Vf Case Study

Rohini Kishna

Professor D. Wong

GSCM 520

June 12, 2015

VF Case Study

Problem Statement

In 2009, VF Brands was the world’s largest publicly owned apparel company. The great Recession of 2008-2009 was causing turmoil around the world and threating the financial stability of every company.  VF Brands foresaw that they would have to make changes to their supply chain and start finding cost saving instead of chasing low cost labor from country to country in order to continue to have a successful strategic vision to move with the tide of change coming to the apparel industry. Many apparel companies strive to develop demand driven innovation to differentiate themselves from competitors, which means they need to cut lead times^[1]. This change was primarily going to focus on sourcing from markets with low labor costs and to increase efficiency with the supply chains.

Analysis

VF has been in the apparel industry for more than 125 years and is in a red ocean environment. According to a benchmarking study completed in earlier 2000’s, VF’s internal manufacturing plants were among the very best in the world in terms of quality, efficiency and reliability. Compared to industry average, the time needed to produce a garment in a VF-owned factory was much shorter so even though they are in a red ocean they are actually striving and able to sustain their growth. This success was reflected in the responsive supply chain that was developed to handle continued growth.

Applying Fisher framework, VF has a responsive supply chain and can be flexible with their innovative product.

VF’s core competencies are operational efficiencies and merchandising know-hows.  By leveraging their competencies by looking at the lead times where VF - owned and operated Mexico sourcing - days lead-time is 17 compared to Packaged and sourced in India/Morocco, which is a whopping 75 days lead-time. Their total cost is higher at $7.48 compared to $7.05 respectively but a difference of $.43 is negligible when compared to a difference of 58 days. The Mexico operations could have the product ready 3 times as fast to the demanding market.

Research Data

Over the past decades, acquisitions and changing market dynamics have required VF to adopt a more balanced global sourcing structure. By the end of 2004, 40 percent of products sold by VF worldwide were made in factories they owned and operate and 60 percent were made by third-party suppliers, including licensed products.

In 2004, they shifted strategy to what they called its new Growth Plan and because they were involved in vertically integrated manufacturing strategy for their in house manufacturing, they were able to successfully expand their strategy. This shift focused on moving from basic apparel into a global lifestyle company and meant focusing on marketing and sourcing product from outside. VF also focused on expanding sales outside of US and expanding its direct to consumer business. Compared to other companies like Sarah Lee and Ralph Lauren, who have no internal manufacturing and relied exclusively on outsourcing, VF produced 30% of its heritage product in house and sourced the rest, their lifestyle products from independent suppliers.