Headquartered in Greensboro, NC, VF corporation is the largest apparel company in the world. Their brands are sold in 150 countries through 47,000 retailers. Their global supply chain organization manages sourcing and manufacturing which oversees the production of 500 million items annually. Last year the company reaped more than $9 billion dollars in revenue.
VF has two distribution centers that distribute brands throughout all of Europe; one in Prague and one in Belgium. Ales Fiala, the distribution manager at the distribution center in Prague, gave us an overview of what it is that the center there does.
The distribution center was built in 2004 and started off as 15,000 square meters in size. Since then it has opened two other annexes covering a total of 54,000 square meters. This particular distribution center only handles the brands Lee, Wrangler, Napapijri, Reef, and Vans. Vans accounts for the largest volume of all sales. Since 2011, Vans has grown 50% in sells of which 80% of is footwear.
The distribution center in Prague ships to Central Europe, the Middle East, and Asia. 95% of their sales are shipped throughout Europe with the other 5 percent of their sales going to developing markets of their indoor brands and outdoor brands in the Middle East and Asia, respectively.
The distribution center in Prague is notable for their unique carton handling system. They have a global IT system that transfers data between operators in Belgium and Greensboro. Their storage process is manual and random. Manually operated fork lifts randomly store cartons wherever space is available. SKUs on cartons keep track of the location of the cartons across all the distribution annexes. Throughout the center conveyors are used to manipulate, track, and route all cartons. In line pack stations scan all of products before dispatch to ensure quality control. The unique IT system makes sure that the center never receives an order for something they don’t have. The electronic data transfer allows logistics to flow smoother with increased efficiency; their average processing time is only 48 hours from order receipt to order shipment.
Where does VF Corporation as a whole see the self in the future? VF seeks to eliminate as many third parties as possible. Realizing that priorities are important and not all variable costs are bad they have targeted two major areas to improve: retail sales and e-commerce. VF is predominately a wholesale company trying to convert to retail. This year the company seeks to have 10- 15 percent of their total revenue come from mono-brand retail stores. (Poland and Germany are an exception to this because they have double-brand retail stores) In addition to the mono-brand stores the company seeks to open establish mono-brand websites. Currently in the European Union e-commerce is not that big of a deal and the return rate from online purchases can be up to 20 percent. Moreover, it takes more time to prepare an online order and every order has a time cap. VF is in no hurry to launch mono-brand websites. They will be launching their first mono-brand website in July to see how cost effective and profitable e-commerce will be.
With regards to their future growth the company is currently stable. Although inventory of the brands Lee, Wrangler, Napapijri, and Reef have cumulatively dropped by 30- 40 percent, Vans has covered this loss growing by 50 percent in the last year.
Written by: Ashley Williams
MBA students with Alex, the distribution manager, and Petr, the assistant distribution manager, after their presentation of how the distribution center in Prague functions.
MBA students at the VF distribution center in Prague. Before the tour of the facilities. Safety first!
Here we see the random storage process used at the distribution center. As well as the SKUs used to identify the boxes and the mezzanine numbers to identify the location of each SKU.
Conveyors which are used to manipulate, track, and route all cartons.