SCM

1. Supply Chain Management at World Co. Ltd.
Facts of the Case
Industry Facts:
 Specialty Retailing Sector -Women’s apparel industry in Japan
 seasonal industry
 products have short life cycles and extremely uncertain demand
 International Competition
 3 Distribution Alternatives- company-owned stand alone stores, shops in fashion malls,
and shops within department stores “store-within-a-store”
Company Facts
 Operates in women’s apparel industry
 Company uses both wholesale and retail distribution methods
 Wholesale items are sold in other stores (retailers)
 Specialty store Private-label apparel (SPA) merchandise which includes the OZOC and
Untitled brands was sold at stores owned by World
 Uses SPARCS, a business process system that allows World to monitor sales trends and
focus on customer demand to maximize the efficiency of store support operations
 By late 1990’s World sold over 40 different brands in approximately 7,000 shops and
stores
 World’s divisions are organized by product (brand name)
 1998- World Employed 2,394 workers
 Net sales $1.8 billion and net income of $32million
 Company held a 3.5% share of the Japanese apparel market
 Major U.S. competitors are Gap Inc., The Limited
 Rooted in Domestic Manufacturing
Brand Facts
 Targeted at female customers 25-29 years of age
 Annual Sales 2.2 million
 Introduce new collections twice annually (Spring-Summer; Fall-Winter)
 Introduced New Products Every 2 Weeks
 At the end of 1998, Untitled Brand could be Found in 110 Stores

2. Qualitative Analysis
Industry Analysis:
Threats: Opportunities
Lack of Channel Power Fewer Variations In Store Assortments
Uncertain Demand Fast Changing Fashion Trends (Social)
Seasonality Low Inventory Levels
Inventory Risk International Manufacturing
Company Analysis
Strengths Weaknesses
World’s High Inventory Turns (5/year) Weak Pay-for-Performance System
(Operations) (Management)
47% Gross Margin Low Brand Awareness
Keen Competitive Intelligence- reviewed Left over inventory is markdown 50%
competitor’s brands every six months (Marketing)
Decentralized Merchandising Operations- each
brand was autonomous (Operations/Marketing)
High Responsiveness (Operations)
Versatile Line Workers
Recruited talented individuals who were unafraid
of change and could motivate others
(Management)

3. Quantitative Analysis:
 Wholesale net sales=(total net ales- net spa sales) ¥1,643,130,000
 World’s private label spa brands ¥250,000,000
 Net Sales Of World Corporation ¥1,893,130,000
 Cost of Sales ¥983,610,000
 Gross Profit Margin at 47% ¥909,520,000
 World’s private label Spa brands Net Sales: ¥250,000,000
 SPA’s Cost of Goods sold: ¥130,500,00
o Purchases @ 97% ¥126,585,000
o Other ¥ 3,415,000
 G. M. of Spa brands at 47.8% of Sales Gross Margin: ¥119,500,000
Cost of Goods sold include merchandise inventory, purchases, (purchase discounts), total
merchandise available for sale
Average Inventory for World Co., Limited and SPA Brands
World Co., Limited
Average Inventory = Cost of Goods sold = ¥983,610,000 = ¥$96,722,000
Inventory Turns 5 times a years
SPA Brands
Average Inventory = Cost of Goods sold = ¥130,500,000 = ¥15,294,117.65
Inventory Turns 8.5 times a years
Cost to Retail Ratio
Problems
 How to overcome Bargaining power of suppliers- retailers charge high prices for retail
space
 Poor implementation of push (or pull) strategy
 Inventory Markdowns is second greatest variable expense accounting 24.10% of total
 Sales staff does not enter shipments into the computer upon receipt
 How to overcome compromised information accuracy during semi-annual sales