Final VF Brands

OPERATIONS STRATEGY | VF CORPORATION
GROUP 05
Aditya KS | Akash S | Ankit P | Anuj P | Sudarshan R
PRODUCT PORTFOLIO
189 The Companys roots could be traced back to 1899 as the Reading Glove & Mitten
9 Company based in Pennsylvania
191 The Company expanded into Lingerie business and was renamed to
4 Schuylkill Silk Manufacturing
Through a contest, the name Vanity Fair was selected as a brand name for
191 a line of lingerie leading to the 1919 company name change to Vanity Fair
7 Silk Mills Inc.
Vanity Fair entered into the Jeans Business through the acquisition
196
of the Lee Company (Heritage business)
9
Jeans accounted for 75% of the companys $1 billion in sales, as

198
the primary focus of the company shifted to jeans manufacturing
3
198 The company embarked on a series of acquisitions aimed at

4 expanding the jeans product line and diversifying into new areas
200 The company decided to focus on marketing and source products from
4 outside. The focus was now on Global lifestyle brands
200 The Heritage brands represented only 56% of the sales and Lifestyle brands contributed to the
8 remaining 44%. The aim was to increase the revenue from lifestyle brands to 60%
MARKETS FOR VF CORP.
1984 Coalitions and Brand
VF used to be a Vertical Integration identity Strategic
company which sold Vertical integration in
existing product Lee jeans
VF s business organised
into 5 major coalitions-
Objectives
whatever they could
manufacture which Diversification into new Jeanswear, Imagewear, of VF
later changed products like sportswear, Outdoor and Action Sports,
In 2001, 19% of the backpacks and uniforms Sportswear and
revenue was through acquisition Contemporary brands
generated by Key acquisitions- Blue Bell, Efforts taken to preserve
international sales. Jantzen and RedKap organisation culture and
This number grew to brand identity of acquired
30% by 2008 brands- highly decentralised
2004 locations2009-12
Further growth in the Growth plan Rapid Expansion
international sales Continue investment in By 2009 VF opened ~700
was targeted by the heritage brands & acquire independent stores
company brands with global appeal Plans made to open 75 new
In the U.S. alone, VF Expand sales in Russia, stores with a target of 1300
Corp. is represented India and China stores globally by 2012
in stores from Focus & improve direct to Focus on Asian markets for
Walmart to consumer business locating stores and
Bloomingdales, Nor Key acquisitions- Northface, developing a balanced
dstrom to Kohls Vans, Nautica, Reef, Kipling channel of distribution
VF CORP - HERITAGE BRANDS & LIFESTYLE BRANDS
Internal Manufacturing &

Outsourcing
HERITAGE BRANDS LIFESTYLE BRANDS
Strategy: 60% Jeans In-house Strategy: Complete outsoucing
Competitive advantage: High internal Competitive advantage: Multiple product
manufacturing capabilities. with short life cycles, easier new designs
Novel techniques and proprietary replenishment
equipment for manufacturing jeans Varying needs and priorities
Best in quality, efficiency and reliability Focus on international markets and access
Building reliable and high quality to other brands
supplier network : High investment in Decisions: Product focused or Cost focused
time or Rapid replenishment focused
Competition
Liz Claiborne, Ralph Lauren, Levi Strauss: Complete rely on outsourcing
Benetton and Zara: Vertically integrated from garment production through retail, limited outsourcing
SUPPLY CHAIN, PRODUCTION & PROCUREMENT STRATEGIES
Product Design and

Identifying Suppliers Contract Sign
Prototyping
1
Placing Orders
Transportation Shipment Production
Sourcing Strategy-Multiple levels of supply chain; Location choices, economic factors, technical skills
Sample Production- Cost estimation, supplier capability check
Accurate forecasting-seasonality and demand forecast
Transportation- Product shipment from distribution center to port, port to VF distribution center and
finally via truck to store
Focus on flexible supply chain
Increased responsiveness- Jeans from Mexican plant to US
PROBLEMS IN VF and Possible Reasons
Operations Possible reasons
Certain items (such as sweater for US markets) Chasing the least costing process, with little regard
have unnecessarily long geographical supply to responsiveness of the supply chain.
chain. Raw wool Aus, Yarn production China,
Dying Australia, Assembly - China Heavy 3rd party reliance on critical elements of
Certain vendors (such as Li & Fung), which started supply chain & no development of competitive
off as supply chain service company, gained advantage over time.
momentum and expanded their value chain to their
own brands.
Vendor Management
Poor vendor support, financially and operationally. Transactional nature with vendors lead to poor
During 2008 economic crisis, vendor working on buffer support during shocks such as economic
wafer thin margin got wiped out, upto 60,000 small crisis. With a highly competitive industry (where top
production shops closed their business & shifted market leaders are in single digit market share),
base which was not in line with VFs supply chain forming long term alliances with vendors helps in
creating a strategic fit
Product line expansion
VF is a primarily jeans and imagewear company, Lifestyle segment is a very short life cycle segment.
catering to large masses. By expanding in lifestyle With VF having upto 40 plants, they should have
segment, their whole supply chain (100% allotted internal plants to have a lead time to shelf in
outsourcing for lifestyle apparel), lagged the days rather than weeks.
markets
Alternatives for VF
WHAT IS THIRD WAY

SOURCING
Halfway between full integration and traditional sourcing
Ensures long term assured orders for Suppliers (who will have dedicated infrastructure for
VF products)
Collaborative development for Forecast schedules and production capacity
VF to Share technical Expertise and Know how and use its purchasing capacity to get
discounts
THIRD WAY SOURCING Package Sourcing Cut and Make
Pros: Increasing Pros: Improved Pros: Increased
trust between Working Capital responsiveness;
supplier and VF; position; Synergy in Maintain tight
reduced cost for time scheduling & control over costs
Suppliers; reduce transport cost; Cons: increased
FG inventory and focus on brand inventory; Price
lead time; building variation against
competitive adv. Cons: Lower capacity utilization;
Cons: Sharing of control over Supply No process
propriety exp; chain; risk due to improvements
Lower flexibility; over dependence;
Cannot be enforced Threat of potential
How Third Way Sourcing will help
Third Way helps to cut costs to the tune of 10-15%

Close co-ordination between supplier and VF tight control, dynamic process
improvements, trust
Focus shift from cost-cutting to efficient manufacturing, speed to market, lower
inventory, less work in process, lower cost to quality
Inefficiency cropping due to mistrust was mitigated via Third Way Sourcing
Challenges
Resistance to change from old suppliers
Intellectual Property Risk
Staffing Expertise
Loss of flexibility
Recommendations
VF should pursue Third way sourcing for lifestyle brands in their port folio. They
have more changing demands. This would create better margins and create
efficiency in the supply chain
Showcase successful improvement in performance parameters to old new
suppliers

Final VF Brands

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OPERATIONS STRATEGY | VF CORPORATION

Jeans accounted for 75% of the companys $1 billion in sales, as

198 The company embarked on a series of acquisitions aimed at

Internal Manufacturing &

Product Design and

WHAT IS THIRD WAY

Third Way helps to cut costs to the tune of 10-15%

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