Once fabric and basic design have been settled on, adjustments can still be made to the quantity of items produced and shipped, according to demand for different sizes, colors, and decoration. Through a technique we call “staged manufacturing,” which is cost-effective for high-margin trend items, early orders — before the market has spoken — are kept to as little as 15 percent of anticipated sales. The remaining capacity is reserved and then deployed to reflect consumer tastes and patterns recorded at the point of sale and elsewhere. One apparel company that used this technique for its line of women’s jeans was able to capture a sales increase of 15 to 20 percent that would otherwise have been lost to out-of-stocks on popular size and wash combinations.
But none of this is possible without the cooperation of the manufacturers themselves. Long-term partnerships that ensure manufacturers high capacity-utilization rates and steady work for their most skilled workers make them more willing to negotiate lower unit prices. The close relationships that result from long-term partnerships also tend to produce goods of more consistent quality. Manufacturers that enjoy this status may even decide to pass along possible improvements in product design, such as elimination of unnecessary stitching.
The different streams of the clothing business, with their varying needs in terms of time and costs, have their counterparts in numerous other industries. Take, for instance, book publishing: Some publishers stay afloat on the strength of their backlists — they keep cloth-covered editions of perennials like The Sun Also Rises and The Great Gatsby in print and in stock. Other publishers excel at producing, in a matter of weeks, cheap paperback accounts of cataclysmic news events. But the publishers that can do both, and almost everything in between, will be the strongest. As will the apparel retailers and the other members of their supply chain that respond to the pressures of the moment while still serving the tried and true.
Author Profiles:
Doug Hardman (hardman_doug@bah.com) is a vice president in Booz Allen Hamilton’s Chicago office. He specializes in operations strategy, organization productivity, and supply chain management for consumer products and retail companies.
Simon Harper (harper_simon@bah.com) is a principal in Booz Allen’s London office. He advises clients in the retail, consumer, and telecommunications industries on operations strategy, procurement, and supply chain transformation.
Ashok Notaney (notaney_ashok@bah.com) is a senior associate with Booz Allen in San Francisco. He focuses on operations and supply chain strategy for retail and consumer products companies.
