Supply Chain Management at World Co., Ltd

Case Analysis, 2005

Supply Chain Management at World Co., Ltd.

Japanese consumers have a reputation of being highly brand name conscious. Although this trend still remains for some categories of people, especially young women who are sensitive to latest fashion trends, nowadays Japanese consumer are also starting to choose apparel that matches their tastes and life styles.

Japanese apparel manufacturers design and develop their own products, oversee a number of production subcontractors, and manufacture and market products under their own brands. Nearly all of these apparel manufacturers also function as wholesalers, selling products directly to retailers. Larger manufacturers even have their own boutiques within department stores, and some also operate outlet stores.

Japan has a mature apparel market, and simply offering low prices does not guarantee success. Manufacturers have to establish a brand identity. Products that offer what Japanese consumers are looking for in material, technical skill and styling will be accepted and will fare well in competition with others. The three factors that distinguish Japan from other countries are:

Delivery Schedules: Special attention should go to seasonal goods and fashion merchandise, especially when produced in lands without four distinctive seasons. It takes time to assemble raw materials, acquire accessory items and ship the finished merchandise. Sometimes the merchandise ends up getting delivered after the sales season is already over.

Production Lots: Because apparel production in other countries has historically been for export to Europe and the United States, production lots have always been large. This practice does not match up well with the preference of the Japanese market for small-lot orders, multiple product types and short-term production cycles.

Quality Control Standards: Many products can pass inspection in their home countries but sometimes fail inspection in Japan. European and American quality standards emphasize external appearance rather than the minute details of workmanship. However, Japanese consumers tend to demand perfection in the products they buy, and they judge products harshly for their flaws even if those flaws in no way take away from their utility.

World Co., Ltd. is a Japanese apparel manufacturer. The Group's principal activity is to operate women's apparel business; handling mainly men's and children's wear specializing in knitted garments. The Group is also involved in developing a nationwide retailing network based on the SPA (Specialty store retailer of Private-label Apparel) business model and pursuing vigorous structural reform of our wholesale business. Operations are carried out through the following divisions: Women's clothing, Men's clothing, Accessories and jewelry, Children's clothing and other.

The traditional fashion industry business model had various problems in terms of sustaining corporate growth. It made it difficult to ensure continuity in a fast changing business - in particular, to maintain momentum once a brand or operation expanded rapidly. This is attributed to the fact that creativity, which is essential element of the fashion business, is not universal. The biggest risk in business is change and the rapid pace of that change. However, risk is synonymous with opportunity. Success depends on whether a company can make an ally out of change.

How does World Co., Ltd. address this issue, maximize customer value and ensure continued growth? Realizing the need to respond flexibly to change and creating a process that can be universally utilized by a variety of different brands, World Co has pursued various structural reforms under the SPARCS (Super, Production, Apparel, Retail and Customer Satisfaction) concept. This concept originates with the customer and unifies the entire process from production to the retail outlet, to convert loss and inefficiency into value. Offering responsiveness to changing needs by constantly maintaining an interface with the consumers, the SPARCS model simultaneously maximizes customer value and improving productivity while integrating the entire management structure with operational platforms at its core, epitomizing World Group's management philosophy.

Since 1992, World has been promoting operational restructuring aimed at maximizing customer value and improving productivity based on SPARCS concept, which provides a concrete form for the realization of a customer-centric business platform that embodies both operational procedures and the decision-making process.

The SPARC model aims to minimize inventory loss and loss of sales opportunities by unifying and integrating the business process. The business model consists of the synthesis of the manufacturing, apparel and retail segments, conventionally separated in the fashion industry, while simultaneously enhancing responsiveness to changing customer demands. World Co believes that SPARCS is the ideal business model for the fashion industry, enabling the realization of customer value.

The SPARC model focuses on the production system, and is aimed at providing flexible and rapid response to customer needs by synchronizing the entire flow of product-related operations - from the development of materials to production, manufacturing of hand-sewn apparel products and distribution to the outlet - to the weekly operational cycle of outlet stores. Therefore, the lead-time is shortened and respective loss of sales opportunities and inventory in the marketing and production process are minimized. As a rapid response and close collaboration are the essence, the producers and suppliers involved are mainly located in Japan.

The SPARC model incorporates four platforms representing World's core operations - retail outlets, merchandising, development and production. This operational platform forms the core to which the personnel, management accounting and information support platforms are attached, making up the entirety that is World's management platform. The operational platform manages the whole business, from the retail outlets to the production sites, while the personnel, management accounting and information support systems contribute organizational assistance from the management side.

In other words, the SPARCS model represents the essence of World Group's management strategy, and its entire managerial resources are concentrated on promoting the implementation of the SPARC model.

Supply-chain management in World Co. Ltd. is based on strategies of SPARC model. It synchronizes a customer relationship, order fulfillment, and supplier relationship processes with the essential processes of its suppliers and customers

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