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Better Back End Systems Drive Better Profits

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This article was featured in Inside Fashion magazine July 2017 issue

MOST COMPANIES understand that shortening lead times is becoming increasingly critical, the challenge is how to do this – particularly when there’s a very complex and well entrenched legacy ‘infrastructure’ in place.
E-commerce is pushing brands and retailers to have more flexible and responsive supply chains.

In April, Amazon filed for a new patent (US Patent 9,623,578) for “On Demand Apparel Manufacturing”, highlighting the company’s future vision for garment manufacturing and sourcing. With highly flexible small production facilities scattered across multiple states in the U.S., Amazon can quickly produce any orders for consumers and deliver them on time.

“The days of buying container loads of the same generic garments and shipping them to every shop in the country is gone. Orders are getting smaller and more fragmented,” said Delman Lee, Chairman of TAL and CEO of Weave Services Ltd., speaking at the Weave Supply Chain 360° Conference (Hong Kong, June 2). The conference, which drew over 120 senior industry executives, featured seminars from Weave Services, CBX Software, Inside Fashion and Indigo, as well as several panels of industry experts.

“Today fast isn’t fast enough. Merchandise assortments are more dynamic than ever before. Suppliers and manufacturers are facing increasing demands for quality and compliance. More importantly, there is the ongoing trend towards smaller, more frequent orders in order to reduce inventories,” said Michael Hung, CEO at CBX Software.

The Right Product, In the Right Place at the Right Time

Today’s consumers expect 24/7 accessibility, to be able to buy anything from anywhere, and at lower prices. “Retailers are challenged to ensure products are available at the right time, through the right channel, and at the right price,” said Fred Lemoine, managing director Asia at Weave Service Limited.

“Our studies show direct correlation between speed and lost sales. To drive profitability one needs to have a better collaboration between retailers and suppliers – an integrated solution. Actually, more than 40 percent of companies don’t have, or only partially have, supplier performance management systems. Almost none of the retailers have implemented full CPFR yet,” Mr. Lemoine pointed out.

“We find that when we help companies to tailor speed levers by product lifecycle and sales velocity, we can help them to prioritize their efforts, such as determining how many collections to develop each year, or to develop a mind-to-market time and action calendar,” said Mr. Lemoine.

“Each lever needs to support the distinct needs of one product segment (such as seasonal items, rolling items, fashion items and so forth),” he added.

Aligning Supply and Demand Cuts Lead Times

There’s no ‘one size fits all’ model supply chain management. For supply chain management systems to have maximum effectiveness, they need to be tailored to the unique nature of each business.

Raw materials procurement is one of the biggest factors impacting lead times and managing them better can significantly reduce lead times. Best practices, such as grouping raw materials based on lead times and pre-positioning materials that take longer to procure, can dramatically shorten lead times, while helping to mitigate financial risk.

Short Lead Times Through Optimized Inventories

Another major challenge is managing finished goods inventory more efficiently and accurately. According to industry research by Indigo, many companies have inaccurate stock balances resulting from a cumbersome warehousing system, which then results in difficulties in finding merchandise, and thus longer order-to-dispatch cycles.

“Optimizing one’s finished goods is critical in improving profitability. As O2O (offline to online), omnichannel, and e-commerce continues to put pressure on traditional distribution centers, there is a growing need to optimized one’s warehouse,” said Mark Wilkinson, consultancy manager at Indigo.

Make Change Stick

“Software alone doesn’t solve problems. People do. However, process re-engineering and change management is at the heart of all successful supply chain transformations,” said Mr. Lemoine.

To implement change, and more importantly, to make those changes stick, one has to have the support of the entire team.

“Instead of focusing on flaws, one should focus on the strength of your team. By role-modeling the best practices and applying them on day-to-day basis, people start to see what each individual can contribute to the success of the business,” said Tony Lopez, director quality and process engineering at New Balance. From 2012 to 2016, Mr. Lopez helped New Balance to achieve a 51 percent reduction in consumer defective returns and a 70 percent reduction in customer complaints.

“If one wants to be successful, one has to focus on making the right changes, and find a way to make them stick,” said Mr. Lopez.

 

To learn more about the latest retail trends that can impact your business, sign up for our next webinar “Winning at Retail – What Leading Companies are Doing Right” presented by Jane Singer.

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