A Presentation On Supply Chain Management At World Co. Ltd.

By group : 1

Company Profile
Fashion Retailer Responds quickly to market signals Gross Margins high Inventory Turns high ROE/ ROA low

Q.1 What is SPARCS system? Examine Worlds inventory and financial performance to understand how successful the system was.

SPARCS system
S- Super, P- production, A- Apparel, R- Retail, CSConsumer satisfaction Introduced in January 1992, by Hidezo Terai, president of World co. Ltd. Speedy and responsive supply chain Basis for promoting SPA (special store private label apparel) business of world co. Ltd. Helps co. to monitor sales trends and focus on consumer demand to increase efficiency

Inventory And Financial Performance

Inventory Gross margin turns a year Company As a whole SPA brand which uses SPARCS system US Specialty retailers The GAP The Limited, Inc. 5 8.5 2.6 5 5.6 47% 47.8% 41% 45% 37%

Markdown World Co. American Womens Apparel Store 11% of total sales/year 31.8% of total sales/year

Q.2 Examine the features of fashion apparel retailing in Japan. How can a company use its supply chain to compete in this environment?

 One of the largest and sophisticated clothing market in the world Fashion and product quality enjoy high reputation Products have short life cycles as compared to US

Highly competitive, locally and internationally

 Three distribution alternatives are available : company owned stand-alone stores, shops in fashion malls and shops within department stores Low inventory levels due to short life cycles and uncertain demand Historical sales data to identify customer needs Point-of-sale data from retailers to analyze purchasing trends Install systems for efficient and speedy sales ordering

Q 3. Explain how the organization structure at World supported its supply chain strategy. Explain how World used its information systems as key driver to improve its supply chain performance.

Organization structure World Co. Ltd.

Each of 40 brands targeted a distinct set of customer Company maintain separate merchandising groups for each of the brand Learning is high from each other group success and challenges Review of each of the cos & competitors brand , marketplace at every 6 month Each group able to keep their brands fresh and exciting Each group empowered to take Merchandising decision pertaining to its brand which make co quick responsive Young and talented employee More promotions opportunity to superior performance

Information System features

Real time information - SKU (Item/Size/Color by store) on daily basis - Shipment to the stores - Shipment between stores - Shipment back to the distribution center - Accuracy close to 100% during the regular selling season Semi annual sales at a few larger department stores where items returned to the distribution center are marked 50% off

 Advance fabric Inspection at the factory and availability of CAD facilities. Proper communication between Merchandisers and factory about actual need of the factory Database of past trends and requirements Electronically transfer of measurements and patterns from headquarters to factories Computer system facilities at factories to make changes in patterns

Q.4 Identify salient aspects of Worlds manufacturing process that helped World achieve the desired level of responsiveness in its supply chain.

Manufacturing Process
Domestic manufacturing Short lead time Fast transportation Close collaboration of design & mfg 2-3 wk replacement Flexibility of factories Small batch production

 Maintain relationships with manufacturers through network of business affiliations Domestic factories were considered over overseas factories as they could respond quickly Factory was informed in advance of fabric and about inspection CAD was used to cut the fabric Maintained an inventory of undyed fabric for faster response times Line workers were versatile

 Measurements & patterns were sent electronically from headquarters to factories Factory maintained small batch sizes to undertake several different operations Major new collections were introduced twice annually To preserve brand focus, designers identified with the target customer Appropriate mechanisms to link dyeing facilities, suppliers, manufacturers and World in an integrated supply chain

Q.5 Explain the method of initial demand forecast and aggregate demand forecast at World for SKU level forecasts.

Initial demand forecast

Initial demand forecast for each product, before sales, was derived in two stages: - First process was to derive aggregate demand forecasts for all SKUs together. - Second process was to rank the SKUs according to likely demand and combining these ranks with aggregate forecasts to derive SKU level forecasts.

AGGREGATE DEMAND FORECAST (Higher of the two)

Distribution Side

Category Side

Yen
Store wise Sales Growth Rates Seasonality Competition PESTE Category Sweaters 30 %

Nos
Brand wise Chain wise Heavy/ medium/ light Knit/ woven Fabric

19

Q.6 Explain the Obermeyer Method used at World for SKU level forecasts.

OBERMEYER METHOD for SKU Level Forecast

To derive demand forecasts To derive associated standard deviation of demand Obermeyer Vote Meetings held twice in a year, where 20 store managers & assistants from all over Japan participated. Autumn-Winter collections in June & August Spring-Summer lines in December & February Store personal were shown the planned product and were asked to predict its popularity.

Obermeyer Method Participants

Participants invited to Worlds Tokyo office to view coming line Participants almost all women : age 25-29 Criteria considered while nominating assistant to take part in vote meeting: Manner of dress, Fashion sense, Understanding of the target audience 20 women selected from 20 different stores

Assessment
Women use to assess the garments on the basis of:
Fit and style on themselves as well as peers Felt and observed the fabric, evaluated weight relative to requirement of future Photographed one another wearing next styles Permitted to share their assessments Instructed not to discuss the scores given to SKUs

Women recorded their thoughts on the ballots

Ranking
Based on fabric and colours between 1 to 7, and a comment section Separate boxes for ranking style, fabric & colour Merchandisers could identify: Hot fabrics v/s Styles Colours independent of Style After ranking Weighted-mean score for each SKU Standard deviation score for each SKU

Results
Sorting of Product:
Mean score Standard deviation

Performing ABCD analysis:

A SKUs : Top 10% of SKUs, comprise 40% of sales B SKUs : Next 20% of SKUs, comprise 30% of sales C SKUs : Next 30% of SKUs, comprise 20% of sales D SKUs : Last 40% of SKUs, comprise 10% of sales

Q.7 Explain the Accurate response Approach used for inventory and production planning at World.

 SKU level forecast is used to calculate the amount of materials needed Fabric is inspected at factory and relaxed for up to 48 hours Inventory is kept for quick response Domestic manufacturers were used to save cost of lead time Reserved production capacity is kept for unusual demands Merchandisers order 50% of the demand forecast right away Based on the early sales data, the merchandisers extrapolated sales data Depending on the fabric and production available further orders were placed Left over inventory is sent back to the warehouses where it is marked 50% off and sent back to stores

Q.8 Can the Worlds supply chain processes be replicated at other apparel companies? Identify features of the supply chain that are, and are not, worth replicating by other companies.

 The process can be replicated to other apparel & non apparel companies having short product life cycle Needs to develop an attitude of efficiency
Can do a cost benefit analysis

Features of World Co.'s Supply chain

Forecasting new product demand Initial product ordering logic Material ordering-staged for use when and if needed Focus on customer satisfaction and employee morale Diversified work force Responsive Process: - Merchandisers working directly with the factory - Flexible ordering of products - Shorter lead time Great product focus-Very homogeneous target group