Supply Chain Management at World Co. Ltd.

Ananth Raman & Marshall Fisher

Discussion Questions
1.
2. 3.

Examine the features of fashion apparel retailing in Japan. How can a company use its supply chain to compete in this environment?
Identify salient aspects of Worlds supply chain, focusing on the processes for manufacturing , demand forecasting and inventory planning. How do the features of the supply chain explain the companys remarkably short lead times (relative to say, Indian/US apparel supply chains)? Examine the features of the supply chain and identify why the company is able to respond so effectively. Can the Worlds supply chain process be replicated at other apparel companies? What about non-apparel supply chains? Identify potential barriers.

4.

Co. Profile
Fashion Retailer Responds quickly to mkt signals Gross Margins high Inventory Turns high ROE/ ROA low

Due to: Japanese economy Too many brands (fragmentation)

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World Co. Ltd

300 250 200 Yen bn 150 100 50 0

Sales Yen Bn Net Income Assets Work Cap SGA

Sales Yen Bn Net Income 2000 1999 1998 1997 1996 Assets Work Cap SGA

Product Timeline for Style # 15122

3500 3000 2500 2000 1500 1000 500 0
25 27 29 31 33 35 37 39 41 43 45

Order Receipt Sales Stock

Nos.

-500

Week
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Supply Chain Processes at World

Inventory & Production Planning
Make 50% of forecast Balance 50% reserve: capacity & raw material

Forecasting
Systematic Disciplined ABCD Rule

Manufacturing
Domestic mfg: Short leadtime Fast transportation Close collaboration of design & mfg 2-3 wk replacement Flexibility of factories: Small batch prodn
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World Co - Planning
Identifies drivers of different factors Improves past forecasts thru PDCA cycle Manages fashion using the Accurate Response Method. ------------------------------------------------------------------------Organization: Empowered Brand Teams

AGGREGATE DEMAND FORECAST

(Higher of the two)

Distribution Side

Category Side

Yen <<<>>> Nos

Storewise Sales Growth Rates Seasonality Competition PESTE Category Sweaters 30 %

Brandwise Chainwise

Heavy/ medium/ light Knit/ woven Fabric

SKU Breakdown (Obermeyer Method)

A 10 % B 20 % C 20 % D 50 %

Some Key Indices

(How does one explain superior operations with poor returns?)

US Dept. Store Avg

Gross Margin % Inventory Turns Markdowns (% of Sales) ROE % 34 2.6 32 2.5

World Co. Ltd

42 6.3 11 50

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High Inventory Turns

Fewer sizes Reduced display inventory

Low ROE/ ROA

High SGA expenses Smaller stores >> high labour costs Collection of many small brands, each having own overhead- much duplication

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World Co.
+ve
Short response times Anticipating uncertainty
Stock R. M & trims. Expects supplier to hold some stock If R. M. out of stock, quick redesign Read data/respond quickly Supplier holds capacity & expects to react

- ve - High SGA expenses - Fragmentation of brands - Co.s processes manual

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Supply Chain Dependencies

SUPPLY CHAIN

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Worlds Approach
World did not have superior production technology. It simply made the right commitments at different points in time and postponed decisions until they had to be made.
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