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.
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:
- 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;
- 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.