Site Loader
Rock Street, San Francisco

The apparel industry faces various supply chain challenges, many due to the fact that the major part of apparel manufacturing activity for the United States market has moved outside the country to low-labor-cost countries in the Far-East. Thus, due to long physical distances, apparel companies in the US are continuously challenged to quickly respond to changing trends, to reduce long lead-times, to execute collaborative product development with us pliers using effective communication and to ensure total supply chain usability.Moreover, fickle consumer preferences and shortening of the product life cycles make the apparel industry very challenging from a supply chain perspective. The Victorians Secret business provides a case study representative of most supply chain challenges faced by the apparel industry as a whole.

Victorians Secret is a multi-channel retailer selling its prod cuts through physical stores located throughout the United States, as well as through a collection of printed catalogs and an online shop.Its major product offerings lie in the category of intimate apparel, sleepwear, beauty, apparel, shoes and wimpier. For the purpose of this research, we focus on the intimate apparel segment of Victorians Secret. Intimate apparel represents the largest portion of Victorians Secret business and is sold through all the retail channels described above. Company History According to company lore, after a disagreement with his father in 1963 over the operation of the family store (Lisle’s), Leslie Weaker, then 26, opened the first Limited store in Columbus, Ohio, with $5,000 borrowed from his aunt.Leslie Westerner’s desire was to focus on moderately priced fashionable attire for teenagers and young women (Hover’s Online). The Limited went public in 1969 with five stores.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
Writers Experience
Recommended Service
From $13.90 per page
4,6 / 5
Writers Experience
From $20.00 per page
4,5 / 5
Writers Experience
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

Rapid development of large malls spurred Limiter’s growth to 100 stores by 1976. Two years later, The Limited acquired Mast Industries, an international apparel purchasing and importing company. In 1982, Limited purchased Lane Bryant (a plus size brand) and Victorians Secret (lingerie). In March 2002 the so called The Limited changed its name to Limited Brands.Limited Brands is currently focusing on its star players, Victorians Secret and Bath and Body Works. Company Strategy The company strategy has evolved over time. Prior to 1995, the company’s tragedy was primarily driven by a knock-off design, shop-and-copy system. During this period, the company’s merchants searched for forthcoming fashion designs, all over the world, especially in Europe, and produced merchandise inspired by these designs.

Their strategy involved speed sourcing of the products and selling them out even before the original brand could actually be launched.By the early nineties, there remained little competitive advantage in this approach, as the rest of the world had figured out similar ways to do business (Limited Brands Presentation, 2005), between 995 and 1998, the company strategically planned an overhaul, focusing on developing a distinct brand identity. The Limited became the largest employer of apparel designers in the world (as mentioned by a top executive). The company re-positioned itself to operate like an upscale consumer package company.With aspirations to be a large powerful brand that controlled its own retail distribution channels and seeking a consistent repeatable business, the company soon incorporated vertically integrated capabilities into its supply chain. In its quest to narrow its portfolio and create a distinct rand image, the company closed all of its poorly performing businesses, including the sale of its bank, and spun off or sold Firebombed and Fitch, Lane Bryant and six out of seven Henry Bended stores (Limited Brands Presentation, 2005).Financial Performance Victorians Secret Business Unit Within Victorians Secret, all three channels – Victorians Secret Stores, Victorians Secret Beauty and Victorians Secret Direct – are experiencing revenue growth as well as profitability. As of august 2013, Victoria ; s Secret stores sales increased 3% on top of a 9% increase last year.

Increase was primarily driven y strength in bras and panties. Victorians Secret Direct, the catalog and online business, also experienced growth. Direct enjoyed a 3% increase in sales in 2013.The growth came from improved clothing assortment at more competitive prices and growth of its intimate apparel category, especially of panties and sleepwear. Direct now represents approximately a third of Victorians Secret sales. A 2001 “share of drawer” analysis indicated that one- third of the typical customer’s lingerie drawer comes from the Victorians Secret brand.

Most of the drawer, however, consists of daily wear lingerie reduces, of which Victorians Secret is a relatively lower percentage.Thus, the trend for the new product introductions will likely be toward more pretty, yet every day, styles like the Body by Victoria sub-brand, a line of everyday intimate apparel. Victorians Secret Stores Victorians Secret (VS.) is the most profitable as well as the biggest revenue generating brand for Limited Brands.

Its net sales for the year 201 3 were $ 271 million correspond of 16. 7% of the total % of sales. Victorians Secret comprises 3 sub-businesses: Victorians Secret Stores (VS.), Victorians Secret Beauty (VS.

) and Victorians Secret Direct (VS.) network of stores.VS. sells VS. lingerie, sleepwear as well as 3rd party brands in the categories Of apparel, shoes and accessories through its online store and catalogs. This case study focuses on Victorians Secrets lingerie business.

Products Victorians Secret sub-brands or collections can be said to focus on a central theme. For example, the most recently introduced Victorians Secret sub-brand called ‘Pink” is a new collection of intimate apparel aimed at a 19 year old woman (Limited Brands Interview, 2005), and the ‘Victoria” is the new languorous fragrance launched that build on its fragrance business.Each of these collections is offered in a variety of different styles based on the extent Of coverage given by the bra, the configuration Of the bra Strap or even its entire silhouette. Overall, the products carried by Victorians Secret Stores can be divided into 3 broad categories: Launch Fashion Products, Non-Launch Fashion Products and Basic Products. About 60% of units in store are basic, 25% Nan-launch fashion and the remaining 15% are launch products. Basics consist of products which sell all year round and have styles and colors which can be old in all seasons and for the most part, never go out of style.Beige Dream Angel’s bras, white and black bras from the Body by Victoria collection are examples of basic products. Fashion products are loosely defined as items with styles, colors or silhouettes which typically sell for one season (1 season = 6 months) and then shift to regular replenishment.

Launch products are fashion items which are heavily promoted and may even announce the introduction of a completely new category. These products involve special planning and are typically launched novo times per year, in spring and fall. An example of a highly successful recently launched product is the new The [email protected] company also engages in about fifteen annual reconfigurations of its stores also termed as “florets”. A florets may or may not involve a launch. Customer Segments Victorians Secret Stores is trying to be the dominant, young, sexy and sophisticated lingerie and beauty brand in the world. Victorians Secret serves a wide range of customers with varied chirography’s and demographics. On a household income scale, the VS.

customer loosely lies between 30-75 percentile ranges. With presence in almost all major malls in the UnitedStates, VS. aspires to become a destination brand, which means that a customer would be tempted to visit the malls just to see the VS. store. With the [email protected] sub-brand, the space Victorians Secret is trying to fill as “young and casual”, a category which had been previously overlooked by Victorians Secret. Pink Was developed in response to the fast growing Firebombed & Fitch brand, which was once a part of The Limited. Out of the three key words describing the overall target customer above, “young” is the most important. The goal is clearly to target a young demographic.

F-anally, the company sees VS. as an “aspiration” brand, and as such, older women may be encouraged to buy Pink products as well, as a 40 year old is likely to aspire to look like 30 rather than to look. Demand Forecasting and planning On the demand planning and forecasting front, the Catalog and Web businesses are governed by separate strategies. This is primarily because the drivers of demand for the two channels are different. For the catalog, the demand forecast is mapped against the curve of the product life cycle from the point the catalog is mailed to when 98% of the product is sold.

Moreover, recirculation of printed books is the primary driver of sales. Within a catalog, dynamics related to location of the display of product, and to the model selected for the display, are sales drivers. Once Direct has visibility as to the actual product layout of the catalog, it re-forecasts the demand several weeks before it is mailed, and subsequently adjusts its purchase orders. For the web, on the other hand, the forecast is based on individual item performance on an hourly, daily or weekly basis. One of the key metrics that Direct uses to monitor its sales is given by the Net-Growth Ratio.This ratio measures for very SSL of demand generated, how much was generated for sales after accounting for returns, cancellations and failure to fulfill back-orders. Victorians Secret Direct, especially the catalog business, has additional levers in the way that offer a wider breadth of fashion assortments.

This is because the marginal costs of carrying fashion versus basics product in Direct is governed by different dynamics in comparison to stores, as the stores have huge fixed costs due to real-estate. Moreover, it is possible for Direct to leverage assets between the catalog and web operations such as common photography.About 400 million catalogs are mailed in a year; approximately one fresh book a week having anywhere between 60 toll 80 pages and including between 250 and 600 items. About 95-98% of the Direct products are sold in US.

Semi-annual sales are tied together with Victorians Secret Stores and a sale period is comprised of 8 weeks, requiring approximately 8 mailings during this time (Limited Brands Interview, 2005). Last, but not the least, if a product doesn’t perform well in one media, it is not introduced in the other. Sourcing and Production Victorians Secret Direct utilizes the Mast network, as do the Victorians SecretStores. Direct is able to maintain accurate data about customer preferences and buying patterns due to the online nature of its business. It is therefore able to quickly translate this information to its vendors, making it much more responsive to changing customer needs than the Victorians Secret Stores. This allows Mast to adopt a sourcing strategy based on the vendors’ ability to deliver smaller and more frequent orders. Smaller orders mitigate risk of over-stocking and frequency allows the company to react closer to the demand and to get the right product out to market in time.

Distribution and FulfillmentOn the distribution front, Direct uses its own distribution center in Columbus, Ohio, separate from the Victorians Secret Stores’ distribution center. Both web and catalog share this DC. The process of picking in distribution centers is different from stores, as these products are picked as single items based on orders, whereas in the Victorians Secret Stores’ operations the products are picked and shipped in cases. The average time it takes to get to customers is about two days.

The online business is well integrated to inventory systems at the DC level, but is not integrated with Victorians Secret Stores.With only about 15-20% of overlap in SKU between the stores and Direct, this is not an immediate need (Limited Brands Interview, 2005). Direct keeps a close watch on its inventory and maintains fairly accurate item levels as well as order level data.

For example, the current percentage of service level that Direct operates shows an 88% in stock and 12% back-order at the item level. This level of data integrity allows Direct to be much more responsive than Victorians Secret Stores and as a result allows them to make dynamic changes to order quantities, prepares and size-curves based on latest selling patterns.In contrast to placing large orders with Mast, as do Victorians Secret Stores, Direct can thus place smaller and more frequent orders. Moreover, Direct doesn’t require excess inventory for the purpose of its floor and window displays as do Victorians Secret Stores. Goals and Challenges As a part of the INSIGHT project, Victorians Secret Direct is working closely with its production team to create a library of fabrics and raw materials to make a choice matrix such that lead times can be reduced dramatically. They are also a part of the same initiative to reduce concept to market lead times from 72 to 40 weeks.The challenge for the company is in the area of returns.

Currently, returns amount to approximately 25% of demand and are primarily driven by the Swim and Apparel categories; however, a considerable part of returns are put back in stock. These are products which are in reasonable condition to be resold. The return rate for lingerie is negligible. One of the challenges that Victorians Secret faces overall is in the category of fringe sizes.

Fringe sizes are the ones which are on the tail-end of the demand curve and whose demand patterns are harder to predict.Customers looking to buy these sizes typically eel the need to try them on before purchase. If these products are carried by Direct, there is potential for reduced customer service levels. On the other hand, if Victorians Secret Stores decides to carry these sizes to provide better customer service, they will be faced with challenges of less predictable demand patterns for these sizes, leading to over or under stocking of product.

Therefore, the company has to work a delicate tradeoff been providing better customer service levels and the subsequent financial impact of this service.A survey about multi-channel retailing tactics used by retailers, inducted by Forrester research, showed that 87% of retailers allowed purchases made online to be returned to stores. Limited Brands fully integrated Victorians Secret with its Direct business. This involves large logistical challenges for the brand but have a positive impact of customer satisfaction levels as the customers are able to return goods purchased online to Victorians Secret Stores, and are even able to order products in stores which they purchased online and have them delivered to their house with no additional cost.Victorians Secrets Supply Chain Framework Victorians Secrets business strategy has evolved from a shop-and-copy system to a branded concept, that of selling innovative, technologically advanced products at reasonably high profit margins.

The Victorians Secret brand is positioned to be the dominant, young, sexy and sophisticated lingerie and beauty concept, targeting young customers who appreciate the value of possessing innovative lingerie. At the same time, the company is somewhat risk averse.It does not rely solely on its fashionable bra launches for all of its sales. It distributes risk by having a mixed assortment of fashion and basic goods. However, having this mixed assortment adds complexity, in that the brand has to operate two supply chains; one for each of these types of products. Below I underlined the operating model, operational objectives and important tailored business activities that drive sustained competitive advantage within the Victorians Secret supply chain and align with the overarching business strategy.

Complementary Operating Model The operating model at Victorians Secret Stores is to achieve desired brand recognition through innovative product development, glamorous bra launches and high shelf availability of its products. Most of the Victorians Secret Stores’ new product introductions are offered in both fashion (items with less predictable demand) as well as basic (stable demand) styles. This mix of fashion and basic items helps Victorians Secret to distribute risk, to ensure profitability and to offer compelling value to customers.The company identifies that there is not a single all-in-one supply chain solution for both of these categories of products and therefore it maintains two different types of supply chains for each. The supply chain for Victorians Secrets fashion items is driven by “Speed-to- Market” to ensure responsiveness. This is reflected in the company-wide initiative to shorten its “Concept-to-Market” calendar. This supply chain is further governed by a sourcing strategy that requires a set of suppliers with an excellent record of product innovation, value-adding capabilities and no minimum volume requirements.

Due to the pronunciation of speed over low labor cost, these items are made in the most capable factories in the world, wherever they may be, and are consistently air shipped to the company’s distribution center in Columbus, Ohio. On the other hand, the supply chain for Victorians Secrets basic items is driven by factors like asset utilization and supply chain efficiency. As a result, basic goods are manufactured in vertically integrated factories which provide close control over capacity utilization and productivity. These factories run at full capacity and provide economies of scale (Limited Brands Interview, 2005).Mast holdings have an equity stake in two of Limited Brands’ largest factories in India and Sir Lankan. This is a strategic decision in order to maintain tighter control and better supply chain visibility. Operational Objectives The help of Limited Logistics Services (LIST), Victorians Secret has drafted a Service Level Agreement that defines various performance metrics for revives to Victorians Secret Stores.

This agreement also defines the role of the Victorians Secret Stores in successfully meeting these objectives. The performance metrics are divided into three broad categories as defined below.Customer Response These metrics are customer-focused and customer-facing. They include a set of distribution metrics as well metrics related to store performance such as responsiveness, floor-set, business priorities, new stores, Value Added Services (VASS), meeting cadence, reporting and air shipments. Efficiency These are internal metrics.

They are productivity and cost-related and include set of metrics at the manufacturing as well as distribution center level such as Auditing/Cycle Counts, Through- Put, Network Productivity, DC Metrics, DC Throughput, and Store Throughput.Asset Utilization These metrics are also internal-facing and largely focus on maintaining economies of scale. They include: Capacity Utilization and Inventory Turns.

Objectives Balancing Framework The focus placed on each of the metrics mentioned, varies by whether the product is basic or fashion. For example, in the category of basic products, asset utilization metrics like capacity utilization and efficiency objectives like apply chain costs and productivity carry more weight than responsiveness.The factories making these products run at full capacity with two shifts per day to efficiently deliver these products to market at minimum possible cost of production. These products generate moderate margins for the company in comparison to the fashion products. On the other hand, in high-margin product categories of fashion goods, particularly in highly promoted launch- related fashion goods, which are most often a result of innovative product development and have relatively short-product-lifestyle of just one season, expensiveness metrics are seen to carry more weight overall.

The focus in this model is to increase in-season product availability to reduce lost sales and maximize margins. Tailored Business Activities At the operational level, there are a set of three tailored business activities that provide significant competitive advantage to the Victorians Secret supply chain and place Victorians Secret in a unique position in comparison to its competitors. These activities are aligned to the overarching strategy, which is to deliver an assortment of innovative fashion products and less risky basic reduces.The first tailored activity emanates from the company-wide open innovation model.

The decentralized design culture within Victorians Secret adds unique capabilities to its supply chain design. Product Innovation can come from the supplier, from in-house development or through design inspirations from external concepts. This creates the possibility of inter- company operating ties with outside suppliers. For example, if Limited Design Studios in New York initiates a design concept, it can go to a preferred supplier to be further developed and even changed.This relationship during he design process adds flexibility, which is hard to replicate.

The second tailored activity has to do with the sourcing model that Limited has adopted as a whole. The presence of Mast Industries as a wholly-owned subsidiary of Limited Brands is of tremendous value to the company. Mast carefully selects its vendors based on capabilities to manufacture and deliver fashion versus basic products. Mast works with a set of vertically integrated factories as well as raw material suppliers to create a product that is hard to replicate.

Vertical integration helps the company to control the production process room fiber to garment. On one hand, this leads to greater manufacturing efficiency required for producing basic products, which generate relatively lesser profit margins than fashion items. On the other hand, vertical integration also helps to speed the product development process essential for new and fashionable products. Finally, the role of Limited Logistics Services’ (ALLS) “shared service model” in the smooth operation of its supply chain is indispensable.As mentioned earlier, the Service Level Agreement with each of its brands, including Victorians Secret, not only defines the detailed performance metrics but also fines the role of each brand in order to carry out the objectives on time. ALLS consistently benchmarks itself against outside logistics providers and has been able to provide higher service levels to its brands at competitive costs.

The dynamic ability Of ALLS to constantly evaluate and re-evaluate its performance against external agencies, helps Victorians Secret to stay ahead of the competition.In its logistics design, ALLS incorporates the fact that whether a product being delivered is fashion or basic. For example, in most cases, fashion lingerie is air-shipped from Asia to Columbus, OH and basic reduces are ocean-shipped. This is because the fashion products, which have relatively higher margins, are less expensive to transportation costs per unit. Fashion and launch products may also have to go through a customized value-added service process in order to cater to the requirements of the individual stores to which they are shipped.

These value-added services are performed at the DC level and the company claims to perform them more cost effectively and efficiently than an outside third party logistics provider. Market Monopolistic competition is a form of imperfect competition where many omitting producers sell products that are differentiated from one another (that is, the products are substitutes, but, with differences such as branding, are not exactly alike). In monopolistic competition firms can behave like monopolies in the short-run, including using market power to generate profit.

In the long-run, other firms enter the market and the benefits of differentiation decrease with competition; Textbook examples Of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large ties, which the company Victoria s Secret fit perfectly. The “founding father” of the theory of monopolistic competition was Edward Hastings Chamberlain in his pioneering book on the subject Theory of Monopolistic Competition.Joan Robinson also receives credit as an early pioneer on the concept.

Unapologetically competitive markets have the following characteristics: There are many producers and many consumers in a given market, and no business has total control over the market price. Consumers perceive that there are non-price differences among the competitors’ products. There are few barriers to entry and exit. Producers have a degree of control over price.

Post Author: admin


I'm Eric!

Would you like to get a custom essay? How about receiving a customized one?

Check it out