How Pepe Manages Its Distributers

Majority of Pepe’s sales are throught about 1.500 independent outlets

throughout UK. They maintain contact with its independent retailers via a
group of approximately 10 agents who are self employed and work
exclusively for Pepe and each of them is responsible for retailers in the
particular area of the country.
Agents meet with each retailer 3 to 4 times a year present new collections
and take order Contact is done by holding presentation in a hotel for several
retailers. Orders are taken for 6 months delivery.
After Pepe receives an order a retailer has 1 week to cancel or make
changes
Pepe has long standing policy to not hold inventory
After orders are placed status can be seen online.
Pepe’s Current Supply Chain

Retailers have to place order 6 months before they arrive.(1 weeks to amend)
Pepe takes the orders to the agent in china
The agent conduct a bidding to about 1.000 potential supplier’s. (Every 2 weeks
The winner works with Pepe Jeans designers for specifications and quality assurance
Production starts
Manufactures transport Jeans from China to Reatilers. (Total Load Time is 6 months)
Why is Pepe Concerned ?

A recent survey of independent retailers indicated some growing problems.

Complaints from Independent retailers
 Pepe has become less of a trend setter than in the early days
 Retailers are unhappy with Pepe’s requirements to place orders 6 months in
advance with no possibility of amendments, cancellation, or repeat ordering.
 The inflexible order system forced retailers to order less resulting to stock outs
of particular size and styles and they estimated that Pepe’s sales would increase
by 10% in sales with a more flexible ordering system.
(Current sales-£200 Mil. Therefore 10% of would be £20 Mil. Profit before taxes
(PBT) at the rate of 32% would mean an increase in the PBT of £6,4 Mil
Why is Pepe Concerned ?

How were the retailers affected by Pepe’s ordering system ?

The six months ordering time made it difficult for retailers to
accurately forecast and order.
The fashion market is very impulsive and therefore the
current favorites are not in Vogue 6 months in the future
When demand exceeded expectations it took a long time to
fill the gap
What retailers wanted :
Some limited returns, exchage , or re-ordering to overcome
the problems.
Pepe felt some pressure to respond because some of
smaller competitors offerd delivery in only a few days.
What Can Pepe Jeans Do To Address Complaints ?

The desired Outcomes

Reduced Lead time
Possibility of amendments, cancellation, or repeat ordering for the retailers
Have more robust designs that set trends like it used to be