2. Process
Agents meets retailers for
presentation and takes order
Order once received to Pepe
Jeans, retailer has 1 week to
cancel the order
Jeans are manufactured by
team who works closely with
Hong Kong team
Order is taken & confirmed are
sent to Hong Kong where
sourcing agent arranges
delivery
Snapshot of
Case
• Pepe Jeans started selling jeans since early 1970
• Pepe Jeans is successful either because the type of
jeans that are not too much produced and the
strong brand of Pepe Jeans in the eyes of the
consumer and the costumer.
• High Percentage of sales is through independent
outlets.
• The company maintains its contact with its
independent retailors via agent
• Currently the orders are collected in two weeks and
potential bids are made by suppliers
Average
retail price of
jeans
45
Independent
outlets
1500
Self
employed
agents
10
What retailers wanted was –
Method of limited returns ,exchange, reordering
3. Issues faced
Alternatives
• Quality, type of model and size that is deemed that it has not become a
trendsetter in the current fashion world
• The time period to change orders or orders that are too short is not
comparable to the lead time that takes 6 months, and
• System is not flexible for bookings.
• Filling of gap between demand and supply
Some
problems
appeared in the
retailers
Keep
operations as
it is
Working with
Hongkong
sourcing agent
Build finishing
operations in the
UK
4. FINANCIALs Assumptions –
• In Baseline ,
assumed
inventory carrying
cost to be
negligible
• In UK ,10%
increase in
revenue, 10%
reduction in cost
of sales, but
additional
investments will
be required for
Capex/Opex. We
have assumed
useful life of the
equipment to be 5
years.
• The third option wherein jeans can be shipped to UK & finishing operations can be
completed in target market shows maximum potential for profit, despite additional
expenses calculated for Opex & Capex investments. This suggests that it should definitely
be considered as a viable option.
Scenario Alternative 1(Baseline Alternative2( HongKong) Alternative 3(UK)
Average Retail Price
£ 45 £45 £ 45
Sales £ 20,00,00,000 £ 22,00,00,000 £ 22,00,00,000
Units Sold £ 4444444 £ 48,888,89 £ 4888889
Cost of Sales £ 8,00,00,000 £ 8,00,00,000 £ 7,92,00,000
Operating Expenses £ 5,600,000 £ 7,28,00,000 £5,60,00,000
Inventory Carrying
Costs
£ 27,41,538
Additional Opex
Expenses
£ 5,00,000
Capital Expenses £13,00,000
Useful Life 5
Annual Expense £ 2,60,000
PBT £ 6,40,00,000 £6,72,00,000 £ 8,12,98,461.54
5. Other
Alternatives
Profit :
• Retailers feel happy because of the fast goods delivery
process;
• Retailers will not miss the current trend so that it can
attract the attention of consumers to buy;
• Improve Service Value
• Improve operating performance with fast goods delivery
Loss :
• When shipping there can be quality issues
• Unable to predict if the shipping service company
occurs delay.
Applying ERP (Enterprise Resource
Planning)
Using a software package designed to summarize
business processes such as when booking
products.
Working with goods delivery service
companies
This way, Pepe Jeans will shorten the delivery time to
several days. This item delivery service company will
distribute Pepe Jeans products to all retailers.
Profit :
• Quick response to order products
• Makes it easier to monitor orders;
• Costs made for fewer bookings
Loss :
• Requires computer software company
• It cannot be predicted if there is a technical
error.
