realated to supply chain

1.  Sparks system meant (super production apparel retail
consumer satisfaction) that had been intoduced in january
1992 to speed response in supply chain
 Sparks system became the basis for promoting worls spa
business. It enabled world to focus on consumer demsnds to
maximise the efficency of its store support operstions

2.  The system was quite successful as the company as
a whole achieved 5 inventory turns a year and
gross margin of 47%
 Worlds private level spa brand which used sparks
system achieved 8.5 as inventory turnover and
gross margin of 47.8%

3.  Apparel retailing in Japan was characterized by
products with short lifecycles and extremely
uncertain demand
 Company owned stores were owned by apparel
company like worlds and were not part of mall or
departmental store
 Departmental stores provided only the sales venue
while inventory risk and decision rights for
assortment quantities and pricing resided with
vendors.
 Japan required less size variety than the united
states

4.  Since apparel has short life cycle, so the more
it is displayed the more sales would be
generated
 Japan retail stores carried less display
inventory than their American counterparts
 So don’t keep it in drawer
 The department store typically received a
substantially portion of the retail sales
generated as high as 40%
 So the company should focus more on
departmental store

5.  Worlds nearly 40 brands targeted a distinct set of
customers ensuring that their brands maintained unique
identities
 It maintained separate merchandising group for each of
the brands
 Every six months worlds strategy team reviewed each of
the company’s brand and competitors brand
 The individual brand teams had rights to make
merchandising decision because TERAI felt that
empowering each group to make decision pertaining to
its brand allowed world to quickly respond to the
market signals
 Incentive system included annual bonuses, employees
with superior performance received promotions more
often

6.  The information system recorded data at the
store level on daily basis.
 Inventory that entered and exited the stores were
tracked and captured by the system
 All the worlds employees had online access
through their computers to both their sales and
inventory data
 TERAI was confident that worlds data accuracy
was close to 100% at the store level stock counts
were performed each month
 To ensure maximum accuracy inventory data
were updated after each stock audit with actual
inventory on hand

7.  Worlds manufacturing process included approximately 20 vendors on
regular basis
 and maintained a number of relationship with manufacturers through a
network of business affliations
 Fabric inspection was conducted at the factory the factory was informed
in advance when fabric would be arriving and how much they had to
inspect
 Factory used a machine to cut the fabric using computer aided design
 Merchandisers maintained open lines of communication with the
factories about their production needs so that the factories could adjust
their production accordingly
 Measurements and patterns were sent electronically from headquarters
to the factories. The technical designers and pattern makers at the
factory made sample garments using information they were given , the
pattern makers developed detailed instructions for the line workers to
circumvent manufacturing problems.
 If any changes was to be made they changed the pattern in computer
system and sent it to the corporate office for approval

8.  The factory maintained small batch sizes to
allow production workers to undertake
several different operations and relieve
boredom
 Also major new collections were introduced
annually augmented by new product
introductions every two weeks
 To preserve brand focus world ensured that
its designers identified with the target
customer

9.  Initial demand forecast for each product is derived in
two stages
 Two different approaches are used to derive aggregate
forecast : A distribution side forecast and A category
side forecast
 Second stage involves ranking the different SKU’s
according to likely demand and combining these ranks
with aggregate forecast to derive SKU level forecast
 Aggregate Demand Forecast: It is based on two sets of
calculations started from distribution side.
 Another set of calculation started from category side
and was based on aggregate demand forecast for each
category

10.  Distribution side forecast is derived by
market management system
 MMS takes historical sales data growth rates,
seasonality, competitor actions and changes
in macro economic conditions into account to
forecast growth in aggregate store sales
 Category side forecast

11.  Obermeyer method- this method was used to derive the
demand forecast and the associate standard deviation of
demand at the sku level
 World always organized obermeyer vote meetings to which
approximately 20 store managers and assistants were
invited
 Assistant Store managers were included because many
store managers exceeded the brands target age
 Store managers considered manner of dress fashion sense
and understanding of fashion sense and understanding of
target audienece in nominating assistants to take part in
vote meetings
 Dress jackets were shirts pants were placed on hangers
and tops were folded in showcases
 The women were able to judge the fabric and evelaute
relative to the requirements of the coming season

12.  As they moved through the new collection the women
recorded their thoughts on the ballots provided each
ballot sheet had a line drawing of the garment a box
for overall rank
 Garments were given overall rank 1-7
 In addition colors in each style were ranked according
to the preference and feed back about the fabrics
overall look
 Based on the voting process a weighted mean and
standard deviation score was derived for each sku
 The products were first sorted according to the mean
score
 The standard deviation was used as second index in
sorting products

13.  Accurate response approach emphasizes the
importance of overstocking and under stocking costs
and recommended controlling these costs through
production planning based on inventory risk while
responding quickly to the demand signals from the
market
 Material Preparation: The process projected
quantities from the SKU level forecast to calculate the
amount of material that would be needed during the
season
 With these material demand forecast merchandisers
were able to negotiate volume discounts and overall
prices with fabric vendors
 First Order Quantity :

14.  Replacement Quantity : In cases where a
popular styles are sold out there is not
enough material to produce enough
replacement quantity from merchandisers try
to have more garments using additional
fabrics or design new styles with
characteristics of best selling items
 These decisions are made in an “order
meeting” that is held every week and is
attended all the merchandisers in a brand

15.  World Co.’s system can be replicated at other
firms given sufficient resources.
 World Co. uses advanced communications
methods, such as online inventory
management.
 These information systems require highly
trained employees and sufficient capital.
 A firm that is just starting out, or does not
have a lot of income may have difficulty
meeting these requirements

16.  World Co.’s success in Japan can be linked
directly to its effective use of the supply
chain.
 Advanced information and communication
methods keep factories in direct contact with
the corporate office.
 Dynamic demand forecasting allows for
effective responsiveness.
 Inventory management and supplier
negotiations minimize lead times as well as
risk

17.  Distribution Side
Forecast
◦ Store sales plan for
category in the sales
period
◦ Average unit price in the
category
◦ Number of stores in the
chain
 Example: store sales =
$200,000, average unit
price = $100, number
of stores = 110
($200,000/store x 110
stores)/ $100/unit =
220,000 units
 Category Side Forecast
◦ Aggregate demand for
category (per week)
◦ Duration of sales period
 Example: 45,000
units/week, 4 weeks
45,000/week x 4 weeks
= 180,000 units
Choose larger of “Distribution”
and “Category” forecast
Max (220,000, 180,000) =
220,000