A smart product mix is vital for the apparel supply chain
Style, fashion and brand image all capture the imagination of consumers shopping for value in apparel items. However, increasing the product mix to ramp up market share can also lead to operational losses and non-fulfilment of the delivery schedule says Debasis Daspal.
Increasing globalisation, market expansion and fashion volatility are all intensifying competition in the apparel chain, and companies are being forced to diversify their products in an attempt to improve market share.
This diversity is largely determined by attributes such as design, handle, size and fit - and leads to a correspondingly wide spectrum of upstream manufacturing parameters and small batch sizes. These, in turn, are major hurdles in meeting delivery schedule and quality standards, which severely affect the marketability of a brand.
It's a typical problem faced by apparel supply chain, where the scheduling of work becomes complicated by the introduction of a highly diverse range of products.
This complexity makes it more difficult to manage a given product basket in terms of time, cost and serviceability. Moreover, product replenishment in the apparel supply chain assumes a new dimension, as global sourcing becomes the order of the day with raw material supply, manufacturing, distribution and retailing all are dispersed across the globe.
Under these circumstances it becomes mandatory to "get the right product to the right place at the right time at the right price."
However, in an apparel supply chain too much emphasis has been put on controlling the "place," "time" and "price" factors, and very little effort has been spent on managing the "right product."
Nature of product variety
Consumers perceive apparel merchandise through a unique set of attributes. The Unique Value Proposition (UVP) of an apparel item is governed by visual and other subjective sensations that can be captured through objective parameters like design, comfort and handle.
Each of these objective parameters is influenced by various material and process characteristics in the upstream apparel chain, as shown in Diagram 1.
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Impact of product variety
The impact of product proliferation can be mapped across two levels: Retailing and Manufacturing.
On retailing and sourcing:
From a given fabric type, an entire range of apparel stock-keeping units (SKUs) can be mapped, as shown in Diagram 2. Here, one basic textile product (purple fabric) delivered out of the textile manufacturer's warehouse gets translated into 144 SKUs by the time it reaches the retailer.
In addition, a retailer may want the goods to be shipped on a hanger or in particular packaging, and may want the manufacturer to attach price and other details before shipping. Variability introduced through accessories (style of button, collar, zipper etc) will further amplify this diversity at retail level.
Looking at the entire range of variables involved shows how many thousands of SKUs will result from a product basket made up of hundreds of different varieties of basic textile fabrics in terms of colour, design, fabric structure etc. Not to mention the enormous task of developing and managing this vast "ocean of SKUs" across globally dispersed supply nodes.
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A highly diversified product range means an increased number of lots at various stages of operation.
All these product parameters lead into multiple batches at various stages of the production process. The key drivers of lot size are mapped across process domains in Diagram 3. Order size and maximum batch size are common across manufacturing stages but are not shown in this example.
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On the one hand, various apparel and textile manufacturing parameters lead to an increase in the number of SKUs on the retail shelf; while on the other there is an increase in the number of manufacturing batches. This latter point contributes to the following problems - loss in productivity, value loss, difficulty in assortment planning, and poor asset management - all of which result in an increase in manufacturing costs.
Loss in productivity
In fibre and yarn dyeing, the likelihood of re-processing increases with the number of lots due to increasing difficulty in shade matching. Machine stoppage also rises, as the units need to be cleaned after each different dye shade. There is also a chance that the machines will lie idle or be under-used because their batch sizes do not match the order size of each individual shade at the fibre or yarn stage.
In spinning, weaving and processing, uneven processing and loss of productivity result from frequent changes.
In manufacturing, highly diversified fabrics, fits and styles create scheduling problems. In a completely automated apparel manufacturing operation, it would be difficult to synchronise movements of body, collars, buttons and other accessories across the cutting, assembly and stitching processes. Garment productivity suffers as a result.
Higher value loss
Material loss increases at every stage with increasing batches. This is largely because a fixed amount of material is wasted for every lot irrespective of size - so more waste is generated with a higher number of lots.
Material losses are typically higher for all-wool, finer micron wool blends and smaller lots in dyeing and spinning. In finishing, wastage is higher for all-wool fabric than that of blended fabric.
In weaving, there is fixed length that goes into wastage with every warp-beam. So with a reduction in beam-length and a higher number of beams, the amount of wastage increases.
In apparel manufacturing, marker making is more difficult as garments become more diverse. Consequently, material waste in pattern making and cutting increases with under-utilisation of fabric.
In addition, product variety also contributes to the generation of more sub-standard goods at the end of every process.
Difficulty in assortment planning
For maximum impact on the consumer's perception of value, the complete range of a particular product line must be available. To do this requires considerable planning at every point along the apparel supply chain.
As back-end textile manufacturing consists of both batch and continuous processes, it is mandatory to move all variations of a style out of the final warehouse at the same time. To achieve this, the movement of manufacturing lots must be harmonised so that all style assortments are available at the cutting stage.
However, each component will have a different processing time, making it difficult to push them all through the manufacturing chain.
For instance, if an assortment includes white and coloured fabric, the white products will reach final warehouse more quickly as they have a shorter processing time. The higher the number of product components, the more difficult it becomes to achieve this synchronisation.
The result is that some designs arrive at the garment cutter earlier. Obviously the final upshot is lost sales due to a lack of the complete assortment at the point of purchase.
In apparel manufacturing, a Master Production Schedule (MPS) is always developed to meet the buyers' contract delivery dates. In many cases, production orders from each buyer are grouped together in the production schedule. Late orders contribute to extra transportation costs and lower prices for the manufacturer.
Poor asset management
In an internal supply chain, all components needed for a particular product must be processed together. However, as variety increases, so too does the time taken for individual components to be processed. This results in higher work-in-process at various stages of operation.
In fibre and yarn dyeing, the changeover from one blend to another increases machine downtime. Also, the time taken to match shades increases with product variety.
Due to the batch size capacity constraints of different machines there is more chance of excess dyeing. Waiting time for component shades also increases, as more variety needs to be processed in a given time. All these lead to more material being locked in the process.
In spinning, multiple blend, count and twist combinations result in more downtime as there will be more changeovers and insufficient batch quantities of a particular blend-count-twist combination to feed the ring-frame.
In weaving and finishing, machine set-up time and work-in-process increase. Similar quality products need to be processed together for a uniform finish, leading to higher inventory at each processing stage.
In the warehouse, finished goods despatch depends on product availability. In a more diverse product mix, it will take more time for all garments to reach in the warehouse, resulting in increased waiting time and higher finished goods inventory.
The way forward: recalibrating the supply chain
It is evident that a wide spectrum of products impacts on the operational level of a textile and garment unit.
While some of these difficulties are due to technological constrains, others are generated by avoidable mix-ups and quality problems. But all lead to delivery failure and sub-standard quality.
While the aim of increasing product mix is to ramp up market share, it can also lead to operational losses and non-fulfilment of the delivery schedule. The latter significantly increases manufacturing cost and considerably affects the bottom line.
Based on experience, there are two ways to counter this 'product proliferation' syndrome.
1: Delayed differentiation or postponement
Product postponement pushes the value differentiation point further down the apparel supply chain. It leverages the advantage of economies of scale by aggregating demand across multiple SKUs. For instance, product differentiation with respect to colour can be introduced across three stages, as shown in Diagram 4.
As the differentiation point moves closer to the final consumer, the number of lots in the stages prior to the 'differentiation point' are reduced.
For instance, in stage III the colouration point has been moved after fabric formation, unlike in stage I where coloration takes place at the fibre stage. The number of lots in the third stage is considerably less, as only white fabric needs to be produced.
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At the apparel manufacturing stage, delayed differentiation has considerable impact in trimming down the number of batches to enhance operational performance and responsiveness.
For instance, in the knitting process it is possible to move the garment colouration point as close to the final consumer as possible. With the Shima Seiki digital knitting machine, the conversion of digital colour data to the physical fabric is moved closer to the point of consumption. In the traditional garment model, the differentiator is the cutting machine. For the digitally knitted garment, the differentiator is the knitting machine itself.
This reduction of batches prior to the differentiation point correspondingly increases batch size - with resulting benefits in the apparel chain's operational platform.
However, the differences of product aesthetics need to be factored in as the value-differentiation point moves along the supply chain. The 'feel and appeal' of yarn-dyed goods is different to fabric-dyed goods from consumer's point of view.
So deciding on the product-postponement stage needs to consider the final aesthetic value too.
2: Product rationalisation
Diagram 3 shows the number of manufacturing lots at each stage. Assuming there are two colours, two types of fibre, two different counts of yarn, two basic designs and two process types, a back-of-the-envelope calculation shows that lot sizes in dyeing, spinning, weaving and processing will be four, eight, 16 and 32 respectively.
A similar calculation can show how many times these 'lots' multiply in reality when there are hundreds of colour, counts, weave designs etc in the upstream direction.
To rein in this explosion of manufacturing lots, an A-B-C analysis could be carried out to rationalise the product base after looking critically at the contribution of each variable (colour, count, design etc) to the final product basket.
Carrying out an A-B-C analysis of sales across the products gives a significant insight into the product mixes that have maximum impact on a firm's top line.
In a composite mills set-up it is often found that less than 20 per cent of products contribute over 80 per cent of revenue. The remaining 80 per cent of the product mix can be rationalised keeping the cost-benefit trade-off in mind.
A similar A-B-C analysis can be undertaken at different stages of the textile supply chain to determine the number of batches contributing to final product varieties.
For instance, in spinning an A-B-C analysis might reveal that only 30 per cent of lots (count-blend combination) contribute to 80 per cent of the final product basket. So there is enough scope to trim down the remaining 70 per cent of 'spinning lots' without much impact on product diversity.
Similarly, a minority of lots in dyeing (fibre) or in weaving contribute to the majority of items in the final product basket. So it is sensible to whittle down some of the lots in these stages to maximise operational effectiveness without taking a hit on final profitability due to lost diversity.
Tailoring the product mix is key
Fashion volatility and ever-shorter seasons mean a high degree of unpredictability is already present in retail.
Product lines proliferate with the creation of new segments, such as yoga wear adding to established sportswear lines. Moreover, product ranges, sizes and fit vary with the globalisation of the market. And all tend to amplify SKU variability to an unprecedented level.
Retailers and buying houses need to manage these diversified product lines through different stages - product development, sample approval, bulk sourcing of components, production or outsourcing apparel, distributing finished product across retail outlets and merchandising.
And all these activities need to be coordinated across vast geographical distances.
Most adverse impacts of product proliferation go unnoticed by the frontline organisations (retailers or buying houses), as businesses in the textile-apparel-retail chain are seldom inter-connected.
Retailers must realise that they should not focus only on purchasing and selling, but on the entire supply chain.
Should a manufacturer not be in a position to deliver the goods at an agreed time, delays run through the entire supply chain right up to the end customer - but the retailer has few options to exercise control in this process.
Even relatively simple garments depend on the combination of a fabric from one factory, buttons and zippers from another, and snaps from yet another - all of which must come together in time for the finished apparel to be stacked on store shelves.
Moreover, as product development consists of developing and selecting fabric swatches, figuring out garment style and merchandise flow, a rise in the product mix results in high product development costs and long design-to-market cycle times.
Typically design-to-market time for a fashion-apparel item is 6 to 9 months. Generally it is found that 70 per cent of this time comprises non-value added activities such as delays in communication, waiting time for assortments, and failure to approve merchandise at various stages.
A well thought-out product mix will make the entire apparel supply chain more manageable without sacrificing the end diversity in terms of apparel fit, size and style that attract the consumer's imagination.
Debasis Daspal is a supply chain professional. Having graduated from Indian Institute of technology in Delhi, he has experience in leading textile and apparel organisations. He is currently with KDS Group, Bangladesh as vice president - supply chain and operation- accessory business. He can be reached at firstname.lastname@example.org
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