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24/02/2016 — auf Deutsch lesen

The solution is in the clouds

First impressions are everything when it comes to clothing. Having found the garment you really want, it is always a great disappointment to find that the right size is not in stock. This is one of the challenges constantly facing the textile industry, not least because unsold inventories push up costs. So how can businesses meet demand and live up to their customers’ expectations without the risk of excessive inventories?

The apparel industry is acutely seasonal and customer tastes are constantly changing. Also, globalisation is making it harder to respond quickly to...

The apparel industry is acutely seasonal and customer tastes are constantly changing. Also, globalisation is making it harder to respond quickly to customer demands. Is the solution perhaps in the clouds? Photos: EMEA

 
Patrick Lemoine

Patrick Lemoine

 

Demand forecasts are seldom precise and in the fashion industry where customer demand is forever shifting, adjustments have to be made on an ongoing basis. The problem is exacerbated by the strong seasonal character of the apparel industry, the increasingly shorter intervals between product launches and the globalisation of the supply chains. Seemingly small adjustments cause great waves among suppliers - and before you know it, the well-known bull-whip effect sets in. This, in turn, can lead to excess stocks of outdated products or conversely, lacking stocks of those items that are in high demand.

What is needed is the ability to detect changes in demand as they emerge and to respond to them without delay. Improving transparency across all levels of the supply chain and gaining a precise insight into customer needs almost in real time paves the way for enhanced planning precision and significantly faster response times. In doing so, the right products always end up where they are needed most. This means that inventories have to be finely tuned to fluctuating demand across every phase of the product life cycle and at all levels of the supply chain.

But how can this be achieved given the sheer number of suppliers, the many production locations around the world and constantly changing customer wishes? Fortunately, these huge challenges can actually be met relatively easily by using the technologies available. The key word in this context is “transparency”. If transparency is achieved both broadly across the level and in depth (i.e. not only amongst suppliers but also the suppliers’ suppliers), companies can gain a substantial and lasting competitive edge.

This level of transparency is obtained by implementing a common platform that provides those involved with access to all the relevant supply chain data. A platform of this kind ensures that the partners along the supply chain - the planners, suppliers, producers, subcontractors, logistics companies etc - all dispose of the same information. This makes it possible to identify any changes in demand early on and to respond accordingly, reducing, if not completely eradicating, the need for safety stocks.

Although there may be consensus that a fundamental demand exists for a product range, it can often be helpful to implement strategies to delay production for as long as possible (postponement). This guarantees availability whilst avoiding unnecessarily high inventories. Not surprisingly, this task receives an added element of complexity when it comes to colours and sizes. This postponement approach to production gives companies the opportunity to procure the raw materials for a product range and to respond within the production window to changes in demand at the SKU level (stock keeping unit).

One example of how this works is at sports events (e.g. Football World Cup), during the course of which a team’s or a player’s success can generate or increase demand for the corresponding strip. Configuring the supply chain accordingly brings flexibility to a completely new level. It enables enterprises to clinch a lasting competitive advantage, whilst increasing sales, reducing the need for discounts and improving responsiveness to the constant changes in customer wishes.

Companies in the clothing industry usually have several product ranges within their portfolio that differ greatly in terms of their warehousing needs and sales profiles. A good example of this is the significant contrast between luxury fashion and mass-produced clothing. Luxury items come with high margins, are kept in smaller volumes and are associated with high costs when stocking the wrong sizes. As a result, a faster, more efficient response to changes in demand is needed in this area. In the case of mass-produced white T-shirts, on the other hand, the rhythm of orders is much easier to estimate. This demonstrates that there is no such thing as a universal supply chain model that caters to both the top and bottom end of the fashion spectrum at the same time. Consequently, the supply chains have to be tailored to the corresponding distribution channels.

These benefits can only be exploited, however, if all partners in the supply chain have access to reliable data almost in real time. This, in turn, can only be achieved with a central, cloud-based platform that connects planning with implementation and brings together all the trading partners in a single business network. Manufacturers and trading companies can only identify problems as they emerge if they have real-time transparency and are able to react quickly to fluctuations in demand by working together across companies. This in turn enhances customer satisfaction and sales, neither of which ever go out of fashion.

[Patrick Lemoine, Vice President EMEA Customer Solutions with E2open]