VF BRANDS: GLOBAL SUPPLY CHAIN STRATEGY

Submitted on
17-01-19
by
Group-7
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 1. How would you characterize VF’s various products/brands in terms of critical
competitive priorities (i.e., price, quality, variety and speed)? What are the implications
for sourcing strategy?

Products/Brands Price Quality Variety Speed

Jeanswear (U.S.) High High Medium Low
Jeanswear (Europe) Low Medium High High
Imagewear (uniform) High High Low High
Outdoor and Action wear Low High High High
Sportswear Low High Medium High
Contemporary Low High High Low

Jeanswear in American markets were considered non fashion clothing, so we

characterize this as moderate variety and relatively high price sensitive when compared to
European market where Jeans is considered as fashion item and market demands high variety
and responsive supply chain to cater to the dynamic market demands and changing varieties
(referred pg 7, para 1). In terms of quality, US market needs high quality differentiation because
the price of VF brands is relatively high compared to other US brands (pg 3, last paragraph).
Jeanswear in US is a functional product with predictable demand so outsourcing the production
and long term raw material contract will help maintain effective supply chain. In Europe
Jeanswear is innovative product, hence in-house production with responsive supply chain is
recommended.
Imagewear market is uniforms for commercial and industrial usage, such markets
usually don’t need much variety and in these bulk deals customers will be price sensitive and
look for high quality clothing( pg 3, 1st para). The case says Imagewear needs quick response
time (pg 5,4th para) so it needs responsive supply chain. Internal production is recommended
for this product line, as the response speed and quality are expected to be high.
Outdoor and Action wear coalition with brands like Eastpak, Vans, etc..(Exhibit 3),
with some research about the brands, we characterize the product line as low price sensitive.
From the external data, the differentiation factors for most of the brands under this category
are quality and variety. So, high quality, high variety and responsive supply chain to address
large variety. This is an innovative product line with demand hard to predict, so outsourcing in
this case is not recommended. In house production will help maintain low response time.
Sportswear from our analysis from the data from and outside the case, customers look
for high quality and comfort wear products and are less sensitive to price. Variety in sportwear
is relatively low when compared to fashion wear product line and so variety is medium. Quality
and design are of high importance and it’s not a high volume product line. Manufacturing in-
house or at selective long term suppliers located closely is recommended
Contemporary which is their newest coalition has brands like 7 for all mankind and
Lucy, which again are high price products with high quality and variety. The products are
considered premium brands, so price sensitivity is low. The expected response time/speed is
low because consumers would be willing to wait for the products of premium quality and high
variety and hence can be outsourced.
 2. In your view, were the operations and business strategies well-aligned over last two
decades? Explain.
Starting from being a lingerie brand and then entering the jeans business by acquiring Lee
company and Wrangler, VF has followed the vertically integrated manufacturing strategy.
Having own factories has helped them to maintain good quality product, higher response time
during uncertainties, technological advancement in processes and less labour requirement but
at the same time cost was higher.
In 2004, company made a major shift in their strategy by it new “Growth Plan”. It wanted to
transform itself from being a basic apparel brand to a global lifestyle apparel company. To
achieve the same, they acquired strong brands from various categories like sport wear,
footwear, etc. In just 8 years, it was able to increase its revenue share from non-heritage brand
from 10% to 44% and increase its global reach from 19% to 30%. In the process of acquisition,
VF didn’t change the operation strategy of any brand. Since labour was the cost driver during
that time, outsourcing was considered favourable option for low cost product. VF also started
outsourcing production of its lifestyle product range to gain this advantage, but it comes with
the cost of less responsive and rigid supply chain.
VF tried to become innovative and introduced various product range, but they didn’t change
the supply chain according to the product category. As we can see from above analysis, it was
not required initially since focus was to expand but now, realignment is required in the strategy.
For example, jeans being product with stable demand, it can be outsourced while sports brand
where demand varies with season can be manufactured in-house.
3. What is your evaluation of the “Third-Way” sourcing strategy proposed in the case?
For which kind of products/brands would you pursue “Third-Way”? For which types
would you pursue traditional sourcing and internal manufacturing? Why?
VF Brands felt that there is a lot of scope for the improvement of whole supply chain as well
as manufacturing processes in developing countries which can result in the reduction of the
lead time and inventory stocks. To tackle with the above scenario VF Brands came up with
‘Third Way’ Supply Chain Strategy. By this strategy they can minimize the investments in
plant and equipment by getting into contract with suppliers and use that money in brand and
retail operations.
Let’s discuss the pros and cons of Third Way Supply Chain Strategy.
Pros:
• As VF engineers were appointed and sent to different locations in different parts of the
world, it helped the suppliers and manufacturers to gain trust across different level of
supply chain therefore having better coordination and control over these locations.
• Contractors and suppliers worked on very thin margins due to which there was lack in
investment in engineering and technology development. As experience and knowledge
sharing was done intensively it resulted in reduced lead time, inventory level and
manufacture and production cost which gives the competitive advantage.
• Dedicated production lines for VF by suppliers along with timed contracts which also
helped supplier in a way as VF invested in equipment and capital and in return VF got
assured supply and quick change responsiveness.
 • Better exchange and flow of information at all stages.
• Diversification of risk as each stage has different contractors and products were sourced
from different locations.

Cons:
• Closing down internal plants despite strong performance and giving away human
resource to external contractors is a huge risk.
• As contractors and suppliers were now being provided with investments and latest
engineering solutions and technologies, there is chance that they might start their own
apparel line and stop serving VF.
• It’s hard to convince existing suppliers to join the Third Way partnership as they are
reluctant to shed away their traditional methods of operating and also they will loose
other clients.

Products/Brands Sourcing Strategy Why?

Jeanswear (U.S.)
Jeanswear (Europe)
Imagewear (uniform)
Outdoor and Action wear
Sportswear
Contemporary
Since price is the most important
Traditional characteristic required along with lower
weightage given to speed and variety.
In Europe, jeans are worn as fashion
item and thus would require to give
higher weightage to variety
In-House
and/designs. Since fashion has a short
life cycle speed is another important
characteristic.
Here, both price and responsiveness is
the driving factor along with the
quality. The in-house technical
Third-Way
expertise could be utilized as a means
of knowledge sharing and thus would
be an effective way to reduce the costs.
This requires high response time, high
variety and high quality at the same
In-house time. Using In-house strategy, one can
control and monitor the resources and
technical expertise accordingly.
Here again since sportswear is price
insensitive while the driving factors are
Third-Way high quality and response time.
Demand estimation is comparatively
easier to estimate.
Since these are premium products and
the responsiveness is given a less
Traditional weightage because the customers can
actually wait for the final customised
product. Also, the volumes are low.