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Pepe Jeans Case In: Other Topics

Pepe Jeans Case CASE DISCRIPTION In 1973, Pepe Jeans was constituted as a road side stall by three brothers Nitin Shah, Arun Shah and Milan Shah from Kenya at Portobello Road Market in West London’s trendy Notting Hill district. The company has achieved enormous growth. This is the result of his unique approach in a product market. Pepe was used to be a trendsetter. However, there are changes in retailer’s demand where Pepe is having a hard time to cope up. Retailers become unhappy with their requirements to place firm orders six months in advance with no possibility of amendment, cancellation, or repeat ordering. Retailers believe that Pepe’s sale would increase by about 10 percent only with more flexible ordering system. Pepe felt pressure for changes needed for them to address all the complaints of their retailers. Obviously, Pepe is not yet ready coping up the changes because they never anticipate these problems will occur. They use their financial strength trying to solve the retailer’s complaint. STATEMENT OF THE PROBLEM: What are ways or alternative actions to correct the growing problems which are the inflexibility ordering system and the six-month order lead time?

OBJECTIVE OF THE STUDY: * To identify the alternative action that addresses the inflexibility ordering system and the sixmonth order lead time. * To cognize the supply chain of Pepe jeans * To have a cost-effective alternatives. * To improve the supply chain strategy of Pepe Jeans * To apply the learning we have in chapter 10 which the supply chain strategy * To go beyond from given alternatives from the book * To know the importance of shortening cycle time/delivery time METHODOLOGIES: Pepe have 1500 independent outlets throughout the United Kingdom. The company maintains contact with its independent retailers via a group of approximately 10 agents, who are selfemployed and work exclusive for Pepe. Each agent is responsible for retailers in a particular area of the country. The agent meets with each independent retailer three (3) to four (4) times each year in order to present the new collections and take sales orders. Since the number of accounts for each agent is so large, contact is often achieved by holding a presentation in a hotel for several retailers. Agents take orders from retailers for six-month delivery. After Pepe receives an order, the retailer has only one week in which to cancel because of the need to place immediate firm orders in Hong Kong to meet the delivery date. The company has had a long-standing policy of not holding any inventory of jeans in the United Kingdom. After an order is taken and confirmed, the rest of the process up to delivery is administered from the Pepe office in Willesden. The status of orders can be checked from a Web site kept by Pepe. The actual orders are sent to a sourcing agent in Hong Kong who arranges for manufacturing the jeans. The sourcing agent handles all the details associated with materials, fabrication, and shipping young in-house designers who are responsible for developing new styles and the accompanying point-of-scale materials. This team provides specification for the jeans. They works closely with the Hong Kong sourcing agents to ensure that the jeans are made properly and that the material used is of the highest quality. SWOT ANALYSIS: STRENGHT: * Company has a brand strength

The company can demand a retail price that averages about $72 for its standard. * Unique approach in a product market dominated by strong brands and limited variety. Pepe presented a range of jeans styles that offered a better fit than traditional 5-pocket Western jeans (such as those made by Levi Strauss in the United States)–particularly for female customers. * No long-term debt. It shows that Pepe has a very healthy cash position. It can make for good investment. Pepe do not have worry about paying off long-term debt when times are tough. * Pepe has a very healthy cash position. This is because of having no long-term debt. It signify financial strength of the company. WEAKNESSES: * Six-month order lead time Since the fashion market was so impulsive, the current favorites were often not in vogue six months in the future. Delay might occur out of trend and product might not the demand of customers anymore. * Inflexibility ordering system Retailers were forced to order less, resulting in stockouts of particular sizes and styles. * Reluctant for changes They become much less of a trendsetters than in their early days. OPPORTUNITIES: * Good relationship with the independent retailers. This will create attachment between retailer and agents in behalf of Pepe. . * Growing population In every business the population growth will always be an opportunity that indicates that the market is definitely growing.

* No long-term debt and has a very healthy cash position.. This is opportunity for Pepe to attract more investor. THREATS: * Pepe’s smaller competitors offered delivery in only a few days. This is an indication that customers/retailers might choose more convenient service for them. * Fashion market was so impulsive. It threatens the delivery reliability and speed of the product to meet the current vogue. There must no delays as possible. FINDINGS: POSITIVE FINDINGS: * Pepe has brand strength and known as a supplier of standard product in fashion market. * The company has financial strength * They have edge in fashion market. * If Pepe improve his flexibility in ordering system, their sales would increase about 10%. NEGATIVE FINDINGS: * Pepe is not flexible in their ordering system * It took them six months to deliver the product to their valued retailers. * They become much less of a trendsetters. * Six-month order lead time made it difficult to accurately order and worsened the problem. ALTERNATIVE COURSES OF ACTIONS: ACA 1 Outsource a shipping company Outsource a shipping company that will agree to deliver the products to all retailers in only a few days. The shipping company will be credit for any damages of the product while shipping so that they handle it well. Advantages:

* It will minimize the shipping cost. * Retailers will be satisfied for shortened delivery speed. * Retailers can meet the current vogue with no delays * Maximize profit * Increase product and services value * Improve operating performance –shorten delivery speed . Disadvantages: * Products might not handle well * Unpredictable circumstances (e.g. fire or technical failure) while shipping that will cause delays ACA 2 Online ordering system Online orders must integrate in real time. Everything in ordering process like all new collection, sales orders and cancelation process will all be available in the site. Everything will do with a click. Advantages: * Convenience for Pepe not to send agents to collect orders and for the retailers to easy order. * Fewer expenses * Faster response to orders * Easy to monitor orders * No hassle collecting orders manually Disadvantages: * Technical errors might occur. * Requires computer illiterate personnel ACA 3 Outsourcing Offshore –put up a manufacturing plant

Countries where there were more cost advantage and greater flexibility where the plant must be place. Advantages: * Cost advantage in shipping * Open job opportunities * Provide the demand needs and deliver less than the usual six months. Disadvantages: * Purchasing new expensive machines * Loss managerial control * Inflexible to changes in business environment * Political and cultural problem RECOMMENDATION: We recommend the Alternative Courses of Action number one (1), outsource shipping company, and the Alternative Courses of Action number two (2), online ordering system. We choose these two because it will help Pepe deliver their product for a very short of time than the six-month order lead time and easy, hassle free, and convenient ordering system. In this matter, retailers be delighted for the value that Pepe is giving. CONCLUSION: Our group believes that all companies must have a room for improvement and always ready for change. These were Pepe jeans, we think, failed to have or to do despite of their enormous growth and success. Change is one of inevitable thing to face in any kind of business. Thus, managers/entrepreneurs must ready for the changes so that they can maintain or improve their products/services and to have consistent customer satisfaction.  

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