Thursday, February 9, 2017

A Stitch in Time – Using Acceleration to meet the Challenges in Retail, Apparel & Footwear

Introduction


Speed-to-Market is a critical factor in new product success, especially for apparel and footwear industries. Both independent companies and private brands feel the pressure of consumers and the retail channel demanding the right product at the right price in the right location – launched at the right time.  The unique challenge for this industry is the sheer volume of style-color-range-size SKU variations needed to be launched each season.

As Faith Baldwin puts it, “Time is a dressmaker specializing in alterations.” The speed of new product introduction can spell the difference between success and failure. Organizations are using shorter product life cycles in order to increase market share and maintain margins longer.  This in turn leads to higher return on development investment and more rapid payback.  An organization can establish procedures and policies to implement speed-to-market, but they will not be effective without the tools necessary to assist each product function and effectively exchange information.  Those that do can capture premium segments and control larger market share.  Zara is an often quoted example – its eight week cycle from concept to market is viewed as a role model.  The temptation is for other companies to adopt the week new product introduction cycle as the desired de-facto standard.

No one size (or speed) fits all


Should concept to market in eight weeks be standard for all apparel?  It depends…upon on product categories, as well as competitive strategy. 

Product strategy and lifecycle decisions also influence supply chain design.  Based on research in this area, Dr. Marshall Fisher developed a framework to align product strategy with the makeup of the physical network.  According to Fisher, there are two types of products, functional and innovative.  In the apparel industry, this translates to Basic and Fast Fashion products.  Basic products have longer lifecycles, requiring a different model for speed-to-market.  They are characterized by lower markdowns and more predictable demand (example six-pack of white socks sold at departmental store).  Fast Fashion products have relatively unpredictable demand, short product lifecycles, but carry product margins that initially appear more attractive than Basic products.   Fast Fashion products should leverage the Zara model, since they are characterized by a very short lifecycle (8-13 weeks), lower demand predictability, and highest markdown risk.  Basic products require more efficient supply chains, which emphasize low cost and minimal inventories.  Fast Fashion products require buffered, quick response supply chains.  This cost tradeoff needs to be considered during the development of product strategy and positioning.  Across both categories, cycle time is under pressure, but sensitivity varies based upon the model.

Accelerator Organizations


Organizations that lay stress on speed-to-market are also known as “Accelerators.” These organizations focus on speed in design, production, sales, response, and customer service without compromising product quality. For the accelerators, the product life cycle graph shows a spike as compared to the traditional smooth curve.   To become an Accelerator, an organization must excel at the following:
·         Use of  technology enablers, linked to business strategy
·         Well-defined business processes and procedures to cluster product development functions
·         Lead time optimization – understanding what propels styles to market

Extending the front end of the life cycle increases payback and profitability.

Figure 1: Implications of new product development for Accelerator Organizations



Technology enablers


 Technology affects every aspect of process, beginning from design to production and delivery to the store.  Product Lifecycle Management (PLM) was once associated with discrete manufacturing, but has now become important in the apparel and footwear industry.  PLM for apparel and footwear has extended PLM beyond line adoption and extended it to sourcing, costing, order tracking, and logistics.  Traditionally fashion, apparel and footwear companies have relied heavily on spreadsheets for product data management and phone, fax and email for collaboration.  Software providers are trying to address these requirements, and though progress has been made, much work remains before companies can realize the benefits of PLM technology into process workflows without significant customization.

PLM applications support design and development processes, enabling tight integration to merchandising, assortment and line planning, and sourcing.  PLM value realization is driven by integration to upstream planning and downstream execution systems.  Therefore it makes sense to define how processes supported by PLM should integrate to other critical areas and create a single source of truth. While implementing a PLM system at a leading apparel & footwear retailer we were actually able to calm the end user community by diverting attention to the technology and that technology being implemented was going to ease the roles, not complicate or dismiss. Video conferencing with rich interaction and meeting support is another tool that organizations can employ for real-time collaboration with suppliers.  An example is a leading US apparel firm that uses video conferencing with its suppliers for fit samples when conducting the 2nd fit for styles.


Selecting the right systems to support acceleration is very important. Private Label apparel product development has nuances that shouldn’t be under-estimated. The concepts of “slow item build” and “slow purchase order build” are not standard out-of-the-box functionality offered by PLM solutions.  The right combination of packages and tools selected across PLM, Global Sourcing, Planning & ERP can make or break an implementation


Business Process


To become an Accelerator, companies require a detailed understanding of who does what and who owns each step in PLM processes.  Many organizations realize they operate with unclear processes and accountabilities.  Organizations need to define processes end-to-end and not simply as functional activity blocks.  These broadly defined process need to be shared with all stake holders to drive understanding of who does what and when.  In spite of general awareness of process reengineering and lean principles, in many organizations departments still work in silos and do not leverage best practices.  Companies should automate non value-added steps from their process using linked workflows. However, to achieve adoption and long-term sustainability they need to avoid the temptation of trying to drive automation too far, too fast and overwhelm stakeholders.

Collaborating with suppliers earlier in the design process can also help companies reduce product iterations and product cost.  To manage across extended enterprises, quality control processes need to be enforced throughout the supply chain and tools provided to capture quality issues early in the process.

Getting products faster to market at the expense of quality can be devastating for these organizations.  It is important for companies to understand that in the dialogue on speed-to-market, quality is sometimes overlooked.  For example, a leading retailer had to recall the an entire line of girls’ clothing as they posed an entrapment hazard, while a footwear company had to recall approximately, 700,000 units of children’s clog shoes due to a choking hazard.

Voice of the consumer


 Excellence in PLM starts with an understanding of the customer and market.  In this area, apparel and footwear companies can look to the CPG industry for applicable best practices.  One best practice is to establish a marketing focus group and identify a sample of consumers with the same profile as your target consumers.  Provide these consumers shopping tasks and solicit feedback for market trends from their perspective.  These trends and desires include volatility in fashion preference, which drives product lifecycles and allowable new product introduction timelines.  Treat sample group feedback as feedback from the actual consumer.  Selection of the right focus group is paramount and should be done carefully.  Business intelligence and data mining techniques are helpful to determine target consumer profiles.  When developing consumer profiles, it is useful to give them names and build a set of attributes so that it is easier to conceptualize the target consumer and select them for the focus group. For example, is your target consumer Debra, who is 35 year old, married with two kids, with disposable income of $85K; or is it Kelli, 22 years old, starting out in her career, disposable income of $50K? Knowing the target consumer and publishing it to the larger organization is important to ensure the organization recognizes and works together to meet the needs of your target consumer. We improved the hit rate and reduced the number of styles in work at leading retailer through more rigorous quantitative and qualitative line planning and integrating with a PLM system.


Conclusion



Is faster speed-to-market really better? Yes, for companies that require short lead times to respond to market trends. No, for companies that rely upon basic products or consumer insight to create demand for their fashions.  Of course, most companies have product families that fall into each category.  Regardless of the cycle time profile, PLM for apparel and footwear companies has become a powerful lever to drive improvements.  Whether just starting to systematically address product lifecycle processes, or refining a mature process, PLM today provides companies one of the few safe bets in an industry marked by volatility and price pressures.