Speed and productivity should be among the priorities

Speed and productivity should be among the priorities

What should apparel firms be doing now if they want to remain competitive into the future? While a 'one size fits all' approach to sourcing no longer works, building integrated, collaborative, fast and flexible supply chains will help to separate the winners from the losers in 2016 and beyond.

Colin Browne: VP and managing director of Asia Product Supply at VF Corp:
I believe that traditional sourcing is dead. The days of sailing from country to country in search of the mythical lowest price has largely vanished. Yes, there are still opportunities to be had, but we are moving into a procurement-based world where procurement skills are and will become even more important than traditional trading skills. Understanding total costs as opposed to just the lowest ex-factory price will dictate sourcing relationships. Knowledge is power in this new world. Sure, understanding the impact of duties and indirect costs is part of the equation, but so is understanding the costs which our partners incur because of our inefficiencies. Proficiency in understanding these dynamics will be paramount.

Buyers that can build symbiotic relationships with suppliers will drive efficiencies and mitigate risk. Understanding where and how to invest for a joint future will become increasingly important, especially as we think about new countries, but also as we think about automation and innovation. When our industry shifted from West to East it was in pursuit of lower labour costs. We treated labour as a resource and lost our focus on labour efficiency. Labour is no longer cheap; therefore, understanding how to automate low skilled roles and evolve labour to become an asset will be key.

Marc Compagnon, president of LF Sourcing and executive director of Li & Fung Limited:
To remain competitive, apparel firms will need to look at cost in its broadest sense – particularly in terms of time. The process from creation to production has huge inefficiencies and that's one area that needs to be addressed.

Forging closer relationships with vendors is important. We are focused on helping our suppliers stay ahead through capacity building. Creating processes, training and production engineering that will help small to medium sized manufacturers become more efficient. Productivity goes hand in hand with sustainability. If we enhance the productivity and capabilities of our supplier base, we build a more sustainable, robust supply chain that benefits everyone. Not only does this help their customers, but will enable them to stay in business and stay competitive.

Sue Butler, director, Kurt Salmon:
A sourcing manager today is spinning multiple plates (cost, speed, CSR, flexibility) on ever-shifting ground that is creating increasing complexity in deciding where to place their volumes. They constantly have to balance customer and internal organisation demands with the ever-shifting sourcing landscape. In my experience the following two capabilities are often missing in an apparel brand, but can provide a true competitive advantage:

1: Differentiated supply chain and joined up planning. Too many apparel brands have their teams working in silos and are still trying to force their sourcing needs into a 'one size fits all' approach. By taking a new approach and developing a strategy based upon an in-depth understanding of the true sourcing requirements by product category, the competing objectives of cost versus responsiveness versus innovation can be realised.

Basic products, often high volume and price sensitive, that remain on sale for longer timeframes, require less market input but are more vulnerable to competitor pricing and need tight margin management. Other parts of the range are critical to strengthen competitive positioning and brand uniqueness; these have to deliver the on-trend product to the customer and leverage latest market insight and innovation.

To handle these different requirements the buying, merchandising, sourcing, and product development teams need to work hand-in-hand to create a clearly defined range architecture framework that clearly details the needs of different parts of the range and provides a clear basis to develop an optimised sourcing plan balancing speed and cost.

2: Understanding the true end-to-end 'cost to serve' enables apparel firms to make informed sourcing decisions when planning where to place products for manufacture. Fashion brands know that product categories that are less predictable are more likely to have better overall profitability if decisions can be made based upon latest market insights; sourcing those products near-shore in more flexible locations would increase overall profitability, even though the initial cost would undoubtedly be higher. However, too often decisions are based upon gut feel rather than through a true understanding of the end-to-end cost that includes product costs, transportation, markdown etc.

Dr Achim Berg, partner at McKinsey & Company and co-leader of McKinsey's Apparel, Fashion & Luxury Group:
Connectivity and transparency, speed and flexibility, and sustainability are all key to winning in the apparel market of the future – be it in merchandising, product development, sourcing, supply chain management, retail, or customer service. Winners are able to manage the change so they can adapt their organisations, develop and attract the right talent, and deploy value-adding tools.

Paul Forman, group chief executive, Coats Plc:
They should keep five key themes for our industry front of mind at all times, with the priorities being speed and productivity, which form the current zeitgeist.

1: Speed is about more than simply being first to market or having the flexibility to respond quickly to in-season changes in demand. Apparel firms should ensure the pace is fast all the way along their supply chain.

2: Productivity needs to be maintained at optimum levels, whether through reducing labour exposure, improving industrial engineering techniques or designing to cost.

3: Innovation is an area that can also help support the need for speed. Innovation in digital technology, for instance providing samples via 3D printing or enhancing accessibility to live information in real time on product availability and order status, helps increase speed all the way along the supply chain. There is also the innovation around the product itself.

4: Compliance has to be a vital focus: responsible sourcing is an area for constant stringent review.

5: And lastly there is quality; how to provide the differentiation and value to the consumer to make them demand the end product.

The winners will be those that are constantly identifying new and creative ways to effectively respond to each of these five areas.

Rick Horwitch, VP Strategy & Solutions Business Development, Bureau Veritas Consumer Products Services:
Think differently. Embrace and encourage change and innovation. Don't fear failure: "If you're not failing you're not trying." Most of all, the customer comes first. Customer engagement, customer experience, customer perception, the customer wants it now. Consumers have unlimited access to information on products – reviews, price, product chemistry, social and environmental impact, etc. Input from social media outlets is growing exponentially. Consumers are demanding transparency into their products. How retailers and brands respond to these challenges will ultimately affect both their ability to build and maintain brand and store loyalties.

These challenges also create great opportunities. There is a greater opportunity to develop a closer, more "genuine," relationship with the consumer, and the supply chain. This trend will continue to grow as technologies and information and product delivery systems evolve.

Technologies like 3D collaborative design, fit/avatars, digital printing, 3D printing are making customised and consumer direct product a possibility. The discussion around "on-time" and "now" is changing. This means all business models need to be addressed.

Matthijs Crietee, secretary general at the International Apparel Federation (IAF):
The winners just do it. In matters of sustainability for instance they don't wait until the consumer formulates a specific demand for a sustainable product. They have already moved. And they communicate what they do well. They invest in their supply chain, they have invested in upstream relationships and they have invested in the right software providing visibility across their supply chain.

Reducing waste will be a theme growing from 'nice' to 'imperative'. Winners look at it holistically. Reduction of waste covers preventing waste in the design phase and engineering phases, going as far as 'design for recycling' and trimming down on the number of styles and investing in 3D digital visualisation. And on the consumer end of the chain, winners will collaborate and press for more effective collection systems of discarded clothing so that an economically viable market for used materials can be established.

Reduction of waste will free resources for necessary investments in manufacturing chains. For the winners, catering better to consumer demand, reduction of environmental impact, innovation, improvement of productivity, and improvement of labour conditions are, fortunately, very much interconnected.

Mike Flanagan, CEO of apparel industry consultancy Clothesource:

  • Manage the damage the 'Three Profit Destroyers' – domestic overcapacity, internet unprofitability and international sales operations – are doing to your business at least twice as fast as you're currently planning.
  • Be ruthless in demanding real productivity from your own operations (starting with your IT and social media departments) as well as from the suppliers who are currently expected to make all the running.
  • "Ruthless" productivity doesn't mean being cruel or exploitative. Just smart. Only very smart.
  • What currently separates winners (like Primark) from losers (like Gap) is being honest and pro-active about costs.

Rick Helfenbein, president of TellaS Ltd, Luen Thai (USA), and chairman of the American Apparel & Footwear Association (AAFA):
Successful apparel companies must have a five-year strategic sourcing plan. They need to be working towards a duty-free, or TPP friendly environment to better balance where they source a defined percentage of their overall product. Without a detailed plan, companies might end up like the frogs that lived in the frying pan. They won't feel the heat, until it's too late.

Mr KL Lee, vice chairman of Esquel Group:
At Esquel, we believe in being financially strong. Then we can weather the storm and continue to invest to be better. There is also the very important corporate social responsibility to bear in mind. Our intention has always been to ensure that our customers sleep better at night. This means not only producing quality products on time, but also producing them ethically and responsibly. We want to demonstrate how textile manufacturing can have a minimal impact on the environment and yet be competitive in the market.

People-caring is another of our key management philosophies. Without good people, there can be no business success. We strive to create an environment where our people dare to err and continue to improve, and through which they can realise their potential and find meaning in their work.

Edwin Keh, CEO of the Hong Kong Research Institute of Textiles and Apparel (HKRITA) and lecturer at the Wharton School at the University of Pennsylvania:
Winning firms are differentiated, have defendable proprietary know-how, and ideally have scale to leverage. Fresh brands with cool understandable aesthetics, accessible pricing, and a mission for good will win in the years ahead.

Robert Antoshak, managing director, Olah Inc:
Apparel firms will need to diversify their sourcing more than ever. A blend of sources always provides the best hedge against disruption. But in today's market, diversification of sourcing will necessarily include some unconventional approaches. For example, regional sourcing may make more sense than it did in the past. China has become expensive while other Asian suppliers such as Vietnam and Bangladesh rack up impressive manufacturing gains, but regional sourcing is alluring in that it meets the desires of a subset of the consuming public. Made-in-USA, Made-in-Europe, now make more sense than was previously the case.

"Fast Fashion" is predicated on the principle that rapidly changing styles will keep consumers interested in buying new goods. Indeed, low-cost, rapidly changing fashion is attractive to many consumers. But so is re-shored made apparel (such as Made-in-USA). It's catchy and on a topline basis helps to draw consumers into stores. It may never make up the bulk of a retailer's inventory, but as a means to draw in consumers it can be effective. Even so, Made-in-USA will never offset the overwhelming opportunities afforded elsewhere. For large-scale, system-wide levels of production, re-shored manufacturing will not be cost-effective. Cost is the overriding consideration today. Whether it's the cost of cotton, or yarn, or fabric, garment-makers struggle to find a formula that provides profit and pleases their customer, the retailer. For retailers, faced with an often-fickle consumer market, low costs help to provide a degree of flexibility in meeting demand.

Julia Hughes, president, United States Fashion Industry Association (USFIA):
It's important to build a network. Companies have lawyers and brokers and tax professionals and factories and associations. It's important to ensure you have partners you trust, and get them talking to one another. Even USFIA is building a network! We have partnered with several companies and non-profits with expertise in a wide range of issues, from global trade management and logistics, to sustainable cotton production, to help us bring critical information to our members.

An internal network is necessary, too. The sourcing, compliance, customs, and government affairs teams can no longer remain in their own silos; everyone must work together and share information. There are many great products out there to help companies manage global trade operations and connect all of these moving pieces.

And most importantly, companies should share information with one another. Our industry is notoriously secretive, but we've found that our members who are willing to come to meetings and discuss their experiences and challenges are able to learn from one another, better manage the risks, and continue to grow.

Click on the following links to read more comments about the year ahead: