Situation Overview
The company thrives in its manufacturing business by introducing apparels targeting the teen market. The company is currently focusing its efforts in distributing the products locally, but plans for global expansion is highly being considered. At first, the company is achieving reasonable sales, but as new competitor emerges, the female segment of the business’s market turns to the upscale store that offers similar styles, but at $10 cheaper. The challenge that the company is facing is to win back the declining share on one segment of the market. With the advent of the planned expansion and declining market share, the company is in need of cost cutting measures to attain the said future goal and mitigate current market issue. One of the potential strategies that the company is looking at is to cut cost. However, such strategy should be initiated carefully so not to compromise the quality of the product and achieve goals at the same time. This paper will suggest potential strategies that the company can consider in order to implement.
Design
When it comes to design in manufacturing, it is apparent that QA (quality assurance) must always be critical in ensuring that the products comply with the design specifications. This means the construction of the product should be done within the facility to closely monitor the quality outcome. However, this approach requires the company more labor force to work on fabrication, cutting, constructing and finishing of the goods, which entails larger overhead. In order to cut cost on this process, the company should outsource subcontractors to work on fabrication and product construction (Friedman and Cammalleri).
Subcontracting enables the firm to gain access to outside firms that offers more intensive production techniques at a much cheaper labor cost (Helper 89). In addition, outsourcings for freelance designers encompass diversified ideas in design that will potentially appeal to the declining market segment. This approach will save the company significant amount of labor hours, which will reflect on reduced overhead cost. However, the company must ensure confidentiality and confidence with the contractors to keep proprietary information particularly product in complete secrecy between the company and the contractors. One way to address this kind of anticipation is to have a strong binding agreement with the subcontractors.
Production
The majority of the expenses in manufacturing that originate from the choice of raw materials, the processes of obtaining the materials and the steps involved in processing the materials in the production line. At some point unnecessary operations within the production line are still being implement, but otherwise can be omitted to save production cost. For example, if the fabrics used in producing teen apparels are procured from local suppliers, the company should start looking at overseas suppliers that offers similar quality of much better for significantly lower price even with all the duties and taxes paid for the imported materials combined. The company should also take advantage of the West and the Trans-Pacific trade partnership that entitles imports and exports low importation taxes (Platzer 6). In addition, since the company is looking forward to an overseas expansion, it will be best to establish international trade partnerships with overseas suppliers as early.
In the production process, evaluating trade offs such as employing the best technologies to shorten the time spent by manual labor on labor-intensive process (Houshik 5). This approach is suitable for high volume production, but new investment on machinery defeats the purpose of cost cutting. Therefore, optimization of current production workflow should entail the same work efficiency as using more advanced machinery. For example, the business has its peak and off peak season, since it was suggested that some of the work has to be outsourced from contractors, the work volume in the in-house production will be less as before. The trimming line should be placed next to the packaging and tagging section to reduce the time needed for the finished goods to travel from one line to the next. This way the workflow in the production would be much efficient cutting the waste in time adding more opportunity for higher production volume. Furthermore, the line sewing the buttons can be utilized to also perform the tacking and rivets attachment process (attaching metallic buttons on the garment). This approach can be done to save cost on adding separate lines to do the tacking and rivets attachments, hence saving the company significant overhead cost.
Sales
Once all the manufacturing efficiency improvements are implemented, the next step is to strengthen the company’s sales force. The first approach is cycle time reduction (Jawa and Lefebvre). Customers and apparel retailers place orders months before the intended season. For example, a retailer places an order of apparel for Spring collection. The orders are placed at least three months before springtime, reducing cycle time encompasses faster delivery of the orders to the stores and ensure display of the merchandise early on target before the rest of the competitors. Being ahead of the game has always been an advantage towards sales, as people rounds up to the stores to purchase clothes and wear the new designs before everyone does, enticing more people to go and check out what’s making the buzz in fashion and the company would be first on the list.
This approach is geared towards sales increase and marketing. However, integrating cost reduction should also involve systematic acquisition of orders by the sales team. For example, the sales team should finalize their design portfolios to be presented to potential buyers. The earlier the buyers are persuaded the earlier the orders can be placed. During the sales pitch, it is important that the sales people explain to the buyers that the orders are to be delivered simultaneously on all stores instead, therefore, all orders must be in place to target a particular delivery date for all stores. This strategy entails, cutting the cost of logistics and transportation. It would take significant amount of money to have the delivery trucks to travel back and forth to individual stores adding up to increasing fuel expenses. Sending the trucks to multiple delivery points at one time will cut the cost of transportation. Studies show that reducing energy consumption by increasing operational efficiency adds an estimated 5% to the business bottom line (Cabon Trust).
In terms of addressing the competition and the dwindling share of a market segment, it would be best for the market to diversify its current product line. The problem is that the company is losing its female customers, it is indeed a large segment of the market to lose, but there are other segments of the market that the company should also consider even though women are the most active shoppers if that is a factor.
Figure 1 Apparel Market Segment (Boyle).
It is apparent from the above figure that women’s apparel encompasses the largest segment, but it also has sub segment that are also intended for teens. Teenagers are engaged in sports; therefore, the company should also introduce sports related apparels. Active wear is also a growing sub-segment of the apparel market that the company should take advantage including children’s wear and apparel. Variations according to functionality is also an opportunity for the company to explore such as making apparel for teens that suits every occasion such as prom, beachwear, active lifestyle and everyday outdoors.
Future Expansion
In terms of expanding the business to new territories, there are emerging markets overseas that are worth investing. For instance, China and parts of South East is a growing market for imported apparel.
Figure 2 The emerging Chinese apparel market (atkearney.com).
The Chinese market is just an example of a potential expansion territory; other countries such as Brazil, Japan, Australia, Canada and several other potential countries are likely candidate for a successful expansion. Countries within closer range can be considered for expansion within a year since the need for progress monitoring would be easier and the demographics are much familiar as compared to other locations that need more feasibility study in terms of the market and consumer behavior. The other expansion target locations are likely to be engaged in the next five years. However, entering new market territories during expansion constitutes advantages and risks. Political, cultural and local competitions are factors that need to be analyzed.
Structuring an overseas venture entails increase in market foothold and increased sales as obvious advantages. If successful, the company will gain global recognition of its brand entailing growth for the company as more investors become interested in the venture. However, the company will also face risks such as competing with stronger and established local and international brands in the target countries. Furthermore, regulatory issues and tax structure is a challenge that the company should also consider preparing to avoid conflict with local authorities in the expansions states (Davis and Macho). Therefore, it is recommended that that the company establishes close trading relationships with the target country starting by importation of their local materials as mentioned earlier. This way the company will gain a clear insight of the system within the target expansion location.
Works Cited
Atkearney.com. "Winning Chinas Apparel Market - Consumer Products & Retail Featured Article." atkearney.com. atkearney.com, May 2013. Web. 15 Sept. 2013.
Boyle, Beth. "NPD Reports on the U.S. Apparel Market for 2010." PRWeb. prweb.com, 10 Feb. 2011. Web. 15 Sept. 2013.
Carbon Trust. "Retial: Energy management – the new profit centre for retail businesses." Sector Overview (2012): n. pag. Web. 15 Sept. 2013.
Davis, Lonnie E. "Expanding overseas." CBIZ ExpertsAccounting & Consulting (2004): n. pag. Web. 15 Sept. 2013.
Friedman, Avi, and Vince Cammalleri. "Cost Reduction Through Prefabrication: A Design Approach." Housing and Society 24.1 (1997): n. pag. Web. 15 Sept. 2013.
Helper, Sue. "Subcontracting: Innovative Labor Strategies." Labor Research Review 1.15 (1990): 89. Web. 15 Sept. 2013.
Jawa, Mickey, and Mark Lefevbre. "Cycle Time Reduction: A Capability-Enhancing Approach To Cost Reduction." Satistar Management Consulting (2011): n. pag. Web. 15 Sept. 2013.
Koushik , Harsha. "Collaborative Cost Management A New Basis for Understanding and Controlling Costs." CGN & Associates White Paper 3 (2011): 5. Web. 15 Sept. 2013.
Platzer, Michaela D. "U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations." Congressional Research Service 7.5700 (2012): 6. Web. 15 Sept. 2013.
