BACKGROUND OF HIM AND HER AUSTRALIA
Him and Her Australia (HHS) is an Australian-based clothing retailer that sells designer and upmarket fashion clothing to both men and women in Australia. They have a substantial slice of the Australian retail clothing market, having amassed billions of dollars in profit in the decade since they began operating. There are nearly 80 shops located throughout the country, which was expanded from an initial run of 15 shops in their first year of operation in 2001.
HHA’s clothing comes from designer labels and outfits; there is an eclectic combination of younger Sydney-based designers, and classic Italian designs. Accessories are also sold through this store – everything from purses to hats and shoes. Their atmosphere is chic and upscale, meant to provide high fashion for Australian customers who have a moderate to high income. These designer clothes require a great amount of preparation and design, and HHA is often given exclusive designs from SYDO and Bienvenuto & Son, two unique design houses who provide unique clothing that can only be purchased at HHA.
The past fiscal year (2010-2011), HHA struck a deal with Beijing Fashion Manufacturing, a company that has agreed to make 8,000 units of clothing for them. They were responsible for 30% of HHA’s clothing that year, putting HHA’s total number of units that year at nearly 27,000. This unique deal led to a great amount of success in that fiscal year, selling nearly 75% of their total stock before markdowns, making for a substantial profit of billions of dollars between the 80 stores in Australia. With this large profit margin in mind, executives at HHA would like to repeat/enhance the elements that led to last year’s success, much of it being attributed to the quality, reasonably priced clothing made from BFM.
Subj: Production Quota
Because of exemplary service from you in the previous year, HHA would like to expand our order with you in the 2011-2012 season. HHA would like to double the production of clothing by BFM from 8,000 to 16,000 units. This would increase BFM’s involvement in the manufacturing of HHA clothing to 60% of our total units.
If that is too much of a commitment, we may be willing to lower our order to 13,000 units.
However, we will not go lower than 10,000, as we absolutely desire to have a stronger relationship with BFM, and require their quality clothing manufacturing to ensure a strong and steady working relationship.
Can BFM’s facilities handle the increased order that HHA is asking for?
How many staff are on hand to make the clothes total?
Does BFM require a longer-term contract in order to justify the change in production priority? If so, how long would BFM be willing to commit to creating a greater percentage of our clothing?
Please get back to us as soon as you can regarding these demands/questions.
Sincerely,
Mr. Smith
Subj: Delivery Timeframe
HHA needs the clothes from BFM delivered by September 15th. This would be an ideal timeframe for HHA, as it provides for a large margin of error in the delivery of the clothing units to all retail outlets in Australia, as well as allows for early sales in the midst of the fall season.
If September 15th is too early a timeframe for the increased order, September 20th could be a reasonable fallback. Barring that, September 25th is yet another option.
The latest the clothes can be delivered is October 1st. This only gives our HQ a single month to get the clothing delivered to all eighty stores in time for the fall season, which is the minimum time estimated to get the units successfully shipped. Each week the clothes are not delivered after that means an additional 5% loss in profits, which is absolutely unacceptable.
The clothes must be delivered as quickly as possible while still maintaining the lower unit price, so as to get the clothes in time for the fall 2011 season.
What methods are used by BFM to deliver your shipments? Plane, ship, etc.?
Does BFM charge more for faster delivery methods? Is it possible to overnight their shipments? Would that cost outweigh any decrease in the unit price that was previously agreed upon?
What are the timeframes for each delivery method? Where does the shipment fly/leave port from, and how far is that from the manufacturing facilities?
At these facilities, how quickly are the clothes created (time spent per unit)? How many individual people work on a single piece of clothing? Would having additional staff speed up production time?
Please get back to us as soon as you can regarding these demands/questions.
Sincerely,
Mr. Smith
Subj: Design Timeframe
In order to push forward production (and only if absolutely necessary), the designs need to be done more quickly. Our designers, Bienvenuto and Son (B&S) may have to push up their design delivery to August 15th.
We cannot ask B&S to push up their design schedule any further, because that firm has other commitments in Milan that take precedence to ours. However, we still desire their quality designs and brand name recognition; therefore HHA would severely diminish our own image in the niche market if we hired other designers for subcontracting work.
If need be, we would be willing to put forth some subcontractors for no more than 10% of the overall order, but the majority has to be from our higher designer labels, such as B&S. An extended line from SYDO for BFM to manufacture is possible, if they can deliver designs before B&S can.
When is the absolute latest that BFM would need the designs from B&S in order to deliver the clothing to HHA by September 1st (or whatever date is decided upon in that aspect of negotiations)?
How much turnaround time can occur in the event of alterations to previous designs/introduction of new designs during the manufacturing process?
Please get back to us as soon as you can regarding these demands/questions.
Sincerely,
Mr. Smith
Subj: Compensation
If that is unacceptable, we are willing to raise that to $15 AUD per unit. Barring that, active negotiation in process can allow us to raise our unit prices to a level BFM is satisfied with. We will, however, go no higher than $19 AUD, as that brings us to nearly the same prices we were paying for the first year’s order.
What is BFM’s at-cost price for the creation of these clothes? Does it vary depending on clothing item?
Would it help the unit price if we emphasized the manufacturing of certain items over others? Making more of the units which carry a lower cost of production could give BFM room to allow a lower unit price and still earn a profit.
Are there other factors/ things that HHA can do on their end to lower costs for BFM to create and manufacture the clothing units?
Would BFM be willing to negotiate a lower unit price if they could guarantee further business from us in the coming fiscal years?
Please get back to us as soon as you can regarding these demands/questions.
Sincerely,
Mr. Smith
Subj: Quality Assurance
In light of the increased order and the truncated timeframe, HHA would want to ensure that the quality of the materials remains the same, or as high as possible. Therefore, certain quality assurance measures would have to take place.
Weekly visits from an HHA inspector to each manufacturing facility would be ideal, in order to ensure that the manufacturing of the clothing remains on schedule, and in keeping with the standards that BFM has presented in the past. A foreman would guide them through the offices and floor, and they would perform visual spot inspections of the clothing.
Barring that, biweekly visits would be absolutely necessary. Longer than that, and the inspector could only realistically make one visit before the absolute deadline for the order would expire. HHA demands to be able to see how the order looks as it is being made, in order to protect its investment.
Some questions we have:
How many manufacturing plants do you have?
What level of access/assistance would an inspector receive, having been given access to a facility of BFM’s?
Would there be any level of interference or loss of productivity by the presence of an inspector from HHA?
Please get back to us as soon as you can regarding these demands/questions.
Sincerely,
Mr. Smith
