Supply Chain Management at World Co. Ltd. Ananth Raman & Marshall Fisher

Discussion Questions Examine the features of fashion apparel retailing in Japan. How can a company use its supply chain to compete in this environment? Identify salient aspects of World’s supply chain, focusing on the processes for manufacturing , demand forecasting and inventory planning. How do the features of the supply chain explain the company’s remarkably short lead times (relative to say, Indian/US apparel supply chains)? Examine the features of the supply chain and identify why the company is able to respond so effectively. Can the World’s supply chain process be replicated at other apparel companies? What about non-apparel supply chains? Identify potential barriers.

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

Identify salient aspects of World’s supply chain, focusing on the processes for manufacturing , demand forecasting and inventory planning.

How do the features of the supply chain explain the company’s remarkably short lead times (relative to say, Indian/US apparel supply chains)? Examine the features of the supply chain and identify why the company is able to respond so effectively.

Can the World’s supply chain process be replicated at other apparel companies? What about non-apparel supply chains? Identify potential barriers.

Co. Profile Fashion Retailer Responds quickly to mkt signals Gross Margins high Inventory Turns high ROE/ ROA low Due to: Japanese economy Too many brands (fragmentation)

Fashion Retailer

Responds quickly to mkt signals

Gross Margins high

Inventory Turns high

ROE/ ROA low

Due to:

Japanese economy

Too many brands (fragmentation)

Supply Chain Processes at World Forecasting Planning Manufacturing Manufacturing Domestic mfg: Short leadtime Fast transportation Close collaboration of design & mfg 2-3 wk replacement Flexibility of factories: Small batch prodn Inventory & Production Planning Make 50% of forecast Balance 50% reserve: capacity & raw material Forecasting Systematic Disciplined ABCD Rule

Manufacturing

Domestic mfg:

Short leadtime

Fast transportation

Close collaboration of design & mfg

2-3 wk replacement

Flexibility of factories:

Small batch prodn

Inventory & Production

Planning

Make 50% of forecast

Balance 50% reserve:

capacity & raw material

Forecasting

Systematic

Disciplined

ABCD Rule

World Co - Planning Identifies drivers of different factors Improves past forecasts thru’ PDCA cycle Manages fashion using the Accurate Response Method. ------------------------------------------------------------------------- Organization : Empowered Brand Teams

Identifies drivers of different factors

Improves past forecasts thru’ PDCA cycle

Manages fashion using the Accurate Response Method.

-------------------------------------------------------------------------

Organization : Empowered Brand Teams

AGGREGATE DEMAND FORECAST (Higher of the two) Category Side Distribution Side Yen <<<>>> Nos Sales Growth Rates Seasonality Competition PESTE Brandwise Chainwise Storewise Heavy/ medium/ light Knit/ woven Fabric Category Sweaters 30 %

Sales

Growth Rates

Seasonality

Competition

PESTE

Brandwise

Chainwise

Heavy/ medium/ light

Knit/ woven

Fabric

SKU Breakdown (Obermeyer Method) A 10 % B 20 % C 20 % D 50 % 40 % Sales 30 % Sales 20 % Sales 10 % Sales

Some Key Indices (How does one explain superior operations with poor returns?) 50 2.5 ROE % 11 32 Markdowns (% of Sales) 6.3 2.6 Inventory Turns 42 34 Gross Margin % World Co. Ltd US Dept. Store Avg

High Inventory Turns Fewer sizes Reduced display inventory Low ROE/ ROA High SGA expenses Smaller stores >> high labour costs Collection of many small brands, each having own overhead- much duplication

High Inventory Turns

Fewer sizes

Reduced display inventory

Low ROE/ ROA

High SGA expenses

Smaller stores >> high labour costs

Collection of many small brands, each having own overhead- much duplication

World Co. +ve Short response times Anticipating uncertainty Stock R. M & trims. Expects supplier to hold some stock If R. M. out of stock, quick redesign Read data/respond quickly Supplier holds capacity & expects to react v e High SGA expenses Fragmentation of brands Co.’s processes manual

+ve

Short response times

Anticipating uncertainty

Stock R. M & trims. Expects supplier to hold some stock

If R. M. out of stock, quick redesign

Read data/respond quickly

Supplier holds capacity & expects to react

v e

High SGA expenses

Fragmentation of brands

Co.’s processes manual

Supply Chain Dependencies SUPPLY CHAIN PLANNING INFO SYSTEMS PRODn PROCESSES EMPOWERMENT

World’s Approach World did not have superior production technology. It simply made the right commitments at different points in time and postponed decisions until they had to be made.

World did not have superior production technology. It simply made the right commitments at different points in time and postponed decisions until they had to be made.