Supply Chain Management at World Co. Ltd.

Facts of the Case Industry Facts: Specialty Retailing Sector -Womens 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 womens 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 1990s World sold over 40 different brands in approximately 7,000 shops and stores Worlds 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 Company Analysis Strengths Worlds High Inventory Turns (5/year) (Operations) 47% Gross Margin Keen Competitive Intelligence- reviewed competitors 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) Opportunities Fewer Variations In Store Assortments Fast Changing Fashion Trends (Social) Low Inventory Levels International Manufacturing 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) Worlds private label spa brands Net Sales Of World Corporation Cost of Sales Gross Profit Margin at 47% Worlds private label Spa brands SPAs Cost of Goods sold: o Purchases @ 97% o Other G. M. of Spa brands at 47.8% of Sales

1,643,130,000 250,000,000 1,893,130,000 983,610,000 909,520,000 Net Sales: 250,000,000 130,500,00

126,585,000 3,415,000 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 Inventory Turns 5 times a years = $96,722,000

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