Friday, December 27, 2002
The urgency of improving supply chain efficiencies and of competing in a more retail-controlled environment were among the chief concerns facing apparel industry executives, who discussed such topics and others during a Dec. 10 technology conference at IBM’s regional offices in Costa Mesa, Calif., hosted by software company Intentia.
The conference featured a panel discussion with representatives from St. John Knits, Kurt Salmon Associates, Intentia and California Apparel News.
Supply chain issues continue to be at the forefront of agendas for apparel managers as they look for ways to enhance their margins at a time when pricing pressure and offshore competition remain heated. Since most of the larger manufacturers have already shifted production overseas and done all the discounting they can do, improving inefficiencies in the supply chain has been the next big problem to solve, said executives attending the conference.
Software companies like Intentia have developed multi-tasked software solutions that tackle inefficiencies in the supply chain through collaboration, problem solving and forecasting. The apparel industry has been gradually invested in these systems and has seen results translate to their bottom lines. Irvine, Calif.–based St. John Knits is using Intentia’s Movex system to help streamline its supply chain, which aside from a high-end domestic knitwear business and retail operations, also includes a maquilladora in Mexico.
“We compete by attacking pools of inefficiency, shortening our lead times and staying locked in with our customers and making sure they don’t want to go anyplace else,” said Scott Huckleberry, St. John’s chief information officer.
Being a design-driven company means having to be flexible, Huckleberry noted, especially with customers like Neiman Marcus, Saks and Nordstrom. “Sequins can be hot one season, and the next season it’s something else,” he said. “We don’t consider ourselves to be a mass-production operation. About 1,000 units is a lot for us. Our challenge is to get vendors to turn around products quickly.”
Aside from St. John’s and local players like Guess and Karen Kane, the apparel industry has been slow to adopt technology, noted Intentia’s Bob McKee, who did point out that new economy operations by firms like Spanish retailer Zara, which integrates point-of-sale auto replenishment through its supply chain, and TAG Apparel, which uses vendor-managed inventories, have raised the standards for supply chain management, making it tougher to compete for those who lag behind the technology curve. Rather than compete on a company-by-company basis, the new economy is forcing a supply chain vs. supply chain issue, he added.
True, the big retailers are getting bigger and are gaining more control over how manufacturers operate, said conference moderator Jeff Rappaport, president of consultant group Outlook Marketing Services Inc., based in Northbrook, Ill. Rappaport pointed to recent Salomon Smith Barney research, which showed that in the last year, national apparel chains grew their market share to 14.7 percent from 12.9 percent the previous year. Specialty stores grew to 25.5 percent from 24.6 percent, while department stores dropped to 18.8 percent from 20.2 percent.
McKee said volume discount chains like Costco are having success selling apparel, even at low margins of 15 percent to 17 percent.
“It does create challenges in dealing with a Costco and Nordstrom [in the same channel],” he said.
Additionally, market leaders like Wal-Mart are continuing to upgrade technologies within the company’s operations, forcing manufacturers to adapt to its way of doing business. And as EDI evolves into a more Web-based platform, apparel companies will also need to keep up or face the consequences, the panelists said. They pointed to factors like China becoming more aggressive and Korea investing in Mexico as additional reasons for staying ahead of the production game. But it’s not always about cost, they said.
“These days you have to have forced discipline,” said Steve Jeffries, an analyst with Kurt Salmon Associates, explaining that balancing quality issues with delivery times is a key to surviving.