Pepe jeans Essay

The company maintains contact with its independent retailers via group of 10 agents and each agent is responsible for retailers in a particular area of the country. Pepe is convinced that a good relationship with the independent retailers is vital to its success. Pepe’s requirement to place firm orders six months in advance with no possibility amendments, cancellation, or repeat ordering. Some claimed that the inflexible order system forced them to order less, resulting in stock outs. Pepe felt that a change was going to be needed soon. The easiest solution would be work with the Hong Kong sourcing agent to reduce the lead time associated with orders but this was going to increase the cost significantly. Even with the significant increase in cost, consistent delivery schedules would be difficult to keep. Another suggestion was to build a finishing operation in United Kingdom. Pepe was interested to see how system worked at U. S. operations. They found that they would have to keep about six weeks’ supply of basic jeans on hand in the United Kingdom and they have to invest ? 1,000,000 worth of equipment. They also estimated that it would cost about ? 500,000 to operate the facility each year. They could locate the facility in the basement of current office building, and the renovations would cost ? 300,000.