New Product Introduction for Patagonia
We proposed a new product (theoretically) for Patagonia Co. by examining its existing supply chain and manufacturing strategies, and quantifying costs and benefits of NPI using Six Sigma analytical tools (i.e. root cause analysis, SPC), inventory, lean principles, and forecasting.
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1. Executive Summary
Patagonia provides high quality outdoor products while keeping a keen eye on sustainable sourcing and manufacturing practices. The two products that epitomize Patagonia’s mission, the Nano Puff jacket and dried mangoes, combine quality and environmental awareness. Our team proposes a new product that would fit into Patagonia’s current manufacturing processes seamlessly to enter a new booming market: the pet industry. The proposed product, the Patagonia Dog Harness, utilizes materials from the Nano Puff jacket and the backpack product line, thereby bringing in revenue while keeping in line with Patagonia’s ethos. Using parts from the Worn Wear program and cutouts from the Nano Puff jacket reduces costs. This new product creates a revenue stream by entering a quickly-growing market.
The present report discusses the supply chain and manufacturing decisions for developing the new product. Without access to specific data, our team made some estimations based on similar, public companies in the outdoor apparel sector.
2. Current Business Strategy and Alignment with Supply Chain
2.1. Product Information
In our previous report, two key products were researched: the Nano Puff jacket and dried mangoes (Figure 1). One of Patagonia’s best-selling products is its Nano Puff jacket, which can be purchased in-store or online. It is a warm, windproof, and water-resistant hooded jacket that uses lightweight and highly compressible materials [1]. Its insulation material is made of 60-g PrimaLoft Gold Insulation Eco with 55% post-consumer recycled content, and is wrapped in a 100% recycled polyester shell and lining. It is also Fair Trade Certified™ sewn. Dried mangoes, on the other hand, are only sold online through Patagonia Provisions. Mangoes, specifically a Nicaraguan mango called Rosa, are grown through regenerative farming with cotton [2]. They are peeled and their pits are sliced off, and are then dehydrated. They are then covered with a drizzle of organic lime juice and dusted with Patagonia’s organic chile, which is made of ground Argentinian red pepper called aji molido.
Figure 1. Images of the men’s Nano Puff jacket (left) and dried mangoes (right).
The supply chain for Patagonia’s jackets is shown in Figure 2. The raw materials of the jacket — cotton, wool, or polyester — are sourced from the 57 factories, mills, and farms located worldwide. All these suppliers have to meet the standards Patagonia rigorously imposes. The sourced materials then go to the corresponding factories for processing. To minimize its consumption of virgin petroleum-based polyester, Patagonia recycles other plastic and polyester products to create recycled polyester fabric and thread. With the fabric, workers manually sew the jackets at sewing factories. Once the products are complete, they are shipped to the distribution centers. From the distribution centers, the products are sent out depending on the type of orders. If the products are ordered by the customer through the Patagonia website, they are parcelled to the customer directly whether internationally or domestically. Otherwise, the products are sent out of the distribution centers in cartons to retail stores. When customers have used the product for some time and no longer desire to keep the products, Patagonia offers them the option to trade in their old Patagonia jackets and buy a new one. These returned jackets are sent to repair centers and factories and are sold on the Worn Wear website to be purchased by another customer.
Figure 2a & b. Diagram of the current supply chain for jackets (left) and of the current supply chain for dried mango snacks (right).
Patagonia’s focus on the triple bottom line, specifically sustainability, drives SCM decisions. The dried mangoes became a viable product due to the regenerative farming practices the company adopted. Most other companies would not consider this creative solution to a common agricultural problem. Patagonia found a way to satisfy their sustainable requirements while discovering a new source of revenue. Choices to include more sustainable materials increase costs. Taking better care of sheep that are later sheared for wool is more expensive. Organic and recycled materials are also more expensive. Dealing with these materials in environmentally friendly ways introduces new costs such as more expensive dyes or dyes that are more expensive to dispose of. Sustainability also limits sourcing options. Not all material sources adhere to the standards that Patagonia requires. Therefore, its factories, farms, and distribution centers are spread throughout the world. Nevertheless, Patagonia has successfully increased its operating income over the years, implying some form learning has been taking place at a rate of 88% (Figure 3).
Figure 3. Patagonia has increased operating income with a learning rate of 88.09% from 2014 to 2019.
2.2. Inventory Risk Evaluation
2.2.1. Delayed Shipping
Because Patagonia outsources its raw materials and labor, reliable shipping is essential in keeping its production and inventory. An unforeseen disruption in shipping the finished goods to the States can create a risk of running low in Finished Goods Inventory (FGI). Patagonia has increased their number of distribution warehouses, but even more locations does not solve the problem of a starved supply chain if raw materials are not available. Distributing from multiple locations does not solve a problem of limited in-transit inventory on its way to these distribution centers.
2.2.2. Inventory Damage
The products may be damaged during the shipping process, and therefore, cannot be sold to the customers. They would need to undergo an additional process to be reused, increasing lead time. Patagonia already has multiple repair shops and even trucks that offer repair services. They could utilize existing processes to mitigate losses due to damaged items.
2.2.3. Natural Disasters
Many of the raw materials involved in the supply chain, such as organic cotton and mango, depend on the weather conditions at the farms and therefore are susceptible to low yield or delay because of the variation in weather. Similarly, spread of any disease or any other natural abnormalities might also impede the animals involved at the end of the supply chain. For example, a disease in sheep might impact the availability of good quality wool from the wool farms.
Patagonia relies on multiple types of materials. Wool, polyester, and cotton can be used for many similar applications. If one becomes scarce, the other is available. Also, the use of recycled materials adds another source that includes all products currently out in the market that could potentially filter back into the production process.
2.2.4 Availability of Recycled Goods
China has severely reduced the amount of solid waste it imports to recycle, banning 24 previously accepted types of waste, including postconsumer plastics and textile waste materials. Recycled goods may become scarce or more expensive. If it becomes difficult to recycle materials like polyester, it may no longer be a sustainable option for Patagonia to use so heavily. Customers may desire polyester less as they understand that sustainable disposal is less likely at the end of the product’s lifespan [3].
2.2.5. Communication Across Suppliers
Because the factories and mills are geographically far from the headquarters in the States, there may be issues while communicating with the suppliers. Language barriers between regions may also cause problems without clear and thorough communication.
2.3. Capacity Evaluation
Patagonia currently utilizes focused factories: it has 57 different factories worldwide, where each factory focuses on specific tasks such as sewing or specific products such as sportswear, outerwear, knitwear, and headwears [4]. The variety of products that Patagonia offers requires many specialized factories. Having focused factories allows Patagonia to maximize its throughput level by having to work with lower volumes of products, and because of the lower volume production, it can focus on increasing the quality of its products. In fact, Patagonia imposes strict guidelines and standards onto its suppliers to limit its number of factories. For instance, it expanded its factories in the early 2000s to 108 suppliers [5]. However, after experiencing deterioration in product quality, late delivery, expensive rework, and customer dissatisfaction, it had cut down its number of factories to 45 (58% reduction).
Although some sacrifices were made to keep its supply chain green and aligned with its core values, Patgaonia uses recycled materials which can potentially increase its capacity utilization rate, in comparison to if recycled materials were not incorporated into the supply chain. Referred to in Section 2.2.3, this adaptability and consistent availability of materials enables reliability at multiple parts of the supply chain. While being able to ramp up production suddenly is a benefit, it is also important to keep level production during difficult situations.
Despite decisions for environmental reasons that had led to increased cost, Patagonia owns a growth percentage change well above VF Corporation and REI, as shown in Figure 4 [6]. Despite the lack of quantitative data to evaluate Patagonia’s capacity, we can infer that, relatively speaking, Patagonia is able to operate at a more efficient level than its competitors.
Figure 4. Patagonia leads both REI and VF in growth change percentage by year from 2014 through 2019.
2.4. Quality Process
“When considering new factories, or evaluating current ones, we take a fourfold vetting approach—one that includes social and environmental practices equally with quality standards and business requirements like financial stability, adequate capacity and fair pricing” [7].
Patagonia has built its reputation as a brand with the most focus on triple bottom line by producing quality products with mindfulness about environmental impact and growing over the years. To ensure the best quality, green practices, and justice to those involved in the manufacturing of their products, Patagonia is affiliated with bluesign, has obtained fair trade certification, participates in a chemical and environmental impact program, and enforces traceability throughout the supply chain.
To enforce the most environmentally friendly practices without compromising the quality of the products, Patagonia attempts to have traceability throughout the supply chain to an extent such that not only do they track their own supply chain for the harm to the environment but also the supply chain of their vendors and suppliers. For example, Patagonia requires all their suppliers to complete a sourcing questionnaire and map their own supply chains and for every one of the fabrics or trims, Patagonia requires a profile sheet, a supply chain tracking sheet and all relevant third-party certificates [8].
The chemical and environmental impact program covers all areas of environmental management systems, chemicals management, waste management, water use and emissions, energy use, greenhouse gasses and
other air emissions. It requires compliance with local laws for manufacturing site operations, as well as compliance with the strictest international consumer products legislation. Patagonia believes this also helps them recognize and partner with the best suppliers.
Mechanical recycling is another practice related to the quality of the products that Patagonia follows to reduce their environmental harm. There are two main factors in this approach:
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The products produced from fresh and virgin materials need to be of best quality so that they can be recycled again and again as many fibres tend to lose strength and durability during the recycling process.
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To attain the same strength and durability in recycled products as in virgin products, Patagonia makes use of recycled plastic from waste bottles as well. This serves the dual purpose of sticking to the motto of “cause no unnecessary harm” and provide good quality products to the customers [9].
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Despite great efforts and innovative new techniques implemented at various points in the supply chain to ensure best quality and reduce the environmental impact, there are a few problems where Patagonia has made the tough decision of compromising in quality to ensure environmental friendliness. In order to reduce the harm caused to the environment due to use of industry standard durable water repellent (DWR), which is a C8 fluorocarbon (8 carbon chain), Patagonia has funded many projects and initiatives to find an eco-friendly alternative for the same quality. However, being unable to find a suitable alternative that provides the same durability, Patagonia had to settle down for C6 fluorocarbon (6 carbon chain), which is less harmful for the environment and humans in the long run but still does not deliver the same quality as the more harmful counterpart [10].
3. New Product
3.1. Product Information
The new product we suggest is a dog vest whose materials and design are similar to those of the Nano Puff jacket (Figure 5). It will consist of a recycled polyester shell, lining, and insulation with a zipper down the back. A harness adds strength and a clip enables securing it to a leash. This product will combine existing Patagonia products and help the company enter a large and quickly growing market while adding very little complexity and costs to the supply chain.
Currently, the pet industry is showing increasing growth. In 2017, there were about 89.7 millions dogs living in households, a 20 million increase from 2000 [11]. In another survey, 68% of American had pets, and 48% of the households had one or more dogs [12]. These numbers represent an opportunity for Patagonia to expand its product lines to the pet industry. Furthermore, pets are often accompanied in outdoor activities, and so, expanding into pet products would align with Patagonia’s branding.
Figure 5. Image of a dog vest made with similar materials to the Nano Puff jacket.
While the market exists, the ability to cheaply produce dog harnesses exists with only a few updates.
The supply chain for the new dog vest line is being suggested to leverage the already established supply chain of different Patagonia products to enter a new and growing market of animal clothing. Patagonia’s family of products already include all the required material and techniques to produce animal vests. We believe that the existing supply chain for human jackets can be used to manufacture pet vests because they are essentially the same products with just different fittings and some minor changes, such as clip or button instead of zips.
Similar to the adult jackets supply chain based on the type of the vest to be produced, the raw materials, mainly cotton, wool or polyester can be sourced using the preexisting network of farmers, factories and mills. The raw material sourced from various suppliers would be turned into fabric yarn that can be stitched by the workers working at the sewing factory (Figure 6). In addition to the regular material sourced for a conventional jacket, the pet vests would also need a clip or button type of attachment to be attached on to the harness before the vest is complete. Patagonia already produces many climbing backpacks. These designs can be stripped down to provide a cheaper harness with an added polyester shell.
The addition to the supply chain would be due to the combination of a harness and a jacket. The transportation from a harness factory to those that process polyester, insulation, and sew presents only limited added complication to the supply chain. This can be either procured directly from the same vendors who supply clips for bags and other hiking gear or can be redirected from the trekking gear factories. Decisions about how to get the clips or the buttons to the sewing factory can be made by analyzing factors such as nearness to source, cost of producing in house, cost of buying from another supplier, cost of inventory if purchased from the same vendor.
Figure 6. Diagram of the supply chain for dog vests. Changes to the existing supply chain are highlighted.
The current shell used for the jacket and dog harness is coated in durable water repellent (DWR) that includes perfluorocarbons (PFCs). PFCs are non biodegradable and Patagonia plans to eliminate them from all noncritical products by Fall 2022. Non-critical products make up around 90% of all products and do not include heavy rain jackets. The dog harness will use the sustainable PFC replacement to provide water resistance [13].
In order to fully utilize the years of experience that Patagonia has in the industry there are some other suggestions that we feel would potentially improve the supply chain further. These are as follows:
1. Expansion of Worn Wear initiative to include animal vests
Worn Wear initiative run by Patagonia where users can either trade in their used Patagonia products to get some store credit or simply donate their used products can potentially be expanded to include the animal line of Patagonia products as well. This way Patagonia will be able to continue on their path of causing the least harm to the environment while providing good quality to customers. Much like baby clothes, many dogs outgrow or are too particular to like certain products.
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2. Expansion of Worn Wear initiative to include trekking gears and equipment
We believe expanding Worn Wear to include trekking gears and equipment can solve part of the problem of sourcing the hard clips or buttons for the pet vest harnesses. This could be made possible by recycling all of the returned products to make the clips for the vests. Moreover, the fact that the products would be recycled would enable Patagonia to even accept broken or damaged products. This might help Patagonia’s brand reputation and increase customer satisfaction level.
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3. Usage of cutouts and trim wastes
We believe that Patagonia would be able to further reduce their waste by reusing the trim wastes and other cutout wastes generated during jacket production to make pet vest. These wastes are generally disposed of or sold to someone else, according to industrial norms, because of irregularity in size and color.
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The highlight of using the preexisting supply chain for Patagonia would be to not go through the years of learning process again. They would now be able to leverage their position in the learning curve to enter a new market and stay focused on their triple bottom line at the same time. There would be a relatively small learning curve to combine the existing processes necessary to make the dog vests.
3.2. Lean Principles
Patagonia’s supply chain can be categorized as a lean supply chain, for it attempts to reduce waste (muda) wherever possible [14]. The new supply chain for dog harnesses further supports this principle by taking advantage of the preexisting supply chain of jackets. No new factories have to be built nor new sources for raw materials have to be searched. Although workers would still need to be trained, the tasks do not require a completely different skill set since the pet vests can be viewed as smaller versions of the adult jackets. The machines at the factories only need to be modified to produce additional sizes of garments. The pet vests can also use the wastes created from existing processes. For example, equipment gear from the Worn Wear initiative can be used as buckles or harnesses for the dog vests. According to Patagonia, repair technicians at the repair factories start on simpler jobs and gradually get involved in more complex ones, and this process is a “four- to six-month learning curve for a technician to be solid on 70 percent” of what Patagonia does [15]. Taking advantage of this learning curve will result in greater efficiency and reel in greater profit.
3.3. Six Sigma Analytical Tools
We used the following six sigma analytical tools to guide our product decisions and analyze different parameters such as the cycle time for producing one dog vest, possible causes of defects, and structuring supply chain suppliers.
3.3.1. Process Control
The following table summarizes the manufacturing process of the dog vest.
Table 1. Manufacturing process for producing the Nano Puff Dog Harness.
3.3.2. Flow Chart
Two different flow charts were created: one for the entire production of pet vests (Figure 7) and another for the sewing process (Table 2). The prior helped us strategically decide where to source different parts of the vests. A separate flow chart was created for the sewing process because it is an equally important process as the vest production. The harness straps being fed to the factory should also be sourced from nearby locations to reduce the cost of transportation, and this flow chart is depicted as a SIPOC type flow chart that clearly identifies the inputs, outputs, suppliers and customers for making a vest (Table 2).
Figure 7. Flow chart for the production of the Nano Puff Dog Harness.
Table 2. SIPOC flow chart for sewing process identifying different inputs and outputs of the process.
3.3.3. Pareto Chart
The pareto chart, shown in Figure 8, was developed based on the reason of complaints for similar products. This information can prove to be helpful for preventing defects and ensuring vests that meet our quality standards.
Figure 8. Pareto chart for complaints about dog vests over a duration of one year.
3.3.4. Run Chart
The run chart, shown in Figure 9, illustrates the number of products produced over a period of one year with an average of 3,511 dog vests per month. This plot was developed considering the suggestions, provided above, that more dog vests can be produced during the time when production of other human jackets is low.
Figure 9. Run chart of estimated number of dog vests produced at one location.
3.3.5. Fishbone Diagram
To track the different causes of a defective product, a fishbone diagram was made (Figure 10).
Figure 10. Cause-and-effect diagram of defected pet vests.
3.4. Inventory Risk Evaluation
3.4.1. Optimal Order Quantity & Reorder Point
A Q-model is used to calculate the optimal order quantity and the reorder point. The optimal order quantity is needed to know the order quantity that would result in the lowest total cost, and the reorder point allows us to determine when to place an order to prevent inventory shortage. The optimal order quantity is 918 units, while the reorder point is 575 units.
Table 3. Table of the data needed to calculate the optimal order quantity reorder point.
3.4.2. Inventory Turn
Inventory turn calculations are made to predict the expected number of times inventory will be replaced over a year. A lower inventory turn indicates poor sales and excess amount of inventories. A higher inventory turn, on the other hands, implies either strong sales or inefficient purchasing order. Knowing the inventory turn would allow us to determine whether this is an overstock of inventories. The inventory turn is estimated to be 96 turns per year
Table 4. Table of the data needed to calculate the safety stock level and inventory turn.
The median industry inventory turnover is around 110 turns per year. Patagonia makes a high end product that does not rely on volume sales as much as most products in the apparel industry. Therefore, an inventory turn of slightly below the median value is expected [16].
3.4.3. Inventory Risk Comparison
While the harness supply is largely dependent on the production and reclamation of other products, the additional stress on the supply chain and added inventory risk is low. The ability of this supply chain to adapt ensures a somewhat steady flow of raw materials. The ability to increase production by using more of the non-reclaimed (but still recycled) goods helps when demand spikes and production must increase to match.
Qualitatively analyzing the inventory risk of new and existing product lines, it is safe to assume that because the new product essentially leverages the supply chain of existing products, the risks are carried over as well. Any major disruption due to factors like poor cotton yield, COVID, etc. to the existing jacket supply chain (for the same material) would in principle affect the supply chain and inventory of the new dog vests in the same manner. However, in certain cases where problems in one's inventory or supply chain does not affect the other strongly, the drop in one's inventory can be seen as an opportunity to increase the production of another. For example if the polyester for nano puff shells is delayed due to some minor transportation and logistics issue, the production of dog vests can be ramped up, given enough inventory for vests is available. This adaptability reduces Availability of Recycled Goods risk stated in Section 2.2.4.
3.5. Capacity Evaluation
Patagonia accepts garments back from the users for repair and recycling. The repair garments are sent to the Reno, Nevada plant where they are repaired by one of the 87 repair persons working there (information provided by Patagonia over a phone call). Based on this information combined with the number of garments repaired in Reno plant we can estimate the labor capacity utilization rate for the years 2015-2017 as shown in Table 5.
Similarly Patagonia currently uses 235 different recycling locations for recycling their items. Since many of these locations are not owned and operated by Patagonia themselves, it would not be possible to estimate the correct utilization rate of each location. However, we can estimate the utilization of these locations in the units of number of Patagonia items recycled per recycling facility.
Table 5. Estimated capacity utilization rates for recycling and repair processes
The above information is based on the assumption that the number of repair persons and number of facilities have remained constant over the period [17].
Due to the fact that we are suggesting to use the same supply chain for animal vests that is already used for human jackets, the total available capacity will now have to be distributed between conventional jackets and the new vests. However, this issue can be easily worked around by either strategically producing the required item based on demand forecasts and or by increasing the quantities of raw materials sourced from different farms.
As the same raw materials need to be sourced from the same suppliers and because the quantity required for either one of the products alone would be less than the total, the net quantity would be more and better prices would be possible because of economies of scale.We believe that the demand for animal vests would tend to remain lower than the demand for human jackets and this will help increase the profit margin for animal products because Patagonia would now be exploiting economies of scale. This could be considered as a competitive advantage over other dog vest manufacturers.
Adding a new product in the portfolio would also help patagonia to strategically plan the capacity usage for each product to ensure level production. Due to a certain amount of seasonality in the jacket industry the demand for jackets can be assumed to be high during the winter months and therefore their production would need to be ramped up a few months before this period. However, after the surge of demand vanishes, producing more jackets might not be a good strategy and producing dog vests at that time can help level the production plan to reduce the fluctuations in production at any given time. This would also add a level of flexibility to the supply chain along with a capacity cushion for both the products.
The Worn Wear program should be able to supply sufficient raw materials initially, due to the current stockpile in the Nevada warehouse. If the supply does not match the demand for dog harnesses, the backpack strap and fastener manufacturers may have to ramp up production. Because the backpack lines are popular products, production must be diverted from this line to harness production.
Like many companies, Patagonia attempts to reduce waste whenever possible. One way that we propose Patagonia continue this is to reuse cutouts from the recycled polyester Nano Puff jacket shell and inner layer. Assuming not all cutouts will suffice due to size and shape, an employee will need to measure pieces and specify where they go depending on the results of the measurement process. Figure 11 shows the internal process of measuring cutouts. Any cutouts that are not usable for the pet vest join the remaining polyester, which is all shredded or melted and baled before shipped overseas. After being processed into recycled polyester, the material heads back to manufacturing facilities for use. This process is clearly flawed. Manufacturers purchase materials, don’t use all of them, ship the unused materials away, before purchasing them back in another form. This is a costly approach that introduces a new lead time into the supply chain.
Figure 11. Decision tree for jacket and harness materials.
The capacity utilization of the pet vest relies mostly on the available cutouts from the jackets. Production that completely relies on that of another product introduces risk. This risk is mitigated by the ability to use sourced polyester as the raw material instead of cutouts. While it is not as sustainable, it will reduce production spikes. Ordering based on forecasted production may create a bullwhip effect, again reduced by the ability to use Just In Time (JIT) production by keeping low inventory. Inbound materials are not stored at a high volume because the source is within walking distance. If inventory becomes dangerously low, materials may be sourced directly from suppliers.
Reducing the Overseas portion of the above decision tree reduces not only costs, but increases the maximum level of output as well as actual level of output. We can assume that Patagonia owns a similar Capacity Utilization rate as others in the industry of 70-85% [18]. As stated in Table 3, our team estimated an initial annual demand of 42,134 harnesses. Therefore, using the Capacity Utilization rate listed the maximum output likely ranges from 49,567 to 60,191 units.
3.6. Quality Process
The quality control process for the dog vest is summarized in Figure 12.
1. First Check
The first sample produced will undergo first check whereby it will be determined whether the production can proceed further to mass production. If there is a defect, it will be reported to the quality control and manufacturing teams to be produced again with the appropriate changes. When the sample is deemed good, mass production will begin.
2. In-Process Quality Control (IPQC) Test
The product will undergo IPQC tests after being mass produced. It will be examined whether it meets the minimum product specs such as size, dimensions, materials, and colors. Any products that are determined not good will be sent for repair, to be recycled and be used as raw materials for other products, or be disposed of if they cannot be repaired or recycled.
3. Full Inspection
The product will undergo various durability and functionality tests as well as chemical inspection. Bluesign will help determine if the dyes and chemicals used in the product meet the standards of Patagonia. Any products that are determined not good will be sent for repair, to be recycled and be used as raw materials for other products, or be disposed of if they cannot be repaired or recycled.
4. Outgoing Quality Control (OQC)
The product must meet the customer quality requirements, taking into account comfortability of the product and product usage scenarios. Any products that are determined not good will be sent for repair, to be recycled and be used as raw materials for other products, or be disposed of if they cannot be repaired or recycled.
5. Quality Assurance (QA)
The QA team will conduct verification tests of the product to determine if the product and process meet all the specs. Any products that are determined not good will be sent for repair, to be recycled and be used as raw materials for other products, or be disposed of if they cannot be repaired or recycled.
6. Packaging & Warehouse
Products that pass all the tests and inspections will be packaged and shipped out to warehouses.
Figure 12. Flowchart of in-process quality control. This process informs the quality score in Figure 13.
Control charts can be used to monitor the quality control process. The average quality scores (assigned by Patagonia itself) were used to create X-bar and R charts (Figure 13). X-bar chart helps visualize the average change in process over time, and R chart helps visualize the range of the process over time. The average quality scores were assigned to products released for Fall/Winter and Spring/Summer collections each year. Any products that lie outside the control limits are considered out-of-control and defective. The quality control process discussed previously will keep the average quality scores within the control limits. Thus far, Patagonia has been able to stay within the control limits for the quality of its products, and assuming that similar protocols will be taken for the new product (dog vests), we expect to see similar trends.
Figure 13a & b. X-bar chart of the quality score of sampled products with average of 8.938 (LCL = 8.606, UCL = 9.27) on the left and R chart of the quality score of sampled products with average of 0.125 (LCL = 0, UCL = 0.408) on the right.
3.7. Logistics of Process
The price-break model was determined as the following:
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The above numbers were calculated using the Q-model with the following data:
Table 6. Table summarizing the required parameters needed to calculate the price-break model. (Refer to Section 3.4 for calculations of EOQ and reorder point.)
Table 7. Table summarizing the price-break model with the breakdown of the costs.
3.8. Green Sourcing
The four core values of Patagonia revolve around environmental stewardship: 1) build the best product; 2) cause no unnecessary harm; 3) use business to protect nature; and 4) not bound by convention [2]. Its manufacturing and supply chain strategies are consistent with these values. Patagonia minimizes its environmental harm by choosing to use eco-materials such as recycled synthetic and organic cotton, and utilizing more environmentally-friendly manufacturing practices such as regenerative agriculture. Furthermore, it limits its available manufacturers and materials sources to those it deems to follow the triple bottom line of social, economical, and environmental awareness.
Current areas of green sourcing that Patagonia already exploits to a good extent include:
1. Use of recyclable material
2. Worn Wear initiative - Encouraging customers to either get their garments repaired for continuing usage or trading them in for credit so that the old garments can be made available to someone else for a reduced price after necessary repairs.
3. Partnering with Bluesign - A system that tracks each step in the supply chain for textile manufacturers to make it more sustainable, green and safe for workers.
We believe the next steps towards greener sourcing can be taken as follows:
1. Expanding the Worn Wear initiative to include outdoor gear and new introduced pet garments
2. Reducing the waste from cutouts by using the fabric trims for human jackets as a source for pet garments or as patches for repairs.
3. Patagonia does not recycle their garments more than 2 times because of the loss of quality caused during the recycling process. We believe with the introduction of the pet line this limit can be further pushed to 3 or 4 times as many pets usually require less insulation quality compared to humans.
4. Recommendations
Pataonia’s supply chain decisions are driven by sustainability and quality. The products reflect these decisions, embodied in the Nano Puff jacket and dried mangoes. We advise Patagonia continues to offer products aligned with these requirements by adding production of the Nano Puff Dog Harness. The materials required for the production of the new product can be sourced from wastes from an existing product and the supply chain can be incorporated with a preexisting one, thereby reducing sourcing and inventory risks.
To incorporate a steady supply of used gear, Patagonia must build out the Worn Wear program by increasing awareness of the program as well as staffing accordingly to sift through returned items and test them for quality before using them in new products. By introducing the Nano Puff Dog Harness, the company adds a target customer that demands and pays for quality. These customers exhibit brand loyalty, becoming brand ambassadors sharing images that carry the company’s brand. This market is already large and growing quickly as almost half of Americans own pets. Pet apparel is an opportunity to increase the company’s revenue stream while maintaining an image of outdoor adventure with quality apparel for everyone involved. Patagonia’s focus on the triple bottom line, specifically sustainability, drives impactful decisions that show consistent company growth. The Nano Puff Dog Harness strengthens this approach by adding a revenue stream and new Patagonia customers.
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References
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[5] Enviro Editor. (n.d.). Patagonia Clothing: Made Where? How? Why? Patagonia. Patagonia. https://www.patagonia.com/stories/patagonia-clothing-made-where-how-why/story-18467.html
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