The trim sample is submitted to the buyer for approval. Once the approvals are


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completed, final order for trims is placed. Wherever the trims have to be sourced from nominated

sourced, the trims are ordered without going through approval process.

Size set sample

Sales man sample

Pre production sample

Production sample

Proto sample

Desk loom

Under ideal conditions the lead-time in a sampling department are:

Stage 1:

1. After order confirmation the first sample sent to the buyer is proto sample, which is sent

approval of fit and style. Then the buyer sends the approval with comments. The general lead-

time in proto sample is 6-7 days in making the sample including the patter stage to the stitching

of the sample. It takes 3 days to reach the buyer So in total it takes 11- 12 day making andgetting the approval of the proto sample.

2 In the meantime the fabric department is said to source the fabric for its approval. The fabric

department demands for the desk loom from its vendor base asking for a test approval with the

testing can be done at the export house itself or the buyer has approved some of the testing and

then the report is sent to the buyer for its approval.

The general lead-time in getting the desk loom in house is around 7 days & then there is testing

done and it takes around 3 days, then the report is sent to buyer for its approval.

Stage2:

After the proto sample approval and the desk loom approval, the buyer demands for the size setsample. For size set sample the export house needs the yardage sample. Yardage sample is

sourced from fabric supplier and then different size set samples are made and sent to the buyer

for its approval. The general lead-time taken in getting the yardage sample in house is around 15-

16days. The time taken in making the sample is around 3-4 days so the total time taken in this

stage is

around 18-20 days.

Stage 3:

After the confirmation of size set sample comes the pre-production sample and it is made during

the batch setting It is an ideal case but in most of the case the sampling department makes the pre

Production sample and sends it for buyer approval. The general lead-time for the production of

preproduction sample is 1-2 day.


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Details of the sample

Lot No. Buyer. Style description. Style reference number. Sketch page and details. Pattern made by and there position Fabrics used (original/substitute). Accessories used (actual/partial/substitute). Nature of sample made. Samples made by referring (sketch /original sample) Samples to be cut (combo no, size and no of samples to be cut) Marker request form The details, which are there on the marker request forms are: Garment description. Fabric description. Initial fabric report Trims status Report: sampling to PPC Sampling report Layout report Another document that is too important;.s thefinal inspection certification of the

packaged good without which AEPC endorsement can't be obtained. For the preparation

ofinvoice all the relevant details hence reached the shipping department, this has to be

ensured.

After this all the processes from the endorsement till the payment is to be followed up by the

shipping. But the merchandiser needs to communicate any message from the buyer as soon

as possible so that no glitches are there.

Documents involved in the process routed through the merchandiser:

Packing list:

For one Purchase Order only one packing list needs to be maintained. It must include

Quantity shipped, Shade, Size, Color, Dye lot. Packing list is to be secured inside a, colored

envelope attached to the 1st carton of the shipment when shipped through cartonsFor GOH it is attached with the first garment on the rack.

Second copy of packing list to be attached with the Bill of lading.


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Final inspection certification:

After the final packaging of goods, buyer's representative undertakes inspection only after

certification of which the goods can be endorsed for exports. A copy of the inspection

certification sheet has been attached.

Finishing and packaging

Eaches:

Prepack:

Case pack:

Pack SKU

Carton marking:

It is the merchandiser's duty to get proper carton and marking approvals and communicate the

same to purchase. But this is to be instructed to the packaging department with proper sketch.

Carton Containing

Marking Packing list, Packing list, Less than standard quantity, Pre-pack Cartons, Pre-pack,

Case-pack Cartons, Case-pack

Other very important things that the merchandiser must ensure are:

Each purchase order is being packed separately. No mixing of styles, colors, dye lots, shades or sizes within carton has been done unless

the purchase order specifies the garments to be pre packed.

Garments are generally packaged in two ways: Flat packed Garment on hanger (GOH) Prepacks and case-packs apply only to flat packed merchandise. No GOH product is to be prepacked or casepacked. All garments must be individually packaged in polybags. All prepacks require an outer polybag which should be of a minimum thickness of .004

mm.

Heat sealing is the preferred way of seating polybags. Otherwise tapes are to be used. Outer polybag's color must be transparent.

Shipping and documentationSome technical terms used in the process:

1. CommercialInvoice:Receipt for a transaction and or goods purchased (invoice) indicating the sender or seller and the

receiver or purchaser. A commercial invoice should contain an itemized list of the merchandise

with the complete description of goods with their unit value and extended total value. Depending


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on the Customs requirements of the destination country, there may be additional requirements,

statement or clauses that must appear as well.

3. Consular InvoiceA document required by some countrie describing a shipment of goods and showing information

such as the consignor, consignee, and value of the shipment. Certified by a consular official, a

consular invoice is used by the country's customs officials to verify the value, quantity, and

nature of the shipment

4. Packing ListA document prepared by a seller/shipper, which details exactly what, is in each package shipped

by commercial invoice line item.

4. Letter of credit:A document issued by a banker instruction by a buyer of goods authorizing the seller to draw a

specified sum of money under specified terms.

5. Bill of Lading (B/L)A document issued by a common carrier to a shipper that serves as:A receipt f6r the goods delivered to the carrier for shipment.

A definition of the contract of carriage of the goods.

A Document of Title to the goods described therein.

This document is generally not negotiable unless consigned "to order."

6. Certificate of OriginA document containing an affidavit toprove the origin of imported goods. It isused for customs

or foreign exchange purposes or both. Certificates of Origin are commonly certified by an

officialorganization in the country of origin suchas a consular office or a chamber ofcommerce.

7. Inspection CertificateA document certifying that merchandise was in good condition, or in accordance with certain

specifications immediately prior to shipment.

Transshipment: - The transfer of a shipment from one carrier to another in international trade,

most frequently from one ship to another.

The tools available with the merchandiser:

8. Shipping document request form:It includes:

Country of destination

Order quantityPcs. per carton

No. of cartons

Gross and net weight of the cartons.

Clearing and forwarding agents name

Buyer's name

Date of shipping the merchandise.


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During sending instructions for documents preparation the merchandiser must ensure ending

following information to avoid any hence of miscommunication:

1.Purchase Order Number

2. Gender of the wearer.

3. Fiber content in % by weight

4. Knit or woven

5. Type of fabric

6. Name of item.

7. Country of destination

8. Port of loading

9. Terms

10. Rate of the goods shipped

9. Fabric control statement:Attached sheet ofthe fabric control statement shows how the merchandiser follows up with the

shipping department about the fabric status for a given lot. This is information to the shipping

dep -artment about the number of excess pieces being sent to the buyer. Attached is the exhibit It

includes info about the fabric requirement; fabric received from the supplier, issued to the

factory, balance shortage of the fabric. It also documents the reasons for shortage of the fabric, if

any.

10.Consumption comparison chart:This is a follow up on the order that what was the planned consumption and the actual

consumption is compared to calculate the excess or shortage of the fabric. It includes the follow

up on purchase consumption ( consumption calculate d at the of purchase including the wastage),

actual consumption as per the pieces cut and also the consumption as per the pcs shipped. 3% of

wastage at the cut stage and 2% after the shipping is under accepted limits.

VENDOR COMPLIANCE

Guidelines for Vendors

While respecting cultural differences and economic variances that reflect the particular countries

where we and our vendors do business, our goal is to create, and encourage the creation of,model facilities that not only provide good jobs at fair wages, but which also improve conditions

in the community at large. Therefore, we actively seek business associations with those who

share our concerns.


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Legal Requirements:

We expect our vendors to be law-abiding citizens and to comply with any and all legal

requirements relevant to the conduct of their business. We will seek vendors who respect the

legal and moral rights of their employees.

Nondiscrimination:

We will not do business with any vendor who discriminates in employment, including hiring,

salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race,

religion, age, disability, sexual orientation, nationality or, social or ethnic origin.

Child Labor:

Employees of our vendors must be over the applicable minimum legal age requirement or be at

least 14 years old or older than the age for completing compulsory education in the country of

manufacture, whichever is greater. Vendors must observe all legal requirements for work of

authorized minors, particularly those pertaining to hours of work, wages, minimum education

and working conditions. We encourage vendors to support night classes and work-study

programs, especially for younger workers.

Forced Labor:

We will not be associated with any vendor who uses form of mental or physical coercion. We

will not do business with any vendor who utilizes forced labor whether in the form of prison

labor, indentured labor, bonded labor or otherwise.

Harassment and Abuse:


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Vendors must treat employees with respect and dignity. No employees shall be subject to any

physical, sexual, psychological or verbal harassment and/or abuse.

Health and Safety:

Employers shall provide a safe and healthy work environment to prevent accident and injury to

health. Vendors should make a responsible contribution to the health care needs of their

employees.

Wages and Benefits:

We will only do business with vendors who pay employees, as a floor, at least the minimum

wage required by local law or the prevailing industry wage - when available, whichever is

higher, and who provide all legally mandated benefits. Employees shall be compensated for

overtime hours at the rate established by law in the country of manufacture or, in those countries

where such laws do not exist, at a rate at least equal to their regular hourly compensation rate.

Hours of Work:

While permitting flexibility in scheduling, we will only do business with vendors who do not

exceed prevailing local work hours and who appropriately compensate overtime. No employee

should be scheduled for more than sixty hours of work per week and we will favor vendors who

utilize workweeks of less than sixty hours. Employees should be allowed at least one day off per

seven-day week.

Freedom of Association:

Employees should be free to join organizations of their own choice. Vendors shall recognize and

respect the right of employees to freedom of association and collective bargaining. Employees


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should not be subjected to intimidation or harassment in the exercise of their right to join or to

refrain from joining any organization.

Environmental Requirements:

We are committed to the environment and will favor vendors who share this commitment. We

require our vendors to meet all applicable environmental laws in their countries and to nurture a

better environment at their facilities and in the communities in which they operate. Commitment

to CommunitiesWe will favor vendors who share our commitment to contribute to thebetterment of the communities in which they operate.PVH has been committed to theenforcement of these standards and has an on-going approval and monitoring system. Our goal is

to engage our suppliers, contractors and business partners in the implementation of these

standards.

BIBLIOGRAPHY: