Hugo Boss Case Analysis
Hugo Boss has become known as an industry trend setter for its high quality men’s and women’s fashion apparel, shoes, and accessories. Product leadership, intimate knowledge of their market and customers, and operational excellence are what distinguish the company from others in the luxury fashion goods industry. From an operational perspective, the variability that exists as a result of designing and manufacturing short run fashion products is high. This perpetual shifting of demands and preferences makes it difficult to maintain accurate industry forecasts that result in high risk actions as manufacturing products with no guarantee of sale leading to large scale inventory systems.
The CEO had to walk a fine line between supplying his customers’ orders promptly, or tying up his production partners with orders that may or may not be placed. Skilled management of the design, planning, and operations of the supply chain impact the success and overall profitability of the operation. As is clearly stated in chapter one of Chopra, “The goal during the operation phase is to exploit the reduction of uncertainty and optimize performance within the constraints established by the configuration and planning policies.”
• Body wear NOS SKU’s are functional products because they do not change seasonally, including style, color, or fabric, and remain constant year after year for a period of three years.
• Some important factors to consider for the business strategy related to NOS items are: o Hugo Boss guaranteed delivery within 48-hours for NOS replenishment orders. o Forecast demand for NOS items is made six months in advance. o Planners seek to keep on-hand inventory level of 3.5 months of forecasted demand. o Production lead time for NOS items was eight weeks, and current transportation lead time by sea was two and a half weeks. Total lead time from the factory to the warehouse was ten and a half weeks. o The cost of holding inventory ranged from 9% to 12%.
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The CEO had to walk a fine line between supplying his customers’ orders promptly, or tying up his production partners with orders that may or may not be placed. Skilled management of the design, planning, and operations of the supply chain impact the success and overall profitability of the operation. As is clearly stated in chapter one of Chopra, “The goal during the operation phase is to exploit the reduction of uncertainty and optimize performance within the constraints established by the configuration and planning policies.”
• Body wear NOS SKU’s are functional products because they do not change seasonally, including style, color, or fabric, and remain constant year after year for a period of three years.
• Some important factors to consider for the business strategy related to NOS items are: o Hugo Boss guaranteed delivery within 48-hours for NOS replenishment orders. o Forecast demand for NOS items is made six months in advance. o Planners seek to keep on-hand inventory level of 3.5 months of forecasted demand. o Production lead time for NOS items was eight weeks, and current transportation lead time by sea was two and a half weeks. Total lead time from the factory to the warehouse was ten and a half weeks. o The cost of holding inventory ranged from 9% to 12%.
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