In order to keep up, apparel, footwear, accessories and home textiles companies need to build value chain partnerships with suppliers and integrate their processes so they can replenish just in time in a matter of days rather than weeks, thereby minimizing the inventory and work in process risk in the supply chain.
Change and increased demand volatility now operate on a scale and at a pace that is previously unprecedented. That in itself makes it difficult to plan for the future.
So how fast is this pace of change?
Just to be clear on what’s meant by the pace of change, let’s contrast that experiment with a spontaneous case of emotional contagion. When Prince William proposed to Kate Middleton, he gave her a sapphire ring—the same ring that his father Prince Charles had given Princess Diana. When the young couple announced their engagement in November 2010, Kate wore a shimmery sapphire dress from Issa London to set off the ring. Blogs like “What Kate Wore” (now a Facebook page as well) identified the label. Not only did the dress sell out almost instantly, but the demand for sapphire rings crashed websites for jewelers around the world. Because the internet enables almost real-time sharing of information, social media trends can make or break a design trend in minutes. Issa was not the only brand suddenly flooded with a demand surge. Many others re-imagined the iconic “little blue dress” in other cuts and fabrics—even maternity styles and short-sleeved cotton dresses—and rushed it out to consumers while demand was high. This was fast fashion in reactive mode. And, this isn’t an isolated incident. It happens when First Lady Michelle Obama wears a new designer to an event or a famous celebrity gets a uniquely shaped engagement ring, and on and on. A single individual—a celebrity, fashion blogger, starlet on the red carpet or even a consumer— can make or break a collection overnight.
How do we realistically plan for this?
Consumers need to be constantly followed, monitored and studied in an attempt to understand/predict consumer behavior. Few brands seem to be getting any better at prediction. That’s because they are looking backward, not forward, trying to pick out winners based on what worked in the past rather than what’s working at this moment in time. Predictive methods have to give way to prescriptive responses; as soon as a style shows signs of trending, be ready to feed the fever.
The ability to capture this demand once it occurs is a challenge, but an even greater one is planning and forecasting for an unpredictable and variable market such as retail. Is there a specific way to battle this? The short answer is no. Or at least not in the traditional sequential waterfall planning type model, with a long-term, high-level forecast at the style level, a tactical demand plan at the style/color level, and a detailed production schedule for the next three months at the SKU level, with details locked down for the next one to two weeks.
Let’s face it, today most collections in specialty markets live for three months or less. Specific styles or colors can become the latest fad and take off in less than 24 hours. Likewise, a collection can be selling briskly, then sales can drop of a cliff as a new collection, style or color supersedes it.
Does this mean that suppliers and retailers should not plan? Not at all. It means we all need to adjust how we plan and our frame of reference. Here are some recommendations for fashion executives and their merchandise planners, ranging from the strategic to the tactical in various functional areas. You have to make both sequential and non-sequential decisions at the same time, along with long-term and short-term commitments.
• Flexibility is extremely important, especially when dealing with your extended network. While it is true that consistency is essential to brand management, too many brands have turned into iron maidens because management insists on doing things “the company way”. You need the value chain agility to quickly react to say a 300-percent uplift in demand for a style as well as the ability to drop a style.
• Shorten time to market and shrink your planning horizon. The severe time compression makes for more overlap between the design, production and inventory control phases, rendering some conventional procedures either unnecessary or counterproductive. Look for “waste” in the value chain and remove it. Shrinking your planning and execution horizon is hard but has good results.
• Lead time and agility mean more than chasing the needle for the absolute minimum cost. The lowest-cost supplier is likely to be the slowest as well, because it will rely on full capacity utilization to compensate for low margins. Also, geographic distance can add lead- time. These factors make replenishment unreliable and sluggish. Source components where they can be done best at the best cost and lead-time that is consistent with flexibility and reliability. Consider bringing components together for assembly in a place close to market.
• Forecast at the style level. Don’t attempt to create a detailed forecast per channel. Instead, create a one-number anticipated demand per style and a supply plan with built-in flexibility to meet both a 300-plus percent uplift and to minimize the commitment risk on a flop. Keep planning on a high level (the style level), that gives you the flexibility to adapt. If you start planning a line on the detail level, you get boxed in. Start with common items for the line: fabrics and trim elements. Design a style around them and put it out there. Let consumers lead; make more of the winners, drop the losers. That way the consumer is driving design.
• Manage inventory as a central pool. Remove all inventory silos and DO NOT allow separate inventory management by channel. This is a key foundation for success in today’s omnichannel retail environment.
• Do not pre-allocate warehoused material stocks as a standard procedure. Market volatility due to fickle consumers, the impact of social media, and other factors make it meaningless. Pre-allocation still makes sense if you contract with your customers for direct-to-store shipping or in fulfillment of standing orders for pre-set quantities.
• Build strong value chain partnerships with your suppliers and integrate processes so that you can replenish just in time in a matter of days rather than weeks, thereby minimizing inventory and work in progress risk in the supply chain. At the minimum, share your product lifecycle management data with supply chain partners to shorten lead time. Consider using mobile apps for quality control and warehousing.
• Whether wholesaling or supplying your own retail, follow the consumer rather than your immediate customer. Otherwise you will be following a distorted demand signal. Watch out for new social tools and techniques to help you track the consumer.
More than ever before, consumers control the economics of the industry, and organizations need to harness this information appropriately and adapt their processes in order to respond to volatile demand, manage inventory risk and rapidly take market leadership.
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