9-609-029 APRIL 27, 2009 ANANTH RAMAN NICOLE DEHORATIUS ZAHRA KANJI Supply Chain Optimization at Hugo Boss (A) Introduction Katja Ruth and Constantine Moros sat facing each other in the empty conference room. Covering the table between them were the latest operational and financial figures from the supply chain optimization pilot Hugo Boss had been running in its global bodywear and hosiery Division.1 Ruth, the director of the division, agreed with Moros, the division’s head of operations and procurement, that the pilot had been a success—better product availability and lower inventory to sales ratios had been observed for the stock-keeping-units (SKUs) involved in it—but was not convinced that expansion of the initiative beyond those …show more content…
These items were rarely repeated once featured in a specific collection. Fashion items for which inventory was depleted were permanently stocked out. Fashion items needed to be designed, prototyped, sampled, and presented to buyers associated with the more than 200 Hugo Boss bodywear and hosiery retail accounts (Exhibit 9 delineates the key steps involved in bringing a collection of fashion items to market). The division’s procurement and production management team negotiated production capacity and established production schedules with contract manufacturers and assisted them with raw material procurement and workforce scheduling (Exhibit 10). The design, prototyping, and preproduction steps were skipped for NOS items, for which the division needed only to plan production, perform quality checks, and arrange for shipment from the factory, warehouse storage, and delivery to retail accounts7. Impetus for Choosing NOS Items for the SCO Pilot In 2004, Moros had been thinking hard about what changes could be made to improve the efficiency and responsiveness of the division’s supply chain. Operational performance metrics for the last half of the year revealed average availability for NOS items to be 97.9%, not bad, but still shy of the 100% product availability guarantee.8 Moros was concerned that retail partners such as Oy Stockmann would threaten
This then translates to a 50% chance of not having inventory available during job opportunities. Therefore, opportunity costs might occur. The indifference of the production managers' in these aspects of inventory control is alarming and should be acted upon.
It is becoming apparent that the ever changing environment in the global marketplace requires a swifter response time from businesses and their supply chains. The era when production was moved overseas, so businesses can take advantage of low-cost labor is coming to an end, because businesses are not only competing on price but also on time. The owner of Zara, a Spanish clothing store knows this first hand, and has turned supply chain management on its ear, making his company the “envy of the industry” (Ferdows, Lewis, & Machuca, 2004).
It takes a team of nearly 140,000 workers worldwide to deliver the merchandise that customers expect (Gap, 2001). The process begins with the product managers and graphic artists that design each season’s merchandise (Gap, 2001). Employees around the globe in Gap’s Sourcing and Logistics Group, along with buying agents place orders with third-party factories in
Reorders are placed at the time of review (T), and the safety stock that must be reordered is:
Supply-chain management consists of developing a strategy to organize, control, and motivate the resources involved in the flow of services and materials within the supply chain. A supply chain strategy, an essential aspect of supply chain management, seeks to design a firm’s supply chain to meet the competitive priorities of the firm’s operations strategy.
Despite Vonkel’s desire for expansion and growth, Thembeka have experienced an overall profit loss for the past five years. An initial investigation into the company’s finances reveal that there is an overall business turnover of about $63 million (USD), and the cost of inventory alone is $27 million USD. Over 80 percent of the company’s total inventory consists of finished product. Inventory is inconsistently categorized, which also leads to a longer lead time for the organization to fulfill orders. Most of the inventory is held in various retail outlets that Thembeka own, and in franchises where Thembeka own the stock.
The topic selected is (Strategic Procurement & Supply Chain Management). For this study, we have selected Toyota Motor Corporations as our company of choice. Toyota is without doubt the best in the world, with its many philosophies and principles on how to make the best out of the least; JIT, lean production and elimination of waste and the desire for continuous improvement are just a few ways how Toyota has become the best in the auto industry. Toyota as a name, a company, and as a brand has become synonymous with Quality.
Russell, R. S., & Taylor III, B. W. (2014). Operations and Supply Chain Management, 8th edition. Hoboken, New Jersey: John Wiley & Sons, Inc.
An effective supply chain is the key to creating business value, and with expansion on the horizon. Good planning and willingness to adapt to changes are key to maximizing our results. In order to do this we have come up with a plan that will make Lady Americana mattresses a household name in our target expansion markets. In the state of Oklahoma, Lady Americana has already become a brand that has a bed in almost every home. The current systems in place are effective for todays operations, below are some challenges and recommendations to improve upon this to create an effective supply chain, that will grow with you as your business does.
The Spanish retail chain Zara has unique supply chain management practices that enable it to gain a competitive advantage over other fashion retailers in the industry. Zara’s rapid response time enables the firm to quickly respond to changing fashions while deliberately under producing products. This strategy, which is supported by competencies in logistic management, design and information systems, allows the company to maintain less inventory and higher profit margins and is a key factor to Zara’s success. The firm should continue to add value by seeking new opportunities to expand in the retail market and maintain their sustainable growth.
For partners of ASOS, they generally go through the same production process as ASOS own-branded dress. However, they receive the order from ASOS and its merchandisers instead of consumers. It is an important process for ASOS as understanding the product lifecycle and stock level, they can plan the introduction and withdrawal of product. Also price can be adjusted accordingly with which sales are introduced during the decline period (The Times 100, NA). However, this supply chain requires a high collaboration of functions across supply chain (Fernie, 2009). The reason why ASOS can eliminate the traditional functions of a retail store is due to its well-managed supply chain, effective stock keeping system and fast-going logistic system (Meadows, 2007).
An additional method Zara utilizes to ensure the right product is produced is to constantly monitoring the sells at every store in real time through the use of computers. Sells managers are the individuals that play out this strategy. When the clothing sells well or does not sell well, they can quickly let the designers know to swiftly create new designs (“Case 3-4. Continued Growth for Zara and Inditex”, 2013). However, the competition is changing their strategies in an attempt to successfully compete with Zara. The methods that Zara has implemented to ensure fast fashion is truly fast has pressured the competition into reducing their lead times on stocking their stores (Hayes & Jones, 2006).
“Considering present market conditions and the way in which industry demand fluctuates nowadays, firms willing to remain operationally efficient will become more reliant on supply-chain management, This is one of the main reasons for which Wal-Mart has been capable of growing at an annual rate of 15.4%.”(Aleksandrov)
Hugo Boss has become known as an industry trend setter for its high quality men’s and women’s fashion apparel, shoes, and accessories. Product leadership, intimate knowledge of their market and customers, and operational excellence are what distinguish the company from others in the luxury fashion goods industry. From an operational perspective, the variability that exists as a result of designing and manufacturing short run fashion products is high. This perpetual shifting of demands and preferences makes it difficult to maintain accurate industry forecasts that result in high risk actions as manufacturing products with no guarantee of sale leading to large scale inventory systems.
4. In a service supply chain, the (explicit) cost of information is higher than in a product