2nd Copenhagen Supply Chain Summit 2010 October 13, 2010
One of Northern Europe s largest fashion companies with more than 2 200 employees. 2
Key numbers (fiscal year 2009/2010) Sales companies in 11 countries Denmark, Sweden, Norway, Finland, England, Ireland, Germany, Holland, Belgium, Poland and Canada. ~320 own stores worldwide 10.800 sales locations Turnover 3.495 mio. DKK EBIT 283 mio. DKK Gross margin 60,8% 3
IC Companys Change challenges Stabilise structure and organisation = Control Establish processes and Brand focus = Direction Standardise and establish platform requirements Improve performance and Execution = Quick wins Transformation 4
Sales has shown a slight decline the last couple of years.. NET SALES, DKK billion ~3.7 ~3.6 ~3.450 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Slight sales decline 5
but from 2009/10 onwards strong growth is expected NET SALES, DKK billion ~3.7 ~3.6 ~3.450 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Slight sales decline Strong sales growth 6
IC COMPANYS SUPPLY CHAIN CHALLENGE 11 Brands (InWear, Matinique, Part Two, Jackpot, Cottonfield, Soaked in Luxuary, Designers Remix Collection, Saint Tropez, Tiger of Sweden, Peak Performance and By Malene Birger) 7
IC COMPANYS BRANDS 8
IC COMPANYS SUPPLY CHAIN CHALLENGE 11 Brands (InWear, Matinique, Part Two, Jackpot, Cottonfield, Soaked in Luxuary, Designers Remix Collection, Saint Tropez, Tiger of Sweden, Peak Performance and By Malene Birger) 4 Distribution channels Wholesale, Retail (including outlets), Franchise and E-commerce Different customer types independent retailers, multibrand stores, department stores, agents/distributers etc. Different order types forward, in stock, express, special orders etc. Different product types basic, seasonal, campaign, flat, hanging etc 4-10 seasons 23 capsule deliveries International presence Global and differentiated sourcing (Europe/Asia; Reaty-To-Wear/CMT) Multiple warehouses 9 Resulting
Differentiation on a common platform COMPLEX PLANNING CUBE Countrie s Wholesale Retail Franchise E-commerce Brands Sourcing 10
Strategic project overview Work streams Corporate Strategy 1. Business plan process Distribution strategy 2a. Retail concept Retail principles Standardise retail formats Standardise & optimise purchasing formats 2b. Franchise concept Standardise franchising formats & agreements 2c. Controlled wholesale Establish controlled wholesale manual and train org. Value chain optimization 3a. Collection development Establish current internal best practise Integrate internal best practise with retail principles Process, R & R s, KPI s Future best practise v. 2.0 3b. Replenishment program Define products & programs/brand Define inventory mgmt processes & systems 3c. Sourcing Develop long term sourcing strategy Sourcing process, roles and organisation Improve purchasing skills Consolidate suppliers Samples mgmt Cost efficiency 4a. Working capital mgmt. Order to cash Purchase to Pay Inventory mgmt Reporting/Forecasting Rightsize organisation Optmise current logiistics New logistics setup 11
Our road to growth will be based on deliberate, focused choices PRINCIPLES AIMING ON OUR MARKETS COUNTRY FOCUS COMPLETE EXISTING MARKETS CLUSTERING RETURN ON INVESTMENT 12 12
We have and will develop and implement new business systems Verticalization New business model for wholesale E-commerce Frequency of selling in B-2-B Portal Outsourcing 13
We will continue to implement best practices COLLECTION DEVELOPMENT SOURCING PRICING SSP CONCEPT RETAIL BUYING DISTRIBUTION MAPPING CONTROLLED SPACE FRANCHISE CONCEPT Alignment with retail requirement Focus on fewer styles More commercial styles Clear roles and responsibilities Consolidation of suppliers IT strategy Detailed cost quotations Alignment across brands and countries Focus on opening prices category leader New replenishment system Better products and packages Standard formats Merchandise flow to fit consumer behaviour Retail space management Profiling customers Potential Customer action plans Less time in showroom, maximum time on the road Fixed m2 (and more) Annual budget discussions Order proposal From sales to advise Manage buying EDI 14
New ways of working 4x100 meter relay FOCUS SPEED CONNECT 15
We need to standardise our common platform and reduce complexity PRINCIPLE EXAMPLE SPACE STATION Complexity does not come from having 11 different brands, but from having 11 different approaches. One standardized common platform incl. customer facing operations for wholesale and retail reduces complexity The result will be clear demands both ways enforced by service level agreements (SLA) 16
USE HOLISTIC AND OUTSIDE IN APPROACH TO MANAGE YOUR SUPPLY CHAIN Policies / Strategy Design policies Distribution policies Footprint Supply and service policies Breaking constraints Design/ development Production/ Purchasing Distribution Market Innovation Complexity Productivity Planning and Control Market insights / requirements S&OP Demand / supply / inventory planning Measurements/KPI s Optimizing within constraints Market team Footprint team Complexity team Planning and control team 17
CONFIGURE & CONTROL Configure Cost efficient Simple Policy driven Efficient/Lean Sourcing strategy Reduce/Manage complexity Explicit and agreed demand/supply trade-offs Control Resilient Differentiated Integrated/ Cross-functional Robust planning & control processes Different service/supply models Integration in development sourcing logistics markets (S&OP) 18
SIMPLICITY HOW TO ADDRESS COMPLEXITY Reduce complexity Driver Rationalize Standardise / Consolidate Modularize Examples Accelerate exit of poor performing product Apply more rigorous evaluation criteria to products to rationalize product range Rationalise distribution channels or customers Prioritize material/supplier standardization Apply a total cost approach in the design/development cycle (choice of materials, details etc. Standardize customer (retail) formats Consolidate suppliers Establish pre-packs where commercially viable Introduce standard start packs for wholesale & retail Manage complexity Manage Implement late customization at all stages of the supply chain Use segmented service models to manage the remaining complexity and accommodate customer requirements at reduced cost 19
SETTING THE CAPACITY STRATEGIES IS AN INHERENT PART OF THE 4 WAY TRADE-OFF AT THE STRATEGIC LEVEL Balancing customer service and cost to serve Different demand scenarios Demand variation levels (core vs. Seasonal products) Impact of uncertainty (forecasting error) Demand Supply Different production scenarios CMT vs RTW Low cost vs. most responsive Supply reliability sensitivity Inventory investments Inventory storage points: raw vs. inprocess or finished goods Inventory Service Levels Lead time and fill rate Differentiation By customer By product By season Allocation rules 20
SUPPLY CHAIN VISIBILITY Visibility is not a question of IT systems or the amount of available information, but to assure that the right nodes in the chain has access to the right information. It is a question for the complete value chain in the company. In many value chains today, the knowledge of future demands and exchange of information and consequently the visibility is limited. In many instances, there is access to a lot of operational information, but low visibility. Through an increased exchange of the right information, there are good opportunities to achieve increased service levels and reduced cost. With good insight into demand and supply and the ability to balance them, you also use visibility to encounter future problems. 21
Europe Romania Romania China Shanghai Turkey China HongKong Turkey India Bangla desh Vietnam/ HCMC South Asia Our Production Offices 22
China challenges Currency RMB stronger? USD stronger? Inflation Workforce availability Manufacturing capacity Domestic demand Raw materials more expensive Transport cost increasing 23
A spectrum of design options exist in organizing the procurement function Local Central Outsourced Description Brand ownership Full spectrum of design as well as strategic and operational sourcing handled by individual brands High Part of the value chain managed by a central procurement function Typically only applied for selected categories Part of the sourcing value chain outsourced to third party player Low Economies of scale Low High Source; Prokura 24
The current trend is towards increased centralization and outsourcing ILLUSTRATIVE Local Central Outsourced Example of companies Trend Source: Prokura, market research 25
Current Distribution Structure - Europe N - Peak RDC Oslo PL-HU-CZ Export RDC Copenhagen RDC Strykow DK-S-N-SF Production ICC Outlets Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops RDC Venlo NL-B-FR-D-GB-ES-IR 26
The immediate solution European distribution Structure PL-HU-CZ Export RDC Copenhagen Hanging RDC Brøndby Flat-pack RDC Strykow Production Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops DK-S-N-SF-NL-B- D-FR-GB-ES-IR ICC Outlets 27
The future solution European distribution Structure RDC Copenhagen Hanging and Flat Pack Export PL-HU-CZ Production Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops DK-S-N-SF-NL-B- D-FR-GB-ES-IR ICC Outlets 28
Future Distribution Center concept All European warehousing activities are consolidated on a single site The new EDC site is a green field project with the construction of a 22.000 m 2 automated warehouse (building height 14 m) located on a 60.000 m 2 site The planned handling capacity is 30 mill. pieces with modular expansion possibilities System support by a new Warehouse Management System interfaced to ERP The solution is very flexible in regards to changes in order structure and volume and can handle the in-sourcing of e- commerce volume with limited adjustments All existing sites are closed down Receiving Picking station Hanging system Dispatch sorter Multi shuttle/osr Loading Hanging 29
The Plan Milestones 2014 2010 New business model Outsourcing New sourcing supplier models B2B E-commerce Collection Structure Retail formats Verticalization World-class standardized platform Controlled space Retail space management Standardized retail buying Franchise concept 30
Thank you for your attention! Supply Chain Planning & Control Planning is an unnatural process. It is more fun to do something. The nice thing about not planning is that failure comes as a complete surprise rather than being preceded by a period of worry and depression. Sir John Harvey-Jones 31
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