Levi’s Strauss Case Study

ISSUE

Levi’s Strauss shows a profitability analysis of women’s jeans in Exhibit 2 of the case. Analyzing this, it is obvious that Original Levi’s Store Channel is more profitable before taxes but requires a much larger investment than Wholesaler Channel. Using Return on Investment Capital, we can determine which channel is more profitable to carry forward with. Performance measurement can indicate how efficient each channel can allocate capital to generate profits.

ANALYSIS

According to Appendix, Exhibit 1, the ROIC for Wholesaler Channel is 30.77 % and for Original Levi’s Store Channel it is 15.79 %. The ROIC is double for Wholesaler Channel than Original Levi’s Store Channel. This significant difference is due to the fact that a much larger investment of capital for retail channel is required than distribution channel. The high ROIC indicates that Levi’s Strauss is efficiently allocating its capital to generate greater revenue. Just focusing on ROIC indicates that wholesaler route is much more profitable than retail. However, reaching 15% mark is a good indicator that both channels are doing well.

RECOMMENDATION

Even though ROIC for wholesaler channel is better for future prospects, customer satisfaction and profit of Original Levi’s Store Channel are better. Based on analysis, both channels are doing well in their sectors and should continue to focus on improving performance management to obtain future opportunities to gain a competitive advantage.

ISSUE

Levi’s Strauss is using a “push-based” manufacturing strategy. Push based strategy was quite difficult to keep up with complex variety fashion trends, as they would have non-relevant stock in stores. With the fashion industry changing every so often, it is difficult to say that the forecast will be consistent with demand.

ANALYSIS

The push based strategy causes there to be inventory in store that are not relevant to current trends. When the products are initially created, there is uncertainty as to whether this will remain in trend or not. Therefore, using an alternative manufacturing system will allow Levi’s Strauss to meet consumer demand. Manufacturing systems that will improve delivery cycle times and achieve a pull-based response to actual buying trends. Inventory and waiting wastes in manufacturing system will decrease, as products will be made accordance to orders placed.

RECOMMENDATION

Since the Levi’s Strauss is working towards further decreasing the lag time of eight months, it should consider implementing a lean systems approach. By using the lean manufacturing systems,