VF Corp. is the world's largest apparel company, with more that 30 leading brands that include Wrangler, The North Face, Lee, Nautica and 7 For All Mankind. These brands are sold in more than 150 countries through a variety of channels, including 700 company-owned stores, and last year generated revenue of $7.2bn.
"One of the fascinating things about VF is that we are one of those companies that many people have never heard of, but they know at least some of our brands," says Chris Hobson, vice president of business systems. "We have tremendous complexity within the company and very diverse distribution channels," he says. "The supply chain is really critical to the success of VF as we look at the leverage opportunities across those brands."
A key factor in the success of VF's supply chain is its long-term relationship with Logility and its use of Logility's Voyager software solutions. This partnership began in the mid-1990s and has evolved into a key strategic relationship, Hobson says. "When we first selected Logility, VF was looking to partner with a best-of-breed application, so we looked at the market leaders and got down to a short list of two. Logility came out on top in a head-to-head functionality test," he says.
In the early years of the relationship, VF's supply chain was much less complex than it is today, Hobson notes. At that time, the company did 90 percent of its own manufacturing and most of the products that it forecast were repetitive, basic products that were sold year after year, he says.
Since then, VF has outsourced a little more than half of its production to third-party suppliers in Latin America and Eastern Europe and has moved to forecasting many more seasonal products. Today, the majority of products at some of VF's brands are available only for one season, with clearly defined and extremely short life cycles. "The number of seasons in a year varies by brand, but some products are up to eight or 10 seasons," says Hobson. Although there is no product demand history for these new, short-lived items, the profiling tool within Voyager Demand Planning uses the history of similar products to forecast sales, he says.
Additionally, VF has added 15 new brands, many through acquisitions, since purchasing the Logility solution. In some years, two or three new brands have been added in a single year. "Of course, we had to integrate these into our supply chain and incorporate them from a systems perspective," Hobson says. These shifts brought a whole new level of complexity and required different skill sets and different processes in terms of forecasting, he adds. "That whole transition happened during the time that we had Logility, and the Voyager solutions have been a big part of our supply chain, which is a big part of our success."
Logility also has been flexible in working with VF's organizational structure for forecasting, Hobson says. The company organizes its brands into coalitions based on consumer lifestyle, such as Jeanswear, Sportswear, Contemporary Brands and Imagewear. There are six major coalitions in the U.S. Each brand has forecasting responsibilities for its products and reports up to the coalitions, which report up to corporate. Logility was implemented at each of the coalitions with a basic rollout. "We were able to leverage the back-end piece by repeating what we had done on prior brands, but the training and loading of data all had to be done on a brand-by-brand basis," he says. "This is crucial because getting the balance right between brand autonomy and central governance is very important to VF."
As with any apparel company, forecasting accuracy also is critical. "One of the things that staggered me when I first came here three years ago was the number of products that we deal with," says Hobson. "We have 600,000 active SKUs that we are forecasting at any one time and we produce more than 500 million products annually around the world." The many size, style and color combinations typical of apparel is partly responsible for this number, but even without that complexity, "we still have a vast array of products to deal with," says Hobson.
Another challenge is VF's need to work with forecasts for both basic, repetitive products and new, seasonal products. For basic products, it generates statistical forecasts "based on a good, long history -- sometimes up to 30 years," says Hobson. "With a brand new product that is coming out next season, we can make an estimate based on similar products. But the real challenge is getting both of those types of forecasts in the same model, in the same hierarchy and then consolidating that up into the style/color/size level to drive our supply planning."
VF forecasts its products three to six months out, Hobson says, "and we only have one shot at getting it right. That shot begins with a good forecast." By improving its demand planning process with Logility, VF has increased its forecast accuracy, which has driven benefits throughout the organization, says Hobson.
VF continues to look for opportunities to leverage its relationship with Logility. "There are some products within the Logility suite that we are interested in, but we just haven't gotten around to them in terms of priority," says Hobson. "But we are in constant discussions with Logility executives about some of the challenges we have and about capabilities in the new products and tools they are building. We want to factor those into our application strategies and integrate them where it makes sense."
VF has very rigorous processes to make sure that every project it invests in has a very solid business case attached to it and has been particularly diligent in the last couple of years about prioritizing projects to make sure the ROI is as strong as possible, says Hobson. "The fact that, even during the challenges of last year, we continued to invest in Logility projects, such as rolling out Logility to our 7 for All Mankind operations in Asia, shows that the company fully recognizes the benefits that Logility brings in terms of driving an accurate forecast, which leads to inventory reduction and reduces inventory carrying costs - all of which are absolutely critical to us. For me, that speaks volumes about the benefits we are getting form these products."
Timely, incisive articles delivered directly to your inbox.