Growth Doesn’t Mean “Grow Your Expenses”
Situation
As Liz Claiborne went into acquisition mode to become more diversified and to grow top line and bottom line numbers, it also grew its back-end operational expenses. As new companies were acquired, the cost of running back-end operations swelled to over 5% from historical numbers of 3.5%. Liz Claiborne was having great success in its business model but had lost sight of some of the complexity that comes with acquisitions. It seemed that every time a new company was acquired, new employees and more offices in Asia were added. The symptoms were significant and were growing: Liz Claiborne Inc. was experiencing missed delivery dates for several of its brands, and margins were going in the wrong direction with no accountability; in addition, there were multiple product development issues and adversarial relationships between the US and Asian operations. Since some of the brands were based on the West coast, the time difference from Asia was as much as -15 hours, making the challenges even more acute.
Strategy and Execution
Clearly, the company needed to become a global organization working together instead of operating as different divisions in opposition to each other. A multi-prong approach would be necessary, focusing mostly on finding more synergy, cost benefit analysis by business unit, and communication processes to promote unity and efficiency.
· Drove more communication and better collaboration between the US and Asia operations; this included videoconferencing and frequent summary emails
· Devised ways to use technology to enhance collaboration and deliver better product
· Shattered old paradigms by implementing a scorecard system for vendors to determine which ones were able to work with designers directly, bypassing Asian offices and improving efficiency
· Reworked the calendar to reduce product development time
· Formulated a long-term plan to consolidate Asian offices and maximized job responsibilities while eliminating duplication across the sourcing and manufacturing organization globally
· Analyzed, reorganized, and re-engineered back-end processes for efficiency
Results
· New communication processes resulted in face-to-face interactions, reducing errors and helping meet deadlines
· Reduced overhead in global operations by eliminating costs in the supply chain
· Back-end costs were reduced to 4% after implementing the comprehensive supply-chain strategy
· The supplier base was reduced from 650 to 425 for 38 brands over 2.5 years
· Altogether the supply-chain strategy resulted in a cost savings > $30 million in a three-year time period
