2nd Copenhagen Supply Chain Summit 2010

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2nd Copenhagen Supply Chain Summit

2010

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14 October, 2010

One of Northern Europe’s largest fashion companies with

more than 2 200 employees.

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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

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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

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Sales has shown a slight decline the last couple of years…..

2013/14 2012/13 2011/12 2010/11 2009/10 ~3.450 2008/09 ~3.6 ~3.7 2007/08

NET SALES, DKK billion

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…but from 2009/10 onwards strong growth is expected

2013/14 2012/13 2011/12 2010/11 2009/10 ~3.450 2008/09 ~3.6 ~3.7 2007/08

NET SALES, DKK billion

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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)

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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

Resulting

in

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COMPLEX PLANNING CUBE

Wholesale

Retail

Franchise

E-commerce

Brands

Co

un

tri

e

So

ur

cin

g

s

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Strategic project overview

Work streams 1. Business plan

process Corporate

Strategy

2a. Retail concept Distribution strategy 2b. Franchise concept 2c. Controlled wholesale 3a. Collection development Value chain optimization 3b. Replenishment program 3c. Sourcing 4a. Working capital mgmt. Cost efficiency Order to cash Purchase to Pay Inventory mgmt Reporting/Forecasting Rightsize organisation Retail principles Standardise retail

formats

Standardise & optimise purchasing formats

Standardise

franchising formats & agreements

Establish controlled wholesale manual and train org.

Establish current

internal best practise Integrate internal best practisewith retail principles Process, R & R’s, KPI’s Future best practise v. 2.0

Define products &

programs/brand Define inventory mgmt processes & systems Develop long term

sourcing strategy

Sourcing process, roles

and organisation Improve purchasing skills Consolidate suppliers Samples mgmt

Optmise current logiistics

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AIMING ON OUR MARKETS

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Our road to growth will be based on deliberate,

focused choices

PRINCIPLES

ƒ

COUNTRY FOCUS

ƒ

COMPLETE EXISTING

MARKETS

ƒ

CLUSTERING

ƒ

RETURN ON INVESTMENT

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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

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We will continue to implement best practices

COLLECTION

DEVELOPMENT

ƒ Alignment with retail requirement

ƒ Focus on fewer styles

ƒ More commercial styles

SOURCING

ƒ Clear roles and responsibilities

ƒ Consolidation of suppliers

ƒ IT strategy

ƒ Detailed cost quotations

PRICING

ƒ Alignment across brands and countries

ƒ Focus on opening prices – category leader

SSP CONCEPT

ƒ New replenishment system

ƒ Better products and packages

RETAIL BUYING

ƒ Standard formats

ƒ Merchandise flow to fit consumer behaviour

ƒ Retail space management

DISTRIBUTION

MAPPING

ƒ Profiling customers

ƒ Potential

ƒ Customer action plans

ƒ Less time in showroom, maximum time on the road

CONTROLLED SPACE

ƒ Fixed m2 (and more)

ƒ Annual budget discussions

ƒ Order proposal

ƒ From sales to advise

FRANCHISE CONCEPT

ƒ Manage buying

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New ways of working

CONNECT

SPEED

FOCUS

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We need to standardise our common platform and

reduce complexity

The result will be clear demands both ways

enforced by service level agreements (SLA)

EXAMPLE SPACE STATION

PRINCIPLE

ƒ

Complexity does not

come from having 11

different brands, but

from having 11 different

approaches.

ƒ

One standardized

common platform

incl. customer facing

operations for

wholesale and retail

reduces complexity

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Design/ development

Production/

Purchasing Distribution Market Policies / Strategy

Planning and Control

Footprint

• Supply and service policies • Design policies • Distribution policies

• Productivity

• S&OP

• Demand / supply / inventory planning • Measurements/KPI’s • Market insights / requirements

Breaking

constraints

Optimizing

within

constraints

Market team Footprint team Complexity team Planning and control team

• Innovation • Complexity

USE HOLISTIC AND “OUTSIDE IN” APPROACH

TO MANAGE YOUR SUPPLY CHAIN

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CONFIGURE & CONTROL

)

Cost efficient

)

”Simple”

)

Policy driven

)

Resilient

)

Differentiated

)

Integrated/

Cross-functional

• Efficient/Lean

• Sourcing strategy

• Reduce/Manage

complexity

• Explicit and agreed

demand/supply trade-offs

• Robust planning & control

processes

• Different service/supply

models

• Integration in

development

sourcing

logistics

markets (S&OP)

Configure

Control

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Accelerate exit of poor performing product

Apply more rigorous evaluation criteria to products to rationalize product range Rationalise distribution channels or customers

Standardise / Consolidate Rationalize Modularize Manage

Driver

Examples

Red

uce complexity

Manage com pl exi ty

SIMPLICITY – HOW TO ADDRESS COMPLEXITY

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

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

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Inventory

Inventory

• Different production

scenarios

CMT vs RTW

Low cost vs. most

responsive

• Supply reliability

sensitivity

• Lead time and fill rate

• Differentiation

By customer

By product

By season

• Allocation rules

• Inventory investments

• Inventory storage

points: raw vs.

in-process or finished

goods

• Different demand scenarios

• Demand variation levels

(core vs. Seasonal

products)

• Impact of uncertainty

(forecasting error)

Demand

Balancing customer service and cost to serve

Demand

Supply

Supply

Service

Levels

Service

Levels

SETTING THE CAPACITY STRATEGIES IS AN INHERENT PART OF THE 4

WAY TRADE-OFF AT THE STRATEGIC LEVEL

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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

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22 14 October, 2010 China Turkey Romania Shanghai Turkey Romania

Our Production Offices

India Vietnam/ HCMC Bangla desh

Europe

South Asia

China

HongKong

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China challenges

ƒ

Currency

ƒRMB stronger? ƒUSD stronger?

ƒ

Inflation

ƒ

Workforce availability

ƒ

Manufacturing capacity

ƒ

Domestic demand

ƒ

Raw materials more expensive

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A spectrum of design options exist in organizing the procurement function

Source; Prokura Brand ownership Economies of scale Description

Local

Central

Outsourced

• Full spectrum of design as well as strategic and operational sourcing handled by individual brands

• 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 High Low Low High

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The current trend is towards increased centralization and outsourcing

Source: Prokura, market research

Local

Central

Outsourced

Example of companies

Trend

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Current Distribution Structure - Europe

Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops Production RDC Oslo RDC Copenhagen RDC Venlo RDC Strykow N - Peak Export DK-S-N-SF PL-HU-CZ NL-B-FR-D-GB-ES-IR ICC Outlets

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The immediate solution – European distribution Structure

Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops Production RDC Copenhagen – Hanging RDC Brøndby – Flat-pack RDC Strykow Export DK-S-N-SF-NL-B-D-FR-GB-ES-IR PL-HU-CZ ICC Outlets

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The future solution – European distribution Structure

Production to RDC Linehaul RDC to RDC Returns to RDC RDC to Shops Production RDC Copenhagen – Hanging

and Flat Pack Export

DK-S-N-SF-NL-B-D-FR-GB-ES-IR

PL-HU-CZ

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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 m2 automated warehouse (building

height 14 m) located on a 60.000 m2site

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

Multi shuttle/OSR

Dispatch sorter

Picking station Hanging system

Loading Hanging

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2014

B2B E-commerce Outsourcing New business model

New sourcing supplier models

Collection Structure

2010

Verticalization

World-class standardized platform

Retail space management

Franchise concept Standardized retail buying

Milestones

Retail formats

Controlled space

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14 October, 2010

Sir John Harvey-Jones

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.

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