INFORMATION TECHNOLOGY TO IMPROVE RESPONSIVENESS
AT PT EDWARD FORRER
By
Harwin Mardhian Idris 19004072
Undergraduate Program of Management
School of Business and Management
Institut Teknologi Bandung
2007
i
VALIDATION PAGE
INFORMATION TECHNOLOGY TO IMPROVE RESPONSIVENESS
AT PT EDWARD FORRER
Harwin Mardhian Idris
19004072
Undergraduate Program
School of Business and Management
Institut Teknologi Bandung
Validated By
iii “Information Technology to Improve Responsiveness at PT EDWARD FORRER”
Name: Harwin Mardhian Idris ID No: 19004072
Examination Date: 21 August 2007 Graduation Date: 27 October 2007 Advisor: Ir. Togar M. Simatupang, Ph.D Undergraduate Program of Management
School of Business and Management Institut Teknologi Bandung
ABSTRACT
The development of information system technologies has brought a lot of positive impact into the development of the retail industry domestic or even internationally. The companies that have played a role in retail industries in high scale or low scale volume now have spent extra concern to this development. In this global era, those companies have allocated special fund to develop the use of information system in their companies. Those companies realized that the use information system technology will bring countless benefits to their companies. One significant example is gaining higher responsiveness in production level as well as distribution level.
For retail companies that focus their business on fashion, most commonly known as fashion/apparel retailer, the use of information technology has played a crucial role mainly because the sold goods are those with short life cycle. Fast and dynamic changes in fashion trends have forced the apparel retailer to respond fast to the market. The sold goods, clothing and apparel, must be able to meet the demand of market and be adaptable with current trends. Each fashion product has different life spans or so-called fashion cycle. One of the most frequent issues in retail fashion industry is keeping up with changes in fashion trend. This typical product requires more attention as the demand of the products could change in a short time frame. For that reason, the supply chain system in that company has to be able to shift effectively to overcome this problem. Applying information technology in supply chain system is very crucial because it will enable the system to have rapid response to this dynamic market change.
This research in EDWARD FORRER has shown that with using information technology can help company to achieve responsiveness. Using information technology EDWARD FORRER has meet shorter lead time to respond the market with their fashionable product. Information technologies also help company to handle large variety of product and also built highly innovated product. EDWARD FORRER have used information technology since last year and it is really improve the performance in planning, execution and controlling
The current strategies that have been use by EDWARD FORRER since last year, have caused several problem when facing the uncertain demand. The problem was no standardization for type of product and inventory level, overstock that caused by design that was not matched with the EDWARD FORRER customer demand pattern and lack of inventory information by outlets for replenishment
To prevent and to fix the current situation there were some strategies that have been recommended in this research. Utilizing information technology will help the company in controlling the flow of product and information. With information advantages company can meet short lead time, handle large variety of products and built highly innovated products. Information technologies also increase company responsiveness to respond the uncertainty.
v “Teknologi Informasi Untuk Memperbaiki Ketanggapan pada
PT EDWARD FORRER” Nama: Harwin Mardhian Idris
NIM: 19004072
Tanggal Ujian: 21 Agustus 2007 Tanggal Wisuda: 27 Oktober 2007 Pembimbing: Ir. Togar M. Simatupang, Ph.D
Program Sarjana Manajemen Sekolah Bisnis dan Manajemen
Institut Teknologi Bandung
ABSTRAK
Perkembangan teknologi sistem informasi banyak membawa dampak positif terhadap perkembangan industri ritel baik didalam maupun luar negeri. Perusahaan-perusahaan yang bermain di industri ritel baik yang berskala besar maupun kecil kini sudah mulai memberikan perhatian lebih pada bidang ini. Di zaman yang serba maju ini, perusahaan-perusahaan tersebut sudah mulai mengalokasikan dana khusus untuk mengembangkan penggunaan sistem informasi dalam perusahaan mereka. Perusahaan–perusahaan tersebut mulai sadar bahwa penggunaan sistem informasi akan membawa banyak manfaat yang baik bagi perusahaannya, salah satu contoh yang dapat dirasakan secara langsung ialah meningkatkan efisiensi dan respon baik pada level produksi maupun level distribusi
Pada perusahaan ritel yang memfokuskan usahanya pada penjualan pakaian atau lebih sering disebut fashion / apparel retailer penggunaan teknologi informasi menjadi hal yang sangat penting karena barang yang mereka dagangkan ialah produk dengan siklus hidup yang cukup singkat. Perubahan tren yang sangat cepat berubah mengharuskan perusahaan ritel pakaian untuk bertindak cepat dalam menghadapi realita yang terjadi di pasar. Pakaian yang diperdagangkan harus bisa menyesuaikan diri dengan cepat dengan tren yang sedang berlaku. Setiap produk fesyen memiliki jangka waktu hidup yang berbeda-beda atau yang biasa disebut dengan siklus fesyen. Salah satu masalah yang sering terjadi pada industri ritel fesyen ialah untuk tetap mengikuti perubahan tren dalam dunia fesyen yang sangat cepat sekali dalam berubah. Penggunaan teknologi informasi dalam sistem rantai-pasok pun menjadi hal yang sangat krusial, dimana dengan penggunaan teknologi ini sistem rantai-pasok dari perusahaan tersebut dapat merespon masalah ini dengan cepat.
Strategi yang telah digunakan oleh EDWARD FORRER sejak tahun lalu memiliki beberapa permasalahan dalam menghadapi ketidakp-pastian dalam permintaan. Permasalahan tersebut ialah tidak ada standarisasi terhadap tipe produk dan jumlah persediaan dalam outlet, overstock yang diakibatkan oleh desain produk yang tidak sesuai dengan selera konsumen dan keterbatasan informasi tentang persediaan terhadap outlet lain untuk melakukan kegiatan pengisisn kembali. Untuk memperbaiki kondisi yang terjadi, ada beberapa strategi yang direkomendasikan dalam riset ini. Riset yang dilakukan di EDWARD FORRER telah menunjukan bahwa dengan menggunakan tekonologi informasi dapat membantu perusahaan untuk meningkatkan ketanggapan perusahaan. Dengan menggunakan teknologi informasi, EDWARD FORRER telah dapat mempersingkat waktu tunggu untuk melakukan respon terhadap pasar dengan produk-produk fesyen mereka. Teknologi informasi juga membantu mereka dalam melakukan control terhadap jumlah variasi produk yang banyak dan juga dalam menghasilkan produk-produk baru yang penuh inovasi.
vii
PREFACE
This project is a partial fulfillment of completing bachelor degree at SBM-ITB. The research of “INFORMATION TECHNOLOGY TO IMPROVE RESPONSIVENESS AT PT EDWARD FORRER” is a study which has been done in PT EDWARD FORRER, who was well known for their footwear product. This research is compulsory for final year requirement.
The author wants to thank many person and organization who contribute in the making of this research, without them it would be impossible for author to done this project:
1. Allah SWT for the giving me chance, power and guidance to finished this project. 2. Riswinandi Idris and Moeharwati Moenarso; researcher parents, and Zahrina Idris
who always there to support me, the unconditional prayers and the spirit to finish this project.
3. Togar M. Simatupang, Ph.D for the guidance, and his continuous encouragement in finishing of this project.
4. Mr. Wendy Werner, Mr. Budhi, Ms. Nirmala and Mr. Bonar from EDWARD FORRER for the information and time to help and answer my question in this research.
5. Mr. Asrizal and Mrs. Nuke for giving me information about footwear industries. 6. Gading Joedo and Ario Wicaksono for being my sparring partner in finishing this
project.
7. Aliya, Caesar, Feiral, Awan, Raushanfikri, Farhan, Novrizal, Pepe, Dhika, Zulfikar, Rathma last but definitely not the least Agitha Amanda Putri, for giving me great support, attention and time we shared.
8. Mba Ida & Mba Ju for their patience.
9. My colleagues’ friends in SBM for their spirit and valuable that keep my spirit alive.
10. Other parties which cannot be mentioned that help me, support me and give spirit to pass those time.
ix TABLE OF CONTENTS VALIDATION PAGE ... i ABSTRACT ... iii PREFACE... vii TABLE OF CONTENTS ... ix LIST OF FIGURES... xi
LIST OF TABLES ... xii
LIST OF APPENDIX ... xiii
CHAPTER 1 INTRODUCTION ... 1 1.1. Research background ... 1 1.2. Problem formulation... 2 1.3. Research objective... 5 1.4. Problem limitation ... 5 1.5. Problem approaches ... 5 1.6. Report outline ... 6
CHAPTER 2 THEORETICAL FOUNDATIONS ... 9
2.1 Definition of fashion ... 9
2.1.1 The fashion cycle ... 9
2.1.2 Theories of fashion leadership ... 10
2.1.2.1 Trickle-down theories ... 11
2.1.2.2 Trickle-across theories ... 11
2.1.2.3 Bottom-up Theories ... 12
2.1.3 Fashion industry ... 12
2.2 Footwear industry ... 13
2.3 Definition of supply chain management ... 13
2.3.1 Responsive supply chain ... 16
2.3.1.1 Lead time ... 16
2.3.2 Information technology in supply chain ... 18
2.4 Definition of responsiveness ... 20
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2.6 Definition of information technologies ... 21
CHAPTER 3 METHODOLOGY ... 23 3.1 Problem formulation ... 23 3.2 Literature studies ... 23 3.3 Data gathering ... 24 3.4 Analyzing data... 24 3.5 Research study... 24
3.6 Conclusion and advice ... 24
CHAPTER 4 DATA ANALYSIS ... 25
4.1 Company profile ... 25
4.1.1 Company history ... 25
4.1.2 Vision, mission and company value ... 26-28 4.1.3 The product of EDWARD FORRER ... 28
4.1.4 EDWARD FORRER market... 30
4.2 Company business process ... 31
4.2.1 Design decision and ordering process ... 31
4.2.2 Production process ... 33
4.2.3 Flow of information and product... 37
4.2.4 Managing under stock and overstock ... 40
4.2.4.1 Managing under stock ... 40
4.2.4.2 Managing overstocks... 42
4.3 Data analysis ... 43
CHAPTER 5 CONCLUSION AND IMPLEMENTATION PLAN... 49
5.1 Conclusion ... 49
5.2 Implementation plan ... 50
5.3 Key Performance Indicator... 54
5.4 Topic for future research ... 56
xi LIST OF FIGURES
Figure 1.1 Product flow diagrams in retail companies ... 3
Figure 1.2 Business Process diagram of classical fashion company... 4
Figure 1.3 Diagram of type of product handling ... 6
Figure 2.1 Stages of the fashion cycle and how merchandising may vary for each stage ... 11
Figure 2.2 Simple supply chain systems in a company ... 15
Figure 2.3 Product lifecycle ... 17
Figure 2.4 Shorter life cycles make timing crucial ... 17
Figure 2.5 Information Technology as an eye that controls all of the supply chain process 19 Figure 3.1 Research Methodologies ... 23
Figure 4.1 EDWARD FORRER Company structures ... 27
Figure 4.2 Graphic of sales comparison for year 2005 and 2006 ... 31
Figure 4.3 Design decision and Ordering Process ... 32
Figure 4.4 Graphic of sales comparison for top 5 products in 2006 ... 33
Figure 4.5 Graphic of sales comparison for top 5 products in 2005 ... 34
Figure 4.5 Production Processes ... 35
Figure 4.6 Outsource Production Process... 36
Figure 4.7 information & product flow ... 37
Figure 4.8 ROSY working processes ... 39
Figure 4.9 Reproducing replenishment ... 41
Figure 4.10 Cross Inventory Replenishment ... 42
xii
LIST OF TABLES
Table 4.1 Male model products... 28
Table 4.2 Female model products ... 29
Table 4.3 Kids model products ... 29
Table 4.4 Unisex model product ... 29
Table 4.5 Toddler model product ... 30
Table 4.6 sales period 2005-2006 ... 30
Table 4.7 Top 5 sales product for 2006 ... 31
Table 4.8 Top 5 sales product for 2005 ... 31
Table 4.9 Company problem and solution ... 44
Table 4.10 Proposed Strategies based on problem... 46
Table 4.11 Strategy comparison... 47
Table 5.1 Implementation plan for 1st strategy ... 51
Table 5.2 Implementation plan for 2nd strategy ... 52
Table 5.3 Implementation plan for 3rd strategy ... 53
xiii LIST OF APPENDIX
APPENDIX ... 63 APPENDIX A: TOTAL SALES FOR 2005 ... 65 APPENDIX B: TOTAL SALES FOR 2006 ... 67
