Got word today that Wrangler is cutting costs by distributing fewer catalogs. Now as soon as order entry gets that unlisted phone number sales should start zooming.
Things are gonna get ugly there for the remainder of the year. Many are wondering who will have a job by year end. More domestic plant closings in the works but announcements unlikely until Jan. Hearing ditto for Imagewear. But analysts seem to crave carnage so stock price should improve.
VF's major initiatives the last few years have had questionable success. You mentioned SAP, aquisitions and shared services as a few key items. SAP has been discussed at length and if the reported $500 Mil cost is correct, I'd say it is wasted. I have heard that the licensee aquisitions have all been a mess including Japan, Turkey, Argentina, Brazil and Chile. Then look at the WorkWear aquisitions and it almost took the whole Workwear division down. How about Britannia, Chic and Gitanno? Nothing there. That leaves shared services that was going to create savings to help fund marketing. It has been told by many VF people that marketing spending is going down verses the promises of extra spending. Now, what do you do when it all fails. You cut manufacturing jobs and unload a few small unprofitabile companies. This will take the heat off senior management for sure. I'd take a close look at where the problems are at VF. I'd like to know if there is truth to all this and whether there is more to uncover.
All true, averagejoe.
I was a bit long winded as it was and didn't go into all the history.
When the AFS group was formed in Hallerbermoos, Germany, many of the AIM developers were used to head-up the project for SAP. They were a sharp group and did their best to "advise" VF on the best way to add the functionality to a system in which they were already familiar, but to no avail. Also, just a minor point, but Sarah Lee's hosiery division was also a "partial" non-voting member of the consortium.
I agree with your sentiment, shut it down and let Wrangler have their way. If out-dated systems are what they want to keep their jobs, stop the bleeding and just commence with some type of common system.
It would be interesting to see a comparison of Levi's and VF's failed attempts at re-engineering.
I have heard from a VF person last week that when Terry Lay was Pres. of Europe in the early 90's he dumped SAP, at a cost of $10 million, and fought for JBA as an alternative. He successfully argued with Mackey to get it installed. Now, Terry is left cleaning up the mess from SAP in the USA. VF people indicate that JBA is running well in Europe. Is this true? Also, is Terry Lay the one person that can stand up to Mackey? Who is this Terry Lay?
A bit of clarification: Actually, SAP was not VF's first choice. In 1991 VF was looking for a "common" system solution in Europe - and worked with KS to try to come up with a plan to implement the Apparel Computer System (ACS). ACS had great apparel functionality but could not cope with VAT, language, etc. So ... VF Europe ran a beauty contest and SAP emerged the "winner" - with the understanding that SAP would not handle apparel sizes. VF developed the specs for an "Apparel Industry Module" and contracted SAP to write the code - for R/2. The end product was delivered in 1992 and belonged to VF. SAP, however, saw a market opportunity and purchased marketing rights from VF. VF agreed on provision that SAP would convert the Apparel Industry Module to R/3. IT knew from the start that standard SAP would not handle apparel ... and the Apparel Industry Module was supposed to address the basic functions of sizes. When SAP was deep into converting AIM to R/3, Reebok was in Waldorf looking for a Retail solution ... when they heard about the new apparel module being developed. They looked ... liked what they saw ... and agreed to join with VF in funding - if they could provide input into the final product. That's how AFS was born. The VF IT group went into the SAP arena with eyes wide open and VF management knew what they were getting into. The breakdown came when the old Blue Bell IT group (who were determined that SAP would not displace their legacy systems) were given free reign ofer the specs for AFS. They killed SAP by loading up the AFS specs with so much cr.. that SAP couldn't deliver. Reebock was OK because they needed only what was in the original Apparel Industry Module plus some additions for footwear.
10 years - $500 million - shut it down and use the Wrangler systems for crying out loud.
$500 Million and almost a decade is true. I saw it happen for the tens years that I was there. I got out right before they pulled the plug on SAP.
I really liked the company in the Pugh years. We had fun working and designing systems but when Mackey took over, things started to change for the worse.
Consolidation and Common Systems are very difficult to do for a $5B company in 10 years. Way to many internal politics for any success.
VFCorp2001 speaks the truth and speaks it very well.
Dan Mc Farland was one of two VF Coalition Chairman. He and his counterpart were co-number two in command at VFC. Dan was a competent and effective senior executive. Unfortunatley, Dan had a nasty little habit of speaking his mind. Alledgedly, Dan lost his job do to his concerns over SAP and the formation of Imagewear. (formerly Workwear & Knitwear) History has proven Dan correct on SAP. Moreover, the disasterous results at imagewear, will make him prophetic on that as well. The disturbing trend at VFC is that Mackey has surrounded himself with yes men. Dan's succcessor is a well known yes man. Imagewear employees have sighted knee,elbow and mouth hinges with wiring on him. The yes man trend has carried its way into the operating divisions. This cancer will erode all decsion making, and result in a brain drain. Mackey needs to return to his core competency of marketing,and stop re-cycling the dead wood puppets. Get some competent fresh blood and let them do their job. Stop the PYA game. Mackey's ego permitting, Dan Mc Farland would be a great start.
Mackey's Recent inititives
Common systems/SAP - Enough said.
E-Commerce - Pulled plug in < six months. How do you evaluate in < 6 months?
Consumerization - Not close enough to this one to know if it is successful.
Several Workwear aquisitions - Several units already closed. What use to be a cash cow has become an anchor in integration.
North Face & Eastpak aquisitions - I think these will be very good for VFC.
The formation of VF Imagewear - Total Disaster. Workwear or VFI West - sales very weak and integration not going smooth. Knitwear or VFI East - This resembles ground zero.
Your comment about the real asset being the brands is true. The unfortunate side of this is that VF has neglected to build brand equity for so many years that they are left with tired old brands. Brand equity erodes over time when the price ceiling drops as evidenced by the Wrangler Brand. This is especially true when you don't counter with strong image advertising. VF continues to let the Marts battle over price and they get pleasure in the short term gains in volume. Isn't the VF team smart enough to realize that they are digging a hole for themselves. The employees that will loose are the ones that have to stick around for a few years.
Given that VF has disbanded their entire SAP implementation team, I do not see where they can go forward with any additonal implementations at this point. The only group left is just enough to maintain the limited install they currently have and that is all. Without the experienced group from the development, there is no alternative but to scrap it and work on a new "common system" from legacy which has been the political driver all along.
The "deeper" problems have been too much in-breeding of the upper management. When people write about their distaste for seeing all old Bluebell employees in key positions, it is not just a jealousy issue. The issue is that they all come from the same mold and it is not a good mix for VF in total. VF desperately needs new blood and to be rewarded with new ideas. The textile industry is fast changing and the old manufacturing model is out-dated. The real asset of VF is their brands, not the operations. At this point in time, it is the retail stores driving what is sold. They control the real estate, hence the product mix. If VF doesn't create demand, retail will not carry them.
Another litmus test for systems is VF's current Peoplesoft project. They are in the beginning stages of the implementation and again have chosen to go it alone without bringing in an experienced implementation partner. We'll see how well this one goes.
Dan McFarland did not follow the official line for SAP and was dismissed.
Some of the significant objectives outlined by VF over the last several years include these.
Growth - Acquisitions including licensee business around the globe, other acquisitions,
core brand development.
Cost reduction and synergy- SAP and Shared services.
Cost reduction from SAP and shared services was intended to fund core brand development thru increased marketing.
I will let someone else talk about success and failure.