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Op-Ed: How to Leverage Technology to Achieve Efficient Manufacturing

Join Theory, Google, H&M, McKinsey, Foot Locker, Lafayette 148, LL Bean, the Retail Prophet and more at Sourcing Journal’s Virtual Sourcing Summit, R/Evolution: Overhauling Fashion’s Outmoded Supply Chain, Oct 14 & 15.

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Everyone knows the David and Goliath story.

In the 2006 book, “An Army of Davids: How Markets and Technology Empower Ordinary People to beat Big Media, Bog Government, and Other Goliaths,” Glenn Reynolds mapped out the future of trends that would enable “Davids”?—?small, independent, empowered individuals to compete and win against large, established institutional players in the same space.

These smaller individuals would use advances in computing, software, Internet, communication and evolving consumer trends to command large audiences. And these new players challenge incumbents, destroy markets, create new markets and up-end age-old practices that have no place in the modern world.

We’ve seen this in the technology sector in the last two decades where new entrants like Google, Facebook, Linkedin, Twitter, Whatsapp, WeChat, Shopify, Alibaba, Etsy and Amazon have leveled the playing field using technology, communication and the Internet to help small business even out the disadvantages of physical infrastructure.

Now, however, we’re seeing a similar model play out across the apparel industry.

The new “slingshots,” as Reynolds calls them, in the world of digital fashion are e-commerce platforms, online payments, cashless transactions, two-sided marketplaces, social media and crowdfunding, to name a few.

Brands like Everlane, Bonobos, Warby Parker, Zappos, Amazon and ASOS, have thrived with these tools.

In the physical retail world, the digital playbook of testing styles and doubling down on styles that work at moderate markups, offering more affordable prices to mid-range customers has helped perpetuate the new “fast fashion” paradigm with brands like Zara and H&M.

Neither of these brands are battling bankruptcy, attrition or slowdowns. They are growing at a healthy clip and making fast fashion the real fashion.

Some of the key learnings this fast fashion culture coupled with the Internet era has instilled into brands of today:

  • The customer is king. Listen to their needs and iterate fast. Lululemon modifies/tweaks their clothing range like software with some leggings on version 5.0 in four seasons.
  • Segmentation is everything. Brands like MM LaFleur have found great success in large underserved segments like, working women, ages 19–32, living in urban centers, with salary incomes of less than $85,000 per year.
  • Loyalty/PR is home-grown. Celebrities have huge fan followings. Authentic, personally-vetted design lines by celebrities are able to transcend audiences and become strong drivers of growth. Jessica Simpson used her singing career and a reality show to develop a billion dollar brand.
  • Ethics and transparency cannot be faked. If you’re not authentic about where you manufacture your goods, if you cannot back up your stories, your brand will fade very quickly.
  • A/B Testing. Data is everything. Test small and iterate quickly. Just like most startups, fashion brands are trying and discarding concepts faster than ever. Stripes are in? Let’s test 500 SKUs at 360 units each. If it hits, we’ll reorder for all stores and produce in 8 weeks. Oh, and we’ll make sure we don’t mark the product more than 65 percent on IMU to make sure sell-through is effortless.
  • Scarcity is good. Zara tries to sell thru every single fashion item it places in its stores. Thats why you’ll likely never see more than a single size assortment. This is also why Ross and TJ Maxx invented the “treasure hunt” rush into their stores and why they drive FOMO (Fear Of Missing Out) to increase sell-through.

But all these advances and insights are ultimately reliant on an efficient manufacturing system. Scale is easy to manage when you’re running millions of units across thousands of SKUs. But what if you’re running tens of thousands of SKUs annually?

The “Army of Davids” has never been a profitable route for manufacturing companies until now.

In 2005, The World Trade Organization abolished quotas and tariffs restricting imports of textiles and apparel into developed countries like USA, Canada and the EU. Clothing no longer needed a “visa” so to speak, to enter these countries. The number of small manufacturers grew hundredfold in the following few years.

Hundreds of thousands of suppliers sprang up?—?some as knitters, some as weavers, some dyeing yarn, some making labels, and those who started sewing factories ostensibly became the only visible “manufacturer” to the final buyer in the chain.

The supply chain has become more fragmented.

Individual providers like knitters, weavers, processing units, embroidery units, sewing factories, trims suppliers and other parts of the chain have stayed independent. This has driven the average cost of goods lower every year.

Large incumbent clothing manufacturers traditionally traded off government favors, industry tariffs and built moats based on history, not capability.

Those same manufacturers and agents now find that environmental and ethical concerns have increased labor costs tenfold across the board due to higher compliance bars, a shortage of skilled labor, higher environmental costs, political and economic downturns, devaluations of currency and spikes in raw material costs.

Marc Andreessen in 2011 wrote at length on how software will “eat” whole industries and how technology is optimizing and digitizing entire industries?—?music, video games, retail, telecommunications.

It has now become easy to create business logic driven software systems that create objective to-do lists that then direct the field operative to enter backing data on the spot (geo location recorded) and then immediately submit this report to the cloud. The advent of smartphones, both Android and iOS, has changed the game for reporting.

Now everyone who has a mobile device can check Facebook, Twitter, WhatsApp, WeChat to read the Newspaper, or to chat with friends and clients daily.

In essence, smartphones have allowed companies to scale their businesses, stay on top of their orders with ease. This instantly allows them to record their data, speed up the feedback loop, enhance efficiencies and add yards of agility to the process.

These smartphones are the new “Army of Davids” that enable last mile adoption and global access.

The clothing industry is ready to embrace technology now. In the past, brands have had limited success scaling their supply chains because the software is usually thrust onto the vendor. The files and strange file formats confuse and distract smaller vendors. Small factories that do not meet compliance cannot integrate into these systems, and most factories do not use any software to run their own internal operations.

Global software platforms that integrate these disparate worlds of brands, manufacturers and supply chains are connecting these fragmented markets to unleash value for the smaller, more nimble players across the world.

Software can automate compliance, reporting, data storage, process workflows, increase transparency/visibility, standardize fits, patterns and materials and enhance the time-to-market for brands of any size.

Disrupting yourself is the hardest thing to do. But if the incumbents in the fashion industry are to stay alive, that’s what companies will need to do. To stay relevant, it will be about embracing and leveraging the “Army of Davids” at multiple levels.

 

By Pranay Srinivasan, CEO of Sourceeasy

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