Lower Costs and Improve Performance with Comprehensive PLM

10/29/2013
While ERP helps retail, footwear and apparel companies optimize inventories for existing products, integrating PLM (product lifecycle management) with ERP delivers further improvement by planning, designing and sourcing the right products and materials.  Why is this important?  Because today's businesses must be fast and nimble to react quickly to changes in style, with just enough inventories to meet current and near-term demand, without maintaining excess.

One key capability for inventory optimization is flexible merchandising and line planning, which can be typically found in comprehensive PLM systems. PLM software allows retailers to carry-over and continue best-selling garments or drop poor-selling ones from the supply chain quicker than with traditional methods.  The process of adding or dropping styles in PLM is very easy, and when this process is coupled with automated workflow or notifications, supply chain stakeholders are immediately informed – helping to further reduce potential inventory losses.

One of the biggest challenges for retailers is the need to have the right inventory, at the right place, and at the right time. Instant visibility into material requirements in a PLM system facilitates forecasting and allows retailers to push some of the management of raw material inventory, and the associated costs, to the suppliers. Material management functionality in a PLM system is particularly important given high, fluctuating raw material costs. Real-time visibility into material requirements is provided by mature PLM systems that offer planning capabilities and great "where-used" capabilities.

PLM enables merchandisers and product managers to plan their assortments, which provides insight into new and carried-over products.  This allows sourcing groups to have foresight into an intended product line and the need for either new or replenishment materials. For example, if a retailer carries over 60% of their styles from fall into winter, sourcing can understand what material is left in inventory and only order more as needed.  The reverse is true as well.  If sourcing tells merchandising that there's a surplus of fabric, Merchandising can choose to carry over styles to consume current stock or create new styles in that same fabric to use the remaining stock.

Where-used functionality in a PLM system can also improve inventory efficiency.  As product Bill-of-Materials (BOMs) are managed, reports can be run that provide insight into which fabrics are being used and how much fabric is needed on a per-product basis.  This can be aggregated across multiple products to understand total fabric yardage that's needed and drive appropriate order quantities that sourcing will place with suppliers. This also yields an opportunity to negotiate better supplier pricing through greater purchasing power.

Additionally, good planning and calendar management in a PLM system will allow retailers to make final production decisions at the last moment. This helps to ensure production is dedicated to products that reflect the latest trends and enables the companies to shift material and resources to best-selling products. The result is a more optimal inventory with fewer markdowns and inventory losses.

For many retailers and brands "fast fashion" is a critical competitive differentiator, which means retailers need to be masters at reducing the time from concept to store delivery. This involves coordinating a complex apparel product development process across a global supply chain, at the right price and quality.

Efficient and effective brand management that takes into account customer trends requires a PLM system that enables collaboration up and down the supply chain. This allows retailers to reduce their cost of doing business and improve performance by involving suppliers with product and material development decisions as early as possible. Sharing early information with suppliers enables design decisions that optimize inventory and increase the likelihood of successful product launch. 

Finally, comprehensive PLM systems have "order confirmation" capabilities that can be thought of as draft PO's.  Order confirmations give suppliers early insight into order quantities by size and color prior to actual PO's being cut from ERP systems. POs can take up to four weeks due to the rigidity of many ERP systems. Order confirmations give suppliers more lead time to prepare for production, which includes procuring materials, such as fabric, trim, and packaging. By enabling insight into order quantities by size and color, suppliers can more accurately procure the right material quantities, thereby reducing waste.

Mature PLM systems have a proven track record of successful integration with ERP to reduce inventory levels and bring more innovative and profitable products to market, faster. By providing a single source of information for teams from concept to sourcing and supply chain, PLM provides better tools to make better trade-off decisions and optimize purchasing and inventory.

Francois Lamy, is vice president of product management, supply chain management, and Quach Hai is director of prroduct management, supply chain management for PTC.
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