If you are a large enterprise leader in fashion responsible for driving millions or billions of dollars in revenue, you need a new success tool kit for 2019. The supply chain is where the real, revenue driving answers lie –
1) It’s really about demand network systems
Successful companies build products not based on supply constraints, but based on a superior understanding of demand. Additionally, upstream and downstream flows are never linear chains, but branched and complex networks. Beyond a nomenclature change, delivering value to end consumers means an understanding that the future is less about supply chain management and more about building efficient physical and digital demand network systems.
2) Manufacturing data is the new king
Manufacturing IoT data demands a seat at the same strategic table with design & merchandising. Factory shop floor data is rarely tracked and that is a critical mistake by absence. Part of the challenge had been an inability to monitor physical movement across fragmented factories. Digital architectures customized to apparel factory floors can now track data in real time and layer analytics across machine operators’ performance and work flow efficiencies. These systems (including our Suuchi AMS system) output insights on metrics including time to move cut pieces to garments, average output per machine, and corresponding levels of automation used across SKUs and factories. If data points to 2 comparable looking design silhouettes with comparable high sales performance historically, one may clearly win above the other in its ability to be made faster and with higher efficiencies. Manufacturing IoT metrics, when tracked & enacted upon, directly drive up revenue and margins.
3) “Low cost strategies are not unfitting for high cost locations”
(Peter Hermann, under references below)
Focusing on efficiency and smaller, shorter bursts of inventory can lead to an efficient and low-cost strategy even in a relatively high-cost local labor market. This is an agile demand network, one that flourishes in an environment of high unpredictability by delivering design variety in smaller quantities. This also limits cost exposure of low sell-through since quantities are low enough that failure at an individual design level is easy to pull out of. This strategy is best implemented in a localized model. Low design variety and low unpredictability products like t-shirts, hoodies, and leggings can still be sourced through a complementary global network.
4) Labor is (and should be) a small and increasingly diminishing fraction of total product costs.
There is a call to action for joint investments by brands and factories in modularizing the supply chain, so parts of the products are pre-made and then curated at assembly. By corollary, products subject to consumer tastes’ fluctuation and those better made locally should come from modularized and at least semi-automated work flows. Design variety being key, popular design blocks can be saved and edited to reduce design costs and reduce corresponding upfront automation/modularization costs per new design. While modularization has long been popular in software and automobile manufacturing, there is big application value in apparel – buttons, labels, binding, collars, etc. can offer huge cost savings as pre-made and/or automated assets in a modular flow. Reducing labor costs’ impact has positive implications on shielding from fluctuating minimum labor wage rates globally and locally and from changing tariffs imposed on goods made abroad.
5) Segment supply chain by demand type and customer
Not all products should be made equally or served equally. The goal is not to equally maximize, but intelligently optimize revenue, profit and customer happiness metrics across customer-product clusters. A 2000-unit production run for a dress could be designed and made in 10 days, with units delivered to consumers 2 days after order. 5000 units of T shirts could be pre-stocked, customized with embroidery and each order shipped 5 days after orders received. No single configuration of the demand network serves all products and customers. Shipping and service level luxuries and exceptions should be differentially offered to customers that want to pay for them.
6) A smart demand network system is a happy customer
Customer service, marketing, and branding can only move the needle slightly. A data driven, vertically connected and smartly segmented demand driven network is the strongest lever and tool in an enterprise leader’s arsenal to create happy customers.
- Zara’s secret to fast fashion – Peter Hermann
- The supply chain revolution – Suman Sarkar
- Custom Nation – Anthony Flynn & Emily Flynn Vencat
- Suuchi GRID Manual
- Suuchi Asset Management System Manual
- Moving back to America” The Economist May 12th, 2011
- “New Tariffs on Chinese Goods Have Apparel Manufacturers Worried” ApparelNews, Nov 1st, 2018