ACCT6004 Management Accounting - Group Case Study Assignment Help

3. AusCotton

Clothing Portfolio: AusCotton

AusCotton is a global manufacturer of winter and summer outdoor sports apparel. Its winter line predominantly includes outerwear such as ski jackets, fleece, windbreakers, and footwear. Its summer line is somewhat different and includes running attire (shorts and shirts), windbreakers, backpacks, hydration systems, and footwear. The company is headquartered in Geelong but does business principally through retailers in Australia, New Zealand, Europe and North America. In addition, AusCotton has established itself as a well-known Internet retailer of its full product line. Overall, AusCotton is viewed as a trendsetter and is one of the most profitable firms in the Australian clothing industry.

At the present time, AusCotton uses contract manufacturers in China, Taiwan, Vietnam and India to make most of the items in its product line. Typical manufacturing lead times are anywhere from 4 to 12 months, depending on the type of product being manufactured and the complexity and range of materials needed to manufacture individual items. Both air and ocean are used for shipments to the destination countries, with the mode selection being largely a function of the urgency of the shipment. AusCotton maintains eight company-owned distribution centres located across the globe to ensure they are able deliver to, and within, different countries every day.

As a practical matter, the alternating seasonal product lines manufactured by AusCotton help to ensure year-round utilisation of its contract manufacturing capacity and its company-owned distribution centres. Over the past few years, AusCotton has experienced a number of areas of concern, including the following:

• Intensifying competition from other manufacturers of similar winter and summer outdoor sportswear. Given the attractive profit margins on many of its products, a number of new competitors have emerged in recent years.
• Inaccuracy of demand forecasts across both the winter and summer lines of products and the geographies served. Coupled with unexpected variations in the length, consistency, and cost of transportation services, this has resulted from time to time in stockouts of needed items at retail stores.
• The need for a meaningful, strategic sourcing process that can help to better guide the approaches taken by AusCotton with regard to the supply side of its business.
• Evidence that the contract manufacturers employed by AusCotton are also manufacturing illegal, counterfeit merchandise that is being sold through gray market channels.

Your task:

To help address some of the procurement and supply chain issues facing AusCotton, you have recently been hired as the new Senior Vice President of Supply Chain. You have taken time so far to visit the company’s global facilities and to become aware of the situation, problems, and concerns that are faced by the company. You are asked to address the following questions:

2. What are the impacts of less-than-perfect demand forecasts for AusCotton products, and of volatility in the length and cost of transport services used to move its products from contract manufacturers to distribution centres? What should be done to mitigate these problem areas?