VF Brands: Global Supply Chain Strategy

Question 1: How has VF Brands' operations strategy evolved over the two decades? How
well aligned was the operations and business strategy?
Answer: Starting from being a lingerie brand and then entering the jeans business by
acquiring Lee company and Wrangler, VF has followed the vertically integrated
manufacturing strategy. Having own factories has helped them to maintain good quality
product, higher response time during uncertainties, technological advancement in processes
and less labour requirement but at the same time cost was higher.
In 2004, company made a major shift in their strategy by it new “Growth Plan”. It wanted to
transform itself from being a basic apparel brand to a global lifestyle apparel company. To
achieve the same, they acquired strong brands from various categories like sport wear,
footwear, etc. In just 8 years, it was able to increase its revenue share from non-heritage
brand from 10% to 44% and increase its global reach from 19% to 30%. In the process of
acquisition, VF didn’t change the operation strategy of any brand. Since labour was the cost
driver during that time, outsourcing was considered favourable option for low cost product.
VF also started outsourcing production of its lifestyle product range to gain this advantage,
but it comes with the cost of less responsive and rigid supply chain.
VF tried to become innovative and introduced various product range, but they didn’t change
the supply chain according to the product category. As we can see from above analysis, it was
not required initially since focus was to expand but now, realignment is required in the
strategy. For example, jeans being product with stable demand, it can be outsourced while
sports brand where demand varies with season can be manufactured in-house.

Question 2: How would you characterize VF's various products/brands in terms of critical
competitive priorities? What are the implications for operations strategy?
Answer:
PRODUCTS/BRANDS PRICE QUALITY VARIETY SPEED
Jeanswear (U.S.) High High Medium Low
Jeanswear (Europe) Low Medium High High
Imagewear (Uniform) High High Low High
Outdoor And Action Low High High High
Wear
Sportswear Low High Medium High
Contemporary Low High High Low

Jeanswear in American markets were considered non fashion clothing, so we characterize this
as moderate variety and relatively high price sensitive when compared to European market
where Jeans is considered as fashion item and market demands high variety and responsive
supply chain to cater to the dynamic market demands and changing varieties. In terms of
quality, US market needs high quality differentiation because the price of VF brands is
relatively high compared to other US brands. Jeanswear in US is a functional product with
predictable demand so outsourcing the production and long term raw material contract will
help maintain effective supply chain. In Europe Jeanswear is innovative product, hence in-
house production with responsive supply chain is recommended.
Imagewear market is uniforms for commercial and industrial usage, such markets usually
don’t need much variety and in these bulk deals customers will be price sensitive and look for
high quality clothing. The case says Imagewear needs quick response time so it needs
responsive supply chain. Internal production is recommended for this product line, as the
response speed and quality are expected to be high.
Outdoor and Action wear coalition with brands like Eastpak, Vans, etc., with some research
about the brands, we characterize the product line as low price sensitive. From the external
data, the differentiation factors for most of the brands under this category are quality and
variety. So, high quality, high variety and responsive supply chain to address large variety.
This is an innovative product line with demand hard to predict, so outsourcing in this case is
not recommended. In house production will help maintain low response time.
Sportswear from our analysis from the data from and outside the case, customers look for
high quality and comfort wear products and are less sensitive to price. Variety in sportwear is
relatively low when compared to fashion wear product line and so variety is medium. Quality
and design are of high importance and it’s not a high volume product line. Manufacturing in
house or at selective long term suppliers located closely is recommended.
Contemporary which is their newest coalition has brands like 7 for all mankind and Lucy,
which again are high price products with high quality and variety. The products are
considered premium brands, so price sensitivity is low. The expected response time/speed is
low because consumers would be willing to wait for the products of premium quality and
high variety and hence can be outsourced.
Question 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 kinds of
products/brands would you pursue "Third-Way"? For which types would you pursue
traditional sourcing and internal manufacturing? Why?
Answer: VF Brands felt that there is a lot of scope for the improvement of whole supply
chain as well as manufacturing processes in developing countries which can result in the
reduction of the lead time and inventory stocks. To tackle with the above scenario VF Brands
came up with ‘Third Way’ Supply Chain Strategy. By this strategy they can minimize the
investments in plant and equipment by getting into contract with suppliers and use that
money in brand and retail operations.
The pros and cons of Third Way Supply Chain Strategy.
Pros:

 As VF engineers were appointed and sent to different locations in different parts of

the world, it helped the suppliers and manufacturers to gain trust across different level
of supply chain therefore having better coordination and control over these locations.
 Contractors and suppliers worked on very thin margins due to which there was lack in
investment in engineering and technology development. As experience and
 knowledge sharing was done intensively it resulted in reduced lead time, inventory
level and manufacture and production cost which gives the competitive advantage.
 Dedicated production lines for VF by suppliers along with timed contracts which also
helped supplier in a way as VF invested in equipment and capital and in return VF got
assured supply and quick change responsiveness.
 Better exchange and flow of information at all stages.
 Diversification of risk as each stage has different contractors and products were
sourced from different locations.
Cons:

 Closing down internal plants despite strong performance and giving away human
resource to external contractors is a huge risk.
 As contractors and suppliers were now being provided with investments and latest
engineering solutions and technologies, there is chance that they might start their own
apparel line and stop serving VF.
 It’s hard to convince existing suppliers to join the Third Way partnership as they are
reluctant to shed away their traditional methods of operating and also they will loose
other clients.
Products/Brands Operation Strategy Why?
Jeanswear (U.S.) Traditional Since price is the most
important characteristic
required along with lower
weightage given to speed
and variety.
Jeanswear (Europe) In-House In Europe, jeans are worn as
fashion item and thus would
require to give higher
weightage to variety
and/designs. Since fashion
has a short life cycle speed
is another important
characteristic.
Imagewear (uniform) Third-Way Here, both price and
responsiveness is the driving
factor along with the quality.
The in-house technical
expertise could be utilized as
a means of knowledge
sharing and thus would be
an effective way to reduce
the costs.
Outdoor and Action wear In-house This requires high response
time, high variety and high
quality at the same time.
Using In-house strategy, one
can control and monitor the
resources and technical
expertise accordingly.
Sportswear Third-Way Here again since sportswear
is price insensitive while the
driving factors are high
quality and response time.
Demand estimation is
comparatively easier to
estimate.
Contemporary Traditional Since these are premium
products and the
responsiveness is given a
less weightage because the
customers can actually wait
for the final customised
product. Also, the volumes
are low.