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VF’s Tech Agenda: Cut Costs, Streamline Ops, Unite Brands

At first blush, Boyd Rogers isn’t whom one might expect to find occupying the top technology executive position at a $5.21 billion company. <BR><BR>“I’m not a systems guy at all,” he said in a phone interview. “I...

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At first blush, Boyd Rogers isn’t whom one might expect to find occupying the top technology executive position at a $5.21 billion company.

“I’m not a systems guy at all,” he said in a phone interview. “I can’t program a VCR.”

Still, since he was named VF’s vice president of global supply chain and technology in February, he’s been the Greensboro, N.C.-based firm’s top dog on the tech front. His background is in keeping with VF’s broader approach of ensuring that its technological processes serve the business, rather than vice versa.

One of his key responsibilities is making sure VF’s five divisions, which the company calls “coalitions,” and more than 30 brands can communicate efficiently with one another, using standardized systems to manage everything from payroll to tracking production of the 500 million items the company buys each year from approximately 1,000 contract and company-owned factories, then ships to 47,000 retailers.

His staff is charged with assimilating the systems of new brands into the VF fold — no small feat at a company that’s made eight major acquisitions since the turn of the century.

Rogers is also one of the key players tasked with meeting VF’s goal of trimming $100 million from its operating costs over the next five years, a target chairman and chief executive Mackey McDonald unveiled at an analysts conference in New York last month.

“We are targeting $100 million in cost reduction, much of which will be used as a fuel to put behind our growth initiatives,” McDonald said, according to a transcript of the event. “This also has very specific projects….We have teams of people across VF that are working on these, in the areas of direct materials, indirect materials, product procurement, distribution, inventory management, our whole information technology and information systems infrastructure.”

VF’s standardized systems will help meet the challenge by enabling the company to cut costs across brands by pooling orders for fabric and components. “We have a cross-coalition direct material group,” Rogers was quoted as saying in the transcript. “We buy something like $50 million worth of zippers collectively, so we can get a pretty good deal when we offer it up as $50 million as opposed to 10 guys going out with $5 million.”

A $100 million trim will significantly boost the bottom line at the firm, which last year recorded net income of $397.9 million and operating income of $644.9 million on its $5.21 billion in sales. Through the first nine months of 2004, VF’s net income was up 19.5 percent on 17.7 percent sales growth.

Rogers, 55, joined Blue Bell, the former parent company of Wrangler, in 1971, and joined VF when that firm acquired his employer in 1986. Most of his career was spent in industrial engineering — ensuring the firm’s factories worked in the most efficient ways possible.

While he developed an appreciation for what technology could enable companies to do, he said, he never lost sight of the fact that it was a means to an end.

“Business drives tech, rather than the other way around,” he said. As he rose through the firm and became increasingly responsible for technology operations, he ensured that executives from the operations side of the business were always involved in developing and selecting new systems.

“When a need for a tech process arises from the business, we would pull together a user group, bring in representatives from each of the different business units to see what does the business need to support these new functions,” he said.

Since 1998, his largest project has been moving all of VF’s coalitions, which had operated fairly independently through the mid-Nineties, onto common software and hardware platforms. The firm uses three main software packages.

The first is enterprise resource planning software from SAP. In plain English, ERP — as it is inevitably known among acronym-loving techies and business people — refers to software that handles the major corporate functions, such as accounting and sales, in one integrated system so that finance knows what operations is doing, and vice versa, throughout the company.

The second is a human-resources program from PeopleSoft that VF uses to track human resources, and the third is a supply-chain management program from i2 Technologies, intended to help executives monitor production across continents. (In a well-known incident in 2001, Nike charged that the company’s software had caused it to lose hundreds of millions of dollars worth of sales, but Rogers said VF has had no issues with i2 and relies heavily on the software for inventory management, production planning and demand fulfillment.)

The first stage of the standardization program was setting up a “shared services center” in Greensboro to handle back-office functions such as payroll. The rollout of the rest of the program has been going on for six years and counting, a time line that Rogers said reflects the many changes VF has made in recent years.

“I kind of describe it almost like we’re flying an airplane and still attaching the wing to it,” he said. In addition to all the acquisitions, VF in recent years has shifted from manufacturing most of its products at company-owned plants to primarily buying goods from contract factories outside the U.S.

The larger challenge is getting the new brands the company acquires to run on VF’s platform, which in turn is a key step toward getting those new companies to adapt to VF’s style of operations. That’s key since VF chooses the brands it buys primarily on the appeal of their products, not on how efficiently the firm ran under previous management.

To ensure that his staff will be able to pull new brands into the VF fold quickly, Rogers said, his department starts evaluating the systems of potential VF purchases before the company agrees to the deal. The amount of time it takes to get a new acquisition integrated into VF’s systems varies widely, he said.

For instance, Nautica, which VF bought in August 2003, is still running on its legacy systems. The company has taken more time to absorb that brand in part because it’s been set up to stand as its own division, called the Sportswear coalition. VF’s four other coalitions are Jeanswear, Global Intimates, Imagewear — logo T-shirts and sweatshirts, as well as uniforms — and Outdoor.

Each coalition has its own chief information officer, positions that report to Rogers. There are also cio’s responsible for the European and Asian operations.

Each cio’s job, Rogers said, “is really to be a liaison between the business unit and the central information-services group. They’re sort of the funnel.”

VF digested The North Face, which it acquired in 2000, more quickly. The story of that absorption illustrates the benefit of VF’s standardized approach to information systems. When VF bought The North Face, there was a clear need to get a handle on that firm’s operations, and quickly.

The North Face had been rocked by an accounting scandal, was disjointed after moving its headquarters from Colorado to California, was having trouble making its shipments to customers and had warned shareholders it was on the brink of bankruptcy.

“When we first acquired them, they had some pretty significant delivery problems and stuff like that,” Rogers said. “Over the course of the three or four years we’ve been working with them, their performance is absolutely improved, their margins are great, the brand is just growing like wildfire.”

Steve Rendle, who today serves as president of The North Face, joined that company in July 1999 and lived through the transformation that came after VF’s acquisition of the brand the following year.

Prior to the acquisition, the brand was known for chronically failing to fill retailers’ orders on time, he recalled.

“People would buy twice as much as they needed,” Rendle said. “The company would ship probably 50 percent of what they ordered, so it worked out.”

After VF bought the brand, one of its first moves was to automate the management of the brand’s warehouse, as well as put The North Face on VF’s standardized product development and sourcing calendar. Within a matter of months, that allowed The North Face to greatly improve its order fulfillment rates, though Rendle recalled: “It took about two seasons for our customers to finally believe that we were going to deliver what they ordered on time.”

Today, he said, The North Face delivers 95 percent of its orders complete and on time. Prior to the acquisition, that number was in the range of 40 to 50 percent.

The North Face is now part of VF’s Outdoor coalition. The total Outdoor business has almost doubled in size since 2000, going from $368 million in sales that year to about $700 million in 2004, said Eric Wiseman, chairman of the coalition, according to the transcript of the analysts’ briefing. The Outdoor group also includes the Vans and Napapijri businesses.

“What we are looking for when we make an acquisition is not necessarily great operating companies,” Rogers said. “We look for great products, great market position. If we can get their growth, then we can help out on the operations side.”

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