MSc International Fashion Marketing

Retail Logistics module:  Course Assignment 2011

CASE STUDY: Vertigo 

Vertigo is a menswear chain 英国物流专业硕士课程论文需求specialising in formal wear of suits, shirts, leisurewear and footwear in the 35-55 age bracket.  Since its launch in 1962 the chain had been performing well with rising sales, profits and share price until 2004. Since then sales have stagnated, profit margins dropped by 40% and its share price by 25%.  Vertigo’s market share has declined from around 13% to 8% mainly as a result of two of its major competitors, Bond and DJ, embarking on a major expansion programme.  They have gained competitive advantage in four ways:

1. Investment in a new generation of larger, ‘off-centre’ stores.   With around 250 square metres of sales area, they are roughly twice as large as Vertigo shops almost all of which are in town centres. 

2. Global sourcing.  Bond and DJ now source, respectively, 55% and 44% of their clothing from low labour cost countries.  Imports from these countries represent only a quarter of Vertigo’s sales, though this proportion has been growing.

3. Extending the product range.  Both of Vertigo’s main competitors have diversified their product ranges into leisure-wear and footwear and broadened their appeal to younger men.  This has expanded their customer base, increased average expenditure per visit and made their offering more fashion-sensitive.

4. Overhauling their supply chain.   Bond has enlarged its original distribution centre (DC) from 8,000 square metres to 12,000 square metres, while DJ has build a new 10,000 sq. m. distribution centre. This has enabled the companies to increase the proportion of sales channelled through their DCs to, respectively, 92% and 84%. 

In mid 2010 Vertigo appointed a new Chief Executive to ‘stop the slide’ and ‘turn the business around within a five year period’.  His initial strategic review identified logistics as a problem area and indicated that the company’s competitiveness could be significantly improved by restructuring the current distribution operation. At present Vertigo channels around 48% of its supplies through three warehouses, all of which are relatively small (London 2200 sq.m, Leeds 1400 sq.m and Glasgow 1200 square metres) and built in the 1970s. All imported product has traditionally been stored at the London DC, though with the recent increase in sourcing from India and the Far East, this warehouse is working at full capacity and struggled to cope with peak sales before Christmas.

In his summary report to the Board, the Chief Executive stated:  ‘Our logistical system has simply not moved with the times.  It may have been state-of-the-art back in the 1960s, but today it is a major liability.  For decades we have been pre-occupied with the front-end of our retail operation, keeping our sales volumes up, and largely ignored the quality and efficiency of store replenishment. This will not simply involve improving the logistical support for our existing retail activities. These activities will also have to undergo radical change if we are to regain our competitiveness. It is now imperative that we re-engineer our supply chain. We will have to follow our competitors’ example in concentrating retail sales in bigger outlets, buying as cheaply as we can in global markets and extending our product range. The intention is to source approximately a third of each range from within Europe and the remainder from the Indian sub continent and South East Asia. This will pose a huge logistical challenge for the business.’

The Chief Executive commissioned a survey to benchmark Vertigo’s retail and logistics operations against those of Bond and DJ. The following tables summarise the main data to emerge from this survey. With reference to this data and appropriate literature, prepare a report for Vertigo which:

1.outlines the deficiencies in the company’s present logistics operation. (40%) http://www.liuxuelw.org/essaydxxuqiu/

2.proposes a new logistical system for the company which takes account of the wider changes that the chief executive outlines in his statement.  (40%)

3.indicates what additional information would be required to formulate a detailed logistics strategy for the business (20%)

Your main report should be a maximum of 2500 words, to be stated (excluding appendices) take account of the % allocation of marks for each section, written in Verdana font 10, should include an executive summary and show how you conducted your analysis outlining any assumptions you have made. You should refer to relevant literature and include citations within the text and a reference list at the end as appropriate.