3. Planning • Marketing Corporate Function Trendy Items Quick Response Designing Manufacturing Basic Items Low Cost Fast Delivery Distribution Distribution Localized Function Distribution Outsourcing Retail Retail Structure of New System Retail
8. Cost Reduction QR In-House Manufacturing (Spain) Trendy Various Types Short Sale Period Big Lot Outsourcing (Vietnam) Basic Price Sensitive Long Sales Period
9. Manufacturing & Supply Management Spain HQ In-house Manufacturing Range Plan Fabric Planning • Marketing Trendy Trendy Sample Design Manufacturing Designing Basic Basic Merchandising Quality Test Manufacturing Trendy Vietnam BO Distribution Outsourcing Basic Order Placing Retail Purchasing Quality Test
51. Cost Reduction QR Trendy In-House Manufacturing (Spain) JIT Various Types Short Sale Period Basic Long Sales Period Outsourcing (Asia) No need to QR Big Lot Price Sensitive
Editor's Notes
At first, I would like to talk about the current operation system.To analyze our system, we used SWOT analysis at this time.I will explain about strength and weakness at the same time.As the strong point, we can think about Based on the SWOT analysis of current system, we tried to build new operation system. Let me move on the next slide
Jae
MathewThank you Jae. Jae explained our new production system. And I’ll explain our new manufacturing and supply management plan. Before going on to explain new manufacturing process, I’ll start my presentation with merchandising plan. As Jae already mentioned we will add outsourcing process in current process. As you can see in the top-right table, QR is the important benefits of in-house manufacturing. But it needs high investment, so in-house manufacturing is not suitable for expanding. In contrast, outsourcing gives us low cost. To use outsourcing production, we separated our product as two different groups. Trendy and Basic items. Trendy item should be sold quickly so QR is needed. In this type of product, we will keep use our in-house manufacturing for competitive advantage. But basic items, we can sell those items relatively long period time and its design would not be changed frequently. So we will use Vietnam outsourcing company for producing basic item. Let me briefly summarize our merchandising plan. Our product will be divided into two groups : trendy and basic. Trendy items will be produced in our Spain factories, and Basic items will be produced in Vietnam outsourcing company. Let’s go on to the next slide.
This slide shows our manufacturing and supply manage process. As I already explained, Vietnam BO is added to our production process. Our production process consists of 6 steps. First three steps will be done in Spain HQ. Range plan, Sample Design ad Merchandising. During range plan step, type of items and number of each items is decided. And then designers make sample design, and production site is decided. In-house factory will produce trendy items, and Vietnam BO will produce basic items. In-house production process will not be changed, so I will not explain about it. Once Vietnam BO has the order, than outsourcing site should be decided during order placing step. We will cooperate with vertically integrated companies as our partners, they will order fabrics and other materials they need. They also has their own production facilities, so Vietnam BO will purchase after production is completed. After quality test is done, garments will be transferred to distribution center. Some of the basic items will be shipped to Spain distribution center, or some of them are sent to distribution center in Vietnam BO. Aidan will come up and explain more about new distribution system.
Let’s move on to logistics. Based on our core belief of globalization, distribution is to be decentralized function. Moreover, in order to reduce manufacturing our cost we’re going to try outsourcing. Therefore, we are going to establish branch as soon as possible, which will take two roles. First of all, it can become Asia pacific distribution , it means we can distribute product and relocate it within Asia pacific through Vietnam branch. Through this process, we can enhance speed and reduce cost as well in Asia pacific market. Secondly, it will also help to outsource product with cheap fabric and cheap labor cost. Based on this strategy, Spain headquarter still has whole value chain and as for distribution, EU/US market will be covered by headquarter. On the other hands, Vietnam Branch will have distribution and outsourcing functions and Asia pacific market will be covered by it.
Let’s move on to detail. Basically, Speed & Expense are the most important thing in logistics. Based on new merchandising & manufacturing process, I’d like to divide our market into EU/US and Asia Pacific and then show you what the benefit of decentralized logistics in speed & expenses. Let’s see this table, which is a little bit complicated but it can help you to understand. Definitely, Shops in Asia Pacific market can have benefits in both speed & expense through Vietnam Branch. However, EU/US market, because basic items are supposed to be outsourced in Asia, will be added one more delivery from Asia to Spain and it will cost money and time. How to solve this problem? Basically, Basic item is steady-seller and easily predictable so we can manufacture that in advance to sale’s period and it can solve speed problem even in EU/US. Again, delivery time to shop in EU/US won’t be delayed at all. In terms of expense, Basic item is supposed to be outsourced with low cost and reduced cost through outsourcing can cover extra expense of delivery.
As we mentioned previously, we changed our current operation system in order to increase our competitiveness and global market share. This figure shows you how we can expand our new system into other markets. As you can see, we expand new operation system into American market. As you know, our system has several benefits such as logistics efficiency and cost reduction compare to the current system. In addition to that, with growing of our company, America market also increased. Therefore, we can also set up the new operation system in Mexico to continue to expand our market.
To sum up, let me go through our main points again.Today, we talk about our new system to expand market share. The first is benefits of new system. As we mentioned, our new system has logistics efficiency and cost reduction. The second is merchandising and manufacturing. Our products can be divided into 2 items, one is Trendy and the other is Basic. We remained Trendy products in Spain to keep QR and to fast follow fashion trend. To reduce cost of manufacturing, we have to outsource for Basic products to Vietnam. The last one is how can we expand our new system into other markets. As I mentioned, our new system has competitive advantages, we can also set up a new system in Mexico to expand our market. Now, we strongly believe that our new system allow us to make more profit and expand our market. Thank you for listening. If you have any questions, we will be pleasured to answer them.
Aidan
Aidan
Aidan
In this slide, I will explain how we will produce basic items in Vietnam BO. In Vietnam BO, we will manage several outsourcing companies in Thailand, Laos, Malaysia. Outsourcing companies in those countries should be vertically integrated. They can buy fabric by themselves, and they also have their own cutting and sewing facilities. Production process consists of three steps. First manufacturing step is ordering. Spain HQ send an order to Vietnam BO. Once the order is received, Vietnam BO allocate it to outsourcing company. Next step is manufacturing. Outsourcing companies produce garments based on order.And then garments are sent to Vietnam HQ. Final step is inspection. In the Vietnam BO, every item is checked and then they are sent to distribution center. Now, Aidan will come up and explain our new distribution system.
MathewThank you Jae. I would like to start with my presentation with one question. Do we need manufacturing facility in Vietnam, Asia? It could be very attractive, because we could reduce our cost and increase our profit. But, please think about our competitive advantage in fashion industry. Alright, let’s compare in-house manufacturing and outsourcing first. Benefits from in-house manufacturing is easy-to-control: control of manufacturing time, volume, and quality. Also QR is key benefit of in-house manufacturing. But the demerits of in-house manufacturing is relatively high cost. High investment is another one. Outsourcing, in opposite, means low cost and high profit. But it’s not easy because of long delivery, hard to control. Most of all, adapting QR in outsourcing is most difficult to be implemented. Based on this comparison, outsourcing is brought more profit to us, but it is not easy to adapt QR system for outsourcing. Now, it’s time to tell you our new merchandising policy. Two different ways could be combined like this. Our product could be classified into two : Trendy and Basic. Trendy item needs QR, JIT cause we have various types of garments, and it should be sold quickly. But the basic items, products dose not nee QR because style is not changed frequently. We can make those item with big volume, and delivery it with big lot. Those two items have different characteristics, we can diversify our production. Basic items are cost sensitive, by using outsourcing to Asia profit could be increased. Also we will keep using our Spain manufacturing facilities for trendy items. Our competitive advantage has strength in that market.
