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. What is SPARCS system?

Examine Worlds
inventory and financial performance to
understand how successful the system was.

Sparks system meant (super production apparel retail


consumer satisfaction) that had been intoduced in january
1992 to speed response in supply chain
Sparks system became the basis for promoting worls spa
business. It enabled world to focus on consumer demsnds
to maximise the efficency of its store support operstions

CONTINUED

The system was quite successful as the company


as a whole achieved 5 inventory turns a year and
gross margin of 47%
Worlds private level spa brand which used sparks
system achieved 8.5 as inventory turnover and
gross margin of 47.8%

Examine the features of fashion apparel


retailing 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
Company owned stores were owned by apparel
company like worlds and were not part of mall or
departmental store
Departmental stores provided only the sales venue
while inventory risk and decision rights for
assortment quantities and pricing resided with
vendors.
Japan required less size variety than the united
states

CONTINUED
Since apparel has short life cycle, so the more
it is displayed the more sales would be
generated
Japan retail stores carried less display inventory
than their American counterparts
So dont keep it in drawer
The department store typically received a
substantially portion of the retail sales
generated as high as 40%
So the company should focus more on
departmental store

Explain how the organization structure at


World supported its supply chain strategy.
Explain how World used its information
systems as a key driver to improve its supply
chain
performance
Worlds
nearly 40 brands targeted a distinct set of customers

ensuring that their brands maintained unique identities


It maintained separate merchandising group for each of the
brands
Every six months worlds strategy team reviewed each of
the companys brand and competitors brand
The individual brand teams had rights to make
merchandising decision because TERAI felt that
empowering each group to make decision pertaining to its
brand allowed world to quickly respond to the market
signals
Incentive system included annual bonuses, employees with
superior performance received promotions more often

continued

The information system recorded data at the store


level on daily basis.
Inventory that entered and exited the stores were
tracked and captured by the system
All the worlds employees had online access through
their computers to both their sales and inventory data
TERAI was confident that worlds data accuracy was
close to 100% at the store level stock counts were
performed each month
To ensure maximum accuracy inventory data were
updated after each stock audit with actual inventory
on hand

Identify salient aspects of Worlds


manufacturing process that helped World
achieve the desired level of responsiveness in
its supply chain.

Worlds manufacturing process included approximately 20 vendors on regular


basis
and maintained a number of relationship with manufacturers through a
network of business affliations
Fabric inspection was conducted at the factory the factory was informed in
advance when fabric would be arriving and how much they had to inspect
Factory used a machine to cut the fabric using computer aided design
Merchandisers maintained open lines of communication with the factories
about their production needs so that the factories could adjust their
production accordingly
Measurements and patterns were sent electronically from headquarters to
the factories. The technical designers and pattern makers at the factory
made sample garments using information they were given , the pattern
makers developed detailed instructions for the line workers to circumvent
manufacturing problems.
If any changes was to be made they changed the pattern in computer
system and sent it to the corporate office for approval

continued
The factory maintained small batch sizes to
allow production workers to undertake
several different operations and relieve
boredom
Also major new collections were introduced
annually augmented by new product
introductions every two weeks
To preserve brand focus world ensured that
its designers identified with the target
customer

Explain the method of initial demand forecast


and aggregate demand forecast at World

Initial demand forecast for each product is derived in


two stages
Two different approaches are used to derive aggregate
forecast : A distribution side forecast and A category
side forecast
Second stage involves ranking the different SKUs
according to likely demand and combining these ranks
with aggregate forecast to derive SKU level forecast
Aggregate Demand Forecast: It is based on two sets of
calculations started from distribution side.
Another set of calculation started from category side
and was based on aggregate demand forecast for each
category

Distribution side forecast is derived by


market management system
MMS takes historical sales data growth
rates, seasonality, competitor actions and
changes in macro economic conditions into
account to forecast growth in aggregate
store sales
Category side forecast

Explain the Obermeyer Method used at World


for SKU level forecasts.

Obermeyer method- this method was used to derive the demand


forecast and the associate standard deviation of demand at the
sku level
World always organized obermeyer vote meetings to which
approximately 20 store managers and assistants were invited
Assistant Store managers were included because many store
managers exceeded the brands target age
Store managers considered manner of dress fashion sense and
understanding of fashion sense and understanding of target
audienece in nominating assistants to take part in vote meetings
Dress jackets were shirts pants were placed on hangers and tops
were folded in showcases
The women were able to judge the fabric and evelaute relative
to the requirements of the coming season

Continued

As they moved through the new collection the women


recorded their thoughts on the ballots provided each ballot
sheet had a line drawing of the garment a box for overall
rank
Garments were given overall rank 1-7
In addition colors in each style were ranked according to the
preference and feed back about the fabrics overall look
Based on the voting process a weighted mean and standard
deviation score was derived for each sku
The products were first sorted according to the mean score
The standard deviation was used as second index in sorting
products

Explain the Accurate Response Approach used


for inventory and production planning at
World.
Accurate response approach emphasizes the
importance of overstocking and under stocking costs
and recommended controlling these costs through
production planning based on inventory risk while
responding quickly to the demand signals from the
market
Material Preparation: The process projected quantities
from the SKU level forecast to calculate the amount of
material that would be needed during the season
With these material demand forecast merchandisers
were able to negotiate volume discounts and overall
prices with fabric vendors
First Order Quantity :

CONTINUED
Replacement Quantity : In cases where a
popular styles are sold out there is not
enough material to produce enough
replacement quantity from merchandisers
try to have more garments using additional
fabrics or design new styles with
characteristics of best selling items
These decisions are made in an order
meeting that is held every week and is
attended all the merchandisers in a brand

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

Forecasting Aggregate
Demand
Category Side

Forecast

Distribution Side
Forecast

Store sales plan for


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

Example: store sales =


$200,000, average unit
price = $100, number of
stores = 110

($200,000/store x 110
stores)/ $100/unit =
220,000 units

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

Choose larger of Distribution


and Category forecast
Max (220,000, 180,000) =
220,000