The New Garment Sourcing Paradigm
New Consumer, New (Market) Dynamics
The globalized digital world has given birth to a new breed of consumers. With an unlimited variety of choices at their fingertips, today’s fashion consumers are informed, impatient and fickle. Their purchases often result from thorough online research on current trends, product quality and the company’s production ethic. Last but not least, they also expect the goods to be delivered to their doorstep in a matter of hours. As a result, consumers now lead the production line, making the marketplace more complex, competitive and fast-paced. It is this very change in the consumption paradigm that has given rise to new business models, where consumers are active participants in the making of their products. The fast-fashion model serves as a perfect example, where production is based on consumer response to trends, and fashion houses release up to 18 collections a year. Fashion manufacturers have to rethink, re-angle and adjust their production schema in order to stay responsive to market trends.
Push or Pull?
The proliferation of fast fashion houses has propelled the pull value chain to the manufacturing forefront. In the early 2000s, the push supply chain dominated the scene, with companies pushing products to warehouses before delivering them to consumers. The pull value chain, however, works the opposite way, by planning production according to consumer demand based on point-of-sales data from stores. The main advantages of implementing a pull value chain are a reduced risk of holding inventory and shorter lead times. However, its implementation is not that simple, as it requires an elaborate and well-coordinated production process in which the retailer and supplier work hand in hand. Nowadays suppliers opt for a hybrid of the two, with which they can both “push” and “pull” different goods, depending on their nature. The driving force behind this strategy is innovation. The complex push/pull models can coexist only with the careful employment of cutting-edge technologies.
The Rise of the Integrated Supply Chain
Implementing a pull value chain will bring about a change in the nature of the supply chain itself. Previously, supply chains were sequential: from planning to production, each stage was carried out separately without any interaction between its actors. Today, supply chains are more integrated. Because retailers are under pressure to deliver on shorter deadlines, they now need to cultivate closer working relationships with manufacturers. This newly-formed alliance reduces lead time and allows them to produce a larger number of smaller-quantity orders, encompassing a wider variety of styles. To facilitate this cooperation, manufacturers now have to be more versatile, by offering value-added services in terms of product development and sampling.
Behind the Balance Sheet: From Competitive to Cooperative and Collaborative Garment Sourcing
During the last forty years, the retailer-manufacturer dynamic was largely competitive. Factories were perpetually at the mercy of their contractors, who fought them for the lowest FOB (free on board), prices. While this was effective in driving FOB prices down, suppliers were often put at a disadvantage as retailers sought to increase their bargaining position by placing orders in various factories without committing.
This generation of retailers, however, has begun to look at the other side of the balance sheet. Identifying FOB prices and labor costs as minor cost factors, they have started to focus on extrinsic costs instead. This means reducing their expenditure on external factors and indirect costs, particularly on product development and markdowns. In response, retailers have started to require that factories undertake some of their product development activities. This calls for suppliers to function as product makers and service providers. To ensure that suppliers are not lone wolves in this new paradigm, customers have started to contribute by sending over engineers and specialists to share their know-how. A cooperative garment sourcing strategy was thus born.
This strategy is taking one step further in the form of coalitions. To combat arising global issues related to the garment industry such as sustainability and fair labor, rival brands, retailers and suppliers are uniting to act collectively on a global scale. Although still far from the norm, this unification marks the beginning of a collaborative supply chain which sets a precedent for the future.
How to Effectively Integrate a Supply Chain
As retailers and suppliers move towards increasingly cooperative and collaborative strategies, there is no denying that the integrated supply chain is here to stay. In order to implement this change effectively, retailers and suppliers have to work together to ensure operational excellence. The key focus for this is product development—if the sharing of information, skills and responsibilities is well-coordinated between retailers and factories, half the battle is won. This, in turn, will not only save on overall garment costs, but also in terms of lead time. The time it takes to produce a collection from the designer’s first sketch to ready-to-ship stock garments can be reduced from forty-five weeks to forty-five days. Speed to market is hence increased, satisfying the demands of our trend-conscious consumers.
Mastering the Art of Change with Lectra
How then can one emerge as a leader in the fashion game?
Innovation is the impetus of success. While technology serves to hasten change implementation, innovation still remains the key driver behind managing the change itself. Retailers and manufacturers must invest in innovation to ensure that the technologies are continuously updated and adapted to every step of the process of change.
In order to aid product development, an elaborate coordination scheme between manufacturers and retailers from design to production is vital. In this scenario, a digital framework such as a PLM solution provides a much-needed structure. With a collaborative platform, retailers and manufacturers can share accurate data in real time. This provides one big picture which oversees schedules, resources and costs while producing numerous collections efficiently at the same time. Having an overall vision helps customers adapt quickly to market demands by adjusting their supply chains accordingly.
In the case where retailers and manufacturers operate in different geographic locations, a PLM solution dramatically eases the burden of physical and cultural distances.
For the product development process itself, virtual prototyping is key. Advanced 3D technology enables shared visualization and hence efficient collaboration processes between retailers and suppliers by reducing the time wasted on creating physical samples, manual grading and fitting sessions. Product developers can therefore ensure accurate sizing and fit in real time at a lower cost with less manpower.
Only by taking this approach can small, on-trend collections of optimal quality be produced in the shorter time frames adapted to today’s marketplace.
This paper is written in collaboration with David Birnbaum, Founder and President of Third Horizon Ltd.
Lectra in Fashion
With 40 years’ experience in fashion and apparel, Lectra’s mission is to provide a complete spectrum of design, development and production solutions to confront 21st century challenges. From first creative spark to final product, or professional services address an end-to-end process. We support day-to-day operations of our customers in over 100 countries from around-the-clock process optimization. From fast fashion to luxury to ready-to-wear, Lectra’s 23,000 customers in markets as diverse as casual, sports, outdoor, denim, and lingerie represent every development and sourcing model imaginable. Beyond suppliers and manufacturers, they are the brands you love and the stores where you shop.
David Birnbaum is the founder and president of Third Horizon Ltd., a consulting firm which he started after a long career in the international garment industry. Third Horizon Ltd. provides services to major apparel manufacturers, apparel importers and retailers, trade groups and both national and international government institutions.
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