VF Corporation's Role as a Supply Chain Orchestrator

www.csasupplychainsummit.com

The Role of the Supply Chain Orchestrator

Ellen MartinVP Supply Chain Information Systems, VF Corp.

Bill McBeathChief Research Officer, ChainLink Research

2

Agenda

• Changing Business Models– Cooperation vs. Competition– Supply Chain Orchestrator

• VF Corporations Journey to Supply Chain Orchestrator– Vertical to Virtual– Leads Times vs. Inventory– Investing in supply chain trading partners– Visibility, collaboration, pre-positioning

3

Changing Business Models

4

Transformation of the Supply Chain

Success comes from managing the links!

5

What is the Problem?

Supply chains have become increasingly out-sourced, globally dispersed, and complex.

The importance of sharing data between trading partners and across multiple tiers has intensified

Tier 2 Tier 1 OEM Wholesaler Retailer

Delays, Distortion, Differences, Disputes

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Single Version of the Truth (SVoT)

Retailer

Wholesaler

OEM

Tier 2

Tier 1

SVoT

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SVoT Example: Service Ecosystem

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Managing Trust with Trading Partners

“When should you trust your trading partners and when should you withhold information

from them?”

“Never and Never”

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The Paradox

• Competition– Private Label vs.

Mfg. Brand

– Margin/Cost Pressures

– Compliance Disputes

– Who gets stuck w/ excess inventory

• Cooperation– Optimize Portfolio of PL

and Mfg Brands

– Reducing end-to-end cost

– Creative compliance improvements

– Improved forecasts, allocation, & replenishment

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Evolution Of The Supply Chain

1990 2000 2004…1990 2000 2004…

ProcessA

ProcessA

ProcessB

ProcessB

ProcessC

ProcessC

ProcessD

ProcessD

ProcessH

ProcessH

ProcessY

ProcessY

Enterprise Authority Domain

VERTICALVERTICAL

“within the four walls”

POLICYPOLICY: Do It All Re-engineer/Outsource Architectural PartnershipPOLICYPOLICY: Do It All Re-engineer/Outsource Architectural Partnership

PROCESSPROCESS: Push Mass Customization Market-DrivenPROCESSPROCESS: Push Mass Customization Market-Driven

PERFORMANCEPERFORMANCE: Cost Accounting/ROI Optimization/ROA Risk ManagementPERFORMANCEPERFORMANCE: Cost Accounting/ROI Optimization/ROA Risk Management

ENABLERSENABLERS: ERP APS/Integration Network/Mobility/RFIDENABLERSENABLERS: ERP APS/Integration Network/Mobility/RFID

ProcessA

ProcessA

ProcessB

ProcessB

ProcessC

ProcessC

ProcessD

ProcessD Enterprise

HEnterprise

H

EnterpriseY

EnterpriseY

Enterprise Authority Domain

VIRTUALVIRTUAL

Shared execution

Fully outsourcedprocesses

EnterpriseA

EnterpriseA

EnterpriseB

EnterpriseB

EnterpriseC

EnterpriseC

EnterpriseG

EnterpriseG

EnterpriseH

EnterpriseH

EnterpriseX

EnterpriseX

EnterpriseY

EnterpriseY

EnterpriseZ

EnterpriseZ

Domains of Authority / Influence

FEDERATEDFEDERATED

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Supply Chain Orchestrator

Customs Agency

Installation/Repair

Tier 1Component

SupplierRaw Materials

Supplier

3PL/Carrier

Design Shop

Physical

ServicesDelivery

Digital MediaServicesTier 2

ComponentSupplier

FinancialInstitution

Concierge

Call Center

Customer

ContractManufacturer

Brand Owner

Distributor

Retail Store

Supply ChainOrchestrator

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N-Tier Sourcing

Old

T1

T1

T1

T2

T2

T2

T2

T2

T3T3

T3

T3

T3

T3

T3

Mill

Mill

Mill

Mill

Mill

S

SS

S

S

S

S

AutoManufacturer

MiningCo.

MiningCo.

MiningCo.

New

S

AutoOEM

OE

M B

uy/

Sel

l

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The Global Virtual Factory

Source: ChainLink Research

• Selection of Suppliers Across Multiple Tiers (Picking the “Team”)• Location of Links, Matching of Competencies• Project-based (Project/program Manager)• N-Tier programs for supplier improvement (6-Sigma, Education)• Making Consumption commitments shortening lead times

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VF Corporate Overview

• VF a global leader in branded apparel with $7B in 2006 revenue

• Publicly traded on New York Stock Exchange - symbol VFC

• Founded 1899 Reading, PA

• Headquartered in Greensboro, NC with locations worldwide

• Over 43,000 employees worldwide

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VF Corporate Overview

• Divided Into 4 Operating Coalitions:

• Jeanswear - Wrangler, Lee, Rustler, Brittania, Chic

• Imagewear - Red Kap, Bulwark, Penn State, Nutmeg

• Sportswear- Nautica, Earl Jean, John Varvatos

• Outdoor - Jansport, Eastpak, The North Face, Vans, Reef

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Discount StoresDiscount Stores

Department StoresDepartment Stores

Casual PantsCasual Pants

1 out of every 4 jeans sold in the U.S. is a VF Brand!

®

WesternWestern

North & South American Jeanswear Coalition

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Outdoor CoalitionOutdoor Coalition

JanSportJanSport

The North FaceThe North Face

EastpakEastpak

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Imagewear CoalitionImagewear Coalition

• VF WorkwearVF WorkwearVF Brand SolutionsVF Brand Solutions

®

Licenses to produce Licenses to produce apparel from NFL,apparel from NFL,MLB, NBA, NHL, MLB, NBA, NHL, NASCARNASCAR

Customers include FedEx, Customers include FedEx, American Airlines, INS, American Airlines, INS, Sysco, AT&TSysco, AT&T

Licensed Sports Licensed Sports VF Solutions

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International Jeanswear CoalitionInternational Jeanswear Coalition

•

Strong market shares in a Strong market shares in a variety of global marketsvariety of global marketsStrong market shares in a Strong market shares in a variety of global marketsvariety of global markets

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Apparel Supply Chains

• Supply chains are going global, becoming increasingly more complex.

• Apparel companies that had vertically integrated supply chains, with US owned manufacturing have gone to non-owned, package sourced product from the Far East

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Global Recourses, Local Delivery

VF uses 1578 active partner factories throughout the world

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Vertically Integrated to Virtually Integrated

• Just how does a vertically integrated apparel producer transition to an environment of sourced manufacturing?

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Vertically Integrated to Virtually Integrated

• With longer lead times and lower inventory targets, how do you meet customer demand for increased service levels?

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Vertically Integrated to Virtually Integrated

• Melding, and molding, core competencies from a highly engineered manufacturing mind set to thinking in terms of global logistics and vendor partnerships

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Vertically Integrated to Virtually Integrated

• Global supply chain visibility and upstream collaboration are essential for pre-positioning of raw materials while minimizing inventory risks.

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Conclusions

• It is a new game, think different, think big

• Creative partnerships

• Get closer to the source

• Right mix of off shore vs. near shore

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Questions?

bill.mcbeath@clresearch.com617-762-4040 x414