OPERATIONS STRATEGY | VF CORPORATION

GROUP 05
Aditya KS | Akash S | Ankit P | Anuj P | Sudarshan R
 PRODUCT PORTFOLIO
189 The Companys roots could be traced back to 1899 as the Reading Glove & Mitten
9 Company based in Pennsylvania

191 The Company expanded into Lingerie business and was renamed to
4 Schuylkill Silk Manufacturing

Through a contest, the name Vanity Fair was selected as a brand name for
191 a line of lingerie leading to the 1919 company name change to Vanity Fair
7 Silk Mills Inc.

Vanity Fair entered into the Jeans Business through the acquisition
196
of the Lee Company (Heritage business)
9

Jeans accounted for 75% of the companys $1 billion in sales, as

198
the primary focus of the company shifted to jeans manufacturing
3

198 The company embarked on a series of acquisitions aimed at

4 expanding the jeans product line and diversifying into new areas

200 The company decided to focus on marketing and source products from
4 outside. The focus was now on Global lifestyle brands

200 The Heritage brands represented only 56% of the sales and Lifestyle brands contributed to the
8 remaining 44%. The aim was to increase the revenue from lifestyle brands to 60%
 MARKETS FOR VF CORP.
1984
VF used to be a Vertical Integration
company which sold Vertical integration in
existing product Lee jeans
whatever they could
manufacture which Diversification into new
later changed products like sportswear,
In 2001, 19% of the backpacks and uniforms
revenue was through acquisition
generated by Key acquisitions- Blue Bell,
international sales. Jantzen and RedKap
This number grew to
30% by 2008
2004
Further growth in the Growth plan
international sales Continue investment in
was targeted by the heritage brands & acquire
company brands with global appeal
In the U.S. alone, VF Expand sales in Russia,
Corp. is represented India and China
in stores from Focus & improve direct to
Walmart to consumer business
Bloomingdales, Nor Key acquisitions- Northface,
dstrom to Kohls Vans, Nautica, Reef, Kipling
Coalitions and Brand
identity Strategic
VF s business organised
into 5 major coalitions-
Objectives
Jeanswear, Imagewear, of VF
Outdoor and Action Sports,
Sportswear and
Contemporary brands
Efforts taken to preserve
organisation culture and
brand identity of acquired
brands- highly decentralised
locations2009-12
Rapid Expansion
By 2009 VF opened ~700
independent stores
Plans made to open 75 new
stores with a target of 1300
stores globally by 2012
Focus on Asian markets for
locating stores and
developing a balanced
channel of distribution
 VF CORP - HERITAGE BRANDS & LIFESTYLE BRANDS

Internal Manufacturing &

Outsourcing
HERITAGE BRANDS
Strategy: 60% Jeans In-house
Competitive advantage: High internal
manufacturing capabilities.
Novel techniques and proprietary
equipment for manufacturing jeans
Best in quality, efficiency and reliability
Building reliable and high quality
supplier network : High investment in
time
LIFESTYLE BRANDS
Strategy: Complete outsoucing
Competitive advantage: Multiple product
with short life cycles, easier new designs
replenishment
Varying needs and priorities
Focus on international markets and access
to other brands
Decisions: Product focused or Cost focused
or Rapid replenishment focused

Competition
Liz Claiborne, Ralph Lauren, Levi Strauss: Complete rely on outsourcing
Benetton and Zara: Vertically integrated from garment production through retail, limited outsourcing
 SUPPLY CHAIN, PRODUCTION & PROCUREMENT STRATEGIES

Product Design and

Identifying Suppliers Contract Sign
Prototyping

1
Placing Orders
Transportation Shipment Production

Sourcing Strategy-Multiple levels of supply chain; Location choices, economic factors, technical skills
Sample Production- Cost estimation, supplier capability check
Accurate forecasting-seasonality and demand forecast
Transportation- Product shipment from distribution center to port, port to VF distribution center and
finally via truck to store
Focus on flexible supply chain
Increased responsiveness- Jeans from Mexican plant to US
 PROBLEMS IN VF and Possible Reasons
Operations
Certain items (such as sweater for US markets)
have unnecessarily long geographical supply
chain. Raw wool Aus, Yarn production China,
Dying Australia, Assembly - China
Certain vendors (such as Li & Fung), which started
off as supply chain service company, gained
momentum and expanded their value chain to their
own brands.
Vendor Management
Poor vendor support, financially and operationally.
During 2008 economic crisis, vendor working on
wafer thin margin got wiped out, upto 60,000 small
production shops closed their business & shifted
base which was not in line with VFs supply chain
Product line expansion
VF is a primarily jeans and imagewear company,
catering to large masses. By expanding in lifestyle
segment, their whole supply chain (100%
outsourcing for lifestyle apparel), lagged the
markets
Possible reasons
Chasing the least costing process, with little regard
to responsiveness of the supply chain.
Heavy 3rd party reliance on critical elements of
supply chain & no development of competitive
advantage over time.
Transactional nature with vendors lead to poor
buffer support during shocks such as economic
crisis. With a highly competitive industry (where top
market leaders are in single digit market share),
forming long term alliances with vendors helps in
creating a strategic fit
Lifestyle segment is a very short life cycle segment.
With VF having upto 40 plants, they should have
allotted internal plants to have a lead time to shelf in
days rather than weeks.
 Alternatives for VF

WHAT IS THIRD WAY

SOURCING
Halfway between full integration and traditional sourcing
Ensures long term assured orders for Suppliers (who will have dedicated infrastructure for
VF products)
Collaborative development for Forecast schedules and production capacity
VF to Share technical Expertise and Know how and use its purchasing capacity to get
discounts
THIRD WAY SOURCING Package Sourcing Cut and Make
Pros: Increasing Pros: Improved Pros: Increased
trust between Working Capital responsiveness;
supplier and VF; position; Synergy in Maintain tight
reduced cost for time scheduling & control over costs
Suppliers; reduce transport cost; Cons: increased
FG inventory and focus on brand inventory; Price
lead time; building variation against
competitive adv. Cons: Lower capacity utilization;
Cons: Sharing of control over Supply No process
propriety exp; chain; risk due to improvements
Lower flexibility; over dependence;
Cannot be enforced Threat of potential
 How Third Way Sourcing will help

Third Way helps to cut costs to the tune of 10-15%

Close co-ordination between supplier and VF tight control, dynamic process
improvements, trust
Focus shift from cost-cutting to efficient manufacturing, speed to market, lower
inventory, less work in process, lower cost to quality
Inefficiency cropping due to mistrust was mitigated via Third Way Sourcing

Challenges
Resistance to change from old suppliers
Intellectual Property Risk
Staffing Expertise
Loss of flexibility

Recommendations
VF should pursue Third way sourcing for lifestyle brands in their port folio. They
have more changing demands. This would create better margins and create
efficiency in the supply chain
Showcase successful improvement in performance parameters to old new
suppliers