Skip to main content

There’s Money in the Material: Managing the Cost of Material Commitment

Innovative apparel and footwear brands want to distinguish their products in the marketplace by combining fashionable and functional materials with quality, comfort and performance. These companies need to fulfill customer demand in a faster-than-ever retail environment. That means orders must be on time and the status of complex shipments communicated to customers at every level—wholesale or consumer. This often has to be accomplished in a sourcing ecosystem that doesn’t always have the best visibility into early production processes. To be a leader in customer service and maintain the competitive edge, companies need access to the raw material order processes and availability to ensure downstream activities will meet each gated milestone.

But achieving this in a globally-distributed supply chain scenario is a challenge.

“Raw materials management (RMM) in the apparel industry today covers a broad array of decisions and concerns; risk should top that list. Meanwhile, business managers at all levels and across all functional areas must manage more with less—more products, activities, materials and metrics with smaller budgets, less time and fewer staff members,” said Dr. Margaret Bishop of the Fashion Institute of Technology.

Material management is defined as the process which integrates the flow of supplies into, through and out of an organization to achieve a level of service which ensures that the right materials are available at the right place and time, in the right quantity and quality, and at the right cost.

Related Stories

The key to success is multi-tier supplier collaboration.

Today, companies are relying heavily on manually-intensive processes to manage product development and communicate with their development trading partners. Exporting and consolidating important data from spreadsheets and emails is time consuming and tedious, adding to an already complicated environment. To make a measurable impact on top and bottom lines, brands and retailers need to implement proactive strategies for collaboration earlier in the product development lifecycle. With a greater focus on rapid product design, collaboration and delivery, retailers can reduce product development cycle times and improve time-to-market. And as we all know, time is money.

A material management technology solution has multiple aspects:

  • The cloud-based platform first facilitates an efficient means to collaborate with Tier One and Tier Two suppliers.
  • This centralized system provides visibility into the capacity, demand, allocation and consumption processes.
  • By using existing data integrated from ERP and PLM systems, suppliers and sourcing can identify the amount of raw material needed and eventually consumed. Each purchase order issued decrements from the inventory on-hand levels.
  • In turn, this resolves the disparities before a financial commitment is made to raw material suppliers by finished goods manufacturers, thus making the brand liable to the manufacturer.

Companies that understand the business value by automating and optimizing their supply chain operations have achieved greater visibility, become agile and competitive, while reducing sourcing costs across the board. The ability to closely manage the demand forecast, actual orders, material reservations, and material usage has reduced the material liability costs for one leading footwear manufacturer. The company implemented a robust material management solution and expects ROI of around 1 percent of the total annual $250M material spend; therefore, they are looking for $2.5M per year in savings.

Process changes and technology adoption can help companies and their suppliers keep the flow of raw materials at the optimum level by providing visibility to the manufacturer of the raw material orders placed by factories and suppliers, directly managing raw material supply and demand to improve the ability to make design changes based on actionable information and reduce the development cycle for new products while ensuring the flow of finished goods orders.

The hard and soft benefits are real: the centralization of all data into a single solution provides for increased efficiency during the raw material development and ordering processes. Digital collaboration with supply chain partners at multiple levels enables a reduction of costs and an increase in customer satisfaction.

Gary M. Barraco, director, global product marketing, is responsible for developing strategic product marketing direction and presenting the Amber Road brand and solutions worldwide. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics which establish Amber Road’s solutions as a standard in the Global Trade Management space.