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What is SPARCS system???

Super, production, apparel, retail,


consumer satisfaction
Introduced in the company in January 1992
to speed response in the supply chain
Enabled to monitor sales trend and focus
on consumer demand to maximize the
efficiency of the companys store support
operations
Basis for promoting SPA (special store private label
apparel) business of world co. Ltd

How successful the system was?


Company name

Inventory turns a
year

Gross margin

World co. (as a


whole)

47%

Worlds private label


SPA brands

8.5

47.8%

U.S. specialty
2.6
retailers of soft goods

41%

Gap Inc.

45%

The Limited Inc.

5.6

37%

Markdown
World Co.
American Womens Apparel Store

11% of total sales/year


31.8% of total sales/year

Features of fashion apparels


retailing in Japan

Products have short lifecycles and extremely


uncertain demand as elsewhere in the
world.
Japanese retail stores carry less display
inventory to impart a sense of uniqueness.
Less variety due to homogenous population
and less climate change
Japanese women approx. 25-29 years old
Bottoms frequently offered in only two or three
sizes, tops and dresses in only a single size.
Japan is a smaller geographic area
much less climate variation.
Very fast changing fashion trends.

How can a company use its supply


chain to compete in this environment?
Characterized by products with short lifecycles
and extremely uncertain demand
Having the right product, at the right store, at
the right time
Less size variants and fits were required in Japan
due to closed society and less climatic variations
Lower inventory levels reinforced the idea that
customer was purchasing a unique item
Try to impart a sense that the customer was
purchasing a one of a kind garment

Explain how the organization structure at


World supported its supply chain strategy?
40 brands targeted a distinct set of customers
World maintained separate merchandising groups for
each of the brands.
They operated independently but learning is high
Every six months , Worlds strategy team reviewed
each of the companys brands, competitors brands
and other offering in the market
Able to keep their brands fresh and exciting
Each group was empowered to make decisions
pertaining to its brand allowed World to respond
quickly to market signals
Young and talented employee

Explain how World used its information


systems as a key driver to improve its
supply chain performance.
Data recorded at the SKU (Item/Size/Color by
store) level on daily basis
Real time information
Inventory that entered and exited , all were
tracked and captured by the system
Accuracy was close to 100% during the
regular selling season
Semi annual sales at a few larger department
stores where items returned to the
distribution center are marked 50% off

Identify salient aspects of Worlds


manufacturing process that helped World
achieve the desired level of responsiveness in
its supply chain?
Domestic factories (20 vendors) focus on quick
response rather than low cost.
Reserves capacity each season without having
actual purchase orders or even actual styles
finalized
Measurement and patterns sent electronically
from headquarter to factories. Include specific
instructions for the line workers.
Fabrics, due to the long lead time, are
purchased in advanced.
Having the right product, at the right store, at
the right time

Designers identification with target customers


Widely varied store sales between different
locations
Close collaboration of design and manufacturing
Small Batch Production
Fast transportation
Short Lead Time
CAD was used to cut the fabric
Advance information to factories about fabric
and inspection

Method of initial demand forecast


and aggregate demand forecast at
World

Initial demand forecasting


It is made for each product, made well
before observing any sales .
It was derived in two stages.
a)Derived aggregate demand forecasts
b) It involves ranking the different SKUs
according to likely demand, and
combining these ranks with aggregate
forecast to derive SKU-level forecasts.

Forecasting Aggregate
Demand
Category Side

Distribution Side
Forecast

Store sales plan for


category in the sales
period
Average unit price in
the category
Number of stores in the
chain

Forecast

Aggregate demand for


category (per week)
Duration of sales period

Example: 45,000
units/week, 4 weeks

45,000/week x 4 weeks
= 180,000 units

Example: store sales


= $200,000, average
unit price = $100,
number of stores =
Choose larger of Distribution
110
and Category forecast
($200,000/store x 110
stores)/ $100/unit =

Max (220,000, 180,000) =


220,000

The Obermeyer Method used at


World for SKU level forecasts

Meeting of approx 20 store managers and assistants (all


women aged 25-29)

twice each for Autumn-Winter (June and August) and SpringSummer (December and February) collections
Room set just like the stores, price tags are affixed to finished
samples.
Can try on the clothes (just like a customer would).

Managers record their thoughts on ballots, judge overall


rank (1-7), and ranks of fabrics and colors.

4 (noncommittal) are not permitted


This allowes the rank of the fabrics/colors as well as the styles,
often find better matches of fabrics/colors and styles.
Weighted mean and standard deviation of rank derived.

Use an ABCD analysis. A SKUs are


the top 10% and expected to
produce 40% of sales, B next 20%
of SKUs represent 30% of sales, C
next 30% produce 20% of sales, and
D 40% of SKUs that produce 10%
of sales.
So if there are 400 SKUs in the
category:
(220,000 x 40%)/(10% x 400) =
2,200 units/A-SKU

Explain the Accurate Response Approach used


for inventory and production planning at World.
Accurate Response emphasized the importance of
overstocking and under stocking cost.
Also recommend controlling these costs through production
planning based on inventory risk.
Accurate Response Approach was captured in three sub-steps (a) Material Preparation This process projected quantities
from the SKU level forecast to calculate the amount of
material that would be needed during the season.

First Order Quantity A portion (roughly 50%) of the demand


forecast for each SKU is ordered .
Replenishment Quantity Untitled merchandisers watched
sales closely once the product was launched. The company
updated forecast every week during the season, placing
additional orders as necessary.

Can the Worlds supply chain processes be


replicated at other apparel companies? Identify
features of the supply chain that are, and are not,
worth replicating by other companies?
World Co.s system can be replicated at other
firms given sufficient resources.
World Co. uses advanced communications
methods, such as online inventory management.
These information systems require highly trained
employees and sufficient capital.
A firm that is just starting out, or does not have a
lot of income may have difficulty meeting these
requirements

World Co.s success in Japan canbe linked


directly to its effective use ofthe supply chain.
Advanced information and communication
methods keep factories in direct contact with
the corporate office.
Dynamic demandforecasting allows for
effective responsiveness.
Inventory management and supplier
negotiations minimize lead times as well as
risk