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Pepe Jeans Case


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Pepe Jeans Case


CASE DISCRIPTION
In 1973, Pepe Jeans was constituted as a road side stall by three brothers Nitin Shah, Arun Shah
and Milan Shah from Kenya at Portobello Road Market in West Londons trendy Notting Hill
district. The company has achieved enormous growth. This is the result of his unique approach in
a product market.
Pepe was used to be a trendsetter. However, there are changes in retailers demand where Pepe is
having a hard time to cope up. Retailers become unhappy with their requirements to place firm
orders six months in advance with no possibility of amendment, cancellation, or repeat ordering.
Retailers believe that Pepes sale would increase by about 10 percent only with more flexible
ordering system.
Pepe felt pressure for changes needed for them to address all the complaints of their retailers.
Obviously, Pepe is not yet ready coping up the changes because they never anticipate these
problems will occur. They use their financial strength trying to solve the retailers complaint.
STATEMENT OF THE PROBLEM:
What are ways or alternative actions to correct the growing problems which are the inflexibility
ordering system and the six-month order lead time?

OBJECTIVE OF THE STUDY:


* To identify the alternative action that addresses the inflexibility ordering system and the sixmonth order lead time.
* To cognize the supply chain of Pepe jeans
* To have a cost-effective alternatives.
* To improve the supply chain strategy of Pepe Jeans
* To apply the learning we have in chapter 10 which the supply chain strategy
* To go beyond from given alternatives from the book
* To know the importance of shortening cycle time/delivery time
METHODOLOGIES:
Pepe have 1500 independent outlets throughout the United Kingdom. The company maintains
contact with its independent retailers via a group of approximately 10 agents, who are selfemployed and work exclusive for Pepe. Each agent is responsible for retailers in a particular area
of the country.
The agent meets with each independent retailer three (3) to four (4) times each year in order to
present the new collections and take sales orders. Since the number of accounts for each agent is
so large, contact is often achieved by holding a presentation in a hotel for several retailers.
Agents take orders from retailers for six-month delivery. After Pepe receives an order, the
retailer has only one week in which to cancel because of the need to place immediate firm orders
in Hong Kong to meet the delivery date. The company has had a long-standing policy of not
holding any inventory of jeans in the United Kingdom.
After an order is taken and confirmed, the rest of the process up to delivery is administered from
the Pepe office in Willesden. The status of orders can be checked from a Web site kept by Pepe.
The actual orders are sent to a sourcing agent in Hong Kong who arranges for manufacturing the
jeans. The sourcing agent handles all the details associated with materials, fabrication, and
shipping young in-house designers who are responsible for developing new styles and the
accompanying point-of-scale materials. This team provides specification for the jeans. They
works closely with the Hong Kong sourcing agents to ensure that the jeans are made properly
and that the material used is of the highest quality.
SWOT ANALYSIS:
STRENGHT:
* Company has a brand strength

The company can demand a retail price that averages about $72 for its standard.
* Unique approach in a product market dominated by strong brands and limited variety.
Pepe presented a range of jeans styles that offered a better fit than traditional 5-pocket Western
jeans (such as those made by Levi Strauss in the United States)particularly for female
customers.
* No long-term debt.
It shows that Pepe has a very healthy cash position. It can make for good investment. Pepe do not
have worry about paying off long-term debt when times are tough.
* Pepe has a very healthy cash position.
This is because of having no long-term debt. It signify financial strength of the company.
WEAKNESSES:
* Six-month order lead time
Since the fashion market was so impulsive, the current favorites were often not in vogue six
months in the future. Delay might occur out of trend and product might not the demand of
customers anymore.
* Inflexibility ordering system
Retailers were forced to order less, resulting in stockouts of particular sizes and styles.
* Reluctant for changes
They become much less of a trendsetters than in their early days.
OPPORTUNITIES:
* Good relationship with the independent retailers.
This will create attachment between retailer and agents in behalf of Pepe.
.
* Growing population
In every business the population growth will always be an opportunity that indicates that the
market is definitely growing.

* No long-term debt and has a very healthy cash position..


This is opportunity for Pepe to attract more investor.
THREATS:
* Pepes smaller competitors offered delivery in only a few days.
This is an indication that customers/retailers might choose more convenient service for them.
* Fashion market was so impulsive.
It threatens the delivery reliability and speed of the product to meet the current vogue. There
must no delays as possible.
FINDINGS:
POSITIVE FINDINGS:
* Pepe has brand strength and known as a supplier of standard product in fashion market.
* The company has financial strength
* They have edge in fashion market.
* If Pepe improve his flexibility in ordering system, their sales would increase about 10%.
NEGATIVE FINDINGS:
* Pepe is not flexible in their ordering system
* It took them six months to deliver the product to their valued retailers.
* They become much less of a trendsetters.
* Six-month order lead time made it difficult to accurately order and worsened the problem.
ALTERNATIVE COURSES OF ACTIONS:
ACA 1 Outsource a shipping company
Outsource a shipping company that will agree to deliver the products to all retailers in only a few
days. The shipping company will be credit for any damages of the product while shipping so that
they handle it well.
Advantages:

* It will minimize the shipping cost.


* Retailers will be satisfied for shortened delivery speed.
* Retailers can meet the current vogue with no delays
* Maximize profit
* Increase product and services value
* Improve operating performance shorten delivery speed
.
Disadvantages:
* Products might not handle well
* Unpredictable circumstances (e.g. fire or technical failure) while shipping that will cause
delays
ACA 2 Online ordering system
Online orders must integrate in real time. Everything in ordering process like all new collection,
sales orders and cancelation process will all be available in the site. Everything will do with a
click.
Advantages:
* Convenience for Pepe not to send agents to collect orders and for the retailers to easy order.
* Fewer expenses
* Faster response to orders
* Easy to monitor orders
* No hassle collecting orders manually
Disadvantages:
* Technical errors might occur.
* Requires computer illiterate personnel
ACA 3 Outsourcing Offshore put up a manufacturing plant

Countries where there were more cost advantage and greater flexibility where the plant must be
place.
Advantages:
* Cost advantage in shipping
* Open job opportunities
* Provide the demand needs and deliver less than the usual six months.
Disadvantages:
* Purchasing new expensive machines
* Loss managerial control
* Inflexible to changes in business environment
* Political and cultural problem
RECOMMENDATION:
We recommend the Alternative Courses of Action number one (1), outsource shipping company,
and the Alternative Courses of Action number two (2), online ordering system. We choose these
two because it will help Pepe deliver their product for a very short of time than the six-month
order lead time and easy, hassle free, and convenient ordering system. In this matter, retailers be
delighted for the value that Pepe is giving.
CONCLUSION:
Our group believes that all companies must have a room for improvement and always ready for
change. These were Pepe jeans, we think, failed to have or to do despite of their enormous
growth and success. Change is one of inevitable thing to face in any kind of business. Thus,
managers/entrepreneurs must ready for the changes so that they can maintain or improve their
products/services and to have consistent customer satisfaction.

Words: 1341
Pages: 6

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