Know the Risk: Digital Transformation's Impact on Your Business-Critical Applications REGISTER >
One of the hidden challenges facing Boyd Rogers as he built a global information technology network turned out to be ordering dinner. VF Corp., where Rogers serves as vice president of global supply chain and technology, is the world's largest apparel maker, with sales last year of more than $6 billion, and a stable of big-name brands, including Wrangler, Lee, Nautica and The North Face. It is a business that has globalized rapidly, with most materials and many finished products now made outside the U.S. So when VF hosts a conference for its major suppliers at its Greensboro, N.C., headquarters, Rogers has to scramble to plan a menu that is palatable to all of his guests. "Just picking things we can all eat is a big job," he says. "We are doing business with people from all over the world, and it's extremely important for me to learn about their countries and their cultures."
VF's progress along that learning curve has been a key to its success in the rapidly changing apparel industry. Under Chief Executive Mackey McDonald, VF has made the transition from successful-but-stodgy manufacturer to world-spanning enterprise, delivering strong growth and financial performance by sourcing and selling its products all over the map. "Our entire business is globalizedmarketing as well as sourcing," says McDonald. The payoff: In the past three years, sales have increased by 20 percent, income from operations is up 30 percent, and VF stock has doubled in price.
"We were a manufacturing business; now we're a sourcing business," says Rogers, a soft-spoken North Carolinian who came up through the ranks at Wrangler before joining the VF corporate team five years ago. "These days, it makes more sense to own brands than machines." But iconic brands are no longer enough, as the decline of rival jeansmaker Levi-Strauss & Co. demonstrates. You've got to manage the business to take advantage of cost savings and marketing opportunities around the world, and to do that you need information systems that can support a truly global company.
McDonald, who became chairman and CEO in 1998, saw that the markets for both textiles and finished goods were opening up, and set the company on a growth strategy aimed at cost savings, customer service for big retail partners, and new products and acquisitions that could reach more consumers and keep up with their changing tastes. He made Rogers responsible for developing the core back-end systems that tie the company together and make its customer-oriented systems work. Despite some early hiccups that saw one big enterprise resource planning project scrubbed, the transition has been successfuland fast.
In 2002, VF bought about $140 million worth of material from Asian producers. In 2005, it will buy ten times that amount. About 30 percent of its products are now sourced from Asia, and over 50 percent from Mexico and Central America. Meanwhile, rapid growth in foreign markets, especially Europe, has made VF the U.S.'s most successful mass-market apparel company in terms of international sales. Sales overseas now make up about 23 percent of the company's total revenue, up from 20 percent in 2002, and they are expected to reach 30 percent by 2008. Last year saw rapid growth for The North Face in overseas markets, along with the launch of Wrangler and Lee jeans in China, the debut of a new jeans brand in Russia, and a market-leading share of the European backpack business from the Eastpack line.
VF has come a long way. The modern company was formed by the 1986 purchase of Blue Bell Inc. (the Greensboro-based owner of Wrangler, Jantzen and other brands) by VF Corp., a venerable Pennsylvania-based maker of intimate garments and Lee jeans originally called Vanity Fair Mills. VF moved its headquarters to Greensboro in 1997. McDonald led the push into global markets and also extended VF's reach by acquiring such brands as Nautica, The North Face and Vans. "They have evolved into probably the best-managed apparel company in the U.S., if not the world," says David Griffith, a senior analyst for retail and consumer goods companies at Tradition Asiel Securities in New York City. "They've done a tremendous job of shifting their supply chain, and also in building global sales."
Essential to this metamorphosis is a technology strategy that standardizes supply chain and enterprise resource planning systems, assimilates the acquisitions that have helped drive the company's expansion, and leverages sophisticated customer-support and data mining software to help drive further growth. "I'm impressed with the amount of energy devoted to systems and consumer research used in tandem with technology," says Griffith.
McDonald credits VF's customer support and analysis technology with much of its momentum. "Front-end systemsthat's where our growth is coming from," he says. VF works closely with key retailers such as Wal-Mart Stores Inc. to manage inventory and replenishment, and to gather data that will inform the latest styles. "With our focus on growth, we need to understand consumer needs around the world," says McDonald. "The successful use of demand-side data to deliver consumer needs is the biggest competitive advantage we have."
Underpinning the sales and marketing systems is the global network of supply chain and ERP platforms overseen by Rogers. "Mackey is looking to me to take out cost and provide the capability for global sales," he says. That means making sure that the five different groups of like companies within VF, known as coalitions (Jeanswear, Intimate Apparel, Outdoor, Sportswear and Imageware), can share information internally and with each other, across both divisional and national borders. "Business drives our technology, and our growth plan is to invest in and acquire core brands, and to build on supply chain to be as cost-effective as we can," says Rogers, who reports to Chief Financial Officer Robert Shearer (VF has no formal CIO).
But before becoming a world-class business, VF had to get things in order at home.