Supply Chain Optimization at Hugo Boss (a)

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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…show more content…
These companies sought to differentiate their brands through craftsmanship, quality, and design, but success often depended on external factors. Sales boosted by an expanding economy could erode quickly in an economic downturn, leaving distribution centers brimming with inventory. Consumer confidence was the cornerstone of consumer spending and, concomitantly, of the performance of the apparel and footwear sectors. Europe’s apparel and footwear industry saw compound annual growth of 2.3% in 2006 and 1.7% in 2005.4 A trend observed in recent years for consumers to split their spending between high-end luxury goods and value merchandise was attributed to the availability from chains such as Hennes & Mauritz of increasingly trendy apparel and footwear tagged at affordable prices. The perpetually shifting demands and preferences of the public encumbered the apparel sector with the need to maintain large-scale inventory systems, the financial burden of failed items, and the risk of stock-outs of popular items. The speed of change together with the lag between production and retail availability made accurate inventory forecasting a persistent challenge. The Bodywear and Hosiery Division Hugo Boss’s two distinct brands, Hugo and Boss, were divided into five subsidiary lines—HUGO, Boss Black, Boss Green, Boss Orange, and Boss Selection (see Exhibit 5)—designed to meet the

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