Supply Chain Management At

World Co., Ltd

Presented by (PGP group 04)-

110064 ABHISHEK KUMAR
110080 GAUTAM PRAKASH
110088 NISHANT GUPTA
110096 RAHUL KUMAR
110104 SAURAV SUMAN
110112 SWATI JAMUAR
110120 YASH GUPTA
 Q1)What is a SPARCS system? Examine the World’s inventory
and financial performance to understand how successful the
system was?
 SPARCS stands for Super, Production, Apparel, Retail, Consumer
Satisfaction.
 The basis for promoting World’s SPA (Specialty store Private-label
Apparel) Business.
 SPARCS business process enabled the World to monitor sales trends and
focus on consumer demand to maximize the efficiency of its store support
operations.
 Coordination between (supply chain) product planning, product
development, production and marketing allowed each are to make better
decision about production volume and lead time.
Inventory performance
 Lead time to replenish fashion apparel is two weeks and for new
product is six weeks.
 Additional Inventory at World were sometimes ordered five times in
a season (13 weeks) and the existing orders were modified nearly
every week.
 After every two weeks period, 20% to 70% of the SKUs was
changed based on the recent sales data.
Financial Performance
Inventory Turns Gross Margin
a year
World Co. (entire) 5 times 47%
World Co. (SPA 8.5 times 47.8%
brands)
US specialty 2.6 times 41%
retailers (avg)
GAP Inc. 5 times 45%
The Limited Inc. 5.6 times 37%
Q2.Examine the features of fashion apparel in Japan. How can a
company use its supply chain to compete in this environment?

 Apparel retailing in Japan was characterized by products with short

lifecycles and extremely uncertain demand.
 Fashion apparels required less size variety, Nippon Hinsutsu Kyokai
(“Japan Quality Association”) mandated standard size, labelling and
specification.
 Bottom size brands offered to younger women were offered only in two
to three size and tops were offered in single size.
 Few variation in store assortment due to less climate variation in
smaller geographic area of Japan
 Apparels being an innovative product have to face challenge by the fast
changing fast trend.
 Carries less display inventory
 Tried to impart a sense of buying “one of a kind” garment by customers
 Company can use a synchronised supply chain management system
 In which customer relationship, order fulfillment and supplier relationship
processes with its essential processes of its suppliers & customers
 SPARCS enabled them to focus on consumer demand, monitor sales trends.
 Coordination between product planning, product development, production
and marketing
 It can help the company make better decisions about production volumes &
lead times.
 Right Product-Right store-Right Time
 Speed & responsiveness will be vital for the World’s survival in the highly
competitive environment
 Each group were empowered to make decision pertaining to its brand that
best served their customer and quickly respond to market signals (Agility)
 World sought employees and recruited talented individuals who were
unafraid of change and able to motivate others through creativity.
Q3)Explain how the organization structure at world supports its supply chain
strategy.

• World maintained separate merchandising groups for each of the brands.

• Every six months, world’s strategy team reviewed each of the company’s
brands, competitors’ brands and other offerings in the marketplace.
• Terai felt that empowering each group to make decisions pertaining to its
brand allowed world to respond quickly to market signals.
• Employees with superior performance received promotions more often.
• It recruited talented individuals who were unafraid of change and able to
motivate others through their creativity.
Explain how world used its information systems as a key driver to
improve its supply chain performance .

 The system(updated in 1995) recorded data at the store/SKU level on daily

basis.
 Inventory that entered and exited the stores and the item returned by the stores
to the distribution centre was tracked and captured by the system.
 Employees had online access through their computers to both sales and
inventory wit a day’s time lag and can also downloaded easily.
 At the store level, stock counts were performed each month; bar codes of each
item in the store were scanned and compared to store’s computer record.
 To ensure maximum accuracy, inventory data were updated after each stock
audit with the actual inventory in hand.
 Q4)Identify salient aspects of World’s 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.
 It also coordinated product planning ,development, production and
marketing in order to make better decision about production volume and
lead time.
• 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.
• 2 week of replenishing lead time and 6 week of product
development delivery times.
• The retailers were linked to manufacturing and supply chain.
• Fast transportation is also an aspect.
Q5)Explain the method of initial demand forecast and aggregate
demand forecast at World.

Initial demand forecast ( made well before observing any sale) stages:-
 First stage involved deriving Aggregate demand forecast i.e., demand for all
SKUs put together was forecasted.
 In the second stage, different SKUs were ranked according to the likely demand
and all these ranks were later on combined with aggregate forecasts to derive
SKU level forecasts.
 Aggregate demand forecast:
It was based on two sets of calculations- Distribution side and category side
 Distribution side- was based on deriving sales forecast for each store. It was
derived by ‘Market Management System” (MMS). Historical sales data, growth
rates, seasonality, competitors’ action, and changes in macro-economic
conditions were taken into account to forecast sales growth at sore level.
 To forecast demand for a new store or a future store, company used data such as
the foot traffic generated by various locations, target customers who shopped at
those locations and competitive brands already offered at the location.
 Category side was based on aggregate demand forecast for each category. To
derive forecast for each category, product features such as the weight of the
fabric, whether the garment was knit or woven and the use of particular
fabrics and specific trims were considered.

DERIVING AGGREGATE FORECAST

a. Distribution Side Forecast
 Store sales plan for category in the sales period - $200,000
 Average unit price in the category - $100
 Number of stores in chain -110

Hence, aggregate forecast for category sales across the chain for entire period
(based on distribution side forecast) is
($200,000/ chain/ period*110 stores/ chain) = 220,000 units
$100/ unit
b) Category Side Forecast

 Aggregate (chain level) demand forecast for category - 45,000 units per
week.
 Duration of sales period - 4 weeks

Hence aggregate forecast for category sales across the chain for entire period
(based on category side forecast) is
45,000 units/weeks* 4 weeks = 180,000 units
 Q6)Explain the Obermeyer Method used at World for SKU level
forecasts.

 Obermeyer method is a process derived based on the practice at Sport

Obermeyer, a Skiwear manufacturer.
 This method was used to derive demand forecasts, and the associated
standard deviation of demand at SKU Level.
 World invites 20 store managers and assistants from its target market to
head quarters, where products are displayed in a room the same way as in
shops.
 Then, they are asked to rank the products.
 Based on this, the weighted mean and standard deviation of the SKU is
calculated.
 The ranking done by the representatives of stores with highest sales
volume is given the maximum weight.
 After that, they divide SKUs in A, B, C and D categories.
 “ABCD” ANALYSIS

 Based on the contribution of each SKU to the sales and category,

SKU level forecast was derived. Even after this lengthy process
managers revised sales plan as they receive latest sales data.
 In addition, Untitled Brand managers tested products in advance
of the actual season to identify sales patterns.
 Q7)Explain the Accurate Response Approach used for
inventory and production planning at World.

Accurate Response emphasized:

-importance of over and under stocking costs
-control costs through production planning
-response quickly to demand signal from market.
This approach captured in 3 sub-steps:
1. Materials Preparation- calculate material amount
2. First Order Quantity- 50% of SKU demand forecast
3. Replenish Quantity- forecast updated weekly based on early sales
data.
 Q8.Can the World’s 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.

 Yes, World’s supply chain management process (SPARCS) can be replicated

by other apparel companies keeping in mind certain points, such as:
 World Co., operated in Japan where the population was homogenous
therefore they required less variety.
 In Japan the climate also varied much less in comparison to other
countries therefore they were able to keep fewer variations in store
assortments.
 They carried less display in inventory so as to impart a sense to the
customer that they were purchasing one of a kind garment.
 Keeping standard inventory at World’s factory to guarantee quick
response
 Features that are worth replicating:
 World’s strategy team reviewed each of company’s brands, competitor’s
brand and other offerings in the marketplace, this allowed them to respond
quickly to market signals
 Data accuracy was close to 100% during regular season.
 Using disciplined forecasting method like initial demand forecast, aggregate
demand forecast, ranking individual SKUs (Obermeyer Method).
 Updating forecast during product life cycle.
 Testing products in advance of the actual season to identify the sales
pattern.
 Using accurate response approach for inventory and production planning.
 Materials Preparation
 1st order quantity
 Replenishment quantity
 Using simple support tools
 Features not worth replicating:
 Electronic Data Exchange – Sometimes transfer of shipment
information reached the stores before the product did.
 World co., couldn’t ensure the accuracy of sales and inventory data
during semi annual sales.
Some takeaways from Word’s supply chain system
 SPARCS system for supply chain
 Advanced information and communication methods
 Demand forecasting methods- since apparels are innovative products
so the Obermeyer Method was effective way of forecasting
 Inventory management system
 Negotiation with suppliers reduced risk and lead time.
THANK YOU