Introducing the Future Factory Models of Demand Sourcing 4.0

Choosing A Digital Factory Footprint

Digital factories have one common mission… they transform a digital virtual inventory of SKUs into physical product. It doesn’t matter if the factory is making furniture parts with CNC cutters or assembling cars using robots the mission is the same.  However, the concept of a Micro-Factory as a stand alone structure is misleading at best and doomed to fail at worst.

Integrated demand sourcing digital factories can be tasked an unlimited array of dedicated factory footprints organized for specific profit and sustainability goals. How the symphony of different technologies is integrated to efficiently complete each individual quality product and deliver it on time, at a profit, environmentally and economically sustainable is a highly complex orchestration.

Digital apparel factories tend to fit in four different general structures.  Each of these generic types is based on production segment of the market or the supply chain.  Each factory is specifically tuned to support an individual business plan.  The experience gained by building each of the factory types and their variations since 1996 has provided a wealth of lessons that are available at AM4U.com or through direct contact with AM4U consulting at bgrier@am4u.com.

The demonstration of different factory configurations at SOURCING at MAGIC created a substantial buzz and sales for the exhibitors. Demonstrating the integration of the role of Digital Manufacturing and the impact of real time sourcing on the financial well-being and future global sustainability is a mission of SOURCING at MAGIC. Joining these factory types together with the 3D of visual design, the Augmented Reality (AR), retail/online merchandising, social marketing software and Virtual Inventory (VI) is the next step in online and retail consumer marketing.

The Direct-2-Garment (DTG) Demand Factory

This factory custom prints, imprints and/or embroiders decoration directly on athletic and leisure finished apparel.

It can be placed almost anywhere and provides outputs from 100 to 600 units per eight-hour shift depending on the printer output. The thousands of small to large DTG T-shirt factories reside in garages and small and large factories throughout the country.

Some of the key characteristics of the DTG production sites are:

• The small factories require no special power or air service, they operate at normal house power and a small commercial compressor can handle any air requirements.
• Most DTG operations do not require sewing capability because they are normally operating with blank pre-sewn garments.
• These facilities also can operate using either direct to garment printers or images applied to the garment through sublimation or transfer.
•  In most states DTG operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

The downside of the DTG opportunity is oddly a byproduct of the low cost of entry and easy operation. Since there is very little barrier to entry the nationwide proliferation of DTG sources has created overwhelming competition and price pressure for small operations. Focusing on very short run custom printing has provided some relief but eventually DTT factories will have to expand from printed T-shirt blanks to additional cuts of athleisure apparel and accessories.

Because of the high level of competition DTG providers need to find a space in the sourcing path for local boutiques and small specialty retailers this opportunity will come as a result of the expansion of the product line beyond T-shirts.

 As stated, these factories are used to produce the initial stocking order for large multi-location retail chains and brands. This technology allows sourcing systems to become extremely lean because there is no requirement for time-consuming prepress or multi-location transportation of product. These factories also allow buyers to take full advantage of the digital design systems that can provide virtual inventories with wide ranges of choice and the ability to create multiple SKUs dedicated to various locations and fast-changing Internet trends.

Some of the key characteristics of the Digital Production factory sites are:

• The DP factories require special power or air service, including a minimum of 800 amp electrical service, numerous transformers and a complex compressed air delivery system.
• Most DP operations can require significant sewing capability based on their structured capacity.
• These facilities also can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment DP’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• In most locations DP operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and dying technology used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

 Unfortunately the downside of the adoption of digital production has been an industry that has a legendary resistance to change. This resistance coupled with significant requirement for capital investment and a microscopic supply of technically trained interdisciplinary workers and management will cause this necessary change to be roughly the equivalent pushing a brick in the mud.  Currently, the lack of integration between the digital technologies of merchandising, design, coloration, cutting and sewing are making the seamless vertical combination of these multiple technologies extremely difficult.

The Forecast Based High Volume Digital Production (DP) Factory

This high-volume factory design is used primarily for Retail and Brand initial stocking orders it included overhead sewing delivery systems, multi-ply digital cutting and high volume printing. This design requires at least 400-800 amp service and compressed air distribution and multiple transformer power supplies.  These factories can output 3000- 6000 m² per hour of fabric with no minimums or pollution.

High-volume digital production is the likely replacement for current coloring, printing and cutting technology. DP factories are still likely to be overseas or at least in areas with lower labor costs. This type of factory still demands huge sewing facilities with hundreds if not thousands of product handlers, sewers and other support individuals. Until sewing is sufficiently automated high-volume factories are likely to remain offshore.

 As stated, these factories are used to produce the initial stocking order for large multi-location retail chains and brands. This technology allows sourcing systems to become extremely lean because there is no requirement for time-consuming prepress or multi-location transportation of product. These factories also allow buyers to take full advantage of the digital design systems that can provide virtual inventories with wide ranges of choice and the ability to create multiple SKUs dedicated to various locations and fast-changing Internet trends.

Some of the key characteristics of the Digital Production factory sites are:

• The DP factories require special power or air service, including a minimum of 800 amp electrical service, numerous transformers and a complex compressed air delivery system.
• Most DP operations can require significant sewing capability based on their structured capacity.
• These facilities also can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment DP’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• In most locations DP operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and dying technology used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

 Unfortunately the downside of the adoption of digital production has been an industry that has a legendary resistance to change. This resistance coupled with significant requirement for capital investment and a microscopic supply of technically trained interdisciplinary workers and management will cause this necessary change to be roughly the equivalent pushing a brick in the mud.  Currently, the lack of integration between the digital technologies of merchandising, design, coloration, cutting and sewing are making the seamless vertical combination of these multiple technologies extremely difficult.

The Demand Based Integrated Micro-Factory

This factory design works directly with the point-of-sale information from retail and online clients to replenish only what is sold or required to maintain proper shelf stock. The Integrated Micro-Factory (IMF) represents the most significant change in the traditional sourcing structure.  The IMF is a substitute for the projected on-hand inventory of product in excess of the initial stocking order.  The IMF allows merchandisers/buyers to replenish in-store or online sales as they occur rather than purchasing the entire forecast and holding finished product awaiting sales.  The IMF’s mission is to increase product offering while removing inventory risk. The IMF is best placed in or near the distribution center and can operate on 3 to 5 day delivery directly from consolidated POS data.

Some of the key characteristics of the Integrated Micro-Factory sites are:

• This factory requires a minimum of 5,000 sq. ft. in a dedicated space with compressed air distribution and 400amp service.  An IMF can output 300—1500 units per 8-hour shift depending on sewing capacity.
• IMF’s can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment IMF’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• The IMF with the proper additional equipment is capable of full dye and print in the same pass as well as art composite placement and piece drop dying production technology.
• The IMF configuration is also the best suited for higher volume (more than 200 units per day) Purchase Activated Manufacturing (PAM) or custom one off production.
• In most locations IMF operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the coloration technology used does not require dangerous chemicals or significant post-operational cleaning or garment washouts.

The Mobile Project/Event Micro-Factory

 The Mobile Micro-Factory (MMF) design is specifically built to fit on a single truck and be installed in a 200amp facility within 3 to 5 days. Its purpose is to provide provisional production for license products and other apparel and accessories, which may have a specific lifespan. It is also used to support events like concerts and fairs. It can produce up to 1000 units per eight-hour shift depending on configuration.

Some of the key characteristics of the MMF sites are:

• The MMF can operate from a truck, tent (with a 40kw generator) or a space with 200amp service.
• The mobile factory normally requires 3-5 days for installation and product testing.
• MMF’s are designed to convert a pre-established Virtual Inventory of multiple designs to finished product on demand.
• These facilities also can operate using either direct to fabric printers, images applied through sublimation or embroidered patches.
•  In most locations IMF operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and decoration technology used does not require dangerous chemicals or significant post-operational cleaning or garment washouts.

Summary

Virtual inventories, digital manufacturing and real-time demand sourcing are here to stay.  Ten years ago 50m² was a top speed for printing fabric today inkjets can operate 100+ times faster and change images and colors on the fly.  Today, we can transform a digital file into a pair of shoes.  Today, a picture of the Internet can shift a fashion trend 180° in just hours while a style forecasts still takes months of prep and conventional production.  Today, the World Bank says that 20% of the world’s water pollution comes from coloring and processing textiles while the digital manufacturing technology is available to dye and print using no w

3D Digital Design and Demand Sourcing

Over and over we hear the mantra “ time-to-market” is the key selling point for the exciting new technology of 3-D design. Although time-to-market can be an important function of digitizing the design development pattern making and other functions of 3-D, it’s not the most important result of the adoption of this technology. The incredibly complex development that reduces a complex product including design, machinery, process and colorization to a packet of binary code that represents a product in its entirety is a fundamental building block of the information age. The real impact point of 3-D design is not its function but the form of its output. In this vision of the real future, hundreds of thousands of square feet of warehouse space and billions of dollars in inventory are reduced to tiny computer files accessed from a digital cloud through your phone, tablet or laptop. Millions of products accessible on-demand through digital manufacturing and ready for purchase when the consumer is ready to buy. Tons of waste and pollution disappear because products are produced on demand from local factories from vast virtual inventories available online or at your local store. Stores that using AR to provide the opportunity for shoppers to browse through hundreds more products than were ever available from racks and shelves. Products that are available digitally manufactured on-site or in a nearby Micro-Factory. These successful retailers no longer have to risk inventories built from long-range forecasts and rendered outdated by ethereal trends that shift with the speed of the Internet.

The Seismic Impact of Virtual Inventories
Building virtual inventories is the most important eventual output of digital 3-D design. As the companies who create this fantastic software begin to understand their overall role in the commerce of the information age they are extending their software to include both merchandising and manufacturing links. The ability of the virtual inventory to connect directly with digital manufacturing allows it to become a true infinite warehouse of products. Even more important is the demand link between virtual design and the retail and e-tail merchandising of products.  Providing visual link that allows retail stores and e-tail providers to increase their selection through a highly efficient AR experience that allow the consumer to efficiently find exactly the product they want is the critical part of the extension of the 3-D digital design function. Using 3-D software as the initial point, vast inventories of products can be created through virtual design, sold through AR’s virtual sensory experiences and digitally manufactured on demand. In addition the further development of real-time digital design will allow consumers and buyers to customize product to fit their specific needs guaranteeing higher value and by extension higher profits. The digital design information handshake between virtual inventory and digital manufacturing will allow high levels of efficiency and accuracy while reducing waste and pollution in providing these custom products.

Pursuing Profit Not Just Lower Costs
In reality ” speed to sale” will always trump “speed to market” as the ultimate goal for visual design software. Creating an efficient path with intrinsic value as a path to the ultimate source of funds, the consumer, will always be a winning hand. Unfortunately, very few of the strategic planners in the visual design category are clearly pursuing the virtual inventory solution as their ultimate goal. In the end the ability to create more designs faster without linking them directly to merchandising technologies is likely to increase the risk of overproduction and possibly lower the sell-through rate at retail.
Is understandable why the software companies have focused on the process of design and development because these areas were both time-consuming and often the source of confusing or inefficient communication. Solving these problems could create a clear and quicker path through an expensive and difficult period of physical product development. Since cost savings was the focus of buyers at every level creating technology, which focused on saving time, and reducing confusion was a logical path. Now is the time for the visual software companies to begin to shift their target from just cost savings to increased measurable profits at the money generating end of the supply chain. Creating, digitizing and storing product in a form that can be easily manufactured and merchandised on demand puts virtual design software in the key role of generating profits. Capitalizing on this change in direction will put these companies in a leadership role as consumer goods commerce shifts from “supply and demand” to ”demand and supply” a paradigm which is the key to sustainability in the information age.

SOURCING at MAGIC Pioneers Integrated Purchase to Fulfillment Technology
Beginning next month SOURCING AT MAGIC will introduce brands and buyers to a new section on the floor dedicated to the evolution of technologies that create an integrated demand sourcing path from consumer merchandising through demand manufacturing and back to consumer fulfillment. This new fashion technology area will feature software and equipment dedicated to the new era of individualized high-value consumer merchandising. SOURCING AT MAGIC will continue to grow this section featuring new merchandising inventory and design technology twice year in February and August at MAGIC in Las Vegas.

Where Does the Micro-Factory Fit in the Sourcing World???

Micro-Factory at SOURCING at MAGIC built by TUKATECH, Mutoh and Graphics One and integrated by Kai Buskirk   Photo by WDG

Finding a Home for Apparel Micro-Factories

Have you been to an apparel show or textile technology show recently? Seems like every show is enthralled with the "Micro-Factory", the industry’s shiny new object. It is exciting to finally see significant technology changes in the way we design product, color fabric and cut the pieces of apparel and home products. All of these wonderful demonstrations still beg the question: Where does the Micro-Factory fit?

Hundreds of millions of dollars have been spent over the last 20 years to perfect digital printing, visual design, robotic cutting and new technologies for sewing. Yet with all these investments the question of where the Micro-Factory fits and its ultimate purpose is still shrouded in mystery. Is this new paradigm the forerunner of mass customization or is it just a little production site for samples. Now is the time to clear up that mystery and look at the purpose and goal of the Integrated Micro-Factory.

Purpose of the Integrated Micro-Factory

 The primary function of the Integrated Micro-Factory is to convert a digital Virtual Inventory in to a physical inventory on demand. That reality allows a direct connection between the production of product and the demand of the market. This function give sellers the ability to switch sourcing away from the risk of supply searching for demand to a real-time relationship between consumer demand and timely product production. In the simplest of terms the purpose of the integrated Micro-Factory is to create a selling environment that is, “never out of stock, or never overstocked” by removing on-hand inventory risk and cost.

Goal of the Integrated Micro-Factory

 The goal of the integrated Micro-Factory is one simple word profit. The big difference is where the profit comes from. In the traditional sourcing model the profit is determined to a great extent by the cost of goods. The problem with forecasting cost in today’s real time world of instant trends and saturating news is ordering inventory months in advance of sale. Ultimately this time gap leads to high risk of trend shifts and unanticipated over stocked "duds" or under stocked “hot SKU’s”. These common conditions can change the cost to profit ratio dramatically after the product is on hand. Since, most manufacturers offer lower per unit price based on volume, pursuing traditional volume discounts increases the probability of overstocking and the resulting clearance discounts and profit loss. Pressing for lower cost also drives lower labor costs and poor labor conditions that can result in lower quality, environmental disasters and bad press or worse.

The Integrated Micro-Factory deals with each of these profit losses. First, the virtual inventory can be converted to physical product and restocked based on actual sales, which eliminates profit stealing clearance discounts. Second, higher profits based on better sales velocity and sustained retail price can support better labor conditions. Third, the cost of product digitally colored and produced on-demand in an integrated Micro-Factory is always fixed regardless of decoration or color allowing for extraordinary decoration agility and digitally exact quality. In addition, most micro-factories operate with no emissions, no use of water or emission of toxic waste. Another amazing side benefit is that in some multicolored apparel designs digital printing can reduce sewing labor up to 35%.

 A demand-based virtual inventory converted by an Integrated Micro-Factory allows the retailer, e-tailer or brand to produce exactly the required amount to initially stock the shelf and then only replenish what is sold. This positive control of the real-time product life-cycle and the ability to replace a non-selling SKU without a loss from dumping the held inventory usually results in a dramatic multiplication of profit regardless of a slightly higher per unit cost.

Demand Sourcing

Positive real-time control of on-hand inventory by linking it directly to the demand driven Integrated Micro-Factory is the fundamental feature of demand sourcing. In order to construct and demand sourcing infrastructure the selling entity whether it is retail or e-tail needs to complete three basic pre-activation tasks.

Establish real time profit risk analysis tools  

• Product velocity index: point score based on gross profit times SKU turns per week
•  Profit Lifecycle track: Average selling price per unit sold vs total units contracted plotted by week.

Establish period sales forecast for high-risk silhouettes

• Build or source an Integrated Micro-Factory that can provide no minimum replenishment of targeted silhouettes with variable decoration on demand.
• Negotiate a “Style Contract” for the on demand delivery of the total period volume of the targeted silhouette based on SKU’s from the Virtual Inventory.

Establish a Virtual Inventory

• Using high definition visual design software build a silhouette construction and decoration TekPak inventory for the choices available in store and online for the SKU’s. (Note: 10,000 different SKU’s will consume less than a TB of digital storage vs over 100,000 sq. ft. of physical inventory warehouse space.)
• Test the selected greige fabric fit pattern construction of the offered sizes and/or shapes of the physical production silhouette.
• Install the software and communication links to facilitate POS based product lifecycle replenishment.

Micro-Merchandising

The next step is to establish the product in-store and /or online. Using the product information from the TekPaks and the high resolution images from the visual design software build the Augmented Reality (AR) tool needed to portray the product both in-store and online in 3D/360° visualization. It’s likely that your risk analysis tools will lead to the conclusion that printed designs represent the highest risk. These are the products that will eventually have to be put on deep clearance because of sold-out sizes or unpopular decoration. It is important to remember, that integrated Micro-Factory demand production does not fit for all apparel products, therefore; it is important to use the profit risk analysis tools to select just those silhouettes/SKU’s that fit in a demand sourcing profile.

 Micro-Merchandising is shorthand for integrating the advantages of the virtual inventory and demand production to focus on niches that can represent high velocity inventory sales focused on short trends or localized opportunities. Because production can match the velocity of sales trends without the risk of volume buying and long production lead times. Buyers and merchandisers can turn on a dime to take advantage of hot events or subjects that drive the market through today’s instant communication. An additional value of Micro-Merchandising is that retailers can focus on a more timely entry of fashion decorations that match local seasons and events. In this time of wild climate changes spring season and spring fashion do not arrive at every locale right on schedule.

Where Can I Learn About the Technology of Real-Time Demand Sourcing?

 In summary, finding the proper role and location for Micro-Manufacturing is ultimately as important as finding and adopting this new technology. Integrated micro manufacturing depends on building an understanding of virtual inventory and the tools that you use to build the appropriate and efficient demand to support the factory. Many of the vendors who provide the technology for micro-factories are beginning to understand that integrating their technology for demand production with the techniques and software that support demand sourcing is critical to the continued pursuit of domestic production and apparel profitability. In addition, some of the shows and conferences in 2019 are recognizing the importance of demand sourcing along with demand manufacturing. WTiN's Innovate Textile & Apparel Americas 2019 (ITA) on May 1 thru 3 will feature both Micro-Factory and the supporting itegration technology. This August, INFORMA’s SOURCING at MAGIC in Las Vegas will feature both micro-factories and training in the tools for Micro-Merchandising and Demand Sourcing. Attendees will have the opportunity to learn the details of risk assessment methods, style contact structures and AR product visualizations. Support is always available from AM4U, Inc. the leader in Integrated Micro-Factory and Real-time Demand Sourcing development. Contact bgrier@am4u.com check out the Principles of Demand Manufacturing and related videos at AM4U.com.

Squeezing Suppliers for Lower Costs Cannot Make Up For Clearance Losses

Time to Reverse Rules of Supply and Demand

We live in exciting times as the world changes around us and we learn to deal with the fire-hose of information that continues to reshape our lives and decision making institutions. The Information Age is accelerating the replacement of the old maxims

that guided business and the economy through the Industrial Revolution. Many of the standards that were based on the time delays inherent in communications, transportation and manufacturing are disappearing with the revolutionary effects of digital technology and automation. One of the first to go is the age old marketing axiom of the quantitative relationship between supply and demand and market equilibrium. The concept is sound but the order of event needs to be reversed. The relationship is used to create wholesale and retail price targets, plant capacities and financial risk decisions. The ultimate effect is to create an unsustainable price driven retail economy and a cost based sourcing environment. This is an environment that limits entrepreneurs, innovation and ultimately competition. The Internet is providing a window to the product value based retail and manufacturing economy of the Information Age. The collective inventory and comparative shopping screens of agents like Amazon, Alibaba and others have turner shoppers into searchers and made the product’s features into critical factors in purchase decisions. This ability to search unlimited inventories (there are over 30 thousand scarf designs on Amazon alone) leave retailers with their fixed high-risk inventories at a dangerous disadvantage. This supply in search of demand strategy is only viable in an expanding market base. The U.S.A. apparel market base is not an expanding. Solving this inevitable circling of the drain for apparel, fashion and the apparel manufacturing sectors requires a change in the basic paradigm to real time demand based sourcing and production.

Starting this February SOURCING at MAGIC will introduce Demand Sourcing to begin the process of educating the tens of thousands of attendees in the spring and fall MAGIC shows in Las Vegas. Understanding and demonstrating the details of this strategic market change is a goal of SOURCING at MAGIC, the market leader in apparel and fashion opportunity. Demand Sourcing is integrated directly with the Demand Micro-Factories that SOURCING at MAGIC has demonstrated at the 2018 spring and fall shows. Digital

demand design and production is a key ingredient of bringing clean highly profitable manufacturing back to the United States. Demonstrations will feature retail “Endless Aisle” Augmented Reality (AR) kiosks integrated with Virtual Inventories produced on-site by the top 3D design companies. Selected product will then be colored and manufactured and finished on site in an Integrated Micro-Factory using the latest digital technology and currently available equipment from the top manufacturers. SOURCING at MAGIC is uniquely positioned to link Demand Sourcing with Demand Manufacturing since it is the largest retail and brand show in the Americas. This is opportunity for thousands of retailers, e-tailers and brands to witness a demonstration of the new “Demand and Supply” paradigm that is the future of clean high profit apparel manufacturing.

The law of “Supply and Demand” has been the root concept of our economic structure for years. Most business plans, company strategic plans, an even nation’s economic policies have been based on this simple concept. For years demand was considered a product of price and therefore the sourcing the product was dependent on cost. This concept led us to believe that the term was actually supply then demand because the price at retail was going to be determined by the cost of manufacturing. This relationship was understandable because the Industrial Revolution and manufacturing technology was based on efficiency of production and the resulting lower cost per product. At the time, the ability to make product at an efficient and low cost rate was always acceptable because the world markets were ever expanding. In the apparel trades the consumer’s agents the retailer and brand, not the actual consumer, always determine the demand and product feature portion of the supply and demand maximum. The retailers job was to consolidate the demand of all the consumers that they served and to correctly forecast months if not years in advance the products that would satisfy that demand and therefore represent the

supply portion of the equation. The accuracy of that prediction was the key to the success of reaching the magical point of market/price equilibrium or product on hand at the correct price to stimulate sales. The inherent danger of the time gap between the quantification of the supply and the actual sale of the demand created great risk for both the retailer and the supplier. To mitigate this risk brands then agglomerate demand from many retailers and attempt reduce the risk of oversupply and the consequence of losing the price equilibrium and requiring the dumping of product. This concept of third party demand forecast driving a supply first business sourcing decision can cause dangerous inventory constipation like H&M’s reported $4.3 billion pile of unsold inventory and resulting profit loss.

We are now seeing the effect of a new paradigm driven by the change in both the content and speed of information at every level of the supply and demand equation. This change in information is driven by access to huge volumes of product choice available to the consumer. This information directly affects demand and the ability for retailers and brands to consolidate forecast information accurately as a basis for long-range purchases. This increased risk because of the inability to actually quantify demand by store location, product design, local competitive price and availability of competing products has been exacerbated by the change from consumers physically shopping to consumers searching the Internet before purchase whether online or in-store. This change from shoppers to searchers has driven a huge and detrimental impact on the retail apparel market. In an effort to bring the last mass merchandising opportunity out of the antiquated supply and demand concepts of the Industrial Revolution retailers have turned to price as a value determinant to stimulate demand. As we know from reading the news for many retailers have not been able to absorb this artificial incentive for consumers to provide the sales required to save their retail locations.

For second let's examine the side effects of this attempt to use the supply and demand concept in this new age of information. First let's talk about the requirement to drive down cost in order to be able to support lower retail prices driving cost down by finding new suppliers with lower labor costs and lower contract production costs normally has three ultimately detrimental affects. First driving down supplier costs often requires contractors to initiate bad and sometimes inhuman labor practices. Second, suppliers need to lower the cost of raw product often resulting in quality deficiencies in the finished product. Third, suppliers in order to save pennies and nickels often shortcut environmental standards resulting in dangerous working conditions and ultimately damage to the ecosystem. Unfortunately, driving down cost through mass manufacturing efficiencies usually has one or more of these inherent detrimental effects. The real problem is overproduction caused by driving down costs by manufacturing efficiency coupled with the inherent risks of the long lead-time forecasting which is now out of sync with the traditional retailer and brand data-gathering process.

While retailers and brands have been consolidating, closing stores and trimming margins, millions of dollars are being spent in another silo where technology has been developed to produce product on demand without the requirement for long lead times and huge reserve inventories. This digital manufacturing capability has created the opportunity to produce one or many without the expensive preparation costs that have been inherent in traditional mass manufacturing for years. Simply stated the technology is in position to make what we need, when we need it, on demand. In addition to the manufacturing technology 3-D software, printing and design capabilities are now in place to produce huge virtual inventories available to the searching consumer so they can have what they want, when they want it, on demand. This integration of product development and product manufacturing technologies is available today and integrated micro-and macro factories capable of producing both individual product and replenishment at speeds capable of matching consumer take away. In short we are ready to realize the retailer and brand dream of never overstock and never out of stock maximized profits. The commitment to education and demonstration of this important structural change by SOURCING at MAGIC will help hundreds of retailers and brands understand solutions for the changing market environment.

In summary, the fundamental difference between “supply and demand” and “demand and supply” is that supply and demand is based on cost and demand and supply is based on profits. While operating on the antiquated theory that price is the primary driver of value; retailers, e-tailers and brands will continue to fail to address the giant profit eating monsters of oversupply, lack of choice, and damaging profit sucking clearances required in today's cost based structure. The huge technological adaption on the supply side is still gambling on the implementation of the demand side of the equation. We are all waiting for retailers, e-tailers and brands to recognize their responsibility to integrate Demand Sourcing by developing real-time POS, ERP and PLM software. That motivates suppliers to adopt the new technologies and end the cycle of forecast, manufacture, stock, discount and dump. Until then we will continue to follow the supply and demand maxims of the Industrial Revolution while we try to negotiate the opportunities of the Information Revolution.

E-mail me at bgrier@am4u.com for further information or with questions about Demand Sourcing or SOURCING at MAGIC.