Lahore School of Economics

Supply Chain Management

Route 66

Submitted to

Mam Amina Aqil

Submitted By:

Ahsan Raza

Asad Ali

Mudasir Suleman

Mustafa Sheraz

Contents
Introduction...............................................................................................................................................3
Understanding the Supply chain:.............................................................................................................3
Basic Supply chain:.................................................................................................................................3
Decision Phase of Supply chain:...............................................................................................................4
Supply chain Strategy and Design:......................................................................................................4
Process View of a supply chain:................................................................................................................4
Push and Pull view of the supply chain:...............................................................................................5
Supply Chain Performance: Achieving Strategic Fit and Scope:.................................................................5
Sourcing Decisions in a Supply Chain:....................................................................................................8
The Role of Sourcing in a Supply Chain:............................................................................................8
Supplier scoring and Assessment.........................................................................................................8
Supplier Selection and Contract Negotiation.......................................................................................9
Design Collaboration...........................................................................................................................9
Procurement Process:..........................................................................................................................9
Sourcing Planning and Analysis:...........................................................................................................10
Benefits of Effective Sourcing Decisions:.........................................................................................10
In-House or Outsource:.......................................................................................................................10
Information Technology in a Supply Chain..........................................................................................11
Conclusion................................................................................................................................................12
Recommendations...................................................................................................................................12

Introduction:
 Route66 is a casual clothing brand based in Lahore Pakistan. It has adapted its name from one of
the oldest and longest highways connecting 37 states of America. Route66 was initially started as
a sister company of Mascot trading Co which was a buying house in Lahore for various clothing
brands. It represented famous clothing giants such as Russell, Cherokee, Starter etc. Setting its
routes back in 2008 the brand has come a long way in terms of the structure of the company and
its supply chain has taken many new routes.

The company now has one retail outlet based in Lahore and also distributes its products to other
online shops such as symbious, Kaymu and Daraaz.

Understanding the Supply chain:

The supply chain for Route66 is dense and long with a lot of suppliers, manufacturers and
distribution channels.

Basic Supply chain:

Textile Mill Knitting Units Dying plants Warehouse Manufacturing unit

Retail Outlets

The figure above shows the basic supply chain of the company where the process is started from
the Textile mill that produces the Yarn or in simple terms the thread to produce the fabric.
Different mills specialize in different kind of yarn. Major suppliers for Route66 are Nafeesa
textile mill which have their head office located in Lahore. Route66 chooses this textile Mill as
they believe they have the best quality and their higher prices are justified by the quality they
produce. The yarn is bought and send to knitting units that turn the thread into unfinished cloth
also referred to as “Cora Fabric”. Once the “Cora fabric” is ready it is moved to the dying plant
where the cloth goes through various process of being washed cleaned and dyed in colors
required. Once the cloth is dyed it is send to the warehouse where it is stored, Inspected for
quality and is further send to various manufacturers. Here the product takes shape and is cut and
stitched to the final garment which is then dispatched to the retail outlets.

Decision Phase of Supply chain:

Supply chain Strategy and Design:
The supply chain is basically a vertically organized supply chain with few horizontal area such
as Manufacturing and Retail. The basic strategy of the supply chain is to set specific companies
at every end of the supply so as to build relationships and make work easier and less
complicated. Keeping most of the supply chain as vertical as possible helps build relationships
and gain advantage of better quality at cheaper rates.

Process View of a supply chain:

The procurement of raw materials is not outsourced but is done by Route66 itself. As the
suppliers are limited so the procurement process is not that difficult. The products as mentioned
earlier are taken from Nafeesa Textile Mill and U.S Traders.

The Manufacturing of Route66 is outsourced to basically two manufacturers. The knitted

garments are outsourced to Decent group that manufacture T-shirts, Knitted Pajamas, Hoodies
and sweatshirts. While the woven garments are outsourced to Ziyaan Group who manufactures
the shirts, Trousers and other light woven fabrics.

There is no replenishment cycle for Route66 as they forecast demand and produce one a season.
For any designs running out of stock are not manufactured again but can be repeated after one
season when the manufacturing starts in the next season.

While the retail outlet for Route66 in defence and the online stores present as the customer cycle
for their brand.

Push and Pull view of the supply chain:

Like all supply chain the Route66 supply chain will also be divided in two processes; the push
and the Pull Process. The end customers which in this case are customers shopping online and
customers entering the outlets are using the pull view or reactive processing because they react
to consumer demand. While Route66 are in the pull process or speculative process as they
respond to speculative or forecasted demand.

Supply Chain Performance: Achieving Strategic Fit and Scope:

Implied Demand Uncertainty for Route66 products is not that uncertain. The sales patterns are
predictable with the changes in season but new entering competitors can affect the forecasted
demand. A few delays in winter conditions like late arrival of season does affect demand but at
the end if seen the demand uncertainty for them is low.
Achieving the Strategic Fit

Route 66 has made sure that they lie in the zone of strategic fit. In order to do so they have
maintained a supply chain which is efficient rather than responsive. This implies that they tend to
cater to the forecasted demand upon which they have worked before hand. This means that they
don’t cater to the fluctuations that arise during season in demand.

The diagram above illustrates the zone of strategic fit where the company lies. On the x-axis
there is the uncertainty spectrum whereas on the y-axis there is responsiveness spectrum. Due to
the efficient approach of the company towards the demand in context to their forecasting they lie
in the zone of strategic fit.

Supply Chain Drivers

Facilities

The main facility for the storage of the goods is located in the form of a warehouse on Peco road
township Lahore. This also acts as a head office where all the activities of office are carried out.
Moreover the incoming goods are inspected for quality check here and then stored. The area that
it covers if somewhat 8-10 thousand square feet.
The manufacturing facility is located in the Quaid e Azam industrial estate. Which makes there
operations easy as the warehouse and the manufacturing are all located near to each other hence
making their supply chain more effective. Moreover reducing the transportation costs of goods
from manufacturing facility to warehousing facility.

Inventory

Inventory is kept in the warehouse where it is divided into regions. Each type of cloth will have
its own separate region. Before putting them into their respective regions within the warehouse
they are bar coded and made sure of that they have been entered in the IT system used to
maintain the inventory. Moreover it makes it easier to find out the location of a particular item
that where it is located within the warehouse and within its region.

The company always introduces season end sales, in effort to reduce its inventory and not to
keep the articles once produce. Moreover the price during the sale are kept as much low as much
possible so that the company is relived of its piled up inventory at the end of season.

Information

The company maintains an IT system that is transparent and it provides the company’s owners
with great control. The system is constantly updated with the incoming stock and outgoing stock.

Sourcing

The process of manufacturing is outsourced as a result of which it gives the company the edge of
diverting their attention towards procurement process. The company has spent almost a decade in
the industry and due to this they have selected their manufacturers very carefully. They have
checked the price and quality of their selected manufacturer very carefully.

Transportation in Supply Chain

Route 66 just arrangements in neighborhood markets where their pieces of clothing are
transported utilizing trucks as the things are in mass and pickups are required for transporting the
texture. Merchandise are sent with not as much as truck load where portions of merchandise are
moved in little parts, taking into account high settled and outbound expenses and setting aside
greater opportunity to convey items. This is reasonable for stock being sent from the distribution
centers to retail offices. Some significant issues incorporated that there is area of combination
offices as products are sent to couple of areas with less limit.

Goods transported to Karchi to Daraz and symbious with the help of a carrier known as Daewoo
Busses. This is a reliable and a quick source of transportation used by Route 66. This is a cost
effective method as well because of the fact that using a cargo service for a limited amount of
goods to transfer would cost more.

Sourcing Decisions in a Supply Chain:

The Role of Sourcing in a Supply Chain:

Sourcing is the set of business processes required to purchase goods and services

Sourcing processes include:

– Supplier scoring and assessment

– Supplier selection and contract negotiation

– Design collaboration

– Procurement

– Sourcing planning and analysis

Supplier scoring and Assessment: Supplier performance should be compared on the basis of
the supplier’s impact on total cost. Route 66 opts for a long term relationships with the suppliers,
as when interviewed they mentioned that their suppliers are old and they have had been
supplying Route 66 since 2008 Moreover, the quality, quantity terms were considered important
criteria for selecting suppliers. As mentioned by the owner during the interview, the major base
decision was the quality of the yarn which was provided to them by the buying agents which
were third parties, namely Nafeesa and Pak Kuwait. Moreover, supplier flexibility was important
determinant as their business involves demand such that if during the peak season which is
summers in their case, the demand rises, the suppliers can easily provide them with excess
inventory.

Supplier Selection and Contract Negotiation: Selection was done majorly on quality and Price
offered. Suppliers were contracted for long term relations using the quantity flexibility contract.
As mentioned by the interviewee, demand varies with the season and so during the peak season,
they often need to get increase demand due to which they have flexible quantity terms with their
suppliers. They have verbal contracts with their suppliers.

• Allows the Route 66 to modify the order after observing demand

• Better match the supply and demand

• Increased overall supply chain profits

There are no auctions and bids for selecting suppliers.

Design Collaboration:

In order to coordinate with all the stages of the supply chain, the customers, suppliers and the
internal operations, software by Loom in Soft Company is used. This is designed specifically for
the purpose of maintain a record of the customers and the inventories record of where it is stored
and how it is processed. As inventory levels fall, this software helps to identify that order needs
to placed and so the suppliers are sent the order. It stores information about the raw materials and
finished goods as well in the warehouse and left for processing being in work in process.

Procurement Process:

The process in which the supplier sends product in response to orders placed by the buyer. Goal
is to enable orders to be placed and delivered on schedule at the lowest possible overall cost

Suppliers send the product in response to orders placed by the Route 66. The product is yarn sent
by the suppliers which is procured by Route 66 in the warehouse and dispatched to the retail
outlets as inventory levels get low.

Route 66 deals with bulk purchase items i.e. the yarn given by the suppliers. Suppliers tend to
have a same selling price, so the distinction is based on services and quality of the yarn. The
value is greater due to the different finished goods made, fulfilling the demands of different
customers. Also, the price goes through all the stages of the supply chain, so the margins by each
member increase the cost. Moreover, these are not restricted in availability in the market. These
are supplied to many retailers in multiple forms.

Sourcing Planning and Analysis:

A sourcing plan requires procurement to assess and manage the change so that the benefits of the
procurement strategy are realized. While sourcing planning the 2 factors that they focused on the
timing of delivery and quality of products they delivered.

Suppliers are analyzed on the quality and the long term relations they maintain with Route 66 as
mentioned by the interviewee.

Benefits of Effective Sourcing Decisions:

Route 66 allows for procuring the yarn which is manufactured into finished good after the
processes of dying and stitching. Aggregated procurement is used to achieve better economies of
scale. The software used for coordinating the suppliers, customers and internal operations allows
for better design collaboration. This also makes the products easy to manufacture and more
efficient procurement transactions take place. The software helps to maintain inventory levels
and avoid demand uncertainties within the supply chain. Good procurement processes facilitate
coordination with suppliers and help build a long term relationship with them.

In-House or Outsource:
In-house:

 Storage

 Quality

 Packaging

Outsource:
  Manufacturing

 Buying from suppliers

Information Technology in a Supply Chain:

Role of IT in supply Chain

As mentioned in the interview, IT plays an important role in coordinating all the suppliers,
customers and the internal operations. They customized design software used by the company is
the point of sale software by Loom in Soft Company. The company stores customer data in a
database, including names and purchase details. The software provides inventory details as to
how much is stored in the warehouse and how much is needed as inventory levels turn low.

Inventory

Inventory accounts for 30% of the total cost. The inventory is stored in the warehouse at Pecco
road. The yarn and finished products are form the inventory. The suppliers of the company
include Decent Group Company, Zain Garments and Nafeesa Brothers as orders are sent to them
and ordering costs occur for this. This is by third parties who act as buying agents and buy as
inventories are needed which they know, using the IT software.

Sourcing

Flexibility contracts and quality of the yarn fabric form the basis for the supplier selection. The
trust factor and the traceability of the order would have been possible using Supplier
Relationship Management and the Internal Supply Chain Management could allow managing the
fluctuating demand.
Conclusion:

To conclude Route66 has a well-integrated supply chain with most of the manufacturing
outsourced giving them an opportunity to concentrate more on making their supply chain more
efficient. They have a certain demand with not many demand fluctuations making it easy to
forecast their demand and thus leaving them with less inventory and making them more efficient.
Their strategy of limited number of supplier in their supply chain has had a positive effect of
relation building and thus better results can be seen in terms of quality and prices of their
products. We see a lot of trust in the manufacturers as only two of them are used by Route66
which might be a negative in case of a falling out between Route66 and their outsourced
manufacturing.

Recommendations:

Route 66 aims to expand in the near future. We would recommend them to first open up more
branches in Lahore and Karachi as they already have their operations there, and will incur less
transportation costs. Moreover, they can open branches in nearby cities like Faisalabad,
Gujranwala in order to be efficient so that they don’t need to incur high transport costs.

Later, they can open branches in Islamabad, Quetta, and Peshawar. This can help Route 66 to
expand while they would also need more warehouses to cater to some faraway places, incurring
more costs.

They can export their products abroad using shipments which will be more convenient rather
than air which will cost them high. Their suppliers can remain loyal with the same contract of
quantity flexibility in order to cater to demand fluctuations.