VF Corporation is an American worldwide apparel and footwear company founded in 1899 and

headquartered in Denver.

The company was established first as Reading Glove and Mitten Manufacturing Company in
Pennsylvania in October 1899 by John Barbey and a group of investors.

VF CORPORATIONS In 1914, the company expanded into lingerie and in 1917, changed its name to Vanity Fair.

– ABOUT THE In 1969, Vanity Fair entered the Jeans Business through the acquisition of the Lee company.

COMPANY
By 1983, jeans accounted for 75% of the company’s $1 Billion in Sales.

In 1984, the company embarked on a series of acquisitions aimed at expanding the jeans product line
and diversifying into new areas by acquiring Blue Bell (Owner of the Wrangler, Rustler, and Girbaud
Jeans Brands), Jantzen (Sportswear and Backpacks) and Redkap (Occupational Apparels and
Uniform).
In 2004, company made a significant shift in Strategy as they transform from Basic Apparel company
to Global Lifestyle apparel company by acquiring brands such as The North Face, Vans, Nautica, Reef,
Kipling, Majestic and many more.

In 2008, VF Corporation had total revenues of just over $7.6 Billion.

CASE SYNOPSIS
• From the past few decades, supply chain strategy in apparel was focused on chasing low cost labour from one
country to the next. Today, apparel is produced everywhere in the world and therefore, it is very hard to lower
the labour cost.
• Though there are scope of cost savings depending on the way the supply chain is managed.
• VF currently procured apparel both from its own plants and from a large network of suppliers.
• There are both advantages and disadvantages of outsourcing. Like its competitors, VF’s outsourcing strategy
emphasized flexibility. The outsourcing strategy allow VF to shift production among suppliers in different
locations in order to optimize costs and to respond to changes in exchange rates, tariffs, and other cost factors.
• Though the lack of coordination and trust between suppliers and apparel companies led to higher inventory and
long lead times.
• To increase the responsiveness, Chris Fraser, President, Supply Chain for VF Brands, proposed another strategy
called “Third Way” Sourcing strategy because it represented an alternative to both in-house manufacturing and
traditional sourcing. The idea was to create a true partnership between VF and the supplier.
• Now, Chris Fraser has to decide whether the “Third Way” Strategy should be implemented more extensively as
company move into global lifestyle apparel?
 • The present operation strategy of VF comprises of both internal
manufacturing and outsourcing which is unique strategy with respect to the
apparel industry.
• Till early 2000s, the entire manufacturing of VF was manufactured in their
Q1) HOW HAS VF own factories. VF pursued a vertically integrated manufacturing strategy in
BRAND’S jeans with majority of factories located in USA.
OPERATIONS • As they planned to move into Global lifestyle apparel in 2004, they planned
STRATEGY to change their operation strategy.

EVOLVED OVER • VF’s internal manufacturing is unsuitable for newly acquired lifestyle brands
and therefore, VF started outsourcing them.
THE TWO • The significant reason for outsourcing was that outsourcing to low cost
DECADES? HOW countries around the world raised companies’ margins, as garment production
WELL ALIGNED was generally labor intensive and had low barrier to enter. It also saved
companies costs like transportation and taxes by direct productions in sale
WAS THE target countries, especially with restriction of quota and tariffs.
OPERATIONS AND • By 2009, 30% production was in-house from their 40 plants and rest from
BUSINESS independent sources. VF used outsourcing 100% for its lifestyle apparels,
footwear and backpacks. VF had relationship with more than 1600
STRATEGY? contractors and 30 distribution centers.
• Thus, the changes in Operational strategy of VF was primarily based on
changes in business strategy as well as based on variation on market trends.
All changes are implemented focusing on the cost benefit analysis.
Q2) HOW WOULD YOU CHARACTERIZE VF’S VARIOUS
PRODUCTS/BRANDS IN TERMS OF CRITICAL COMPETITIVE
PRIORITIES? WHAT ARE THE IMPLICATIONS FOR OPERATION
STRATEGY?

VF Brands

Heritage Lifestyle
Business Business

The outdoor Contemporary

Jeanswear Image wear and action Sportswear Brand
sports Coalitions
 • The competitive priorities for VF vary across coalitions, and across
different geographies.
• The heritage businesses range of products was complex, with the
Jeanswear coalition alone having over 100,000 SKUs.

HERITAGE • VF has traditionally had a mix of in-house and outsourced

manufacturing operations for their heritage businesses.
BUSINESS • Low cost and rapid replenishment were key for these segments.
• There were also varying requirements regarding price and product
attributes across different markets. For instance, Wranglers jeans
had different cuts, design and fit in the European market than in
the US due to different tastes and fashion preferences of
consumers and were also priced much higher ($60-80 for a pair,
compared to $16-30 in the US).

• The lifestyle businesses featured several acquired brands, that

LIFESTYLE appealed to consumers globally.

BUSINESS • Variety and Design is more important than price.

• This means that the supply chain must be very responsive in terms
of providing the customer with the latest trends.
 • The “Third Way” of sourcing can be looked as a mix of outsourcing and in-
house production.
• The aim is to solve the coordination problem and trust issue by increasing
Q3) WHAT IS YOUR the term of contract with suppliers.
EVALUATION OF THE • Traditional supply chain meant expanding the supplier base to low cost
“THIRD-WAY” SOURCING locations all over the world with short term contracts with lengthy
negotiation processes all of which added to high lead times. One way out of
STRATEGY PROPOSED IN this was to go for full integration but that goes against VFs own business
THE CASE? FOR WHICH strategies of capital deployment in retail and design.
KIND OF • The Third Way mostly looks at improving efficiency while keeping the
PRODUCTS/BRANDS supply chain intact. VF believes that they can leverage their technical know
WOULD YOU PURSUE how to improve the production processes of the suppliers and build better
“THIRD-WAY”? FOR relationships through longer contracts which will reduce both inventory and
WHICH TYPES WOULD lead times.
YOU PURSUE • VF should use Third Way outsourcing on Lifestyle brands which are more
fashion sensitive. As mentioned in the case, it takes almost a year to start the
TRADITIONAL SOURCING
design from scratch and to put it up on a shelf. This should be made more
AND INTERNAL responsive.
MANUFACTURING? WHY? • Since VF already had expertise in Jeanswear and still had manufacturing
plants which made Jeans, it makes for sense to stick to Jeans manufacturing
as a fully integrated business while using the third way to improve the
efficiency in the supply chain of their other product lines.
Q4) WHAT ARE THE
IMPLICATIONS OF THE It emphasizes the affect of
STATEMENT MADE BY THE Globalization and competition.
HEAD OF OPERATIONS
THAT “TODAY, APPAREL IS
PRODUCED JUST ABOUT
EVERYWHERE ON EARTH,
AND WE HAVE BASICALLY It is hard to reduce labor cost
RUN OUT OF NEW “LOW furthermore.
COST” PLACES TO SOURCE
PRODUCTION UNTIL, OF
COURSE, PENGUINS LEARN
TO SEW. WE HAVE TO FIND Therefore, if we are looking for
COST SAVINGS BY HOW cost savings, we should find
WE MANGE OUR SUPPLY ways to optimize the supply
CHAIN.” chain.
THANK YOU