Fashion Unlimited Canada Case Study

Case Study

On

Fashion Unlimited

Submitted by :

Jimmy Mariano

TABLE OF CONTENTS

EXECUTIVE SUMMARY  ……………………………………………………………………………………   3

ISSUE(S) IDENTIFICATION ………………………………………………………………………………..   4

ENVIRONMETAL & ROOT CAUSE ANALYSIS ……………………………………………………..   6

ALTERNATIVE & OPTIONS ……………………………………………………………………………….    9

RECOMMENDATIONS ……………………………………………………………………………………..  11

IMPLEMENTATION ………………………………………………………………………………………….  13

MONITOR & CONTROL …………………………………………………………………………………….  15

EXECUTIVE SUMMARY

Fashion Unlimited was founded in 2001 by a graduate of the International School of Fashion, Arts & Design, La Salle College in Montreal, Canada. It is Canadian owned & operated with its head office in Toronto, and had retail operations across the country.  The company made affordable, current fashion in pants, skirts, tops & outerwear as well as basic underwear, socks & T-shirts and the brand has increased popularity with customers ranging in age from 15 to 35.  It exported to the US through deals with several large department store chains. Given the customer demographics, most Canadian & US sales were on-line.  There were no plans for further domestic expansion of retail stores. Management was actively pursuing expansion opportunities on-line, and brick & mortar, in Mexico & China where there were growing middle classes & young populations.

This case report was prepared in line with the Fashion Unlimited’s vision that the brand was not able to capitalize on its identity  as a Canadian company. Increasing sales coupled with the lack of domestic skilled cut & sew workers and strict labor laws regarding overtime and wages put pressure on the Executive team to move towards offshore production. The ongoing challenge was finding factories with the same of better quality and service at lower total cost of ownership than domestic operations.  Management was committed to running the company in an economically, environmentally, and socially sustainable manner.  For continued growth and expansion, management finds that domestic production is no longer seemed feasible to survive in this cut-throat, highly competitive market. However, the management planned to keep & continue Canada-based non-manufacturing, high value added activities such as design, R&D, branding, merchandising, marketing, logistics & distribution. The company also planned to operate short run & replenishment facilities in Canada.

April Song, VP of Supply Chain, her biggest challenge was to design an optimal strategy that maximized profits & minimized risks, had the capability to quickly adapting to new fashion trends with short lead times and small runs & provided the appropriate degree of quality control to meet customer’s perceptions of quality.

With the passage in 2003 of the Canada Lease Developed Country Tariff program, it removed duties across imports from 49 countries. It became increasingly difficult to manufacture clothing in Canada & remain competitive. As such, many companies shifted their production operations overseas to lower labor cost host countries.

At the moment, the situation has not reach alarming proportions. However, if crucial measures are not visibly undertaken, the company may start to lose big business in the process to its competitors & compromise gravely its survivability.  It is of prime importance to change the current global sourcing initiatives, revisit its sourcing strategy, perform country risk analyses, & evaluate its merits based on cheaper landing cost of products & execute a well-planned cost analysis.  The Management deem it was timely to overhaul its global sourcing strategy and move production offshores based on the above sentiments,  to shore up & increase its profitability for the company. Doing so, it will help capitalize its market reach for its online business markets as well.

Looking at the merits of the case, a detailed report has been prepared incorporating all the underlying reasons, rationale decision, pros & cons & the strategic action plan, henceforth, it is highly recommended to move production offshore to China to effectively address major concerns such as :

• Readily infrastructure for high quality manufacturing facilities, availability of highly skilled cut & sew workers & slightly lower labor costs coupled with exemplary quality products at lower prices. These will effectively boost record corporate profitability. Fashion Unlimited can once again regain competitive advantage in Canada & United States.  China, being renowned to high faster rate of production, Fashion Unlimited can gradually venture into the Fast-Fashion industry sector.  The ultimate goal is to obtain a Chinese Manufacturer with this portfolio in mind, and come up a with a Total Landed Cost that is favorable in terms of low pricing coupled with short leadtime delivery, premium / acceptable quality & products that will win the hearts of 15-35 age group.
• China, being the world’s most populist country having a record 1.5 Billion inhabitants & a 15-35 year old  market consumer power house of about 300 Million, a fashion trendy populace & an emerging middle class, Fashion Unlimited can capitalize on this highly tech savvy age group for its on-line business undertaking.
• If for any reason that the China venture won’t translate to overnight success, contingency measures & plans A & B are laid out on this report to fall back on and execute as & when necessary.

With this expansive vision & market driven approach, it’s a sure win-win approach for the sustainable long term business success for Fashion Unlimited.

ISSUE(S) IDENTIFICATION

In 2003, after the passing of the Canada’s Least-Developed Country Tariff program removing duties on imports from 49 countries,  it became difficult to manufacture clothing in Canada and remain competitive.  Of late, the increasing costs coupled with lack of domestic skilled workers, strict labor laws regarding overtime & wages put pressure on Fashion Unlimited’s executive management team to move towards  offshore production. Government regulations & policies on the clothing industry per se, has put severe pressure on its viability & profitability & as such, is forced to move the manufacturing operations overseas  to remain competitive. To survive this cut throat industry, Fashion Unlimited consider moving its production platform & relocate to countries with lower cost of production with competitive pricing. Fashion Unlimited will need to run a feasibility matrix to choose :