9-609-029
APRIL 27, 2009

ANANTH RAMAN NICOLE DEHORATIUS ZAHRA KANJI

Supply Chain Optimization at Hugo Boss (A)
Introduction
Katja Ruth and Constantine Moros sat facing each other in the empty conference room. Covering the table between them were the latest operational and financial figures from the supply chain optimization pilot Hugo Boss had been running in its global bodywear and hosiery Division.1 Ruth, the director of the division, agreed with Moros, the division’s head of operations and procurement, that the pilot had been a success—better product availability and lower inventory to sales ratios had been observed for the stock-keeping-units (SKUs) involved in it—but was not convinced that expansion of the initiative beyond those …show more content…

Bodywear accounted for 53%, hosiery 32%, swimwear 7%, loungewear 5%, and terrywear 3% of the division’s 2006 net sales of € 33,040,259 (see Exhibit 6)5. The division was further segmented by replenishment type (Exhibit 7). The division’s 711 product stock keeping units (SKUs) included a wide selection of men’s underwear variously classified as Selection, News, Athletic, Basic, and Packs styles (Exhibit 8). Styles differed in terms of raw material composition, cut, elastic type, and color, each style being sufficiently different that an average customer would be unlikely to substitute one style for another. The majority of the 513 SKUs of Boss Black bodywear and hosiery products were classified as Never Out of Stock (NOS) products to discourage customers from substituting similar product offerings from competitors such as Calvin Klein, Polo Ralph Lauren, Dolce & Gabbana, Tommy Hilfiger, Triumph International, Lacoste, Bjorn

4 DataMonitor, “Apparel Retail in Europe,” August 2007. 5 Nightwear’s contribution to the division’s 2006 net sales was negligible.

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Borg, DKNY, 2 X-ist, and Armani.6 NOS products differed from the majority of the 198 other bodywear and hosiery SKUs in the Boss Orange and HUGO collections in that they did not change seasonally in style, color, or fabric each season, remaining consistent year