VF Brands : Global Supply Chain Strategy

VF Brands : Global Supply Chain StrategyApparel IndustryInclude an extremely broad range, from socks to “haute couture”$ 1.3 trillion! From own traditional “base” to branch outVF Operations Strategy"Third way" sourcingQuiz!!1. When VF Brands is founded? 2. Tell me about the company's Weaknesses3. Tell me about the company's opportunities4. Tell me about the company's threatsQuestions 1. What are the critical competitive priorities for each of VF’s main product line? 2. What are the main differences between the three souring modes mentioned in the case study? What are their pros and cons?3. Which sourcing mode should the company choose for each main product line in the future, and why?Apparel Industry: Trends- Compete with shoes and footwear companies : Nike, Adidas- Highly fragmented competition- No dominant player -Substantial, continuous investment : 7~12% of revenues- Growing power of large mass retailing chains- Walmart- bargaining leverage, PL- Price competitionApparel Industry : Environment - Subject to complex and ever changing tariffs and quotas- Separate duties and quotas for fabrics and textiles - One country vs another- “Chased quota”- Have an extremely broad geographic base of suppliers ex) sweater in the US marketApparel Industry : Environment - Concentrate on design & marketing- Little or none of their production- Outsourced to low cost countries- Labor intensive process offering few scale advantages- Relatively low entry barriers & relatively generic skills-As a result, small manufacturers around globeFrom design to store shelf : F/W 2009- 2008. 6~9 Design and marketing decision making- 2008. 9~12 Identifying suppliers, obtaining price quotes and producing samples- 2009. 1 Contract signed for all products in the F/W 2009- 2009. 3~6 Products made- 2009. 7 From suppliers to retailers in the US Season begins, salesVF Supply chain- "Cut and make" contracts Mostly for heritage lines- "Package sourcing" Mostly for the lifestyle brands- Lack of coordination & trust Little loyalty to one another- Time consuming- Lack of process improvement- Different standpointWhat is next?Let's move on the next pageAnswer1899Answer2. Weaknesses - the lack of coordination and trust among suppliers and the company.3. Opportunities - "Third Way" and the expansion of sales in developing countries4. Threats - Apparel industry is very much affected by economic situationsA. Preserve unique identities of brands (Heritage brands – Jeans, Imagewear)- Keep design groups intact- Original locations Internal manufacturing modeB. Highly decentralized (Outdoors&Action, Sports, Contemporary Brands, Other)- Vans operates out of Southern California- Napapirji operates out of Milan Outsourcing modeWhat are the critical competitive priorities for each of VF’s main product line? What are the main differences between the three souring modes mentioned in the case study? What are their pros and cons?Third way production is a half way between full integration and traditional outsourcing. It can create a true partnership between VF and the suppliers. In the past, there was lack of trust and it could cause many issues such as process time consuming and lack of process improvement. No matter what lines are, having Third way production is more efficient way throughout the entire supply chain. It will create strong long term bond between VF and the suppliers and

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cost benefits also.Which sourcing mode should the company choose for each main product line in the future, and why?VF BrandsV.F. Corporation is an $11 billion apparel and footwear powerhouse.(2013)IntroductionThe company serve consumers with over 30 brands, multiple channels of distribution and geographies organized by five distinct coalitions: Outdoor & Actions Sports, Jeanswear, Imagewear, Sportswear and Contemporary Brands. VF Corporation : History- 1899 Reading Glove and Mitten Company- 1914 Expand into Lingerie- 1917 changed its name to Vanity Fair- 1969 entered jeans business through the acquisition of Lee Company- 1984 acquisition of Blue Bell, Jantzen, Redkap Strategy The company is focused on attaining sustainable, long-term growth driven by continued geographic expansion with our wholesale partners and owned retail, product innovation, and acquisitions.Manufacturing-Unique operation strategy(internal manufacturing and outsourcing)- Produced 30% in-house in its 40 remaining plants, sourced rest -Very best in the world in terms of quality, efficiency and reliability -Set the standard in the industryOutsourcing- Require an enormous investment in time- Need to be visited and assessed- Strict policy of doing business- 1600 contractors and 30 distribution centers by 2009- 2000~2009, increased 15 fold to $ 1.8 billion in Asia alone- Sheer complexity of the product line :over 600,000 SKUs- Widely differing needs and priorities of the brand coalitionsInternal manufacturing Mode1. Feature Owned & Operated by Company (VF)2.Pro- Relatively good Quality, Efficiency, Reliability- Shorter Lead time3.Cons- Relatively High CostOutsourcing Mode1. Feature - Packaged Sourced by suppliers2.Pro -Flexible outsourcing(Distribute production among different locations to minimize the costs) -Strong incentives to reduce costs for contracts 3.Cons -Lack of coordination and trust between supplier and buyer(Higher Inventory & Long Lead time) -Huge Investment Building Network - Carefully assess manufacturing capabilitiesThird way1. Feature Halfway point between full integration and traditional outsourcing2.Pro- Good Quality and Reliability- Cost and Lead time were driven down by supplier’s willingness3.Cons - Sharing of its proprietary expertise with outside suppliers. - Staffing issue (difficult to move staffs quickly)VF Corporation Key Elements - Expand sales outside the US-Russia, India, China 2001 19% vs 2008 30%-Expand direct to consumer business2009, 700 single brand stores By 2012, 1300 stores globally(75~100 annually)Growth Plan- 2004 new “Growth Plan”, global lifestyle apparel company with strong brands- 2000, heritage brands accounted for 90% of sales- 2008, heritage brands 56%, lifestyle brands 44%Final goal, heritage brand 40%, lifestyle brands 60%Apparel Industry : Environment- Some Challenges : Suppliers, Relationship, Product Flow- Some manufacturers provide fully-integrated supply chain services- Dramatic changes in upstream segment of supply chain- Half-way point between full integration and traditional outsourcing- True partnership between VF and the suppliers- Agreement for a specific product line and commit to a volume forecast over a number of years- Suppliers would set up production lines-Develop production schedules jointly- Work together on process improvement- Suppliers would own the factory and the equipment and be responsible for managing the work force- VF would utilize its purchasing capacity to help the suppliers- Suppliers would be paid on a cost plus basis with a margin to meet its ROA requirements

Captain Lee

Engineer Kang
Director Jeong
[2014411122] Lee Dong-Kyu[2014411165] Jeong Hae-Won

[2014411002] Kang Seong-Hun

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Category: Case study

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