VF BRANDS

Global supply chain strategy

Write-up - VF Brands: Global Supply Chain Strategy (HBS Case)

How has VF Brand’s operation strategy evolved over the years? How well aligned was
the operations and business strategy?
Vanity Fair Corporation started
as Reading Glove and Mitten 1983 -
Company by John Barbey in VF become a $1
1899. This company go on to do billion sales
company with 75%
many acquisition like Lee, Blue 1914 & 1917 - accounts for jeans
Bell, Jantzen, RedKep to become
expended into
pioneer in almost every product lingeries and
line in apparel industry. The changed name
product line of this company to Vanity Fair 1984 -
(VF) series of
ranges from basic apparel like
1969 - acquisition
jeans to lifestyle apparel diversifying into
enters into jeans
including sportswear to formal business through new product like
wear. acquisition of Lee lifestyle apparel
company
VF Corp. has developed and 1899 -
relied on its owned Founded as
Reading Glove and
manufacturing infrastructure
Mitten Company,
from the begning, focusing on Pennsylvania
jeans and denim product as their
major market was restricted to U.S only. However from the begnning of 1980s major apparels
companies and competitors of VF started to focusing on outsourcing the manufacturing to
specialized suppliers. VF Corp. mainly started its outsourcing operation after the acquisition
of lifestyle apparel companies and also after their business startegy started to focus outside U.S
market, in different countries like China, India and other Asian countries. Lifestyle apparel
requires contious change in design based on the market and also manufacturing in other
geography require lot of invest which is not possible. Traditional outsoursing based on the
suitable tariff and qouta combination was used by VF. However, VF did not compromise with
brand image and hence build up a network of reliable and high-quality supplier with
international started of operation and worker safety. Result of this strategy was that by 2009,
VF produced only 30% of product in-house and rest where outsourced, majority of which
where lifestyle apparel.
VF have build the relationship with supplier in two different ways. First one was ‘cut and make’
or CM contact and second one was known as ‘package sourcing’. Fraser and Green identified
in 2004 that supplier where facing immense trouble fron the technical side of order fulfillment.
They identified an opportunity and introduced “Third Way” supply chain strategy in 2005
where VF would share their expertise in engineering and technical side to the supplier to build
their capability to resolve the issue of full intergation and building a strong network of reliable
and consistant supplier to serve demand in other countries.
VF business strategy of entering into lifestyle apparel market and expansion into other markets
required outsourcing operation strategy. The current operation strategy is in line with the
business goal of organisation and even though “Third Way” strategy may not show immediate
result but in long term it would establish VF strongly in these markets.
Write-up - VF Brands: Global Supply Chain Strategy (HBS Case)

2. How would you characterize VF’s various products/brands in terms of critical

competitive priorities? What are the implications for operations strategy?

Broadly, VF’s various products can be divided into heritage brands and lifestyle
brands.
Heritage Brands
Heritage brands included 2 coalitions namely, Jeanswear and Image wear which was
majorly manufactured internally. Jeanswear included brands like Lee and Wrangler. Image
wear included uniforms for commercial and industrial use. Because VF was able to
manufacture these products at very low-cost owing to operational efficiencies, the price of
the products was relatively low. These products have comparatively low varieties (In the US
markets jeans were treated as non-fashion item, unlike the European markets). The
products were of highest quality to maintain the brand legacy. The speed of replenishment of
exhausted stock was fast to accommodate demands. These products can be categorised
into functional products which have relatively stable and predictable demand and long-
life cycles. To conclude, the products had low price, high quality, low variety and rapid
delivery response. This calls for an efficient supply chain that supply predictable demand
efficiently at lowest possible cost. The predictable demand makes market meditation easy.
The supply chain must reduce lead time as much as possible as long as it does not increase
costs. The suppliers are mainly selected for cost and quality. The stockout rates must be
very low. The whole chain operates to maximise performance and minimize costs.
Lifestyle Brands
Lifestyle brands included 3 coalitions namely, Outdoor and Action Sports brands like The
North face, vans, Sportwear brands like Nautica, Kipling and Contemporary brands like
Lucy. These products typically had very high varieties owing to seasonal nature short life of
the product and changing product designs every year. The products have high quality
and relatively high price. The responsiveness for these kinds of products was low. The
unpredictable demand and lower life cycle owing to seasonality calls for a responsive supply
chain. An unresponsive supply chain can lead to shortages or excess inventory due
unpredictable nature. To counter this, the decision about where to place inventory and
production capacity becomes important. Costs take a secondary consideration in these
supply chains. Aggressive investments are required to reduce lead times to prevent
stockouts of in season products. Suppliers are selected mainly for quality, speed and
flexibility.

While deciding the operational; strategy, along with the above factors core competency of
the firm, operational expertise, plant locations, political scenarios and related other
qualitative factors also need to be considered.
Write-up - VF Brands: Global Supply Chain Strategy (HBS Case)

3. What is your evaluation of the “Third-Way” sourcing strategy proposed in the case?
Is it “the best of both worlds” or “the worst of both worlds”? For which kind of
products/ brands would you pursue “Third-Way”? For which types would you pursue
traditional sourcing and internal manufacturing? Why?
“Third-way” supply chain strategy helps organisations work directly with suppliers by
leveraging their internal technical expertise to improve production processes resulting in
increased savings through optimisation. Moreover, it helps in establishing long term
commitment with the suppliers, which helps them to maintain lean inventory level. Also it can
be inferred that third way strategy helps in reducing net cost of production.
Products/brands suitable for third way-
1. Area of expertise or core competency
These are mostly matured products tested through the ups and downs of time and tide. Over
several years, the organisation has developed novel techniques and specialised equipment
targeting the production capabilities of such products. Henceforth, they are in a better
position to contribute in the manufacturing process, making these products ideal candidates
for third way sourcing. Wrangler, Lee are the examples of brands where VF Corporation can
go for third way sourcing.
2. Large Volume, Low Customisation Products
For these types of products, the production process is mostly standardised and fine-tuned
and does not need experimentation. As a result, these products are well suited for third-way
sourcing.
3. Lifestyle brands without dedicated manufacturing unit
Many global lifestyle brands do not have their own manufacturing unit. The North Face is an
example and when VF acquired it, the option of first-way or internal manufacturing was out
of the way because of VF’s in-house production facilities not well suited for them. It is clearly
seen that third way is more cost effective compared to second way, we would suggest third-
way sourcing for this brand like the North Face.
4. Special Products from specific Geographic area
In apparel industries, many places all over the world are famous for their exquisite products.
Mostly in developing nations, these types of products are still manufactured using age-old
procedures. This creates a scope for an application of process innovation through third-way
sourcing.
5. Partners ready for innovation.
If there are partners manufacturing products or brands, interested in R&D, latest
technologies like robotics and automation to improve efficiency, third-way partnership model
will be hugely beneficial for both.

Products/ brands suitable for traditional sourcing-

If the partner is already an expert in developing a highly marketable product and at the same
time, not ready for the third way, then traditional sourcing is the only option left.
Products/brands suitable for internal manufacturing-
Write-up - VF Brands: Global Supply Chain Strategy (HBS Case)

Products requiring shorter lead time and lower cost: These types of products are well suited
for internal manufacturing as clearly seen from the data given in case.
Products requiring large, capital intensive investment: This type of products needs extensive
time and money investment before finalising the efficient manufacturing procedure. Hence, it
is easier to try it as an in-house manufacturing first before exploring third-way sourcing.
Write-up - VF Brands: Global Supply Chain Strategy (HBS Case)

4) What are the implications of the statement made by the head of operations that
“Today, apparel is produced just about everywhere on Earth, and we have basically
run out of new ‘low cost’ places to source production – until, of course, penguins
learn to sew. We have to find cost savings by how we manage our supply chain”

The head of operations is inferring that they truly need to reconsider the coordination’s
behind their inventory network. Garments are produced in almost every nation, attempting to
make jobs for the populace. Each organization needs to cut expenses and locate the least
expensive approach to get their items created. There is no such thing as free work and
organizations are continually attempting to discover nations to fabricate in that don't have
staggering expenses of living so they can pay the least expensive rates. Actually, there is
getting to be less and less approaches to chop down on these important expenses and
make the ideal benefits. This is the reason the proposed new Third Way approach will be
best for all gatherings.

The ramifications of his announcements are those of the impacts of globalization.

Reasonably we don't have any more Magellan's finding enormous spots with modest
exploitable work to utilize. Rather we have a very much mapped out globe with problem
areas of spots we know are viable at assembling certain things. What he implied was that
except if things change either in innovation or socially costs are bottoming out for modest
work. An extreme change would need to happen, a change in outlook, for example,
mechanized assembling where the human component is evacuated. Which I genuinely
accept we are headed as well, so we won't require penguins sewing, we will have robots
carrying out the responsibility less expensive and more adequately.