In Focus - Supply Chain Management

As the trans-seasonal buying season hits fever pitch, Ragtrader asks leading supply chain management specialists about how fashion business can avoid those curly logistical pitfalls.

What is the biggest mistake designers make when it comes to the supply chain management process?

Apparel 21 general manager Luke Haites

There are two areas where we find designers commonly make mistakes as part of the supply chain process. The first is in tracking: it can be difficult to keep track of all the orders / styles that have been placed with overseas suppliers.  Because of this, companies often don't know far enough in advance what is going to finished when, and so often don't make the most of consolidating orders onto shipments and taking of the associated savings.  Worse still is when, through a breakdown in this tracking process, orders are not finished in time to be sea freighted and end up having to be air freighted, eroding a sizeable chunk of the margin of that product. 

To solve this companies should look to put in place a critical path / workflow tracking system that they can use to see well in advance what products are possibly going to have delivery problems.  They also need an order tracking system that can show them all the outstanding factory orders they have, grouped by likely completion date.  Ideally these factory orders should be linked to their customers indent orders so that if there are any problems customers can be informed well in advance.

The second mistake is in costing: many designers spend hours for each style working out the actual landed cost of an item.  This gives them an accurate understanding of the margin they make on each of the styles they just landed.  This is interesting but usually too late for it to actually be of any value to the business, the products been made, the selling price has been set and the sales taken. What is needed is to take this information and use it to review the initial costing procedures so that better decisions can be made earlier based on more accurate estimates.

A surprising number of people we talk to aren't able to view this information easily averaged across a season or range and so aren't able to easily assess the accuracy of their costing assumptions.  What is needed is a system where the financial implications of the supply chain are integrated with the design and costing information developed pre-production.

Dean World Cargo managing director Bruce Haines

Seeing as supply chain management comprises procurement (i.e. fabric and components), production then shipping, export and distribution I find the most common causes of problems are lack of lead-times in procurement and production and unrealistic expectations in terms of shipping and distribution.
The pressure on the designer and his desire to meet the customers needs seems to lead to promises that often times cannot be achieved.

Procurement/Production: I notice lately that Ex factory dates are slipping out more and more. If you are sourcing out of Asia this is definitely the case. Perhaps the choice of supplier is more critical as you need to somehow become more important to them to achieve your goals.

Shipping: If importing then you need to be aware of the peak seasons and choices open to you. Whether air or sea, the cheapest option is not usually the best and again you need a reliable forwarder who can achieve uplifts or get available space on vessels. The unforseen often happens with forwarding.

Distribution: Local Australian distribution is usually not such a problem but export distribution is by no means as simple. The biggest mistake in exporting, whether it be the U.S or Europe is finding a distributor who is the right fit for your business. If you get a mismatch then your costs can really blow out and you cannot recover these costs.
Whilst no one wants to add time to the process it seems that some in the industry reckon that planes fly twice the speed of sound and that ships never get held up.

Nortech Australia managing director Graham Meyerowitz

The most common mistakes are:
1) Not using appropriate software or freight services can be your downfall when it comes to the cost of getting your product from factory to store.
2) When to warehouse yourself rather than make use of third party logistics warehouses. This decision often hinges on the nature of the packing of your goods. Small goods that need complex picking and packing can be costly in a Third party warehouse.
3) Warehousing in Australia and sending freight around Australia is more expensive then bringing containers from Overseas. Using [the right software] you can have factories in China pack and label down to the store level, and then indent ship direct to retailers DC's in Australia. This saves in having to warehouse and repack in Australia
4) Not integrating the different systems that are used. Integration of Point of Sale and of purchasing/merchandising systems with your accounting package is vital, so that purchases and sales are automatically updated into your accounting system. This will make it easier to manage the flow of your goods. You will also be able to make decisions based on actual stock levels and predicted stock levels.

Toll Ipec Fashion national manager Michael Eubanks

One of the most common mistakes is not allowing enough time to do the pre-work to ensure all the necessary actions are in place prior to shipment to the end customer. They might over simplify the events in the supply chain and not consider the steps taken and time required to get from A to B. The use of technology is extremely important to ensure tracking of each event which would provide the required flexibility to meet the short time windows.

Lawson Software senior solution architect Colin Strang

Designers often don't allow for delays in production, which may result in the use of air-freight instead of sea freight in order to deliver goods according to tight schedules. This is expensive and can mean that the vendor may make a loss on that particular style.

Due to lack of information, designers can often over-estimate the demand for a style. This can cause mark-downs of surplus stock at the end of a season. However, range planning tools can help to alleviate this problem.
Changes to designs once they have been issued to makers can lead to supply chain delays and increased costs. This factor is often overlooked by designers or their customers.

Changes to designs by customers are often accepted without adjusting the delivery time through the supply chain. Once again, this may lead to expensive freight charges to get the goods to the customer on time. With proper capable to promise (CTP) tools, this can be easily avoided.