Case 14
La Vogue
Supply Chain Leadership Through System Approach
La Vogue is one of India's leading retail chains having 15 department stores countrywide. La Vogue has progressed from being a single brand shop in 1991 to becoming a fashion and lifestyle store for the family. La Vogue is a professionally managed and a system-driven organization with strong focuses on customers. The timely supply chain initiatives and committed work force have enabled it to achieve success and scale up to achieve aggressive growth targets. It has been successful in strengthening its brand position by offering their customers a top of the world, class shopping experience and superior merchandising. To support its pre-eminent position, La Vogue found it very critical to enhance the efficiency of its supply chain and to integrate both vendors and service providers to the operational and service requirements of the customers.
La Vogue revamped its systems and process and implemented the warehousing module of JDA in 1999, which was followed by initiatives like Auto Replenishment and Auto Purchase Order system. La Vogue launched its B2B connectivity with vendors to improve the communication. It displays a broad range of branded apparels, footwear, perfumes, cosmetics, jewellery, leather product accessories, home products, electronics, books, music and toys.
In the past, La Vogue did not have a good ERP system in place. This created problems for inventory control resulting in high inventory, shutting down of all operations for 48 hours for annual stocktaking and inefficient use of exertive time. To overcome this problem, La Vogue implemented the state of art ERP applications. It appointed KSA Technopark, a specialized management consulting firm and a leader in fashion and textile consulting in India, to offer solutions covering the entire value chain.
To improve business relations with partners, La Vogue took the following initiatives.
Business-to-business(B2B) software La Vogue provided their vendors’ delivery authorization trough suppliers’ connect. The organization used electronic data interchange (EDI) to get details of the supplier's stock for raising a purchase order and getting an invoice detail of vendors; this application also makes vendors’ payments electronically and on a timely basis.
Sources tagging To reduce the turnaround time of the stocks reaching the stores, the price tags were attached to the merchandise at the vendor's premises rather than tags being put at the La Vogue distribution centre.
Receipt and payment confirmation On receiving goods at the distribution centre, the receiver's confirmation report is prepared and sent to the finance and account department at the La Vogue corporate office. La Vogue releases payments of the vendors against the receiver's confirmation report. This led to 100 per cent reconciliation of receipts, ensuring timely payment to vendors.
Auto style set-up concept La Vogue along with Arvind brands developed a standard template which covers all the new style codes. Vendors send the details in the form of text files, which automatically uploaded on ERP at La Vogue. The buying and merchandising team (at La Vogue) is required to upload the quantities and give it to the production team.
Due to these supply chain initiatives, La Vogue got many benefits, like reduction in operation cost resulting in profitability that substantially went up, improvement in the customer satisfaction index (CSI) from 62 to 65 and faster transactions (due to B2B, auto purchase order and source tagging). With an immense amount of expertise and credibility gained over years, La Vogue has become the highest benchmark for the Indian retail industry. It maintains strong a distribution and logistics network to operate 300, 000 SKUs around approximately 400 vendors in the country. This strong network connected online with vendors enables La Vogue to deliver merchandise to the stores within 24 hours of notification.
The initiatives taken by La Vogue for systems comprise of the following points.
JDA retail merchandise management system (MMS) La Vogue implemented an end-to-end solution for managing merchandise throughout the chain, right from purchase orders to sales, to replenishment, to market down and inventory management. MMS is an integrated online system connected with the back end and front end of the store and the distribution centre. La Vogue was the first retailer in Asia to implement JDA.
Warehouse management system (WMS) This is one of the key modules of JDA MMS that assisted La Vogue revamp its system and processes and implement the warehousing module of JDA. The entire process is controlled electronically and has reduced the turnover time to 48 hours instead of 96 hours. This enables the distribution centre to store the exact number of units and merchandise needed; moreover, the system generates a put-away document, which allows a specific area to each product category. When it transfers to the store, it generates a pick list indicating where the merchandising is located; this helps in identifying the exact location of the merchandising at the SKU level in the rack and bin system
Auto purchase order It was initiated along with the warehousing modules of JDA MMS. The buying and merchandising team sets a pre-determined level of minimum stock for core style. APO is generated and sent electronically to the specific vendor. This order authorized the vendor to get the merchandise ready for delivery. This resulted in reduction of lead time, increase in merchandise time availability and improvement on hit rate from partners.
Auto replenishment The auto replenishment module in the JDA triggers off an automatic stock transfer command at the SKUs level for the merchandise in question and replenishes the same from the distribution centre attached to the particular store, with the ensures of replenishment in 24 hours and 100 per cent availability.
Perpetual inventory control system The distribution centre scans one department every day. All departments are scanned in quarters to check for pilferage, identify variances every day and provide accurate stock status. This system is a major tool for reducing shrinkage, resulting in the La Vogue cost saving. For improving logistics, La Vogue took the following initiative like delivery against purchase order. To ensure the right quantity of merchandise intake in the distribution centre, goods are accepted against the purchase order and the quantity mentioned therein. This results in elimination of overstock at the distribution centre. Based on the sales forecast for 10 days, La Vogue issued a delivery authorization number for every purchase order given to each vendor. This helped them in avoiding excess inventory stocking. In addition to the above, La Vogue also implemented the concept of intake consolidation, which involves the appointment of a national transporter conducting a milk-run for private label brands. The transporter sends his truck to the vendor, combines the merchandise location-wise and sends a consolidation load of shipments to the respective distribution centres
In conclusion, SCM initiatives undertaken at La Vogue have mainly resulted in a decline in shrinkage from 0.66 per cent in 2002 to 0.54 per cent in 2003 to 0.40 per cent in 2004. Customer satisfaction index (CSI) improved from 62 to 65 through these initiatives. Distribution and logistics expenses decreased from 1.06 per cent in 2001–2002 to 0.83 per cent in 2003–2004 (per cent of turnover).
REVIEW QUESTIONS
- Discuss the various supply chain initiatives taken by La Vogue.
- What are the constraints faced by La Vogue in implementing the various technology-based solutions?
- Explain the ‘perpetual inventory control system’ implemented by La Vogue.