Fashion retailers need only two words to describe the frenetic pace of change taking place within their industry: Amazon and Zara. Together, these retail giants are changing the way clothing is distributed and sold across the globe, leaving other companies in a seemingly perpetual state of catch up.
Zara, the world’s largest fashion retailer, turns out an estimated 10,000 different products each year, and can bring an item from design stage to sales floor in about two weeks.
Meanwhile, Amazon was projected to overtake Macy’s as the largest U.S. apparel retailer by the end of 2018, with consumers increasingly using it as their “go to” source for basics including T-shirts, jeans and underwear. In fact, Amazon’s top selling apparel items during 2017 included ASICS men’s running shoes, Levi’s men’s regular fit jeans, and UGG women’s boots.
These news-making success stories come at a time though, when many established U.S. retailers continue to experience declining sales, and an apparent inability to keep pace with changing trends.
So what is it about super-achievers such as Zara and Amazon that are propelling them forward, while others seem stuck in neutral?
For one thing, both have been widely successful in creating a hassle-free shopping experience that includes inventory availability, convenient fulfillment options and flexible returns policies. The common threads in achieving these capabilities are technology-based logistics strategies that continually push the envelope in adding efficiency and identifying opportunities.
But you don’t have to be an industry behemoth to have a top-notch supply chain. Technology can be the great equalizer, in that solutions can be scaled to meet a retailer’s precise needs.
Here are some of the innovative solutions that are changing the way fashion companies manage operations and fulfillment:
Visibility/Supplier Collaboration. When Ralph Lauren set a goal of reducing lead times from 15 to nine months, management stressed the need to strengthen collaboration with its Asia-based supplier network. To do this, the company relied on a technology solution to establish visibility across the entire organization, so that managers were allowed insight into all parts of the design, production and distribution processes.
Inventory Management. Greater visibility is also integral to helping retailers address the significant issue of mismanaged inventory which, according to The Wall Street Journal, cost retailers nearly $1.4 trillion during 2017. Retailers lost an estimated $686 billion due to item stock-outs, and another $675 billion because of surplus inventory, sold at a marked-down price.
E-Commerce Fulfillment: As retailers struggle to find ways to offer increasingly fast and flexible options for online order fulfillment, a growing number are using their retail locations as mini-fulfillment centers. According to The Wall Street Journal, Zara is among the retailers that have embraced the ship-from-store concept, with a goal of having 2,000 stores located in 48 countries able to process online orders by the end of 2018. While ship-from-store allows retailers to forego having to maintain dual inventory systems, proper tracking of in-store and in-warehouse inventory levels is essential to make this work.
Product Lifecycle Management (PLM) technology solutions can be quite effective at helping companies reduce lead times — by an average of 25 percent to 30 percent. PLM has been referred to as a “cradle-to-grave” approach since every stage of a product’s lifecycle is monitored and linked. PLM technology was originally developed as a tool for the automotive and aerospace industries, but its benefits have become apparent to other industries, including apparel.
Pre-production Efficiency. In 2016, Kohl’s challenged suppliers to improve production times, and indicated an openness to new ideas and processes. One partner was able to cut lead times in half by focusing on product pre-production. Instead of relying on the time-consuming process of shipping samples back and forth between U.S.-based designers and manufacturing facilities in Asia, the retailer now relies on three-dimensional digital designs. Designers in the United States can “see” modifications throughout the product development process, and collaborate through an integrated system with the Asia-based production team.
Minimizing Customs Delays. Since 97 percent of apparel sold in the United States is made elsewhere, customs clearance is an integral part of the apparel supply chain. While many governments have upgraded their clearance processes with technology-based document filing systems, the risk of customs delays remains a real threat. To manage this uncertainty, companies are turning to experienced logistics providers to manage the process on their behalf, and for insight about the nuances of each government’s customs procedures.
Expedited Services. Expedited service has become an increasingly attractive solution for ensuring guaranteed deliveries of time-sensitive apparel shipments. A shipment of sweaters, for example, sitting in a warehouse in China but set to go on sale in a few days throughout American stores, could seamlessly be delivered via an expedited solution. Other companies rely on expedited services for just-in-time manufacturing efficiency, or for its highest levels of customer service, including extra security for valuable shipments and inside deliveries.
Distribution Center Bypass/Direct-to-Store Shipping Solution. Traditional distribution solutions have been upended by out-of-the-box thinking that allows merchandise to travel directly to retail stores. This eliminates unnecessary and inefficient distribution center stopovers. It used to be that shipments were routinely shipped to a distribution center, often located hundreds of miles off-route, just to be sorted and re-loaded. By allowing shipments to move directly to their end destination, a company can shave three-to-seven days from its transit time.
Returns management. An inevitable aspect of retail, product returns can amount to as much as 30 percent of an apparel company’s total sales. But retailers now see potential in those returns — both as a way to satisfy customers with a hassle-free returns policy, and as a source of revenue. An experienced logistics provider can work directly with a business to build a returns process that addresses key variables including a process for consumers to use when returning an item (i.e. including returns label with original packaging, RMA authorization), a process for accepting online purchases for return at retail store locations, and for ensuring undamaged returns are reflected in inventory levels.
U.S. apparel retailers understand their industry is in a continual state of motion, with today’s “standards” soon to be replaced by ever-faster and efficient ways of operating. Smart retailers are embracing these changes, and recognize the exciting role technology is playing in enabling capabilities that have been unattainable in the past.
John Costanzo is president of Purolator International, the U.S. subsidiary of Purolator Inc., a leading integrated freight, package and logistics solutions provider in Canada. He leads the company’s Third Party Logistics business and the development and execution of Purolator’s strategic growth plan for markets outside of Canada.