The global supply chain

According to the report’s review, the long delay in ordering goods caused retailers to lag in predicting and ordering products. Indeed, the apparel industry has proven to be impulsive, and it will cease to exist in the future. If demand exceeds projections, it will appear that filling such a void would take a long time. To overcome the issues, the retailers needed some trade as well as re-ordering. The supply chain case study also shows a broad range of competitive factors that have helped Pepe jeans remain at atop the market. These competitive factors include the order winners, order qualifier, supply to demand alignment and customer value. Concerning theories, Pape Jeans depend on some theories. The first theory is the Fisher theory which argues that poor performance of a company is due to the misalignment of the processes as well as the services that are in demand. The company signed a contract with the suppliers and this is under the guidance of the contract theory. Other approaches include the transaction cost theory that is evident in the way the agents use their analytical skills to predict the costs of the products. In summary, this report also concludes by comparing supply chain of Pepe jeans and the Toyota Company.

Global Supply Chain

Introduction

The Pepe Jeans is a casual attire manufacturer company that was first branded and established back in the year 1973 (Jacobs and Chase 2008). The inception of the brand was due to the effort of three brothers namely Arun, Milan Shah and Nitin (Jacobs and Chase 2008). It was later sold at the initial stage of growth but currently is worth billions of US dollars and has captured the whole of Europe. It is currently available in hundreds of countries and employs thousands of workers.

The operation management is the process that involves the management of the resources as well as the processes that assist the organization to produces goods and services (Barnes 2008). In other terms, the operation management is the management area that is entirely concerned with the designing and controlling the production process and designing the activities of a business to produce goods and services. Pepe’s case study confirms that no organizational operation can take place in isolation. The activities of an organization involve suppliers as well as customers. Currently, organizations contract either internal or external suppliers. From the case study, it is clear that Pepe has increased its reliance on foreign suppliers through outsourcing not only to increase its competence but also to reduce the cost of operations. Traditionally, the service managers have substituted the labor with the machines to not only simplify the work of production of goods and services to the customers but also to devise a plan that is incentive to the employees. Efficient management of the resources ensures that resources are used in a useful manner. There is a close link that typically occurs between the marketing and financial performance for the profitability of an organization.

Findings

Every company has the profitability objective and so does the Pepe jeans. The profitability of a company depends on the optimization of the way the supply chain performs. It is important the companies with the aim of increasing profitability improve not only their performance indicators but also increase compliances. According to the Pepe jeans’ case study, five stages are involved in the supply chain process. The steps include planning, sourcing, making, delivering and returning. The planning stage includes an extensive repertoire of activities and some of the activities are arrived at after considering some decisions. The planning stage is characterized by weighing of options which, according to the study involves either manufacturing the products domestically or in the foreign market. Outsourcing means obtaining services from outside country or external people apart from the internal services (Barnes 2008). For instance, Pepe has outsourcing team who operates from Hong Kong and the unique quality of the Jeans is provided by the team. From the case study of Pepe Jeans, it comes out clear that the Pepe jeans utilize offshoring approach. Offshoring is the practice of a company of establishing some of the services and processes overseas to explore the lower costs in other countries. Apart from being established in United Kingdom (U.K), Pepe has also set new practices in places such as Hong Kong and United States (U.S).

The supplier selection is the process whereby a buyer is involved in the identification, evaluation and signing of contracts with providers of the services that a company wants. According to the case study, Pepe carries out the process of identification, evaluation and signing of the contracts through the outsourcing agents. At the moment, Pepe’s agents collect orders after a certain time and open bid for potential suppliers which are around 1,000.

Diagram of the Pepe’s Current Supply Chain

Retailers have to place orders six months before they arrive

Agent conduct a bidding to about 1000 potential suppliers

Manufacturers transport Jeans from Hong Kong to Retailers

Pepe takes the orders to the agents in Hong Kong

Winner works with the Pepe Jeans’ designers for specifications and assurance

Production starts

Competitive Factors

From the case study of Pepe, some competitive factors make the company perhaps ahead of others in the market. These competitive factors included the order winners, order qualifier, supply to demand alignment and customer value. The order winners only mean the competitive advantage that makes one purchase a company’s product and these include the delivery speed, design of the product, image and the quality of the outputs. Regarding the Pepe’s case study, the quality, design and the flexibility of the jeans make the buyers prefer the product over other services in the market. On the other hand, there is the order qualifier which is the competitive advantage that a manufacturer has to demonstrate to make its products competitively viable in the business arena. For example, in comparison to the Toyota’s case study (Barnes 2008, p.4), Toyota has demonstrated the competitive technology in the past years and this has made its products remain relevant in the business market. Toyota has not only advanced technology but is also environmental friendly. The company can manufacture products that use fuel and electric power. The operations of the Toyota Company involve the collaboration with the suppliers to achieve a high volume of production and flexibility (Barnes 2008). It then comes out precisely that order qualifier is the competitive standard of a company’s products that make its products liked by consumers while order winner is the standard that makes a product be separated from those from other businesses.

Creation of a customer’s value is a stepwise process that involves the understanding the driving values of a product, understanding the proposition of a product, identifying the targeted clients and the segments, creating win-win products’ prices and focusing the investments on the most valued products. Pepe has achieved the customer value by establishing a quality that drives the customers to buy the products. Besides, Pepe has identified customers’ population segment and created 1,500 independent retail outlets.

The Pepe’s case study faces a lot of disadvantages which this report has captured in-depth. The first trade is that Pepe needs an online ordering approach that is integrative. Currently, the ordering process that involves a collection of new products, sales order and the process of order cancellation is not integrated. Each of the activities is performed independently. Therefore, it is quite evident that Pepe is not flexible in its ordering system. Another tradeoff is that it takes Pepe approximately six months to supply their retailers with the ordered products. Unlike during the past years, Pepe products have ceased to be trendsetters in the market. Further, the increase in the lead time has worsened the condition and hence it cannot accurately order the products.

There is a consistent variation in the lead time. An alternative way to solve the issues is that Pepe should consider outsourcing a shipping company that must work within the required time to deliver the products. The shipping company will have to be responsible for the poor handling of the products in the process of transportation. Despite the need to hire shipping company, other possible trade-offs that the company might experience include poor handling of the products and perhaps technical failures.

The delay of the delivery of the products needs an alternative system of ordering products that would reduce the lead time. As earlier mentioned, online ordering system best suits the situation under which Pepe operates. However, the use of the approach is rather disadvantageous because of the possibilities of errors and that it also requires knowledgeable computer personnel.

Application of Theories

It is clear that the case study relied on Fisher model theory. According to the Fisher’s model, the bad performance of most of the logistic companies is due to misalignment between the suppliers and the products in demand. Alignment of the supply to the request is the smooth movement of the products from the manufacturer to the consumers. Fisher’s model presents both physically efficient and the market responsive supply chain structures (Harris, Componation and Farrington 2010). Pepe’s case study is an example of the physically efficient structure of a supply chain whereby the assembly of the products takes place away from the main factory. The Fisher theory is useful in the analysis of the benefits of the alignment of the best supply chain strategy that can enhance performance.

Another theory that is also evident in the Pepe case study is the contract theory. The case study showcases how the company has contracted the external suppliers and this case, contract theory has to play a role to increase trust between the agents and the management. Deals help in improving beliefs and cooperation. Also, other organizational theories are useful for the supply chain management. According to Pepe case study, this report additional presents four other theories. The first theory is the principle agent. The theory focuses on the management of the administration of the company from the U.K to the agents who operate from other countries. For instance, Pepe jeans have around ten potential agents that are in charge of the 1,500 independent retail outlets through the U.K. They are the ones responsible for the activities of the companies at the retail level at a particular level.

There is also the transaction cost theory for analysis of the prices of the jeans. For example, from the case study, the source agent is reported to have indicated the price of the basic jeans, and they use the theory to anticipate that the prices will certainly reduce with an increase in the volumes of the products. Besides, there is also the network theory that was evidenced in the case study. The outlets of the Pepe jeans are organized in certain with various skills and thus representing different locations in U.K. The network theory contributes the understanding of the interchangeable relationships between the company and its outlets through short and long term cooperations. The agreement between the company and its stores is also enhanced through interactive communications and this takes place among the agents on a yearly basis.

Comparison to other Cases

The report first makes a comparison with the case of the Toyota as presented in work of (Barnes 2008, p.4). According to the case study, Toyota is perceived as on trend to becoming number one. The company moved to number two as one of the companies with prestigious technologies in manufacturing vehicles which meet the needs of the users.

The case study presents how the company intends to expand its market with the intention of increasing profitability. Currently, the company has growing markets in the United States (U.S), China and African countries (Barnes 2008). Therefore, it can be established that the firm has had a successful opening of the outlets. While Pepe jeans have improved their competition in the market through better imaging of the products, high-quality jeans and plastic products, Toyota has integrated advanced technology that makes its products to use both electric power and fuel and thus enjoying great customers’ demands. Therefore, Pepe jeans and the Toyota have used more or less similar approaches in making products that are appealing to the eye of the customers.

While Toyota seems to be guided by some principles to improve the environment, the Pepe jeans’ case study does not showcase principles of protecting the environment. Toyota works on the principles of eliminating wastes from the environment, constant improvement, automation and finally involvement of the workers. The principles are manifested in the just in-time production, quality management of the products, team work and layout of the products (Monden 2011). The company also ensures that there is a close collaboration with the suppliers and this aspect is similar to the Pepe jeans which also maintains close cooperation with the providers and hence an increased alignment of the supply and demand.

Comparatively, Toyota has also achieved high volumes of its products in the market just like Pepe jeans and this is import as a measure of lowering the costs of the products. According to the case study, the car products have high flexibility and little inventory listing (Monden 2011). The fact that the Toyota Company has had a low number of defects has eliminated the chances of few customers who get discouraged by the high number of errors and thus triggering recall of the products. Similarly, Pepe jeans have shown excellent quality and hence have not experienced any defect.

Currently, Pepe jeans do not face a lot of competition from the competitors due to the evolving design production. Toyota also uses different design operations and hence had made the company make new products relatively faster than its rivals like Ford.

Just like Pepe jeans has been a trade setter, Toyota has also been a carmaker that many companies have tried to copy. It has become the world’s best car making company that is known to many with the best manufacturing practices. Finally, Toyota has satisfied their customers in using a lean technology which does not require any recourse. Some of the supply chain theories which also play a part in the case study of the contract resourced based and the principle agent approaches.

Conclusions

Pepe Jeans Company has created a network of companies that produce, handle and distribute particular goods and products as per the demands of the customers and further a close relationship with the present outsourcing agents in Hong Kong which is a good approach for the management of logistics. The current failure of the company is due to its inability to manage its supply chain. The Pepe jeans have failed to remain competitive in the market despite the enormous initial growth and an extensive repertoire of successes. Organizational change is one of the unavoidable development steps that any business will have to face. Therefore, Pepe Jeans ought to switch to new suppliers as a long term strategy. The use of the new suppliers as well as a new system of operation will certainly reduce the lead time. It is important the organization’s supply chain is managed in a way that will satisfy the customers. In comparison to Toyota, the Pepe case study has shown exemplary similarities as well as differences.

Recommendations

Companies must move towards improvements and be ready for new changes in the market. Managers of the companies must be willing to improve their products as per the demands of the market to remain relevant in the market. It is important to classify the recommendations into a short, medium and long term. The company should make sure that the lead time with the existing suppliers is made short to increase profitability. Also, the company should source new suppliers from other countries overseas. The final temporary recommendation is that the corporation should take advantage of the local manufacturers. On the mid-term solution, it is recommended that the company build a finishing operation plant in U.K. Finally, the longtime recommendation is that Pepe Jeans should build its manufacturing facility and perhaps adopt the ERP system of services.

References

Barnes, D., 2008. Operations management: an International Perspective. Cengage Learning EMEA, pp.1-165.

Jacobs, F.R. and Chase, R.B., 2008. Operations and Supply Management: The core. McGraw Hill/Irwin.

Harris, G.A., Componation, P.J. and Farrington, P.A., 2010. An exploration of Fisher’s framework for the alignment of supply chain strategy with product characteristics. Engineering Management Journal, 22(4), pp.31-43.

Monden, Y., 2011. Toyota Production System: An Integrated Approach to just-in-time. CRC