The World is becoming faster, driven by technology and fuelled by the expectations set by social media and mobile devices!

?In the face of fierce retail competition, the push to minimise write downs and maximise full price sales is causing buyers and brands to play closer to the market, committing less up front and buying more of their total volume in response to market trends. To achieve this they need MUCH shorter lead times and a more responsive, yet reliable supply chain. Many are actively reducing the number of suppliers they deal with.

Many low cost countries are now not so low cost and wage rates in many regions remain under intense upward pressure.

1. Speed and Flexibility

? At least one major international brand has reduced its lead times (order placement to ex-factory) over the past 6 years from between 90 days up to 150 days, to now running 70% of its products at 60 days lead time.

? At least one leading USA retailer now has more than 70% of order volumes on some kind of speed replenishment program and ships the bulk of its product by air as standard.

? Fast fashion lead times previously at 45 days or more are now way below this level, even for new styles, where we see frequent examples of 28 days from order to ship.

? Speed replenishment programs are on the increase, with lead time from order placement to ex-factory often being as low as 2 weeks and in some cases 1 week from order placement.

? Vendor managed inventory programs also feature more prominently. In these cases, the manufacturer plays a fine balance between inventory level and speed of response, but with inventory representing risk, it’s important to achieve a highly responsive manufacturing model.

What is changing? Here are a few examples:

These significant market dynamics mean that manufacturers are under pressure like never before. In these 3 part briefs, we look at how manufacturers are responding and additional areas of opportunity.

Last week in part 1 of the series, we looked at: -

1. Increasing labour costs and competition for labour.

2. Consolidation of suppliers and competition to be a Gold/Preferred status supplier.

If you missed part 1 please review earlier posts made on Monday 13th February.

In part 2 we continue with: -

3. Speed and Flexibility.

4. Vertical or ‘Virtual’ Integration in the supply chain.

The world is changing at an unprecedented pace. The fashion supply chain, not historically ‘cutting edge’ in terms of its technology and systems, is having to catch up FAST.

Where 5 years ago, speed of information, data accuracy and a high level of integration between different IT systems were challenges yet to be overcome by most businesses, today they are a requirement and significant progress has been made.

Manual data entry is no longer acceptable and neither is waiting 2 days for information in response to a query. Yet, a huge proportion of fashion manufacturing businesses still wrestle with intensely manual, disjointed systems for planning, critical path and materials management and still need to make the change.

What key message should we take from this?

Some leading Asian manufacturers made speed and flexibility part of their strategy nearly 20 years ago, but they were in the minority; we see that these programs will be part of the future for every business. Reducing lead times will inevitably put more pressure on your business process and management team; initially as lead times drop from 90 days to 70 days, you may still have enough buffer built in, but, in a frantically busy fashion manufacturing supply chain, which in many respects remains very manual and which has long prided itself in its ability to ‘fire-fight’ and still ‘somehow’ deliver, if we increase the fragmentation (number of styles and orders) and also take away a good part of the time available, it is likely that existing methods will fail. Something has to change…and it can’t be your efficiency, delivery performance or compliance that gives.

Fact

The only way to cope with reduced lead time and the complexity of quick response (QR) programs is by adopting and developing a better process, and that starts with achieving an effective planning process. In order to remove lead time, material inventory and Work in Progress (WIP) buffers, you will need to: -

? Do the same work faster; a good system is much faster and more connected than multiple spreadsheets and email.

? Be more precise and consider as many of the variables as possible. With dramatically increased speed, it will not be possible to work with average efficiencies and lead times.

More precision is required; each style and order has a unique production and pre-production lead time.

? If the plan is of good quality, accurate and realistic, then 80% should be achievable; for the other 20% we need quick updates and advanced alerts of problems, also rapid ‘what if’ planning to assess the impact and best options.

? Embrace planning performance KPI (e.g. plan efficiency as a measure of how good the plan is and plan vs actual to measure how well we achieve the plan, also your hit rate with ‘on time start’, all of which are vital). To identify where the weak links in the chain are, we need regular, reliable measures of the process, including reasons for lateness or failure.

? Supply chain is exactly that, a chain! Each department cannot work alone on separate spreadsheets and some on ERP modules, in isolation. Team work and coordination can only happen if you have total visibility, a properly joined up process and can understand ‘the cause and effect’ quickly e.g.:

(a) If a fabric is delayed, how does that affect production and delivery on any and all orders involved (including impact on all orders of changes to the plan).

(b) If demand for a particular style increases, do we have materials and capacity to support that change?

2. Vertical or Virtual Integration What is changing?

? Many business are forging closer links with materials suppliers.

? Buyers & brands are moving products to different countries and factories that have local fabric source.

? Some business are opening their own textile mills or partnering in a Joint Venture.

What key message should we take from this?

This trend of course makes sense for the buyers as it reduces both shipping costs and lead times; it also makes sense for manufacturers as they can access faster materials supply and if vertical, they can earn a margin on the material too.

However, to really leverage the significant investment in the supplier relationship and/or the physical fabric mill, the parties need to integrate more closely on planning and communicate and coordinate more fluidly.

Over the years past 15 years, of the many business we have met, including both many garment factories and textile mills, each time we meet one, we ask them what their major pains are. This is how they typically respond:

Garment factory: “Material supply is my main headache...I regularly have materials, that I don’t need yet, but I still have to chase the supplier for the materials, that I need urgently to start production..!”

Textile mill: “The garment factories are my main headache; they’re always changing their mind or telling me too late that they need something. I get calls from garment factory customers saying ‘Hold the shipment of fabric A, I don’t need it yet, but rush me fabric B that’s awaiting dyeing!”

Sound familiar?

So it seems that even if these businesses move next door to each other, there are some fundamental issues that need to be resolved. It’s clear that a better process is needed to help coordinate and communicate effectively to meet their common goals.

Fact

Despite the increasing popularity of LEAN, the majority of garment/textile supply chains still operate a ‘push system’ approach to material planning, i.e. garment orders are received from the buyer and ‘x’ days later, material purchase orders (MPO’s) are issued to the textile supplier, who then promises to deliver within ‘y’ days.

?With buyers typically issuing orders on a monthly basis, the above approach means that an average factory will receive perhaps 100 styles/orders at once, either all with the same lead time and similar delivery date, or in groups of same lead time and delivery date. The end result is that with a push system (or even a crude pull system using the delivery date of the garment), there is no clear priority given with the MPO, so the textile supplier produces either, likely, in the sequence that makes most sense to them, or on a first in first out basis.

But later, when the garment supplier starts to understand that some of those 100 styles need to start production sooner that others (due to product complexity, order size or capacity bottlenecks), the planning/purchasing teams then realise that some of the required materials will not be available when needed, so they then have to go back to the materials supplier to renegotiate delivery dates. This causes major challenges and fire-fighting at the fabric mill, with accompanying risks to cost and quality; or in some cases, it’s already simply too late to achieve on time delivery.

In essence then, to make significant improvements in coordination and communication between garment and textile partners, firstly the garment business must use a ‘pull system’ approach to planning, including a detailed analysis of materials requirement considering product type and manufacturing lead time, available capacity, any capacity bottlenecks, order size etc. and use that to provide more clear and specific goals to materials suppliers.

In many cases, to achieve the above change, existing manual and dis-jointed planning spreadsheets will need to be replaced by a proper planning system, which allows the garment supplier to plan quickly and effectively, considering all key elements, in order to identify quickly accurate material requirements and priorities. Businesses that achieve this, can be dramatically more effective in working with their materials partners.

3. Summary

Fast and flexible, reliable, cheap (or at very least massively cost competitive) and with quality and compliance built in - a modern garment business needs to achieve all these things.

For all suppliers, that challenge is getting tougher. For anyone still struggling to maintain endless, separate manual documents, implementing an effective planning solution really is an essential and immediate priority for survival…fast and accurate planning, together with the improved visibility and coordination that this brings, provides the key to unlocking the many performance gains that are so vital to your competitiveness. Delaying that priority is likely to be very costly, one way or another.

Business leaders are realising this, and change is happening fast.

Is it happening fast enough in your business and can we help?

If you’re not already working with Coats Digital and you would like to understand more about how our solutions can really help your business, visit our site at www.coatsdigital.com or contact me for more information.