When I was entering college, my dream job was to become a buyer at Saks Fifth Avenue. I felt so strongly about it that I majored in Fashion Merchandising. In the spirit of full disclosure, I ended up double majoring in Accounting and became a CPA. But life has a funny way of coming full circle – I did become a “buyer” of sorts. I don’t get to buy fashion; rather I help clients buy things like transmission transformers, professional services, ERP systems, etc. But my passion for the retail industry has not waned. I recently subscribed to WWD (Women’s Wear Daily) to get a daily update on what is going on in that space. In one week, I read more articles about apparel manufacturers and retailers running through 3 – 4 CEOs in as many years and others that are running with no CEOs at all because no one will take the job. What is happening?
According to an article in Sourcing Journal, “In 2019, Supply Chains are Still Too Far Behind the Curve”, the main culprit of the fashion retail sector is speed (or lack thereof). The authors have applied a very simple analysis, which those of us that study supply chain management have known for years – speed = value. Here is a simple model we have used in our Supply Chain Management training for over 15 years:
Variability and uncertainty cause friction, friction reduces velocity (like applying the brakes in your car) AND velocity = speed which translates into value. According to the article “Speed is not only cycle time and store turns; it is less inventory, markdowns and lost sales.” I love a bargain, but when I walk into a Macy’s (it’s STILL hard for me because they destroyed my Marshall Fields) and see piles of inventory that has been marked down, I think, bad retailing. I have written a number of blogs about Inditex (Zara) and their approach to “fast-fashion” retailing and how it has paid huge dividends – “The emergence of fast fashion is often blamed for Gap’s inability to compete, even if Zara’s U.S. presence is minimal. Since 2006, Gap’s sales (with Old Navy) have stalled at or near $16 billion through four CEO’s while Inditex (Zara) sales doubled to $32 billion and Inditex’s profit margin increased by 28% while Gap dropped.”
The article offers three elements to fully achieve the “essential catalyst of market value” which is speed:
- Speed – defined as a reduction of uncertainty, high forecast accuracy and neutral / negative working capital. To do this, the metrics need to change significantly and the culture of the organization MUST shift to a focus on speed (this is not easy to do).
- Science – this is NOT about digitization (YES!). A quote from Bill Gates, sums it up best, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” The insight here is to use predictive data to make forecasts more accurate and couple that with suppliers that are capable and can respond quickly. Technology alone is NOT the fix – look at the underlying operation for efficiencies first, then automate.
- Social Impact – socially responsible companies will win as “this generation demands product value and values not be separate”.
The issue in fashion retail is most likely the same as it is in other manufacturing sectors – there is no one in the company that is responsible for looking at the end to end supply chain. There can and most certainly are multiple friction points that can be evaluated and eliminated to increase speed. I do believe that going back to the basics in supply chain management could go a long way to fixing the problem. But it requires a leader that is willing to map it all out to determine where those friction points lie and how to reduce / eliminate them.
Is “Speed” the fix for Fashion Retail? Yes, and let Supply Chain Management 101 lead the way. Let us know what you think and join in the conversation . . . .
Latest posts by Anne Kohler (see all)
- Post COVID 19 – What does Recruiting & Talent Management Look Like in This New World? - June 25, 2020
- Post COVID-19 : Is Digital Transformation the Silver Bullet? - June 11, 2020
- Do You Know the Difference Between Strategic Sourcing & Category Management: “I Just Don’t Have the Time”!!! - May 28, 2020