PEPE JEANS

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PORFERIO A. SALIDAGA, JR. Prof. Januario Aliwalas Operations Management June 15, 2012

While the policy of not holding an inventory is a good business idea as it helps to control operational cost, it may however adversely affect the operation of a company if it contributes inflexibility in the order system and results in stock outs of supply. With inflexible order system, Pepe Jeans has lost its sales opportunity, not just because of the unavailability of the products at the time that the consumers need them, thus unfortunately proceeded to the next jeans store (say, Levis Jeans), but also because of the easily becoming pass of the product, considering that fashion market has high obsolescence. Hence, Pepe Jeans really must outsource some parts of its production process, such as to hasten its answer to the demand, or to decrease its operational cost, particularly labor, if it manufactures its products in country where the labor wage is low, or where the raw materials are easily procured. Moreover, as cited by Chase and Jacobs in their book entitled Operations and Supply Chain Management, through outsourcing, a company can focus on activities that represent its core competencies. It may be mathematically proven that by making the order system more flexible through a shortened lead time, the cost of Pepe Jeans may go up 30 percent, it must not be forgotten also that this system may yield material pay off. The faster distribution and higher demand of the Jeans, sales and revenue of the company may increase that could cover the cost incurred in the shortening the lead time.