Supply Chain Optimization:
The Case of World Co. Ltd.
Diane Floresca
Nidhi Ghurka
Michael Sable
The World of World Co. Ltd.
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Vertically-integrated retailer of Japanese women’s
apparel—designs; produces; and ships the product
Headquartered in Kobe, the fashion capital of Japan
Established in January 1959 as a clothing wholesaler
specializing in knit garments. 40 distinctly targeted
brands in 7,000 shops. 3.5% of apparel market.
$1.8 billion in net sales and $32 million in net income
for fiscal year ending March 31, 2000
Key Brand: Untitled. Target Market: Females (25-29
yrs. of age). Avg. annual store sales: 1.8 million
Japanese Women’s Apparel Industry
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Products have short lifecycles and extremely uncertain
demand as elsewhere in the world.
Japanese retail stores carry less display inventory to impart a
sense of uniqueness. Less variety due to homogenous
population and less climate change
3 different retail formats for a vendor:
Company-owned stand-alone stores
Shops in fashion malls (Sales Staff are Vendors)
Shops within department stores (Dept. Store received
substantial—up to 40%--of retail sales generated at the store
without inventory risk. Location key to sales so department
stores dictated terms to vendors. )
The Problem
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Speed and Responsiveness to market conditions are
essential to World Co.’s survival in this highly
competitive industry.
Hidezo Terai, the President of World Co., emphasized
monitoring sales trends and consumer demand to
deliver right product to right store at right time to
maximize profitability.
The Solution
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To coordinate product planning, development, production, and
marketing among SPA (Specialty store Private-label Apparel)
brands, Terai championed the SPARCS (Super, Production,
Apparel, Retail, Consumer Satisfaction) supply chain management system that had been introduced in January 1992.
SPARCS is essentially IT for real-time demand information.
It affects:
a) How much to make
b) What to make
c) When to make it
d) Negotiating Power with Dept. Stores
Result: SPA brands that used SPARCS experienced 8.5 inventory
turns per year with a gross margin of 47.8% compared to 2.6
turns per year and 41% gross margin by U.S. specialty retailers.
Supply Chain
Designer
Raw Material
Supplier
Distributor/
merchandiser
Retailer
Manufacturer
World
Malls
Dept.
Stores
End
User
System Benefits
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Improved Forecasting and Planning of the supply
chain
- Right inventories at the right store at the right time.
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Supply Chain visibility
- Visibility to sales data and inventories facilitates the viewing of
the entire supply chain
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Efficiency
- gain market share – better negotiating power
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Responsiveness and velocity
- React to change
Bottom-line Benefits
How system benefits translate into more money
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Optimized Inventories
Increased sales
Resulting in
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Higher working capital
Higher revenues
Benefits for others
Suppliers
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Better management of inventories/production
capacity through smoother demands from World.
Achieve business growth through increased sales as
World continues to gain market share.
Retailers
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World Co (retail) can meet demand better
Higher sales and business growth for Departmental
Stores (projected)
Risk Reduction
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Working capital tied in inventory
Lost sales/stock out
Decisions made on inaccurate and incomplete
information
Comparing the Supply Chain
Designer
Raw Material
Supplier
Distributor/
Merchandiser
Retailer
End
User
Manufacturer
World
Malls
Dept.
Stores
Sub contractors (many)
Manufacture
(Many)
General Contractors
Suppliers
(many)
Consultants
Developer
Designer
Owner
End
User/Tenant
Similarities
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Fragmented Industry: no far and away
leader for all apparel retail
Same supply problems in procurement
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price volatility
timely availability
limited storage space
competitive bidding
Differences
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Scale
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Shipment/Order responsiveness
 need 300 jackets or 50 W14x211
Data collection on demand is more difficult
 win 1 bid out of 10 in 3 months --> forecast to
next year? Nothing close to real-time
Beneficiaries -- depends on contract and role
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CM “at risk”/ “not a risk”, Developer, sub
Dept Store/Mall have less risk: still collect rent
 transactions different in construction
IT
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Internal IT innovations benefit company
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Retail: SPARC
Construction: Primavera
External IT (B2B) more complicated
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Competitive interests
Analogous Collaborative Structures, Inc. in retail -tracked real-time demand/foot traffic, by type,
region
For Discussion
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Some benefits to World Co made possible by its
vertical integration in manufacturing, distribution, and
retail -- Lesson to construction industry? Note: Willy
Welsh, and Dell-Webb
Advocate construction contracts to foster win-win
situations -- cost plus percentage fee inversely
proportional to cost?
Should World Co share demand information with raw
material suppliers
 help prepare factory for orders -- anticipate
 could take info to other manufacturers
Supply Chain Management
Summary (World Co)
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Cost reduction
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Value-Added benefits through tech advantage
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Competitive tension with raw material suppliers
Strategic alliance with Dept Stores and malls
(or use as leverage)
Trust and information flow: just within World