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Siloed Supply Chains Can’t be Efficient Supply Chains

The rapid-fire shifts at retail have left most companies reeling, and now those with any hopes of getting ahead will have to go a step further than business as usual when it comes to supply chain efficiency.

Among the manifold problems retailers have, a major one among them is that their organizations are stuck in silos.

Siloed companies and their siloed supply chains are essentially those that don’t want to share information across departments for one reason or another, which ultimately ends up leaving the whole company in the dark and its supply chain slogging behind those of more successful organizations.

For many companies that get it, the answer has been supply chain management systems.

A new generation of supply chain management solutions, or SCM, is helping companies connect and organize data from all of their systems to improve decision making and turnaround time. The tool makes it seamless to share information across a company’s internal departments, plus its vendors, suppliers, product testing labs and logistics providers.

As NGC Software explains in a recent white paper, “SCM takes information from a number of other systems and data sources, shares and analyzes it, and then executes decisions based on the results. Every stakeholder shares in the information, which is important, since issues in one part of the organization have ripple effects upstream or downstream.”

“When you look at a supply chain and when you look at companies that do PLM [product lifecycle management], their area ends where their software ends. What really needs to happen is you need to have supply chain visibility during pre-production, production and then post-production,” Mark Burstein, president of sales, marketing and R&D at NGC, said. “The key to this system is being able to see what’s happening at retail and having the agility within the supply chain to make changes and to reach sales, that’s the key.”

And despite its apparent perks, retailers aren’t using the tool to the extent it can be used.

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“What this tool had done is systematized Zara’s manual process of collecting sales data,” Burstein explained.

Zara—ever the lusted after retailer for its efficiency and dominance in fast fashion—holds weekly meetings with sales staff (since they are the ones on the ground, with the customers, after all) to discuss what’s been working and what hasn’t. Based on that knowledge, the retailer can make quick decisions about what to make more of and what to scale back on.

But for years, retailers have been lacking ways to seamlessly share information with designers to give them a heads up about what styles to design more of, or to tell the fabric buyers which fabrics to snag more of. Emails and spreadsheets and phone calls can get fuzzy and many things end up confused in translation.

“Even though they [retailers] may know black sold, they’re not positioned to do anything about it,” Burstein said.

Gone are the old days of retail where brands could plan what their store floors would look like months in advance, buy inventory to fill it months in advance and then bring a product in and figure out how to create demand for it.

Instead, as Burstein explained, “What ends up happening is the customer sees that product and now they’re trained to wait until it’s marked down. Every penny of that markdown money is profit.” And while savvy consumers wait it out for deals, inventory gets older, the next month’s merch comes in and needs a place to go, so more markdowns and sales take place.

Zara, on the other hand, has trained its loyal consumers to buy on the spot because they know an item may not be there the next week, or even the next day.

“They make up for it 10 times because they’re selling it at full price,” Burstein said.

One way to be positioned for faster response and greater speed market is to have fabric on hand that’s been selling at retail and then make quick decisions about what to cut from it and start getting it sold. Some retailers design as much as six times the amount of product they actually go forward with, which means those remaining designs have already gone through fit and material approvals and could be ready for cut and sew in nothing flat if need be.

Right-pricing is also key.

“If something is selling at full price, there’s demand for it. Go in with the right priced product and if people are buying it, there’s demand,” Burstein said.

Going in with less product could also help conditions. If a retailer goes in with the wrong size set ratio, say, they can a use a supply chain management tool to look at what sizes sold out and focus on replenishing those.

“I think retailers need to change their methodology,” Burstein said. “People are wanting to do this, they just don’t know how yet.”