VF Brands Global Supply Chain Strategy: Third Way Sourcing

Introduction

Amid rapid technological advancement and intense competition, it has become a serious challenge for businesses to manage their operations effectively and efficiently. It has become mandatory for businesses to find ways and methods that are not only cost effective but also deliver the required value to customers (Beamon, 2008).

Beyond these ongoing changes, the forces of globalization and internationalization have imposed significant and far-reaching impacts on the decisions organizations make regarding both day-to-day operations and long-term strategies. Companies must now account for international and global environmental factors that have direct or indirect effects on their business (Fisher, 1997).

The overall business environment has become a highly competitive landscape, and companies face increasing pressure to create a competitive edge in order to survive and grow. Trade liberalization policies and the removal of international quotas and tariffs have, on one hand, provided companies with expanded opportunities and access to new markets; on the other hand, they have raised serious challenges and threats for many businesses around the world.

Many manufacturing and other related companies are outsourcing portions of their operations to suppliers and contractors in countries where the cost of production is considerably lower. This has allowed businesses to create a competitive edge based on lower production costs, enabling them to offer the same products at relatively lower prices than competitors (Maloni & Benton, 1997).

However, outsourcing across different regions has also created challenges in managing global supply chains. Businesses are seeking new methods to manage their global supply chains more effectively in order to increase both efficiency and responsiveness (Min & Zhou, 2002).

One of the most difficult decisions facing organizations in this environment is the effective and efficient design of the supply chain. Companies face a dilemma between outsourcing operations and performing them in-house. The overall performance, responsiveness, and efficiency of a supply chain are directly dependent on this decision. Several factors must be considered, including the nature of the product and the needs of the market. For example, if consumers demand quick service and high responsiveness, it is more beneficial to retain operational control internally. Conversely, if consumers are price-sensitive, it may be better to outsource operations to suppliers who can perform them at considerably lower cost (Min & Zhou, 2002).

Challenges in Supply Chain Management

It is becoming increasingly difficult for organizations to manage their supply chains effectively and efficiently. Decisions about supply chain design are among the most vital and critical choices that companies must make (Ballou, Gilbert, & Mukherjee, 2000). It is essential for companies to understand that supply chain management is not simply a new name for logistics — it is far more than that (Cooper, Lambert, & Pagh, 1997). The supply chain network encompasses the main organization together with its suppliers and customers. Due to the involvement of many different parties and levels, supply chain management combines the management of human resources, internal processes, and product transformation. It also includes the sharing and management of information among the organization, its suppliers, and its customers (Harrison, Lee, & Neale, 2003).

A fundamental question that organizations must answer when designing a supply chain concerns its primary objective. There is an inherent tradeoff between responsiveness and cost efficiency: a supply chain can be designed to be either highly responsive or highly cost efficient, but optimizing for both simultaneously is difficult. This decision should be guided by the needs and demands of the market and customers, and the supply chain should be designed to facilitate the fulfillment of end-consumer requirements (Kouvelis, Chambers, & Wang, 2006).

Decisions related to supply chain strategy, operations, and design are complex and challenging. Companies are building competitive advantages through effective and efficient supply chain networks. The involvement of multiple parties and levels makes management even more demanding, requiring companies to develop strategies for profitable integration and lasting partnerships with suppliers and distributors (Lavassani, Movahedi, & Kumar, 2009).

Supply chain management is critical for organizations because it enables them to create maximum value and customer service, which in turn supports higher profits and revenues (Lancioni, 2000).

VF Corporation is one of the most recognized names in the apparel industry. The company has been in operation since 1899, when it began under the name Reading Glove and Mitten Company. Over time the company expanded, and in 1917 it changed its name to Vanity Fair. The company continued to grow by pursuing an acquisition strategy, using it to expand existing product lines and diversify into new markets. For many years, Vanity Fair's primary strategy centered on vertically integrated manufacturing of jeans, with most factories located in the United States. In subsequent years, the company also entered the global lifestyle apparel market (Pisano & Adams, 2009).

Overview of VF Brands and the Apparel Industry

The company's strategic growth plan revolved around two key objectives. The first was the expansion of sales outside the United States, particularly into countries with rapidly developing economies such as Russia, India, and China. The second was the expansion of its direct-to-consumer business through increased retail outlets and company-operated stores in various regions. The company continually sought new and innovative ideas and strategies in order to compete and thrive in the industry.

The overall apparel industry encompasses the design, manufacturing, and marketing of clothing, accessories, and personal luxury goods. It is highly fragmented and competitive, with a wide range of products and price points. Companies in the industry constantly seek new methods to establish competitive advantages. The growing power of mass retail chains has created additional challenges, and the recent economic downturn intensified pressure to reduce operational costs.

Globalization and technological advancements have also transformed the industry's broader landscape. Consumers are demanding quicker service while retailers and wholesalers seek greater flexibility. To meet these evolving needs, apparel businesses are looking for ways to make their supply chains more responsive and flexible (Pisano & Adams, 2009).

The supply chain of VF consists of several steps and intermediaries. The process begins at the design stage and ends when the final product is on the store shelf, ready for the consumer to purchase. The traditional supply chain process begins long before the product becomes available to consumers. The design department starts working on product designs based on market and consumer needs. Once the design is complete, a prototype is developed, which is used for internal and external decision-making related to manufacturing.

Prototypes are essential because even highly detailed drawings are sometimes insufficient to evaluate a design. They are used not only for internal assessments but are also shown to retailers as prospective customers. In response to privacy and security concerns, as well as issues of speed and responsiveness, VF produces prototypes in development centers that are either owned by the company or operated by established partners. This process takes approximately four weeks. Concurrently, the marketing department forecasts key variables such as prices, sales volumes, and profit margins for different products. These forecasts have a significant influence on supply chain design and strategy.

Once the design is finalized and key decisions have been made by the marketing department, the company moves to sourcing and supply chain design. VF decides whether to use internal or external suppliers, determines supplier locations, and addresses other procurement considerations. Sourcing decisions span multiple levels, including raw materials, accessories, fabrics, and other inputs. Factors considered when selecting suppliers include location, cost, and the supplier's skills and expertise. The company maintains sourcing offices in several locations to manage regional procurement.