Abercrombie and Fitch business model and marketing strategy

ABERCROMBIE & FITCH

As one of the most important retailers on the market, Abercrombie & Fitch relies on the efficiency of its supply chain in order to be able to deliver at lower prices that its direct competitors and be more competitive on a market where the number of actors is continuously increasing. An analysis of the supply chain will involve an analysis of the different external factors that have an impact on the company's supply chain, but also a general overview of the company's objectives in terms of improving the efficiency of its supply chain and some of the instruments that are used in this sense.

In terms of the external factors that have an impact on the company's supply chain, one should first of all mention the fact that a lot of the company's production units or initial suppliers of clothing and apparel are outside the U.S. This means that the supply chain is an international one and, as such, that external factors such as macroeconomic or political ones have an impact on its efficiency. In terms of political factors, the supply chain at Abercrombie & Fitch is influenced both by the political situation in the countries where production is outsourced, as well as by the relationship between those countries and the countries where the good are primarily sold. If the initial step of the supply chain, the production unit, is in a country that is politically unstable, this will likely impact the way that the company is able to deliver its products to the final consumers. It will also have a negative impact and imply additional costs in terms of the insurance that Abercrombie & Fitch will need to cover for the transport of those respective products to the consumption markets.

The economic and macroeconomic factors are also important in the overall evaluation of the supply chain at Abercrombie & Fitch. On one hand, an unstable macroeconomic environment in one of the countries in the supply chain will likely make the company either switch to a different market, be it a production or consumption market, which will incur an additional cost, or simply support the cost of maintaining operations in the respective country. An unstable macroeconomic environment could mean everything from increased inflation to lower purchasing power for the final consumer in the supply chain. With these in mind, an unstable macroeconomic environment will negatively impact the supply chain at Abercrombie & Fitch and determine a decrease in its efficiency.

It is interesting to note that one of the economic external factors that has an impact on the supply chain is also the economic relations that exist between two countries that are part of the company's supply chain. If those countries have an open and liberal trading strategy, based on the elimination of custom taxes, it is likely that this will have a positive impact on the company's supply chain. On the other hand, a closed commercial policy will not favor the effectiveness of moving the products and goods along from the initial producer to the final consumer.

The technological factor is probably the most important one in this case. The reason for this is that Abercrombie & Fitch has put extra importance on the technological instruments and the way that these can make the supply chain both more transparent and more efficient. The subsequent paragraphs will analyze the way Abercrombie & Fitch has implemented different systems in its supply chain and the way that these have helped in improving distribution along the supply chain. The technological factors are also important because of the numerous facilities that such tools as scorecards or reports provide in terms of monitoring and reporting along the supply chain and ensuring that the information moves with speed along the chain.

There are numerous technological tools that the company uses. First of all, management has noticed a certain lack of transparency and visibility in a supply chain that included 30 trading partners and several international units. A lack of transparency and visibility also went hand in hand with potential communication problems that existed within the supply chain, especially since many of the units were in different countries, separated by language and time barriers. One of the solutions that the company used to address this issue was the Supply Chain Visibility solution, provided by Management Dynamics

. This solution provided the appropriate means and framework to connect all the actors involved in the company's supply chain: retailers, producers, suppliers, carriers or brokers. This shows the emphasis that Abercrombie & Fitch placed on improving communication between all these different elements in the supply chain.

This solution was integrated with the Oracle Retail Merchandising System, a complex solution that allows merchants "merchants to monitor the delivery status of key orders and for the logistics team to proactively manage inbound shipments by milestones"

. There are several elements worth analyzing here. First of all, accurate shipment information, as implied by the delivery status of key orders, means that the company and the management is able to completely track when each batch of products is delivered and is sold throughout the supply chain.

This is very important, because of several key issues. First of all, it allows the company a proper inventory management. This means that it is able to estimate the potential demand in a certain store and determine exactly when the orders that have been sent will arrive, which means that the respective store will be able to determine whether or not it can sell the merchandise in the inventory and how much of it. Second, it will also create a rational approach to the way products and goods move in the supply chain, with the company able to track the products as they move in the chain at certain milestones. This also means a more strategic approach and a better understanding of its own supply chain.

Another technological solution that Abercrombie & Fitch has implemented in order to increase transparency and visibility is the Xpress Commerce. This tools is also primarily used for tracking and reporting, and ensures a cohesive transparency and visibility within the different elements that are part of the supply chain.

It is safe to emphasize that, as most supply chains, the supply chain at Abercrombie & Fitch is a combination of a push and pull systems. On one hand, Abercrombie & Fitch sets certain volumes of products that the manufacturers with which it is working have to complete. With that in mind, it is also a pull-based supply chain because the orders are linked with the actual customer orders rather than on the forecasts that the company sets.