Eat or Be Eaten: The Key to Growth and Profitability in Apparel

Revenue growth in the fashion industry is closely related to economic growth and industry projections for long term growth range from two to three percent a year. In the future, the growth in consumers from emerging markets, the longevity of baby boomers, and the increase in dual income families, will be offset by a slowing in population growth, a shifting of economic wealth to the top 20% of households, and a change in sentiment from conspicuous consumption to capital conservation.

Over the last nine years the Apparel Consumer Price Index has declined, wetting the consumer's appetite for value. There are no indications that this psychographics will change. The result will be more complex supply chains driven by labor arbitrage.

Recent strategies where retailers create private labels and branded manufacturers open full price stores has spurred creative competition and increased the importance of product development. Finally, mergers and acquisitions, entry into global markets, creation of new formats, brands and brand extensions, and multi-channel sales strategies has added to the complexity.

Fragmented, Fickle, Fast, And Unforgiving -- The consumer is informed and selective, fashion trends have higher volatility and shorter lives.

The Internet has opened up a shopping world where, at the click of the mouse, a shopper has access to prices and products from around the globe. Additionally, the Internet allows shoppers to spot a fashion trend from anywhere in the world, in an instant. A recent example was the success of the "kurti" in 2003. A shorter and trimmer version of the traditional Indian kurta, originally targeted at the twenty-something woman, it took U.S. markets by storm and could be found virtually every retailer and modified to meet the needs of all age groups. Speed and responsiveness of bringing concepts to market and reacting quickly to consumer preferences will continue to determine the success or failure of the players in the predominantly global value chain

Surviving In the Jungle -- A holistic view to bringing products to market provides the competitive edge

Many companies continue to find new ways to shorten the concept-to-market processes for fashion merchandise. Efforts to-date has predominantly focused on the design, manufacturing and logistics processes. However, integrating the design and manufacturing processes with retail and brand strategies is essential to attaining margin and sell-through goals. A clear understanding of the consumer segment is essential to ensure brand integrity during product development. Also brand strategies determine price point and margin goals and can impact sourcing, manufacturing and supply chain strategies. Finally, implementing one of the newer product development applications available in the market and integrating it with planning, sourcing and supplier management systems is required to optimize efficiency and responsiveness of the processes that bring concepts to market.

Making the process more responsive - Applying best practices

Making the process more responsive requires converting a traditionally linear or sequential process of design, sourcing and manufacturing into a series of parallel processes. By de-coupling the process, design decisions, for most categories, move four to six months closer to in-store dates thereby increasing the probability of fashion correctness and higher sell through volumes at higher margins.

The change requires committing to key fabrics, patterns and colors at appropriate times in the cycle -- often before production orders are firmed. The risks associated with committing to fabrics, colors and patterns can be effectively managed by timely insights from customers, consumers, the many fabric and fashion shows, and a host of test marketing strategies. The risk associated with raw materials can be further managed through effective planning and with supplier alliances.

More frequent design cycles minimizes the risk of creating large quantities of merchandise that does not sell at full retail price. It also improves merchandise freshness and uniqueness at the point of sale, differentiates the brand for retailer and manufacturers, and entices the end consumer to make more frequent visits.

Making the process more efficient - Leveraging resources

The number of styles designed and manufactured is the key driver of all process related costs. Early decisions on how many styles to design and how many styles to eventually produce reduces the resources requirements and the duration of the design cycle. Targets for styles to be designed and developed can be established based on expected sales per style and the brands financial goals.

Aligning the sourcing and production management organization with the supplier base further improves process efficiencies. Aligning internal and external resources by supplier capabilities allows organizations to understand the global manufacturing base and shortens the supplier identification and selection process. It also enables the organization to place production with suppliers and balance factors such as cost, production lead-times and quality. Realignment also facilitates supplier intensification and partnering which should result in reductions in product costs as well as the costs associated with product development, and production and quality management.

Technology Investments - Revamping for the upturn

An integrated process needs to be supported with integrated applications that enable integrated planning with the retailers systems, tracking product performance and trends, managing the calendar and the design process, managing supplier activity, orders and tracking production. To become more responsive and productive, the industry continues to leverage the Internet for timely communication with consumers, retailers and suppliers. It can be used to promote and sell merchandise, validate brand integrity and perception, test designs and concepts, and share a myriad of information electronically (such as markers, designs, specifications, purchase orders, quality reports and ASNs) with even the most remote suppliers..

Managing the Change -- Implementation on multiple fronts

Gaining a competitive edge by creating an effective and responsive concept-to-market process is a strategic initiative and not just a tactical one of implementing a product development application. Managing the change requires deep management commitment and dedication. The complexity of change is magnified by the systems that need to be designed, implemented, and integrated in order to support the change.

The first step is the creation of a case for action followed by constant communication with the stake holders as process improvements, system enhancements, and organizational realignment are rolled out. Careful planning and program management is essential to mitigate the risk and yet reap the rewards at a pace that keeps the organization engaged and enthusiastic about the transformation. This is especially true for retailers or branded manufacturers that have multiple brands, produce many categories of merchandise, sell in several markets through different concept or store formats, and deal with several agents and buying offices, and source from host of countries.
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