Professional Documents
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OPERATIONS RESEARCH
ASSIGNMENT ON
INVENTORY MANAGEMENT
Product
CHEMSITRY proves to be good at producing cheap products of reasonable quality, inspired by the
latest catwalk trends. With daily new products in store, the CHEMSITRY has a unique selling
proposition, competing with as CHEMSITRY states- every other fashion company. CHEMSITRY
offers a broad range of product for a broad range of people.
Innovation
CHEMSITRY is very innovative and has extremely fast and numerous NPD cycles. However, the
role of the customer in this innovation process could be improved. Whereas other companies, like
Nike is doing for almost a decade now, adapt to the individualization trend by enabling their
customers to design their own items, CHEMSITRY is just offering their products as they are.
Customers are involved only sporadic into the designing process, although cooperating with
trendsetting customers might bring the brand closer to the customer.
Target Market
The target customers of CHEMSITRY belong to the group of fashionable and trendy consumers who
see shopping as a social activity providing pleasure in their daily life. They acquire the most
fashionable clothes each season and want to follow the trends without investing a lot of money. In
addition, they invited the top fashion designers in the industry such as Karl Legerfeld to be their
partners for designing the new collection. As shown in the emotional curve, there are two pleasure
peaks happening in the process which are psychological identification and product price. As a result,
CHEMSITRY is successful in making the combination of the best design under the name of an
inexpensive clothing label.
Fashion designers collaborations
Trompe-l'il printed viscose jersey dress by Maison Martin Margiela for CHEMSITRY, 2012.
In November 2004, selected company stores offered an exclusive collection by fashion designer Karl
Lagerfeld. The press reported large crowds and that the initial inventories in the larger cities were
sold out within an hour, although the clothes were still available in less fashion-sensitive areas until
the company redistributed them to meet with demand.
In November 2005, the company launched a collection by Stella McCartney and, in November 2006,
by avant-garde Dutch designers Viktor & Rolf.
In March 2007, it launched another collaboration designed by the pop star Madonna. In June 2007
the company worked with game developers Maxis to create a stuff pack for the latter's The Sims 2
computer game, CHEMSITRY Fashion Stuff.
In November 2007, the company launched a collection by Italian designer Roberto Cavalli. It was
reported that the clothing sold out very quickly. Also in 2007, another design with Kylie Minogue
was launched in Shanghai, China. In the spring of 2008 the Finnish company Marimekko was
selected as guest designer and was followed by Japanese Comme des Garons in the fall.
For spring and summer 2009, the British designer Matthew Williamson created two exclusive ranges
for the company the first being a collection of women's clothes release in selected stores. The
second collection saw Williamson branch into menswear for the first time, only in selected stores.
The second collection also featured swimwear for men and women and was available in every
company store worldwide.
On 14 November 2009, the company released a limited-edition diffusion collection by Jimmy Choo
featuring shoes and handbags, ranging from to including a range of men's shoes. The collection also
included clothing designed by Choo for the first time, many garments made from suede and leather,
and was available in 200 stores worldwide, including London's Oxford Circus store. Sonia Rykiel
also collaborated with the company, by designing a ladies knitwear and lingerie range that was
released in selected company stores on 5 December 2009.
For Fall 2010, the company collaborated with French fashion house Lanvin[19] for its 2010 guest
designer.
For Spring/Summer 2011, the company collaborated with fashion blogger Elin Kling, which was
available at selected stores only.
In June 2011, CHEMSITRY announced a collaboration plan with Versace, that was released on 19
November. Versace also planned a Spring collaboration with CHEMSITRY that was only be
available in countries with online sales.Similar to previous collaborations Versace agreed to let
CHEMSITRY use the renowned name of the company for a previously agreed upon sum,without
actually having a role in the design process.
In November 2011, CHEMSITRY announced a collaboration plan with Marni, that launched in
March 2012. The campaign was directed by award-winning director Sofia Coppola.
On 4 October 2012, Japanese Vogue editor Anna Dello Russo launched an accessories collection at
CHEMSITRY as Paris Fashion Week drew to an end. The collection was stocked in 140
CHEMSITRY stores worldwide and also sold through the CHEMSITRY website.
On 12 June 2012 CHEMSITRY confirmed that it will launch a collaboration with avant-garde label
Maison Martin Margiela for a fall rollout. The Maison Martin Margiela collection for CHEMSITRY
hit stores on 15 November 2012.
Isabel Marant was a collaboration designer for Fall 2013 and for the first time made a men's
collection to accompany the women's collection. The collaboration was sold out very quickly in
cities across the globe and was heavily anchored in sales online as well.
Alexander Wang was announced as a collaboration to be released 6 November 2014 across the world
to a select 250 stores. The announcement came during the Coachella Valley Music and Arts Festival
in California and will be the first collaboration with an American designer. Beyonc was the face of
CHEMSITRY in summer 2013. Her campaign, which began in May 2013 was entitled "Mrs. Carter
in CHEMSITRY", and drew heavily on Knowles' personal style.
Balmain was announced as the next collaboration with CHEMSITRY. The collection was released in
November 2015. The announcement came from Balmain designer Olivier Rousteing's Instagram
page.
In 2016, it was confirmed that the next collaboration with CHEMSITRY would be with Kenzo. The
designer line will be out on November 3, 2016
INVENTORY MANAGEMENT
Inventory management is the practice overseeing and controlling of the ordering, storage and use of
components that a company uses in the production of the items it sells. Inventory management is also
the practice of overseeing and controlling of quantities of finished products for sale. A business's
inventory is one of its major assets and represents an investment that is tied up until the item sells.
Activities employed in maintaining the optimum number or amount of each inventory item. The
objective of inventory management is to provide uninterrupted production, sales, and/or customerservice levels at the minimum cost. Since for many companies inventory is the largest item in the
current assets category, inventory problems can and do contribute tolosses or even business failures.
Also called inventory control.
To offer the consumers high fashion and quality at the best price, CHEMSITRY works with few
middlemen. The company buys right items in large volume from the right markets. The firm has a
well-established and efficient distribution channel and relies heavily on its IT system to work
efficiently.
Fashion isn't just all about dressing up and CHEMSITRY's supply chain procedures are a testament
to that. Globally recognised for being a successful and expansive retail giant in terms of market and
financial prosperity, CHEMSITRY's supply chain strategy is a continuous search for promising
markets, cost-efficiency in production of goods, and reduction in lead times for their retail inventory.
CHEMSITRY, which ranks number three on Gartner's Supply Chain Top 15, is the world's secondlargest clothing retailer. This is certainly no easy feat for a company that has 950 stores in 19
countries, AND raked in a whopping turnover of 14.6 billion Euros in 2013. With such staggering
figures, one can only wonder how the retail giant manages to successfully stay afloat and ensure
adequate stock control for its fleet of stores.
The organisation's reliance on efficient and integrated systems for retail inventory management in the
major components of its supply chain, has played a huge part in enabling success in its stock control
management and a well-earned placing in the Gartner list. Lets take a look.
Fashion for All CHEMSITRY
CHEMSITRYs business model consists of creating value for customers by offering fashion and
quality at the best price. CHEMSITRY offers products for women, men, teenagers and children.
Products include sportswear, underwear, shoes, accessories, cosmetics, home textiles and decorations
(CHEMSITRY Home). The company sells through retailers and through its online site Hm.com
CHEMSITRY retail inventory
Design & Production
CHEMSITRY is famous for offering chic, trendy styles with rapid turnarounds - an epitome of the
widely acknowledged and appropriately named phenomenon that is 'fast fashion'. However, Van den
Bosch, CHEMSITRY's fashion oracle and head designer for the last 20 years, believes that the
frivolous term does not do justice to the complex design process that is heralded by her team of 100
designers who meticulously curate and coordinate each collection more than a year in advance!
This mammoth feat of designing and producing collections season after season is achieved via
CHEMSITRY's two-fold design process. It involves not only long-term planning of collections, but
also a real-time design response that stems from a customer-driven production strategy.
"The design team is very important to us and all our designers are very well-educated," says Bosch.
What comprises of this fashionable A-team you ask? Well, its designers come from all over the
globe; From Holland, South Africa to Japan. The entire team works from CHEMSITRY's design
center in Stockholm, popularly known as the "white room". It does not stop there however. The team
works closely with a mind-boggling number of services to produce its range of apparel - 60 pattern
makers, 700 suppliers and 20 worldwide production centers to be exact.
Indeed, the production rate of CHEMSITRY's retail inventory is elevated by its heavy dependence
on outsourcing from design to production. Although CHEMSITRYs core operation relies on its
designers, creative directors, and pattern makers to stay on top of the latest trends, it also uses the
services of fashion trend forecast companies such as Worth Global Styles Network (WGSN). As a
fast-moving retailer, it takes on an innovative direction in determining consumer interests through
both traditional analysis and experimental augmented-reality technologies.
With customer-driven reports of future trends in hand, CHEMSITRY creates collections that strike a
good balance between latest trends and the basics. Street fashion, haute couture, trends from the '50s
and clean lines from the '60s are examples of a few recent avenues of inspiration for the
CHEMSITRY team as well. "We get inspiration from everywhere, but the most important thing is to
make it your own way," says Van den Bosch. However, while the brand is international in its
persona, it certainly holds the Scandinavian trait of being democratic and practical.
And democratic it is in terms of price tags. With CHEMSITRY's range of baby-doll dresses, printed
silk blouses with fashionable leggings, and drainpipe jeans available at uniform, egalitarian prices.
What's behind the brand's economical prices? That's where its manufacturing game plan comes in.
Design: A mix of traditional and trendy collections
CHEMSITRY has a group of approximately 160 in-house designers and 100 pattern makers that
decide on the collections. The company offers two main collections each year, one in spring and one
in fall. CHEMSITRY has two design processes: long term planning of collections and real-time
design driven by customer trends in the market. The real-time design allows CHEMSITRY to
respond to the market in a faster way and be more flexible in the eyes of the customer.
Just in time production
The retail giant delivers fashionable and trendy numbers catered for different tastes through a
controlled and integrated process just in time.
CHEMSITRY keeps a significant amount of its production in-house and makes sure that its own
factories reserve 85 percent of their capacity for in-season adjustments. In-house production allows
the organization to be flexible in the amount, frequency, and variety of new products to be launched.
The company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities
nearer to its design headquarters in Sweden.
The wages of these European workers are higher than those of their developing-world counterparts,
but the turnaround time is miraculous.
Manufacturing
CHEMSITRY manufactures 80% of its retail inventory in advance and introduces the remaining
20% based on the most current market trends. The retail giant's ability to offer affordably priced
apparel is largely due to its strong supplier relationships and its manufacturing strategies to reduce
lead times.
The most admirable characteristic of CHEMSITRY is its ability to collaborate efficiently with its
partners. Not having any factories of its own, it utilises over 700 partner companies in more than 20
countries, relying on a network of external suppliers to manage its buying and production.
CHEMSITRY purchases garments from around 750 suppliers, with 60% of production taking place
in Asia and the remainder mainly in Europe.
CHEMSITRY fosters close and effective engagement with its partners by strategically locating 30
production oversight offices as a mediating function and to enable easier contact with the partner
companies on the latest fashion trends and the internal matters of the company. This helps to ensure
the goods are produced at the accurate quality and price and that the suppliers abide to the company's
code of conduct. These production offices play a significant role in checking and testing sample
garments.
Most of the manufactured products from the factories go directly to the logistics centers and from
there are distributed to the stores closer to the area. Stores dont have back up stocks, but inventory is
held in regional replenishment centers from where it is distributed to stores.
Centralized logistics
CHEMSITRY sticks to a deep, predictable and fast rhythm, based around order fulfillment to stores.
Each CHEMSITRY outlet sends in two orders per week on specific days and timing. Trucks leave at
specific times and shipments arrive in stores at specific times. Garments are already labeled and
priced upon destination.
As a result of this clearly defined rhythm, every staff involved (from design to procurement,
production, distribution, and retail) knows the timeline and how their activities pan out with respect
to other functions. That certainly also extends to CHEMSITRY customers, who know when to visit
stores for fresh new garments.
Technological Integration
The company relies on IT integration between the central national office and the production offices.
Communication between the various departments takes place electronically, especially in regards to
design and product development. This is crucial especially because the fashion giant does not own
factories and does not secure fabrics in advance. Instead, its partners secure fabrics on behalf of
CHEMSITRY. With an efficient IT communication infrastructure in place, the company simply has
to place an order with one of its partner companies in the region that already have the necessary
fabrics.
With these manufacturing operations in their supply chain, CHEMSITRY has managed to reduce the
average lead time by 15-20% through their continuous developments in the buying process.
Flexibility and short lead times have reduced the risk of buying the wrong items and allowed
CHEMSITRY stores to restock quickly with the best selling products at affordable prices.
So, there you have it! A brief but hopefully, very insightful tour of the strategic backend processes of
one of the world's biggest fashion retailers. If you're ever planning to conquer the fashion retail
industry (or perhaps just setting up a cosy retail e-commerce store), it might do you good to follow in
the footsteps of the influential CHEMSITRY.
Through IT, the company has information about the fabrics that each supplier has and can make
informed decisions as to where to place a specific order.
There is a central inventory management software. Each store is connected to corporate logistics and
CHEMSITRY warehouses which makes the process of ordering and restocking stores more
efficient.The head office can monitor the trends from sales in each store and use this information for
design and production choices oriented to the customer.
1. SAM
2. Pattern making
Simultaneously, CHEMSITRY Product Development Team works on the fabric sourcing if the
fabric is not available in the store.If there is any change in the design, style or trims are added, the
new M-list sent to the pattern Making department and if not needed wont be sent to the SAM, only
to the Pattern Making Department.
GPO: Global Purchase Office for CHEMSITRY in China, acts like a mediator between the head
office of CHEMSITRY, SEBO in Stockholm, Sweden and the suppliers.
Everything is done from here, also the Price Quotation. GPO
coordinates with the Sweden.
Since CHEMSITRY is worldwide, it is difficult for SEBO to monitor everywhere. The
CHEMSITRY at Shahi sends 3 samples:
1. GPO
2. SEBO
3. Buying offices
Other brands at Shahi send just two sample but CHEMSITRY has to send an extra to GPO, which is
introduced 2 years ago.
M-List keeps on updated if there are any changes to be done in the sample. CHEMSITRY is well
organized, gives a proper PO with full details about the m list before executing the order
CHEMSITRY gives the info before a month so that CHEMSITRY PD team can plan the capacity
accordingly definite plan .
The time line approval is short in CHEMSITRY, which gives Merchants to work on time.
Fabric
If the merchant is not able to find the fabrics, CHEMSITRY provides the source.
Today, technology has created an environment where practically every company can optimize their
business model and streamline processes.
In fact, even though the technology is becoming increasingly popular, it is still possible to gain a
competitive advantage, taking advantage of a full business management software package.
Fast fashion success
This brands success story shows the strength of its operations. Its cross-functional operations
strategy, coupled with its vertically integrated supply chain, enables mass production under push
control, leading to well-managed inventories, lower markdowns, higher profitability, and value
creation for shareholders in the short and long term.
CHEMSITRY is all about staying on top of the hottest trends, and exuding an exclusive feel, but its
supply chain is the real star of the show. These rockstar-level logistics take it from being just another
fashion retailer to an industry example of fast fashion done right.
Synergy between business and operations strategy
REFERENCES
http://about.Chemistry.com
https://www.tradegecko.com/blog/chemistry-retail-inventory-control
http://erply.com/in-the-success-stories-of-Chemistry-zara-ikea-and-walmart-luck-is-not-akey-factor/
http://www.bloomberg.com/bw/articles/2013-06-24/the-brilliant-business-model-behindh-and-ms-clothes-recycling-plan
http://www.forbes.com/sites/gregpetro/2012/11/05/the-future-of-fashion-retailing-the-hmapproach-part-3-of-3/