Overview

Levi Strauss is a large clothing manufacture famous for its Levi jeans. It is a behemoth which dominates its segment of the clothing business. In 1995, the company generated record sales of nearly $7 billion with profits of more than $700 million. Its market value is an estimated $10 billion, nearly 4 times its value when it went public. It has unparalleled brands and world class marketing capability. Yet, for all these formidable strengths the company is being pressured by nimble competitors and ever more demanding customers(retailers/distributors) and consumers (end users). In response, the firm has undertaken broad initiatives to reinvent the company, with the supply chain being the principal focus, and to get closer to the consumer.

The goal of reinventing the company is to deliver better value to the customer and consumer with greater efficiency. The effort will impact the large majority of the thousands of Levi employees. It will also entail using novel work methods, such as the virtual organization, discussed below.

Levi is experimenting with several ways of getting closer to the end user of its products, including an original, entertaining Web site, forward integrating by establishing its own retail network, and mass customization of product.

Redesign

The supply chain redesign was not undertaken lightly. Levi Strauss has 600 contractors in 50 countries making 65,000 different products, which are sold to 8,000 distributors/retailers. The reinvention process was driven by a realization that customer service was abominable. It could take 30 days to restock a store and only 40% of orders were shipped on time. In some clothing segments, it could take a year to source new products . Customers were complaining, "We trust many of your competitors implicitly. We sample their deliveries. We open all Levi's deliveries." Another stated, "Your lead times are the worst. If you weren't Levi's you'd be gone". Realizing they were being out-serviced by the competition and it was only a matter of time before significant erosion of market share occurred, Levi took preemptive action.

Levi analyzed all the processes needed to be successful and redesigned them to improve efficiency and customer service. Existing jobs were redefined and whole categories of jobs with new responsibilities, qualifications, titles were created. To assure that the right people are placed into these jobs, internal candidates are being screened and interviewed by the thousands. To remove fear from the organization, Levi has indicated that head count will not be reduced as a direct result of the transformation. They have made it clear, however, that the employees are expected to adapt to the new environment. If they choose not to, Levi is encouraging them to rethink if Levi is where they really want to be.

Virtual Teams

To improve efficiency and to develop products with global appeal, Levi is experimenting with virtual organizations consisting of personnel from around the world. An example of such a team in action is the one which developed Levi jeans Web site. The team consisted of North American and European employees along with the contractors needed to provide specific functional and technical expertise.

This virtual team, though separated by thousands of miles, quickly created an award winning Web Site. The site is intended to appeal to Levi's young male core customers by using a technology with which they are familiar and it unifies for the first time all the company’s brands in one global campaign. Not only was the team highly dispersed, but included people from disciplines such as brand marketing, consumer affairs and others not normally involved in marketing. Advertising agencies and consultants specializing in Web site development were added to provide key functional support and technical support. The resulting virtual organization was collaborative and represented a broader cross section of the organization than in the past. This was by design. One of the key goals of the project was to give the site universal appeal, such that it would appeal as much to California netnauts as to German Web surfers and Chinese netizens.

The key enablers were a panoply of telecommunications tools, including Web technology, which allowed the organization to effectively function in real time across continents. As the virtual organization resided in multiple locations in different countries and team members seldom met, the meetings were conducted by video and tele-conferences and a document management system which permitted the creation and manipulation of documents in real time during the conference calls by all the participants regardless of location. Though more Levi people were involved across a broader spectrum of offices and skills than previous Levi campaigns, the project was completed in less time than comparable advertising efforts.

Getting Closer to the Customer

The resulting Web site embraces and contributes to the global youth culture Levi so desperately wants to keep in jeans. In fact, one of the stated goals of the project is to become part of the youth culture, a place where kids will want to go for entertainment not only to get information. This means Levi is starting to move from an information/image based advertising approach to one with more content. They hope this content will be partially generated by the site visitors themselves by including such things as youth chat lines and places where "graffiti bombs" can be posted. To learn more about these future big spending consumers, Levi solicits customer profile data, and offers in exchange such things as After Dark screen savers. Levi also allows visitors to post inquires to its staff about its products, giving valuable market based feedback at little cost.

The goal is to begin to approach one-on-one marketing, with the belief that the closer you can get to the consumer the better. Their ultimate goal is to disintermediate both the marketing and distribution channels. Examples of this intent include the Web site described above and another for the Dockers, which is much more mainstream given its older, more settled target customer base.

Forward Integration/Mass Customization

Levi is also getting closer to the consumer by going directly to them. For example, it has established its own retail network and is equipping these stores with mass customization tools. This has been done at the risk of alienating their long established distribution and retail network. In effect, they are competing with their customers. These drawbacks, however, are outweighed by the benefits of dealing directly with the consumer, including more control over the elements of consumer satisfaction and unfiltered consumer feedback.

Mass customization consists of taking detailed measurements by computer at the store site and posting same to a manufacturing facility which then custom makes the jeans. The turnaround time is 3 weeks and the jeans cost 20% more, but the experiment started a year ago has been sufficiently successful for Levi to announce it will be extended to the Dockers brand. Future goals are to reduce the delivery time and to expand to stores in which this service is available. By adding such value, Levi hopes to realize a price premium and by making to order they hope to reduce inventory carrying costs. More importantly, however, is the direct link being established with the consumer. After the first fitting, future pairs can be ordered simply by phone or e-mail. Levi believes such convenience along with the improved fit will increase customer loyalty and lead to higher levels of repeat business.

W. C. Severns