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
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The reduction of inventory also helps to reduce total holding cost, which can be averaged at 10.5% of inventory cost. The SCO initiative achieved a reduction of inventory from 3.5 months of forecasted demand to 2 months. Then, inventory turns increased from 3.43 to 6 turns per year. One driver for reduction of inventory was the reduction of lead times to 4 weeks, which impacted in the reorder Level (R) that is calculated as the average lead time plus safety stock.
Overall, the decision to use NOS items as a pilot was appropriate and successful. However, this pilot was successful due to the fact that it was implemented with NOS items, and the pilot did not deal with the short –run fashion items. It would be incorrect to assume the same pilot program would be applicable to the other short-run fashion division products that operate on a different design, manufacture, and supply chain. However, there are functional improvements that were realized during the pilot program that could be implemented to the other fashion products, in a limited format. 2. Provide your recommendation. Does it make sense to extend the pilot to other product groups? If so, which ones and why? What challenges would she face in attempting to do so? Are these challenges insurmountable?
As shown in the table below, the other product groups are fashion products, which require a different supply chain strategy. It is important to understand that Fashion products are