The Future of Standards in the Apparel Industry

7/9/2013
Since the first barcode was scanned in 1974, standards have led to huge savings for the consumer goods industry, including the apparel sector, allowing more efficient flows of goods and information. In fact, research conducted by GS1 UK and the Cranfield School of Management revealed that barcode adoption in the UK saved the country’s retail industry £10.5 billion in 2011. However, a new study, which was based on in-depth interviews with more than 20 consumer goods and retail companies conducted by Capgemini Consulting in partnership with GS1 and The Consumer Goods Forum, has found that if standards are extended more broadly within the industry’s ecosystem there is the potential for even more savings.

The study, The Future of Standards in the Consumer Goods & Retail Industry, highlighted that the future of standards is simultaneously about focusing on a “‘back to basics” approach while selectively advancing into new territory. Although food and beverage companies were the primary participants in the study, companies in the apparel segment of the industry can also benefit from these findings.

Back to basics
“Back to basics” implies that more can be done with the current standards programs. Specifically, there was a call for a wider range of trading partners to embrace standards to increase supply chain efficiency and add more value to the order-to-cash processes. In addition, greater consistency in implementation of current standards programs, across organizations, was seen as a needed next step.

Certainly large national apparel retailers, and by extension, their suppliers, have been utilizing standards for many years. However, as in the food and beverage marketplace, there are examples of under-use of existing standards that represent gaps. For instance, apparel is sold in a wide range of specialty stores and is increasingly available through pure-play e-tailers. The sheer number of these smaller-scale formats creates visibility gaps that could be closed by embracing a minimum number of standards.

On the manufacturer side, smaller and medium-sized suppliers dominate a broad landscape (by contrast to the highly concentrated consumer products companies). This means that many suppliers were not involved in standards development and may be less aware of the standards themselves, and the benefits of embracing standards. Additionally, these organizations likely have fewer resources to devote to standards adoption and implementation. However, as consumers increasingly demand origin-related information (from a fair labor perspective) and guarantees of authenticity, all manufacturers and upstream suppliers of raw materials and components will need to utilize standards.

It is equally important that standards are used by transportation and logistics partners to maximize the benefits of collaboration and meet more stringent government regulations around declared origin information and composition information (tied to product safety). Apparel is a global industry, with most production occurring offshore and involving a complex import/export network to move goods from the point of manufacture to the consumer. Each link in this chain must be able to exchange product information seamlessly by using standards to connect organizations as product flows through the supply chain.

Advancing into new territory
The future of standards is not solely about expanding the usage of current standards programs into broader segments of the industry. It is also about embedding standards into process areas outside of supply chain. Two areas in particular received a great deal of attention from manufacturers. First, consumers now expect to have a vast array of product information at their fingertips and are increasingly comfortable with direct-to-consumer shopping channels. Second, effectively managing product-related risks is a critical capability for all companies.

In addition, executives were keen to explore the possibilities of emerging technologies to support the provision of these information categories both internally and externally. They debated the use of RFID, the value of smart tags and the need for a revolutionary approach to data carrier design. However, the executives were undecided on which solution would emerge as the winner and instead called for the development of a roadmap for the evolution of the industry’s data carriers.

Changes in consumer behavior
Nearly all of the study’s participants told us that changes in consumer behavior will have the greatest impact on the industry’s supply chain in the coming decade. Internet access, smart phone ownership and social media usage are becoming pervasive globally. These technologies enable people to purchase goods via multiple channels and access information when and where they want it. Consumers now demand readily available product information with real-time updates and the ability to scan barcodes or take a photo of a product to obtain information such as brand, price and stores where it is available. Many seek information beyond the label, including the stories behind the products, product origin and manufacturing working conditions.

While the type of information that apparel companies must provide (e.g., care instructions) is different from the type of information that packaged goods companies must make available (e.g., nutrient and ingredient data), the need for an extended set of product attributes is clear. Thus, new standards to capture and share these additional attributes will be required.

How consumers buy is also changing. They are just starting to test the water with online grocery purchases and are becoming more comfortable with purchasing packaged goods from Amazon boutiques. However, the apparel industry has been selling directly to consumer since the days of catalog shopping, and the consumer of the future is expected to continue to embrace online and mobile platforms for their apparel purchases. Therefore, the apparel industry faces a more urgent need to provide information across multiple channels.

Emphasis on safety and sustainability
Food safety was a dominant theme that translated into the need for standards programs to support end-to-end traceability of product. Pressure to create this level of transparency is coming from both increased government regulation and heightened consumer awareness. In addition, packaged goods companies were very aware that consumers’ perceptions of the impact their goods and services have on the planet (e.g., excess packaging and waste) will drive change across the industry over the next several years.

Similarly, the apparel industry faces product safety-related regulatory requirements. For example, there is more government oversight on the lead content in items made overseas, and the materials and components that make up children’s products. Also, products made from endangered species, such as fur, are being monitored. While consumers are less inclined to be concerned about the impact of apparel companies on the planet, they are applying more scrutiny to the topics of fair wages and suitable working conditions. The need to have this type of information available in the event of a product failure or to promote a company’s Corporate Social Responsibility score will be a success factor in the future. This is behind a call for new, or expanded, standards for capturing and exchanging safety and sustainability data.

Evolution of data carriers
The consumer products companies in our study believe that a “smarter” data carrier is both necessary and possible. Companies in the U.S. apparel sector are already embracing EPC-enabled RFID tags as the next-generation data carrier, and are using this “smarter” tag to their advantage. They are deploying this tag to address some of the challenges unique to the sector. For example, given the color and size dimensions of apparel, a data carrier that has the ability to deliver product availability information to consumers wherever they are shopping is extremely helpful.

In addition, the EPC-RFID tag is being used to provide apparel retailers with better information in the area of loss prevention by making visible exactly what walks out the door and when it disappeared. Next, the modern tag can be used to support anti-counterfeiting practices and increase consumer confidence in the brand-name items they are buying. Finally, space-constrained retailers are utilizing mobile technologies such as GPS to confirm that a complete sample set of products is on display (e.g., shoes).

GS1’s Melanie Nuce, vice president, apparel and general merchandise, says: “Several manufacturers that sell basics (underwear and socks), men’s dress shirts, footwear and jewelry are currently tagging millions of products with EPC-enabled RFID tags that are allowing for serialized tracking (beyond style/color/size to the specific instance of a product) of merchandise — providing real-time inventory visibility and enhancing the consumer experience. In addition, we believe that EPC-enabled RFID is the standard that will enable the success of omnichannel supply chains as every store becomes a fulfillment center and consumers seek higher levels of satisfaction in terms of instant visibility to inventory availability.” This success creates an opportunity for companies in the apparel sector to share their leading practices with organizations in other sectors that are just beginning to define a next-generation data carrier.

Shaping the future by taking action today
The industry acknowledges that the current system of standards has successfully laid the foundation for clear and understandable exchanges between companies. It is now time to multiply this capability by extending the reach of standards to a wider range of trading partners and a wider set of business processes beyond supply chain. At the same time, the industry must acknowledge the role that smarter consumers play in new standards and the requirement for improving the guidelines and services that support standards deployment.

In light of a clear mandate to advance the industry’s system of standards, The Future of Standards in the Consumer Goods & Retail Industry concludes with a series of seven recommendations for the industry:
1. Develop marketing programs targeted toward companies not making full use of standards
2. Introduce simplified standards programs for ease of
adoption
3. Use existing standards to communicate product information to consumers
4. Collect sufficient information about product origin and route-to-market to minimize risk
5.  New standards to meet industry needs, in particular to facilitate the exchange of sustainability-related data
6. Develop solutions to ensure data quality
7. Expand GS1’s role from standards-defining body to center of excellence in standards implementation.
 
Both apparel and packaged goods companies can benefit from these actions by supporting GS1’s efforts to help the industry realize the next generation of savings.

Read the full report here: www.capgemini.com/the-future-of-standards or www.gs1.org/future_of_standards.

Susan Wood is principal, Lisa Lancaster is managing consultant and Connie Wang is senior consultant, Capgemini Consulting.
X
This ad will auto-close in 10 seconds