Supply Chain Management at World Co. Ltd.

Industry Facts

Specialty Retailing Sector -Women’s apparel industry in Japan seasonal industry products have short life cycles and extremely uncertain demand International Competition
3 Distribution Alternatives- company-owned stand alone stores, shops in fashion malls, and shops within department stores “store-within-a-store”

Company Facts

Operates in women’s apparel industry
Company uses both wholesale and retail distribution methods Wholesale items are sold in other stores (retailers)
Specialty store Private-label apparel (SPA) merchandise which includes the OZOC and Untitled brands was sold at stores owned by World Uses SPARCS, a business process system that allows World to monitor sales trends and focus on customer demand to maximize the efficiency of store support operations By late 1990’s World sold over 40 different brands in approximately 7,000 shops and stores World’s divisions are organized by product (brand name)

1998- World Employed 2,394 workers
Net sales $1.8 billion and net income of $32million
Company held a 3.5% share of the Japanese apparel market
Major U.S. competitors are Gap Inc., The Limited
Rooted in Domestic Manufacturing

Brand Facts

Targeted at female customers 25-29 years of age
Annual Sales 2.2 million
Introduce new collections twice annually (Spring-Summer; Fall-Winter) Introduced New Products Every 2 Weeks
At the end of 1998, Untitled Brand could be Found in 110 Stores

Qualitative Analysis

Industry Analysis:
Threats:
Lack of Channel Power
Uncertain Demand
Seasonality
Inventory Risk

Opportunities

Fewer Variations In Store Assortments
Fast Changing Fashion Trends (Social)
Low Inventory Levels
International Manufacturing
Company Analysis
Strengths
World’s High Inventory Turns (5/year) (Operations)
47% Gross Margin
Keen Competitive Intelligence- reviewed competitor’s brands every six months (Marketing) Decentralized Merchandising Operations- each brand was autonomous (Operations/Marketing) High Responsiveness (Operations)

Versatile Line Workers

Recruited talented individuals who were unafraid of change and could motivate others (Management) Weaknesses
Weak Pay-for-Performance System (Management)
Low Brand Awareness
Left over inventory is markdown 50%

Quantitative Analysis:
Wholesale net sales=(total net ales- net spa sales)¥1,643,130,000 World’s private label spa brands ¥250,000,000
Net Sales Of World Corporation¥1,893,130,000
Cost of Sales ¥983,610,000
Gross Profit Margin at 47% ¥909,520,000

World’s private label Spa brandsNet Sales: ¥250,000,000 SPA’s Cost of Goods sold: ¥130,500,00 Purchases @ 97%¥126,585,000
Other¥ 3,415,000
G. M. of Spa brands at 47.8% of Sales Gross Margin: ¥119,500,000

Cost of Goods sold include merchandise inventory, purchases, (purchase discounts), total merchandise available for sale

Average Inventory for World Co., Limited and SPA Brands

World Co., Limited
Average Inventory = Cost of Goods sold = ¥983,610,000 = ¥$96,722,000
Inventory Turns 5 times a years

SPA Brands

Average Inventory = Cost of Goods sold = ¥130,500,000 = ¥15,294,117.65
Inventory Turns 8.5 times a years

Cost to Retail Ratio

Problems

How to overcome Bargaining power of suppliers- retailers charge high prices for retail space Poor implementation of push (or pull) strategy
Inventory Markdowns is second greatest variable expense accounting 24.10% of total Sales staff does not enter shipments into the computer upon receipt How to overcome compromised information accuracy during semi-annual sales