Monday, July 19, 2010

The World of Fashion Evolves

Designs Aren't the Only Thing That's Changing in the Apparel Industry

According to a story in the July 16 Wall Street Journal (link), the apparel industry is facing a number of challenges that are affecting the entire supply chain.  After three years of excess inventories and idle labor, companies throughout the industry are taking steps to reduce the risk of similar exposure in the future.  Instead of reinventing themselves, though, it appears that the companies are dealing with the changes by attempting to push the risk to their customers and/or suppliers.

When industries face a changing environment, companies throughout the supply chain need to work together to respond to the change in a positive manner.  The immediate reaction to drive risks to customers or suppliers has effects that, although not immediately visible, have longer-term effects that are destructive to everyone involved.  It does not help a company to improve its own profitability at the expense of its suppliers or customers.

The New World of Fashion

Among the issues faced by the apparel industry include:
  • Smaller orders placed by retailers to test demand before committing to larger runs;
  • Increased material, freight, and labor costs;
  • Delays in ramping up production capacity because of a lack of confidence in long-term demand.
If smaller runs and increased costs sound familiar, it's because these are issues that have been faced by many industries over the last 30 years.  Change happens in every industry, and those companies that are flexible and able to adapt to (or drive) the changes quickly will be the most successful in the years ahead.

The Focus Still Needs to be the Customer

One of the problems I noticed from the information in the article is that the impetus for change within the industry is profitability rather than the consumer.  As has been proven over and over again in business, changes made without regard to the end customer can have devastating effects.  While a focus on value can increase profits for the company, a focus on profitability will not lead to increased value for the customer.

Two key areas that companies in the apparel industry need to investigate in order to survive and grow in the years ahead include:
  1. Lean Manufacturing  Smaller production runs require improvements in quality, setups, and changeovers.  Lean (when done correctly) gets everyone focused on eliminating the waste that forces longer leadtimes and larger lot sizes.  Lean will also address the issue of increased labor costs;
  2. Closer Factories  Increased freight costs and leadtimes will force retailers to have production capabilities closer to the point of sale.  Although oil prices have leveled out since the initial drop at the start of the recession, it is only a matter of time before they start rising again.  As a result, the benefits of having factories in areas with low labor costs will be offset by increased freight costs.
In an industry that thrives on change at the consumer level, one would think that the fashion retailers and producers would have no problem adapting to changes themselves.  Unfortunately, this does not appear to be the case.  The environment has changed and, as has been the case in so many industries over the years, it's time for a new business model.  The sooner the apparel companies realize this and make the necessary changes to adapt, the sooner they can once again turn their designs into financial success.

1 comment:

Greg said...

I agree that the fashion and apparel industry is ripe for change. I am not surprised by the recent issues either. It's hard to find another industry with as much waste. From variation to quality, to overproduction the waste is obvious. All I have to do is go to a shopping mall to see. I am 6'7" and rarely can find anything that fits me, and if it does, chances are it's out of style or way too expensive. Retailers continuously advertise about clearance sales, and retail chains have spawned specifically to sell overruns and "factory seconds".

Although there are some innovators in online apparel retail. Most notably the customer oriented They seem to buck the trend (at least from the retailer point of view). Does anyone have some success stories to share about positive changes with apparel manufacturers?