Case: Supply Chain Management at World Co., LTD: Assignment Questions

Case: Supply Chain Management at World Co.
, Ltd
Assignment Questions
Question 1: Examine the features of fashion apparel retailing in Japan. How can a company
use its supply chain to compete in this environment?
Japan is one of the largest, most sophisticated and advanced clothing markets in the world and its
fashion designs and product quality enjoy a high reputation worldwide.
The features of fashion apparel in Japan:
● Fashion products in Japan have short life cycles
● Uncertainty in demand due to fast-changing trends and increased seasonality
● The fashion apparel industry in Japan is highly competitive (local and international)
● Distribution alternatives include company-owned stores, shops, and fashion malls
and shops within departmental stores
● Most fashion retail chains operate via specialty retailers like World Co. Ltd., who
apply fast fashion policy in their business model
● Low inventory levels are required because of uncertain demand
By focusing on sophisticated forecasting methods, taking account of the historical sales data and
changing trends in the market conditions, retail chains can cater to customer's needs effectively. The
company can gather point of sale data from its retailers and analyze consumer purchase trends to
estimate the quantity of a particular product required in certain retail stores. It will give a better idea
of consumer preference in that location. For this company can offer its retailers the latest information
technology tools and can also encourage them to install systems for efficient and speedy sales
ordering.
Question 2: Identify the salient aspects of the World’s supply chain focusing on the process
for manufacturing, demand forecasting, and inventory planning.
Aggregate forecast from the distribution side and category side were made and the maximum of the
two was selected. The distribution side forecast was based on the total demand for each store. For
existing stores, historical sales data, growth rates, seasonality, competitor actions and changes in
macroeconomic situations were considered to forecast sales growth. For new and future stores, it
used the amount of foot traffic, target customers who come there and competitor locations to
forecast. Based on demand forecast for each store category for each category was derived based
on the percentage of the sales expected at that particular store.
Under this, the expected sales of each product category were added to reach the total. This was
based on historical data, market trends, and the planned advertising expense. Ranking of SKUs was
done using the Obermeyer method. World invites 20 store managers and assistants from its target
market to headquarters , where products are displayed in the same way as that in shops. Then, they
are asked to rank the products. Based on this, the weighted mean and standard deviation of the sku
is calculated. The ranking done by representatives of the stores with highest volume is given the
maximum weight. After that, they divide SKUs in A,B,C and D categories. Based on the contribution
of each SKU to the sales and category, SKU level forecast was derived. Even after this lengthy
process managers revised their sales plan as they receive latest sales data. In addition, Untitled
brand managers tested products in advance of the actual season to identify sales patterns.
An “Accurate Response” for planning is used for production and inventory planning. First SKU level
forecast is used to calculate the amount of materials needed. They order some (about 75%) and the
vendor (supplier) keeps the rest. This helps them get trade discounts. Fabric is inspected at the
factory and relaxed for up to 48 hrs. They also keep inventory of undyed fabric and standard sizes of
zippers and common buttons for quick response. Domestic manufacturers were used because
sourcing overseas will increase the lead time and so was not cost effective. They maintained close
contact with manufacturers. Also, factory kept reserve production capacity for unusual demands that
were expected but cannot be measured. Merchandisers order 50% of the demand forecast right
away, this makes that rest could be used to produce more of high in demand SKUs. As mentioned
based on the early sales data and depending on the fabric and production available further
production available further orders were placed. In this way quick response is provided, and
inventory is measured that can be converted into finished goods based on forecast. After the season
is over inventory is sent back to warehouses.
The whole process is supported by a dynamic workforce and excellent information systems. Data
accuracy is 100% in the regular season and regular stock counts make sure that inventory is
updated. Bar code systems were installed in stores. Apart from this employees were empowered in
product design, merchandising operations, and its stores to make a decision on their own.
Question 3: How do the features of the supply chain explains the company’s remarkably
short lead time (relative to U.S. apparel supply chains)? Examine the features of the supply
chain, and identify why the company is able to respond so effectively.
Answer 3) World company uses early product sales as a predictor of the overall sales. They
estimate future demand for various products. These esteemed analyses are conducted at periods in
the sales cycle. This helps World co. to reduce the errors from its forecasting analysis. Furthermore,
by using a different source of data for forecasting and using the aggregate forecast, It has been able
to increase the accuracy of its forecast. This in result helped to reduce the lead time by great
amount. By immediately ordering for items that might be facing stock-outs, merchandisers make
sure that the supply chain faces no disruption. Another important tool used to improve forecast and
hence lead times is product testing. It helps to gauge the expected demand and sales of the product.
These, in turn, help to reduce the errors in the demand forecast.
Maintain supply chain Speed:

World co. makes certain arrangements with its supply chain partners even before production starts.
For instance, the company pre-orders and store fabric and other miscellaneous hardware. Even
though World co. avoid carrying finished goods inventory. It keeps an inventory of raw material.
World co. also reserves production capacity with its manufactures before the start of the production
process. This makes sure the production line never blocked
Question 4: Can the World’s supply chain processes be replicated at other apparel
companies? What about non-apparel supply chains? Identify potential barriers.
Answer 4:) Yes, the supply chain process of World company can be replicated to other apparel and
non-apparel companies where there are short product life-cycles. Firstly, the management of other
companies needs to develop an attitude of efficiency. Various firms usually focus on inventory
optimization by not keeping inventory rather than focussing on quick response time, which should be
done by firms so as to streamline the supply chain process. For non-apparel firms also, cost-benefit
analysis to see whether it's beneficial or not will help them to fasten supply chain processes.
There are some potential barriers also. Firstly, usually, retailers are reluctant to share data due to a
lack of incentive and relevant technology. Moreover, the diversified workforce may not be available
to other companies and even top management is unwilling to change the traditional approach to
function. The main reason is that companies cant quantify cost saving from shorter lead times.
Moreover, the companies don't focus on customer satisfaction and employee morale instead focus
on short term goals. As a result, they face frequent stock-outs and employ markdown techniques to
match supply with demand.

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