Importance-Supply-Chain-Management.pptxy

Importance of Supply Chain In our Day-to-Day lives.

1. Sparcs system meant (super production apparel retail consumer satisfaction) that had been introduced in January 1992 to speed response in supply chain Sparks system became the basis for promoting World’s spa business. It enabled World to focus on consumer demands to maximize the efficiency of its store support operations What is SPARCS system? Examine World’s inventory and financial performance to understand how successful the system was.

2. The system was quite successful as the company as a whole achieved 5 inventory turns a year and gross margin of 47% Worlds private level spa brand which used sparks system achieved 8.5 as inventory turnover and gross margin of 47.8% CONTINUED

3. Apparel retailing in Japan was characterized by products with short lifecycles and extremely uncertain demand Company owned stores were owned by apparel company like worlds and were not part of mall or departmental store Departmental stores provided only the sales venue while inventory risk and decision rights for assortment quantities and pricing resided with vendors. Japan required less size variety than the united states Examine the features of fashion apparel retailing in Japan. How can a company use its supply chain to compete in this environment?

4. Since apparel has short life cycle, so the more it is displayed the more sales would be generated Japan retail stores carried less display inventory than their American counterparts So don’t keep it in drawer The department store typically received a substantially portion of the retail sales generated as high as 40% So the company should focus more on departmental store CONTINUED

5. Worlds nearly 40 brands targeted a distinct set of customers ensuring that their brands maintained unique identities It maintained separate merchandising group for each of the brands Every six months worlds strategy team reviewed each of the company’s brand and competitors brand The individual brand teams had rights to make merchandising decision because TERAI felt that empowering each group to make decision pertaining to its brand allowed world to quickly respond to the market signals Incentive system included annual bonuses, employees with superior performance received promotions more often Explain how the organization structure at World supported its supply chain strategy. Explain how World used its information systems as a key driver to improve its supply chain performance

6. The information system recorded data at the store level on daily basis. Inventory that entered and exited the stores were tracked and captured by the system All the worlds employees had online access through their computers to both their sales and inventory data TERAI was confident that worlds data accuracy was close to 100% at the store level stock counts were performed each month To ensure maximum accuracy inventory data were updated after each stock audit with actual inventory on hand continued

7. Worlds manufacturing process included approximately 20 vendors on regular basis and maintained a number of relationship with manufacturers through a network of business affliations Fabric inspection was conducted at the factory the factory was informed in advance when fabric would be arriving and how much they had to inspect Factory used a machine to cut the fabric using computer aided design Merchandisers maintained open lines of communication with the factories about their production needs so that the factories could adjust their production accordingly Measurements and patterns were sent electronically from headquarters to the factories. The technical designers and pattern makers at the factory made sample garments using information they were given , the pattern makers developed detailed instructions for the line workers to circumvent manufacturing problems. If any changes was to be made they changed the pattern in computer system and sent it to the corporate office for approval Identify salient aspects of World’s manufacturing process that helped World achieve the desired level of responsiveness in its supply chain.

8. The factory maintained small batch sizes to allow production workers to undertake several different operations and relieve boredom Also major new collections were introduced annually augmented by new product introductions every two weeks To preserve brand focus world ensured that its designers identified with the target customer continued

9. Initial demand forecast for each product is derived in two stages Two different approaches are used to derive aggregate forecast : A distribution side forecast and A category side forecast Second stage involves ranking the different SKU’s according to likely demand and combining these ranks with aggregate forecast to derive SKU level forecast Aggregate Demand Forecast: It is based on two sets of calculations started from distribution side. Another set of calculation started from category side and was based on aggregate demand forecast for each category Explain the method of initial demand forecast and aggregate demand forecast at World

10. Distribution side forecast is derived by market management system MMS takes historical sales data growth rates, seasonality, competitor actions and changes in macro economic conditions into account to forecast growth in aggregate store sales Category side forecast

11. Obermeyer method- this method was used to derive the demand forecast and the associate standard deviation of demand at the sku level World always organized obermeyer vote meetings to which approximately 20 store managers and assistants were invited Assistant Store managers were included because many store managers exceeded the brands target age Store managers considered manner of dress fashion sense and understanding of fashion sense and understanding of target audienece in nominating assistants to take part in vote meetings Dress jackets were shirts pants were placed on hangers and tops were folded in showcases The women were able to judge the fabric and evelaute relative to the requirements of the coming season Explain the Obermeyer Method used at World for SKU level forecasts.

12. As they moved through the new collection the women recorded their thoughts on the ballots provided each ballot sheet had a line drawing of the garment a box for overall rank Garments were given overall rank 1-7 In addition colors in each style were ranked according to the preference and feed back about the fabrics overall look Based on the voting process a weighted mean and standard deviation score was derived for each sku The products were first sorted according to the mean score The standard deviation was used as second index in sorting products Continued

13. Accurate response approach emphasizes the importance of overstocking and under stocking costs and recommended controlling these costs through production planning based on inventory risk while responding quickly to the demand signals from the market Material Preparation: The process projected quantities from the SKU level forecast to calculate the amount of material that would be needed during the season With these material demand forecast merchandisers were able to negotiate volume discounts and overall prices with fabric vendors First Order Quantity : Explain the Accurate Response Approach used for inventory and production planning at World.

14. Replacement Quantity : In cases where a popular styles are sold out there is not enough material to produce enough replacement quantity from merchandisers try to have more garments using additional fabrics or design new styles with characteristics of best selling items These decisions are made in an “order meeting” that is held every week and is attended all the merchandisers in a brand CONTINUED

15. World Co.’s system can be replicated at other firms given sufficient resources.  World Co. uses advanced communications methods, such as online inventory management.  These information systems require highly trained employees and sufficient capital.  A firm that is just starting out, or does not have a lot of income may have difficulty meeting these requirements

16. World Co.’s success in Japan can be linked directly to its effective use of the supply chain. Advanced information and communication methods keep factories in direct contact with the corporate office.  Dynamic demand forecasting allows for effective responsiveness.  Inventory management and supplier negotiations minimize lead times as well as risk

17. Forecasting Aggregate Demand Distribution Side Forecast Store sales plan for category in the sales period Average unit price in the category Number of stores in the chain Example: store sales = $200,000, average unit price = $100, number of stores = 110 ($200,000/store x 110 stores)/ $100/unit = 220,000 units Category Side Forecast Aggregate demand for category (per week) Duration of sales period Example: 45,000 units/week, 4 weeks 45,000/week x 4 weeks = 180,000 units Choose larger of “Distribution” and “Category” forecast Max (220,000, 180,000) = 220,000