Supply Chain Management at Beautiful Bags

Abstract

Joe Smith, senior director of merchandise management at Beautiful Bags (BB), was about to place a large order for the upcoming winter season. He had to decide how many pieces he should order of each product. But another big question was how BB should source the product: from its domestic manufacturing facility, its Chinese suppliers, or some combination of the two. What made the most sense, given timing needs, labor costs, minimum order requirements, and BB's expanding product assortment? Excerpt UVA-OM-1522 Dec. 8, 2014 SUPPLY CHAIN MANAGEMENT AT BEAUTIFUL BAGS It was June 2014. Joe Smith, senior director of merchandise management at Beautiful Bags (BB), was about to place a large order for the upcoming winter season. In four months, he would need to deliver the merchandise ordered now to BB’s stores and more than 3,000 retail partners. His design team had spent the past several months touring fashion shows throughout the world, and after a significant testing and vetting process, they had settled on the colors, patterns, and items they thought would resonate most highly with BB’s customers. Now he had to make a decision regarding how many pieces he should order of each SKU. Smith had two primary locations to choose from for manufacturing finished products: BB’s six partner suppliers in China, and a domestic production facility located just 20 minutes down the road from BB’s distribution center. Smith used historical sales figures to estimate demand for each of BB’s nearly 6,000 SKUs, but given the vagaries of the fashion industry, accurately predicting customer demand was notoriously difficult. Merchandise sourced from China was less expensive, but the large order quantities and four-month lead times for receiving an order increased BB’s risk exposure in a trend-intensive business. The Company BB made quilted cotton bags in bright, pretty patterns. The company was founded in 1982 in King of Prussia, Pennsylvania, by two friends, Millie Patrick and Jean Marcus. Operations first began in Marcus’s basement with $500 worth of cloth, thread, and sewing machines. A key to BB’s success was its use of proprietary patterns. BB cycled through four new patterns a year. From each of these four patterns, nearly 100 different styles of handbags, wallets, and luggage pieces were created each year. . . .