World Co. is able to compete effectively in the fast fashion apparel market in Japan through an agile supply chain focused on quick response. [1] Its supply chain prioritizes communication between all parties and empowering decision making. [2] It uses domestic manufacturing, frequent demand forecast updates, and an inventory planning approach focused on materials preparation and replenishment quantities. [3] This allows for remarkably short lead times through test marketing, fabric preparation, close factory collaboration, flexible workers, and automated processes. [4] While World Co.'s supply chain could be replicated by other apparel companies with sufficient resources, non-apparel industries face barriers to replication like inflexible lead times or locations.
World Co. is able to compete effectively in the fast fashion apparel market in Japan through an agile supply chain focused on quick response. [1] Its supply chain prioritizes communication between all parties and empowering decision making. [2] It uses domestic manufacturing, frequent demand forecast updates, and an inventory planning approach focused on materials preparation and replenishment quantities. [3] This allows for remarkably short lead times through test marketing, fabric preparation, close factory collaboration, flexible workers, and automated processes. [4] While World Co.'s supply chain could be replicated by other apparel companies with sufficient resources, non-apparel industries face barriers to replication like inflexible lead times or locations.
World Co. is able to compete effectively in the fast fashion apparel market in Japan through an agile supply chain focused on quick response. [1] Its supply chain prioritizes communication between all parties and empowering decision making. [2] It uses domestic manufacturing, frequent demand forecast updates, and an inventory planning approach focused on materials preparation and replenishment quantities. [3] This allows for remarkably short lead times through test marketing, fabric preparation, close factory collaboration, flexible workers, and automated processes. [4] While World Co.'s supply chain could be replicated by other apparel companies with sufficient resources, non-apparel industries face barriers to replication like inflexible lead times or locations.
World Co. is able to compete effectively in the fast fashion apparel market in Japan through an agile supply chain focused on quick response. [1] Its supply chain prioritizes communication between all parties and empowering decision making. [2] It uses domestic manufacturing, frequent demand forecast updates, and an inventory planning approach focused on materials preparation and replenishment quantities. [3] This allows for remarkably short lead times through test marketing, fabric preparation, close factory collaboration, flexible workers, and automated processes. [4] While World Co.'s supply chain could be replicated by other apparel companies with sufficient resources, non-apparel industries face barriers to replication like inflexible lead times or locations.
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Supply Chain Management at World Co:
1. Examine the features of fashion apparel retailing in Japan. How
can a company use its supply chain to compete in this environment?
- Apparel retailing was characterized by products with short lifecycles and
extremely uncertain demand, where speed and responsiveness were vital for company to survive under this highly competitive environment. - SPARCS system – focus on consumer demand to maximize the efficiency of its store support operations. Coordination between product planning, product development, production, and marketing allowed each area to make better decisions about production volumes and lead-times. Merchandisers in the corporate office quickly reacted to actual sales data by placing additional orders or modifying existing orders. - World’s supply chain also enabled it to change product assortment frequently based on recent sales data after every two-week period - Facilitate communications between all parties of business; empowering each parties’ decision making authority in order to respond quickly to market changes
2. Identify salient aspects of World’s supply chain focusing on the
processes for manufacturing, demand forecasting, and inventory planning.
Manufacturing - Domestic manufacturing where factories could respond to the inevitable small changes that were necessary more quickly than overseas manufacturing facilities - Lower inventory turns would be highly detrimental to the company’s financial position in the long run due to their extremely fast fashion cycles - Factories worked very closely with the merchandisers located at the corporate offices which maintained open lines of communications - In the process of constructing the sample garments, the pattern-makers developed detailed instructions for the line workers to circumvent manufacturing problems when the garments actually ran on the production lines - Line workers were very versatile and able to perform many different operations, they were compensated for their ability to perform more operations - Fabrics are purchased in advanced due to long lead time.
Demand forecasting - Initial demand forecast and updating this forecast based on early sales data - Aggregate demand forecast Distribution side forecast (Market management system (MMS)) - Historical sales data, growth rates, seasonality, competitor actions, changes in macro-economic conditions Category-side forecast - Projected chain-wide sales plans for the brand, and product features for the products in a particular category - Based on historical data, market trends and advertising expense planned - SKU-level forecast Based on the opinions of managers and assistants of World Co. stores Participants of Obermeyer Method are similar to target customer base Took the votes of participants to perform an ABCD analysis
Inventory planning - Based on Accurate Response approach Materials Preparation - Based on aggregated demand for various SKUs in order to be accurate and able to negotiate volume discounts First Order Quantity - 50% of SKU demand forecast Replenishment Quantity - Updated forecasts every week during the season in order to place additional orders as necessary
3. How do the features of the supply chain explain the company’s
remarkably short lead times (relative to US apparel supply chains)? Examine the features of the supply chain, and identify why the company is able to respond so effectively.
The financial advantages of quick response and short lead time:
- Inventory turn 8.5 times with a gross margin of 47.8% compare to US apparel only achieved 2.6 turns and 41% gross margin - Markdowns was only 11% of total sales compare to 31.8% for American women’s apparel
Examine the features of supply chain:
Plan - “Test” the product in advance of the actual season to identify sales patterns - Demand forecasts were updated with real sales data frequently Source/Inventory - Prepare the fabric in advance, - Maintain an inventory of undyed fabric to allow for faster response time - Competent IT system for inventory control (availability and accuracy) Make - Domestic manufacturing could respond to small changes more quickly - Factories worked very closely with the merchandisers located at the corporate offices - Designers were on the front line with the workers to develop detailed instructions - Line workers were flexible and able to perform many different operations - Automated processes Deliver Anything??
4. Can the World’s supply chain processes be replicated at the other
apparel companies? What about non-apparel supply chains? Identify potential barriers.
Can the world’s supply chain processes be replicated at other apparel
companies?
World Co.’s system can be replicated at other firms given sufficient resources. However, given the secret to succeed from the case, certain apparel companies would still have difficulties replicating the process. For example, World Co. uses advanced online inventory management. These information systems require highly competent IT personnel and sufficient capital. A start up may have difficulty meeting these requirements. For companies located outside of Japan would not be able to use the exact same system, at least not cost effectively.
What about non-apparel supply chains？
Not for service industries, as the supply chain functions for service are very different from manufacturing. Also with industries facing the following barriers, will not be able to replicate the process effectively
Potential barriers: - Unreducible lead times - Involve perish goods (unable to prepare material in advance) - Location of different parties - Inflexible Organizational structure - ie, strict hierarchy - Ability to maintain effective and efficient IT functions - Unable to reach economic of scales
