Gene's, Inc. Case

Problem Statement

Facing dramatically changing environment, Gene's is slow to make change and almost lose the leader position in the market.

Situation Analysis

Gene's is one of the largest brand name apparel marketers in the world. Since the operating environment of Gene has changes significantly, Gene's expands their single product line into a diversified product line. Gene's is advantageous than competitors due to their long history in the retail industry and an incomparable global presence. The situation of Gene can be shown as following: (1) External Environment: Gene's faces the pressure to reduce cost, increase product development speed and reduce the lead time. Moreover, Gene's must have the ability to respond more quickly to fashion trends to attract customers. Due to increasingly fierce competition of retail business, Gene's must continue to provide customers with high quality, a varied product line and high level service.(2)Global Manufacturing: Gene's has shut down the majority of domestic manufacturing centers and move much of their industries to lower wage countries. However, Gene's still remains one domestic manufacturing location at their headquarters in San Francisco. Each manufacturing operate full line of products. (3)Raw Materials: More than 100 vendors all over the world provide Gene's raw materials. Material requirements of each manufacturing location between vendors are negotiable. In order to avoid the risk of obsolescence, Gene's require to stock raw material inventory at each manufacturing location in 1 week. (4)Finished Materials: Various Gene's distribution channels are supported by 12,000 SKU's stocked in the distribution centers. Each SKU is a unique identifier according to channel, brand, color, fit and size. One disturbing trend, which clothes sold on markdown, has increased steadily over the past four years. (5)Product Fulfillment: All of Gene's SKU's are stored in the 6 US distribution centers at present. Gene's use line items fill rate, which up to 98 percent overall, to measure customer service. (6)Customer Service: The demanding customers and a variety of competitors require Gene's to have a high level of customer service. Gene's has been receiving many complaints that several items are on backorder or that it is taking too long to receive their orders.

Recommendations

In the fashion apparel industry, the production is innovative. The innovative products have following characteristics: high profit margins; the life cycle of products is short because imitators are quick to copy successful designs; unpredictable demand; limited distribution network; high price; fast transportation. High profit margins increase the cost of shortage. Short product life cycle increase the risk of obsolescence and the cost of excess suppliers. The unpredictable demand leads to overstocking or under stocking risk. In this case, the supply chain strategy of Gene's can be improved as below:

Long-term recommendations:

1. The supply chain experts can participate in the product design. The supply chain experts concentrate their attention on the supply chain demand of the new design products, they can improve the efficiency of manufacturing, reduce lead time and control costs.Also, the participation of supply chain experts can make products more innovative and efficient. In addition, Gene's should add supply chain managers in the communication loops to develop road mapping for design teams to decide a product's route to market.

2. Create history with test batches. The uncertainty of demand force Gene sold the unwanted products on markdown. In order to improve the forecast, Gene can put small part of their products in some stores and collect the sales data. This test batch can be used as an indicator to predict the whole line sales.

Short-term recommendations:

1. Build postponement Strategy: A postponement strategy aims at delaying some supply chain activities until customer demand is revealed in order to maintain both low cost and quick response. In this case, customer demand for Gene's products