Supply Chain Management at World
Since the start of globalization and industrialization, competition occurred to different manufacturers of products. The undying demand of consumers and the rate of response of a manufacturer dictate the development of a company. Hidezo Terai, the president of World Cp. , Ltd. , innovated a way to quickly respond to the supply chain. SPARCS (Super Production, Apparel, Retail, Consumer Satisfaction) enabled World to monitor their sales trends and consumer demands to increase their production efficiency.
As a matter of fact, due to this system, World boosted one of their sales item (product 15122) by more than 110% and in 5 years, World’s income increased by more than 600%. Terai also stated that product planning, development, production and marketing could give an increase on the production volumes and leadtimes (Raman & Fisher 1). Table 1 shows the financial advantages of quick response to market signals. World’s SPA brands US Specialty The Gap Limited, Inc. retailers (average) Turns/yr 8. 5 2. 6 5 5. 6 Gross margin. 47. 80% 41% 45% 37% Table 1. Comparison of World’s SPA brands to other US-based products.
World divided their products to wholesale brands and Specialty store Private-label Apparel (SPA). Wholesale brands were sold to stores not owned by World while the latter thru stores owned by World. Most of wholesale brands were transacted through department stores, which can have at most 40% cut depending on its strategic location. Department stores also select through its preferred assortment and desired quantities of private-owned products. Factors that affect the arrangement between the department stores and the vendors are the brand strength and the desirability of the store location (Raman & Fisher 2).
Products were planned through the culture of the consumer. Japan, as opposed to America has a homogenous population and lesser variation of climate due to its geographic location. American apparel vendors display a number of the same product to assert that they “SUPPLY CHAIN MANAGEMENT AT WORLD CO. , LTD. ” Page # 2 are the exclusive retailer of certain products unlike Japanese vendors which display only one product of the same kind to make an impression of uniqueness. The company follows this tradition because it is important to them to impart a sense of uniqueness. Targeting the specific customer is also a practice of World.
They separate their merchandising groups for each brand. These groups help each other through learning from each other’s successes. Each group was also allowed to decide for their own brand. This privilege empowers each group to respond quickly to market signals (Raman & Fisher 3). World continuously review their brands with respect to the changing fashion environment, thus, keeping their products fresh and appealing. Its accessible information system is powerful and is consist of inventories entering and exiting each store. Factories were inside Japan so that it could quickly respond to inevitable small changes.
Domestic factories also lessen the shipping time of products than overseas manufacturing facilities. These factories worked very closely to the merchandisers enabling the production based on the demand of the merchandisers adjustable (Raman & Fisher 4). To preserve brand’s aesthetic focus, World ensured that their designers match with their targeted customers. This eventually plays a vital role on sales growth per square foot of the company, which is seemingly greater than of U. S. quality stores. Managers of the company focused on having the right product at the right time and place to maximize their profitability (Raman & Fisher 5).
Forecasting demands is also important in product sale. Forecasts are made initially and updatedly. Initial demand forecast that is used by World is the derived aggregate demand forecast. This could be classified as distribution side forecast or category-side forecast. Distribution side forecast takes into account the historical data and growth rates of existing stores, seasonality, competitor actions, and changes in macro-economic conditions while category side forecast is derived from historical data, market trends and true expenses
“SUPPLY CHAIN MANAGEMENT AT WORLD CO. , LTD. ” Page # 3 planned for the brand. These two forecasting system is used for every store and the one with the larger value is selected (Raman & Fisher 7). After forecasting, an exhibit and a vote balloting is done to predict the sales of a product and its production. This procedure is called the Obermeyer process. Initial forecasts are then updated for more accurate vale of order of a certain product (Raman & Fisher 8).
Terai believed that speed and responsiveness is the edge on surviving in a highly competitive environment but its execution is a combination of careful planning, powerful information systems, well-organized production processes and empowerment (Raman & Fisher 10). Through the right utilization of these factors, a company could adapt to its environment and surpass competing manufacturers regardless of racial predominance and colonial mentality.
Raman, Ananth and Marshall Fisher. Supply chain management at World Co. , Ltd. Harvard Business School, 2001.