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Managing the fashion retail supply chain

Sam Jackson discusses a few key strategies to make business processes more robust and agile in the fashion retail supply chain.

All over again

Fashion businesses have unique complications built into their business models that reflect directly on the supply chain. Trends must be identified quickly, products designed, samples created and then presented and tested in the market, only then does large-scale manufacture begin. At this point, fabrics need to be sourced, perhaps from Europe, sent to the place of manufacture, most likely in Asia, and then delivered to strict schedules and deadlines. To complicate matters further, the seasonality of fashion means the whole process of redesigning new product lines from scratch starts all over again on a six-month cycle. All of this combines to make the fashion retail supply chain one of the most complex and demanding in the retail sector.

Come together

Almost all the famous fashion brands started out small and have typically grown organically and therefore incrementally, acquiring diverse IT systems for merchandise management, mail order, EPoS etc. However, while these solutions may support initial requirements, the challenge of maintaining and integrating software and business information as the organisation changes and moves into new sales channels can add significantly to complexity, cost and potential unreliability. And more important, it often reduces visibility and control at the very time in a fashion company’s life cycle when better intelligence about business performance across all channels is vital.

The stock problems

For a successful fashion retailer, good stock merchandising and management is second only to good product design. Yet, today, most fashion businesses are ring-fencing stock by channel. Goods that could have been sold at full price through one channel end up being marked down in another, whilst sales opportunities in one channel are lost despite stock availability elsewhere in the business.

The result of this siloed approach is that the retailer is effectively running several separate businesses, and losing the economies of scale and flexibility that multi-channel retailing can bring. The purchasing process is inherently inefficient as buyers focus on individual channels rather than the collective business needs, while the warehouse has to pick for each channel separately, adding cost and complexity to the supply chain process.

True multi-channel retailing means concurrent support for all sales channels (eCommerce, own store, wholesale, franchise etc.). However a large proportion of fashion retailers are still experiencing significant problems in the effective management and allocation of stock across multiple channels.

If retailers are to improve stock availability across every channel, they need to take a radical look at the existing supply chain and stock management processes. For example, many retailers allocate stock to an eCommerce or mail order channel as if it were another shop: the stock is either available in that “shop” or it isn’t. This approach is simply not sophisticated enough to maximise either profitable sales or the customer experience.

Barrier to future growth

Some commentators have suggested that point-solutions can deliver flexibility, but this does not appear to be the experience of businesses in the fashion sector. Software integration is notoriously difficult and time consuming, especially when it involves systems that communicate in real-time – for example, a website that displays stock currently available in a store. Furthermore, the time and resources required to improve the integration between point solutions can make such initiatives unfeasible or cost unjustifiable. This inability to support innovation may start as a minor irritation, but it can become increasingly frustrating as the business strains to improve efficiency, develop new channel strategies and ramp up customer service.
While adding a new channel to the business may be a sound strategic decision, the supply chain and supporting systems can be overwhelmed by the increased complexity, and the number of directions new demand comes from.

Integrated approach

In our view an integrated single database approach delivers the real business agility that a modern fashion multi-channel business needs. This approach delivers a consolidated view of stock across every channel of the business and can transform operational performance, for example as warehousing staff pick for multiple channels simultaneously, significantly reducing costs and improving efficiency. Similarly, with aggregated and immediate information across every channel, merchandisers make better decisions and gain efficiency benefits from consolidated purchasing and maximising the flexibility of each product consignment.

Another key to streamlining supply chain processes and driving up the customer experience is the use of real-time, automated decision-making. For example, if stock is unavailable in the eCommerce channel, rules can be set that check stock levels in alternative channels and re-allocate in real-time to fulfil immediate customer demand. Retailers can then match rules to business objectives, for example prioritising orders placed over the telephone or via the website without jeopardising availability at stores.

Business flexibility

In the past, the own-store channel might have represented most, if not all of the sales, but as fashion retailers increasingly plan to boost the proportion of revenue from home-shopping, overseas franchises and wholesale channels, it is becoming critical to improve and integrate stock and supply chain management across the entire business. This is more complex than the old single retail channel model, but it brings huge benefits in terms of flexibility, increased margins and improved customer experience.

With an integrated channel retail solution that delivers an aggregated and flexible view of stock across every channel, fashion retailers can ensure stock is allocated across channels to maximise sales and minimise end-of-seasonal mark down. Furthermore, with a stronger supply chain, these businesses can confidently embark on new business initiatives – adding a franchise channel or concessions for example – without compromising stock utilisation across existing channels.

The author

Sam Jackson, Chief Executive of Prologic

(ITadviser, Issue 60, Winter 2009)

 

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