Apparel Logistics & Technology: A Perfect Fit
Technology is the latest accessory to hit the apparel world. By embracing technology solutions, forward-thinking apparel and footwear companies are fashioning tight, visible, integrated supply chains—and reaping the rewards.
At first glance, Martha Stewart leaving prison wearing a poncho knit by a fellow inmate has little to do with logistics and supply chain management.
But look again.
When images of the domestic diva hit the media, consumers scrambled to find the poncho, racking up $375,000 in sales when it was first featured on Stewart’s TV show. Apparel companies sent their supply chains into overdrive to deliver on the poncho demand.
Such celebrity-inspired fashion crazes, as well as each year’s must-have items, and standard seasonal clothing such as bathing suits and outerwear, make the apparel supply chain more time-sensitive than many other verticals.
The ability to capitalize on instant—and often fleeting—demand is crucial to apparel and footwear manufacturers in their quest to boost profitability and satisfy fickle fashion consumers.
“Apparel logistics is a different world. While part of it is still moving boxes, it’s more trend-driven than other verticals,” says Freida Bailey, senior manager, supply chain and logistics, Polo Ralph Lauren. “If a shirt doesn’t get to a store by a certain date, it won’t be the hot item anymore.”
Increasingly, apparel companies turn to technology to help meet the do-or-die supply chain demands that characterize this hypercompetitive environment.
Apparel manufacturers, importers, distributors, wholesalers, and retailers must have a good grasp on what will sell, where it will sell, and how to make sure it lands in the right place at the right time. Throw multiple color and size choices for each style into the mix, and it’s easy to see the need for robust, flexible supply chain technology.
“Today’s demanding in-stock requirements mandate exceptional forecasting and effective in-season management. Best-in-class collaboration, forecasting, and pricing software applications are now the price of entry for successful apparel retailers,” says Steve Poplawski, group vice president of retail for Rockville, Md.-based supply chain solutions provider Manugistics.
Though timing is the most obvious critical factor in the apparel supply chain, it is hardly the only obstacle.
“Apparel retailers have a complex and unforgiving business model. Challenges they face daily include changing style assortments, major seasonal change-outs, tariffs/quotas, and long lead times often associated with import purchases,” says Poplawski.
The dual quest to cut costs internally and keep product prices low has driven many apparel and footwear companies to embrace global sourcing and manufacturing in low-wage areas such as Asia, India, northern Africa, and Central and South America.
Indeed, nearly 50 percent of apparel sold in the United States today is made abroad, according to a 2004 Deloitte Consulting report outlining the top 10 issues facing the industry.
Inherent in these complex global supply chains are issues involved in getting raw materials and/or finished products into and out of congested ports, dealing with security delays, and keeping up-to-date on textile quota issues, as well as global trade and tax laws, the report finds.
Custom-tailored enterprise resource planning (ERP), warehouse management (WMS), product lifecycle management (PLM), and inbound logistics software systems help apparel and footwear companies combat supply chain obstacles.
Advances in RFID capabilities, web-based technology, and reverse logistics applications, among others, also push the industry forward.
These technologies dish out real-time visibility information that lets apparel companies better track product across global supply chains, and make timely decisions on changes to style, color, size, price, where products are sold, and distribution patterns, among others.
If a pricey black sweater sells well in New York, but not in the Midwest, for example, a retailer can reroute shipments of that item. If size 10 jeans sell faster than size 4, a manufacturer can increase production of the larger size to help meet demand.
“The shift toward a high-tech supply chain helps apparel companies be more reactive to consumer needs, which ultimately helps them increase revenues,” says Larry Ravinett, senior vice president, logistics and supply chain solutions for National Retail Systems, a New Jersey third-party logistics and technology provider.
Because of the value-adds technology provides—cost reductions, just-in-time capabilities, getting product to store shelves faster, new methodologies, and automation—the supply chain has become a margin factor rather than a cost factor for apparel companies, he says.
A closer look at three specific areas of the supply chain—enterprise-wide operations management, inbound logistics, and reverse logistics—highlights how the strategic use of technology can help apparel companies.
Enterprise-Wide Operations Management: Changing the Fabric of the Supply Chain
Technology early adopters sometimes face high risks because they embrace the latest applications before the kinks are worked out. But they often gain a competitive advantage that comes from pulling ahead of the pack.
Such is the case with outerwear importer Amerex Group. Based in New York City, with additional offices in New Jersey, Shanghai, and Hong Kong, Amerex is a 70-year-old company that provides childrens, ladies, and mens outerwear to high- and low-end department stores, as well as to smaller, mom-and-pop retailers. The $180-million company has 220 worldwide employees.
While many apparel companies are playing catch-up, Amerex was one of the first companies in the industry to implement BlueCherry, an ERP system from New York City-based Computer Generated Solutions (CGS).
“Our supply chain is now 100-percent automated—no single process requires a person to stop, think, or schedule anything,” says Ross Amarante, vice president, finance and information systems, Amerex.
But it wasn’t always that way.
Before it took a leap into technology, Amerex was operating on “a 10-year-old system that was costly to maintain, offered limited flexibility, had no problem management capabilities, and no visibility into how to grow our business, or find inventory black holes,” explains Amarante.
The company’s supply chain was growing faster and more far-flung than its cobbled-together system could handle. Amerex imports both finished product and raw materials from Asia, Mexico, the Caribbean, and other global locations. It consolidates fabric imports at various factories, where it is cut, made into different product styles, then packed and shipped either directly to customers or to Amerex’s third-party warehouses.
With so many touchpoints along the way, Amerex needed proper visibility to ensure a smooth flow from sourcing to manufacturing to shipping and distribution.
Allocating products so that orders went out correctly from the warehouse to the company’s various retailers and distributors was also a major problem, particularly during peak season from July to November, when Amerex ships 85 percent of its total yearly goods.
“We had a five-person allocation team during peak season, when we ship 30,000 to 50,000 cartons a day,” says Amarante. “And the process was totally manual. Someone had to touch every order and make a business decision as to whether it should ship or not.”
Amarante and his team realized they had to make a change. The company began researching potential solutions providers in late 2001, partnered with CGS in early 2002, and went live in 2003 with BlueCherry, an ERP solution to handle operations, supply chain management, production administration—including purchasing and manufacturing—and distribution.
The company made a decision quickly because it was eager to switch from an AS400 environment to Windows-based technology. “CGS was one of the few players offering Win platform technology when we were looking,” Amarante explains.
The system’s ability to grow with Amerex was also a factor. “Our system scales up from very small to very large companies,” says Paul Magel, senior vice president of CGS’ application solutions division. “All users run on the same code, but the system is configurable to each business’ unique needs.”
The decision was not without road blocks, however. The early adopter challenge reared its head when Amerex realized CGS did not yet have a WMS component. It had to build an interface between BlueCherry and the Manhattan Associates PkMS system it was using—no small feat. BlueCherry now has a WMS component, which Amerex is currently migrating to for tighter integration.
Overall, however, the implementation helped Amerex turn operations around. Today, it processes all orders in BlueCherry and communicates among the company, its vendors, service providers, and customers via Electronic Data Interchange (EDI).
EDI documents are sent to detail purchase orders and estimated shipping times; notify that orders have shipped; let warehouses know where and when goods are expected; and to mark goods as received. Amerex performs these updates automatically, and its supply chain partners have visibility of the data.
Since going live with BlueCherry in early 2003, Amerex has cut its staff by 22 positions, bringing average cost savings of more than $650,000 per year, and saw a $500,000 decrease in EDI chargebacks in the first full year after it went live.
The company is now toying with the idea of using BlueCherry upstream in the business process to help improve and streamline its merchandising and product development system.
Though Amerex experienced both the ups and downs of embracing technology early on, Amarante knows it has moved the business forward. “Technology gives us better visibility to proactively manage and schedule our supply chain and make smart decisions. It keeps us on our toes,” he says.
Inbound Logistics: From the Runway to the Racks
It’s not surprising that Polo Ralph Lauren, one of the world’s most recognized brand names, has a complex inbound supply chain that encompasses multiple global shipping locations, international freight forwarders, customs brokers, third-party logistics providers, and several distribution facilities.
After all, the $4-billion company manufactures, distributes, and sells everything from its ubiquitous polo shirts and jeans to $30,000 runway gowns, home furnishings, perfume, accessories, and footwear.
What is surprising, however, is the low-tech approach Polo Ralph Lauren (PRL) took toward inbound logistics until a few years ago.
Some 60 percent of PRL’s business comes from its wholesale division, which manufactures product and sells to department stores such as Macy’s and Dillard’s; while 30 percent is from the retail division, which sells product in more than 50 full-priced Ralph Lauren stores and 130 outlet stores in the United States, as well as numerous stores worldwide. PRL derives the rest of its revenue from its high-end collection, home, and children’s lines.
“The business is organized in silos because we are a lifestyle brand. What works logistically for our home division is not necessarily good for wholesale,” says Freida Bailey, PRL’s senior manager, supply chain and logistics. Bailey is based at PRL’s main distribution center in Greensboro, N.C.; the logistics group also has employees at other global locations including New York City; Geneva, Switzerland; and in Parma, Italy, where PRL manufactures couture garments.
The silo approach, however, was not helping the company’s ability to track inbound transportation and logistics. PRL was tracking shipments for the wholesale division using an Access database that received Advanced Shipment Notices (ASNs) from vendors and freight forwarders; the retail division used simple Excel spreadsheets. On both sides, they were managing the process with telephone calls, e-mails, and meetings.
“We were flying blind on a lot of shipments, which limited our ability to plan, execute, and make decisions,” says Bailey.
Because its inbound tracking depended largely on employees updating spreadsheets, one error or omission could bring drastic consequences.
“If one container with $30 million of product didn’t leave when expected, and we weren’t notified of the delay, it could mean the difference between having the merchandise for a big sale we advertised, or making a planned wholesale shipping target,” she says.
When management changes occurred in the supply chain team, frustration with this inefficient system reached fever pitch. The new executives felt the time was right for a technology upgrade so the team could make better decisions, execute operations more efficiently, and improve forecasting.
PRL went through a routine selection process, looked at a variety of inbound tracking solutions providers, and ended up with five finalists. The list included some of the biggest players in the industry, as well as Freightek, a small firm based in Dresher, Pa., that was providing PRL with ASN technology at the time.
PRL ultimately selected one of the leading firms, but quickly realized its rigid format for inputting data would not work for the apparel company’s dynamic business structure.
“We wanted to standardize our process, but our complex, diverse business model means our data is not standard. We needed a flexible system that would support us,” Bailey says.
PRL worked with the original service provider on a long-term implementation goal, and partnered with Freightek to develop an interim solution.
When PRL and Freightek shifted into co-development mode, however, the proverbial light bulb went off. Within one year of working together, PRL shelved its original project in favor of a full partnership with Freightek to develop eFocus, a custom-tailored inbound tracking solution.
“We were able to provide PRL with a single platform to centrally manage their inbound shipments from creating purchase orders to delivery at their DCs and 3PLs,” says Donna Stelzer, vice president, business development, Freightek. “Also, by using eFocus, we were able to increase worldwide information flow with all PRL’s trading partners.”
Today, when PRL ships product from its manufacturers in Asia, Italy, and South America, all information along the inbound lifecycle automatically interfaces to eFocus via EDI. As soon as the manufacturers or freight forwarders send an ASN, PRL can access information such when goods left; when orders are estimated to arrive at key event milestones, including customs and ports; and when orders hit PRL’s Greensboro DC or a 3PL facility.
eFocus also provides an exceptions module that automatically generates reports if shipments go awry.
“If an order leaves Asia on Nov. 1, for example, with a 14-day ocean transit time, I expect it to arrive Nov. 15. If that doesn’t happen—due to a compliance issue, or a problem at customs, perhaps—the system notifies us so we can take action,” Bailey explains.
Also in the works is an eFocus system customized for PRL’s European inbound supply chain.
“PRL Europe will utilize eFocus to increase visibility with real-time track-and-trace functionality and reporting capabilities for goods imported into Europe. These capabilities are limited in daily operations today,” explains Stelzer, who has been involved in both eFocus projects.
Overall, PRL has watched technology transform the culture and efficiency of its logistics operation from manual to high-tech. “Embracing technology allowed us to go from managing spreadsheets and phone calls to managing the supply chain by exception, an ideal model for any retailer,” Bailey concludes.
Reverse Logistics: The Sole of the Operation
Reverse logistics has traditionally placed low in the supply chain hierarchy. Recently, however, apparel businesses, service providers, and technology companies have begun to understand that strategic reverse logistics management can have a large impact on overall operations.
“Returns have been a black hole—customers are left to their own devices, and companies don’t get information proactively about products coming back to their warehouse,” says Jonathan Dampier, vice president, marketing, strategic alliances, and corporate strategy for Newgistics, a returns solutions provider in Austin, Texas.
“For apparel companies, in particular, growing online operations means they have to pay more attention to this process.”
Comfort footwear manufacturer Aerosoles is one company embracing returns technology. Through its partnership with Newgistics, Aerosoles revamped its reverse logistics operations and now counts that part of its supply chain as an asset.
The Edison, N.J.-based company has three divisions: retail, wholesale, and direct marketing, which is made up of catalog and Internet sales. While growing the direct business, the company continually bumped up against the “fit problem” when acquiring new customers.
“With apparel, if a customer is a size medium in one store, a medium in another store might be slightly different, but it still fits to some degree,” says Magnus Gustafsson, Aerosoles’ vice president, direct marketing. “With shoes, consumers need a perfect fit.
“To grow our direct division, we had to eliminate returns as a customer’s objection to purchase. We had to make that process as easy and seamless as possible so consumers weren’t hesitant to try Aerosoles for the first time,” he adds.
Before it partnered with Newgistics to revamp the reverse logistics process, Aerosoles did not have the ability to proactively manage returns. The onus fell on the consumer, who was responsible for packing up the order, shipping it back, and following up with Aerosoles for status.
Aerosoles, for its part, was not able to provide the level of customer service for returns that it offered on the forward supply chain.
It also was unable to analyze returns data to gauge trends in what merchandise was being sent back, or prepare its warehouse ahead of time for a large volume of returns, says Gustafsson.
When searching for a reverse logistics technology, Aerosoles evaluated the key players, sent out an RFP, and searched for a system “that would remove the burden of returns from the consumer,” explains Gustafsson.
The company also wanted a solution that was scalable and could provide a rich amount of data on the reverse supply chain. After a nine-month selection process, Aerosoles chose the SmartLabel solution from Newgistics. It went live in May 2003.
During implementation, ensuring that Newgistics’ technology aligned properly with the back-end systems used by Aerosoles and its warehouse partners was top priority. The companies went through a long, detailed process to make sure data files were set up properly, that the systems could talk to each other, and that data was easy to decipher.
Another challenge it faced was educating consumers about SmartLabel. Aerosoles marketed the solution in its catalog and online, with detailed instructions and a list of benefits SmartLabel offered customers.
Currently, almost 75 percent of Aerosoles’ returns—roughly 50,000 a year—come back via SmartLabel. “Our goal is the 90-percent range,” says Gustafsson.
Every order placed through Aerosoles’ web site or mail-order catalog now comes with a pre-paid, pre-addressed, bar-coded SmartLabel. When returning an order, customers affix a SmartLabel to their package and drop it off wherever the U.S. Postal Service retrieves mail.
“A dynamic bar code links the package to the customer’s invoice and provides package visibility early in the returns process, enabling customer service representatives to proactively address customers’ exchange or credit needs,” says Dampier.
SmartLabel returns are scanned three times during the return cycle—at pickup, at Newgistics’ regional facilities, and at Aerosoles’ warehouse. This visibility lets Aerosoles keep customers updated, and manage exceptions.
Visibility of this data also lets the company analyze returns trends to find poorly performing styles or colors, and forecast demand more effectively.
Technologies such as these that streamline logistics processes, provide visibility of data early in the supply chain, and benefit both manufacturers/retailers and their customers will continue to lead apparel businesses out of the manual realm and into the high-tech world.