Making Smarter Business Decisions

Nothing is more important to the success of our business than getting the right product in our stores at the right time. In an industry as competitive as ours - and with cotton prices and fuel prices on the rise - we have to be quick, flexible, innovative, and smart about how we do our job. We have to make better decisions faster, build stronger relationships with the best suppliers around the world, and manage the many moving parts of our supply chain more effectively.

Streamlining Internal Decisions

In 2010, we began taking several steps to streamline our design and product development process. First, we took a hard look at our product development calendar. To reduce time to market and get fresh designs into stores faster, we needed to better align our internal timelines and eliminate unnecessary and redundant meetings. At the same time, we also found that we needed to hold people more accountable for making decisions at major milestones. Our design, merchandising, and production teams had to develop consensus more quickly on the specific products to be included in our store assortment each season. To that end, we have introduced opportunities for closer collaboration earlier in the product development cycle and built in executive review earlier in the calendar. We even asked some design and production teams to move offices and sit together so that they could work more closely on a day-to-day basis.

Strengthening Supplier Relationships

We've been working hard over the past couple of years to build stronger business relationships with the right suppliers around the world. We're reducing the number of new suppliers that we bring into our sourcing base each year while expanding our business with key vertical suppliers who have direct access to yarns and fabrics. We're also working to provide more consistent production orders and greater assurance to suppliers that we are in this for a longer-term relationship. We believe these deeper partnerships offer more speed and flexibility to get our clothes to market and the opportunity to chase trends, while providing our suppliers with greater visibility into future order volumes and the ability to better manage production schedules. As these strategic suppliers get to know our products, we also collaborate more effectively on design and fabric innovation.

In addition, we've expanded our use of supplier performance data in our decision-making. Every quarter - and often on a more frequent basis - our Corporate Responsibility team sits down with each of our production divisions to discuss supplier performance in each apparel product category. When major compliance concerns arise, the teams work together to develop a joint message requiring supplier corrective action and improvement. The Corporate Responsibility team also highlights top supplier social performers who may be good candidates to consider for business expansion.

No relationship can thrive without good, honest communication. To that end, we are assessing and introducing new ways to facilitate ongoing conversation and feedback with our suppliers. In August 2011, we held our second biannual Vendor Summit to share company goals, business trends, and future expectations and opportunities and asked our suppliers to provide constructive feedback about ways in which we can improve our business relationships.

Improving Material Management

In today's world, it is more important than ever that we have ready access to the materials we need to produce the products that our customers love. So, we've had to become smarter about how we manage the materials and components that are the building blocks of our clothes, especially fabric. We've begun to implement a more robust fabric platforming process that allows us to react quickly to changing customer desires without compromising quality or compliance. We're working to consolidate core materials across departments and streamline testing procedures. This active approach to managing materials reduces our exposure to market fluctuations, promotes more flexible production schedules and helps us to manage our inventory more efficiently, while at the same time bringing better quality and consistency and reducing some of the "middlemen" in the supply chain.

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