COMING OF AGE WITH THE INTERNET
Purchase Activated Manufacturing factories make a net profit after only 300 apparel units a day...Each line can produce up to 3000 a day. Learn how it works and build your own. Watch the videos linked below and follow this blog.
Showing posts with label inventory control. Show all posts
Showing posts with label inventory control. Show all posts
Monday, November 25, 2019
Coming of Age with the Internet
COMING OF AGE WITH THE INTERNET
Thursday, April 4, 2019
Where Does the Micro-Factory Fit in the Sourcing World???
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| 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.
Friday, March 1, 2019
Rebuilding the Profit Structure of Apparel Sourcing
Reprint of an interview of Bill Grier written by Tansy Fall of WTIN for the new journal Textile 4.0 available at: http://textile40magazine.wtin.com/
Merchandisers
can drive on-demand manufacturing
By
Tansy Fall 26 February 2019
Moving from a traditional supply chain model to an on-demand
workflow is not as easy as flicking a switch. But AM4U CEO Bill Grier believes
there is a place in the supply chain for microfactories to make this transition
easier. Tansy Fall reports.
Among the biggest challenges facing apparel manufacturers
today is shortening time-to-market whilst simultaneously reducing inventory.
This issue has risen to prominence thanks to both ecommerce and the changing
demands of consumers, which has left the traditional textile and apparel supply
chain in a quandary over how to keep up with demand.
On-demand manufacturing has the potential to solve both
inventory and time-to-market issues. However, the lack of data sharing in the
industry is seen to be stifling brands’ and retailers’ ability to connect
orders with production. If businesses could better connect to the rest of the
supply chain, brands and retailers would undoubtedly see dramatic improvements
in sell-through (the percentage of a product that is sold by a retailer after
being shipped by its supplier) and ultimately in-store and online profits.
This is where US-based AM4U (Apparel Made For You) comes in.
The company is aiming to position itself as a leading consultant and supplier
of microfactories and CEO Bill Grier is confident that there is a way to change
the make-up of the supply chain, though admits it will be a gradual process.
Grier has long worked in the digital printing space but has also been employed
as a technical adviser to American apparel businesses. In 2012, Grier launched
AM4U with the goal of demonstrating the capabilities of a demand-based
integrated microfactory, for deployment in the apparel sector.
The company has since struggled to on-board the concept with
brands and retailers and Grier says this is largely due to the mindset of the
industry and its historic structure. “We are still mired in the industrial
revolution,” he explains. “The mentality of investment, the mentality of
purchase, and the mentality of stocking and inventory. We build factories for
capacity […] and capacity is the antithesis of demand. […] The brands were not
ready. Everyone visited us but nobody bought because they had no deployment
plan.
“We do have three manufacturers right now where we have
installed equipment and they have demand-based opportunities. [However] we have
to balance the money involved between the manufacturer, the brand and the
retailer. Because of the focus on cost, the manufacturer has been left in a
position where they can’t make the kind of money they need. […] Once you focus
on cost then you focus on labour, and you end up moving production.”
Most recently, the difficulties associated with working in
an industry very much set in its ways has led AM4U to partner with event
organisers UBM Fashion, to build three integrated microfactories on the show
floor of Sourcing at Magic, which took place in February 2019. The company is
endeavouring to showcase the customisation possibilities of a digital
microfactory and encourage those in sourcing departments to think outside the
box.
Away from the exhibition floor, Grier says he has also spent
millions of dollars trying to develop a new way of making apparel, with each
on-demand factory requiring an average investment of US$650,000 for set-up.
From this, he has learnt that there are two key elements for success, which are
now driving his business forward: integration across the supply chain and
deployment planning.
Driving
change
Considering supply chain integration and deployment
together, Grier is of the opinion that digital manufacturing processes and
microfactories will find their sweet spot if they are remote from traditional
sourcing practices. He explains: “Buyers aren’t going to change. Their job
description instructs them to find the lowest cost. [However] whilst buyers are
responsible for cost, merchandisers are responsible for profit.”
The role of the merchandiser at a brand or retailer is to
predict up-and-coming sales trends, and therefore to ensure maximum
profitability. Merchandisers make certain that products appear in the right
store, or online, at the appropriate time and in the correct quantities.
Moreover, the merchandiser directly liaises with the distribution centre and
often has access to data from the POS and the supply chain. This enables them
to identify production and supply difficulties and deal with any problems or
delays as they arise. As a result of this, the merchandiser is also well placed
to make decisions about product quantities, however they are often bound by
pre-ordered stock and are therefore also responsible for monitoring slow
sellers and therefore price reductions.
“There are items where you need to have inventory, so buyers
have a role there,” Grier continues. “But merchandisers deal with the
distribution centres, not the manufacturers. And, you can drop a pollution-free
microfactory into the distribution centre.”
Adding a microfactory to the supply chain at the
distribution stage in the process is a relatively new concept for the industry.
It is something that ecommerce marketplaces, such as Amazon, are implementing,
however, as Grier notes: “Amazon is trying to put things in at their
distribution point but it’s direct-to-garment. […] The problem is that Amazon
is doing what we used to call just-in-time. This killed American manufacturing
because it just moved inventory to the next level down.”
Moving inventory along the supply chain is not a solution.
However, adding microfactories to distribution centres, well placed to leverage
POS data, could be the appropriate first step towards digitalisation of the
industry.
Mitigating
risk
This is particularly applicable for high-risk products such
as prints. White or black garments still lend themselves to being manufactured
in bulk, responsibility for which remains with the buyer. But for those
products that are more experimental, be that in colour or design, on-demand
production can allow for garments to be bought before they are made; limiting
the risk the brand or retailer takes in producing them. If they are successful,
manufacturing capacity can then be increased.
AM4U currently has microfactories that are being tested by a
handful of brands in the US. The results of this will be first realised in
August and this testing will then go on for another year. “It has a direct
connection with 2375 stores,” Grier adds. “They are at risk, and they have a
huge pain at the moment, so they have to change. They’re therefore willing to
try this. Retailers need to develop new technology to evaluate how they
calculate product risk.”
This test is an extension of another AM4U project. Grier
continues: “We ran 100 of a major retailer’s stores on a test basis. The
question was, how many [products] do we have to make to cover their entire
licenced design children’s pyjamas? How many did we have to make a day? […] The
most we ever had to make in one day was 174.”
This assessment highlights the validity of the microfactory
concept, provided retailers and brands can be moved towards an on-demand
sourcing structure. “We began to realise that the biggest issue was that nobody
was ready to give us [the manufacturer] POS data. […] The manufacturers can’t
change until the point where the money enters the system changes.” Therefore,
the microfactory needs to be close to the end consumer, where the money enters the
value chain.
One AM4U customer based in Los Angeles, US, has embraced
this microfactory concept and has successfully set up partnerships with brands.
The business is a leggings manufacturer, and the owner is able to pay its
workers US$20/hr, Grier says, selling a pair of leggings for US$32. Grier
explains that the business has ‘silhouette discipline’ meaning that the design
of the leggings can be varied and easily changed whilst the tried and tested
shape of the leggings remains the same.
Moreover, Grier highlights the kind of contract the
microfactory has with the brands. He says that whilst the brand the
microfactory works with commits to buying X number of leggings a year, they do
not specify the design at the point of order. The design can therefore be
changed at any time, using digital technologies, and the microfactory is given
access to the brand’s POS data in order to guide its manufacturing decisions.
Grier says that the mircrofactory’s “sell-through rate is 80%, compared to the
average sell-through rate for women’s apparel, which is only about 23% at
retail.”
Regarding the importance of the supply chain having access
to POS data, Grier draws on experience from his family’s involvement in food
company General Foods, which was bought by Kraft in 1990. Grier references the
impact the barcode had on the grocery industry, providing the ability to track
buying patterns and apply this directly to stock quantities and production
needs. He says that this same approach could be applied in the apparel industry
if the retailers would release the POS data upstream and that the ‘sell-by
dates’ formula that informs inventory in the food sector, should be applied to
sourcing and inventory control in the clothing sector. Due to trends in the
fashion industry, garments also have a sell-by date and, whilst brands and
retailers are aware of this, which often results in them discounting items,
they are not currently managing their inventory and supply chains in order to
ensure the right number of garments are produced that can be sold by the
‘sell-by date’. Grier adds: “Sales should be based on promotion and not on
clearance.”
The
future of the factory
In the creation of microfactories, two areas of the supply
chain that have been very separate for the majority of the industry’s history
are united: “Colouration has been separated from cutting and sewing for so long
that they don’t have an understanding of it,” Grier comments.
This poses a big challenge to manufacturers or brands that
implement microfactories as processes are being connected that haven’t had to
interact with one another before. And, connection between the textile
manufacturing element of the supply chain and the apparel manufacturing element
is not the only communication problem. The design process needs to better
involve information from the manufacturing process as well. Grier says: “Up
until the middle of last year, not one design software available could see
directly into a RIP [raster image processor, which interprets and renders a
design into a pattern of dots for digital printing].”
Technology also clearly needs to advance to achieve the
seamless production processes that the implementation of microfactories require
to be successful. With the concept of microfactories at the distribution
centre, responsibility for investment could finally be brought to the table of
those that hold the most capital for investment, the brands.
Monday, April 2, 2018
Principle 7: Retail Profit is Based on Cost per Units Sold NOT Cost per Unit Made
The New Sourcing Paradigm "Demand and Supply" NOT "Supply and Demand"
What is the future of apparel marketing
and manufacturing in the digital age? Where is the solution to the loss of over
97% of jobs in one of the countries largest manufacturing sectors? It’s obvious after decades of “Buy American”
political platitudes, questionable sourcing promises and bogus promotions, that
the answer has evaded the current establishment. In fact, importing overseas manufactured
apparel continues to increase and U.S. retail sales are up, so what could be
wrong with this picture? This makes no
sense, how can sales be up yet, retail stores are closing at record rates? The popular answer is to blame on-line sales
even though they represent only about 15% of sales. Article after article on the “retail
apocalypse” blames the demise of malls and traditional retail on the impact of
on-line purchases but if sales are hitting records how can stores be failing. Blaming online sales for this situation,
simply ignores the glut of excess inventory caused by the pursuit of lower cost
of goods in an economically unsustainable sourcing system.
Inventory Kills Profit
Although supply versus demand may
be a viable predictor of future economic sourcing trends it is no longer a
viable maxim for predicting profits. Citing
mass production efficiencies and negotiating a requirement for lower costs to
support profit projections, is old school logic with disastrous results. The disconnect between sourcing and selling
causes merchandisers have to compensate with excessive retail pricing markups,
to allow for the deep discount clearance sales required to clear the excess
inventory. The systemic problem is maintaining any retail margin, since according
to Accelerated Analytics, less than 25% of the inventory is actually
sold at the retail price. When wholesale
buying decisions have to be made and financed months in advance the odds of
matching inventory to sales are not good.
When you factor in inventory multipliers like color, print and size variables
the chances of selling out an entire line of apparel at the projected profit are
probably only slightly better than actually winning the lottery.
Fix the System
The greatest difficulty in the world is not
for people to accept new ideas, but to make them forget about old ideas
—
John Maynard Keynes
Every day new “next big ideas” are touted as the biggest
opportunity to capture the future. Most
of the time this brilliant break through is tied to a stratospheric idea like
cell regeneration or artificial intelligence.
This future enterprise is soul stirring and often wallet building for
the one-percent club, but it does little today for building the working base of
our economy. Jobs in today’s economy
have been under assault by big business for years through the constant pursuit
of bigger and bigger market share and market sector competitive control. The top financial tier’s rationalization of ambition
as an acceptable definition of greed has exacerbated the divide between Wall
Street and Main Street.
Big business and big finance have made a huge error that
ultimately could swing control back to local entrepreneurs and domestic
manufacturing. That error of cost based leveraging
of mass manufacturing is almost totally dependent on business’s outdated concept
of the industrial revolution. The out
dated maxim that if you can make it cheaper based on efficient mass production and
the belief that the market will always expand to match production is over. Today’s version of market expansion is to make
it cheap and discount the price to create perceived consumer value. Ultimately this strategy erodes profits and
creates waste. The retail truth is
discounts raise sales but lower profits, higher sales at lower profit directly
affect store operating margins and eventually close stores. Sooner or later, less selling locations causes
lower volumes and drives up manufacturing costs. This trend looses jobs and further inhibits
bringing back manufacturing.
Consumers are Driving a Paradigm Change
Article after article reinforces the
change that a consumer driven formula of product/value is replacing the risky merchandising
formula of price/value. As consumer’s
closets fill up from sale priced deals, product selectivity replaces price seduction
and value shifts from price to product.
This shift in consumer purchasing paradigm is shifting the sourcing
model to smaller orders and faster style shifts. Why should a shopper search
their local store when the entire product universe is available online?
Ultimately, this merchandising shift is further accelerated by the speed and
selection offered on line. The path of
change is defined by the statistics that illuminate the decision to buy process
for consumers. Although consumers still purchase about 85% of their apparel in
stores and only about 15% online, the decision on where and what to purchase is
influenced by a web search over 80% of the time, a trend that is growing every
year. This multi-channel purchase approach
forces retailers to offer greater choice, theoretically increasing the number
of SKU’s in the store’s floor space.
Retailers and brands that still buy based on the mass production
principle of “volume = lower cost” are doomed to a “buy-stock-discount-dump” merchandising
cycle. Current strategies of “lean” inventory
volume or selection are just band-aids since the influence of online choice
continues to expand. Under the current
structure of mass manufacturing, reducing inventory volume increases production
cost and increasing inventory choice can explode the pre-manufacturing and
merchandising costs and drive higher manufacturing contract minimums.
Finding a Profit Sustainable Solution
Is there a “silver bullet”? Sure,
there is always a silver bullet, solution.
The trouble is that everyone’s definition of their silver bullet is in
the mind of the beholder. However, there
is one common denominator that seems to meet the definition of a solution that
spans the economic goals of both Wall Street and Main Street. That common goal is sustainable profits. Years of experience and leadership
responsibility have taught me that the simplest path to a common goal is to
find the intersection of common tasks.
Reviewing the paths of retail stores, apparel brands and product
manufacturing the task intersection required by all three is the holding of
inventory. So what happens if we get rid
of the common requirement of holding inventory, does this create profits? What if every product manufactured was
already sold? What if every product a
retailer sold was replaced in real-time from a virtual inventory instead of
warehouse full of mass produced apparel ordered months in advance, financed by
factors and ultimately sold at discount or dumped in a landfill.
The Profit Guarantee of the Virtual Inventory
Selling, ordering, manufacturing and fulfilling orders in
real time from a digital SKU in a Virtual Inventory (VI) is no longer a
technological reach. We can now design,
visualize, color, customize, sell, pick, produce and fulfill in hours or days
depending on the SKU. AM4U and its
predecessors have spent 18 years and millions of dollars learning how to
design, build and integrate demand factories capable of producing finished permanently
colored apparel from a roll of greige fabric in just hours. These Integrated Micro-Factories (IMF’s) use
a customer’s purchase information to pull a digital SKU from a VI cloud and
convert binary code into a finished custom retail apparel garment that matches
the shopper’s selection.
Applications for Increased Retail Profits from Virtual Inventory
The Virtual Inventory dramatically affects the profits of
all three tiers of the supply chain. The
Manufacturer sells and ships everything he makes, the Brand gets full mark-up
and avoids tariffs and warehouse charges and the Retailer sells more goods at
full price. Here are examples of the
impact at the manufacturing, brand and consumer retail levels. Each tier of the sourcing and merchandising
path has multiple concurrent strategies that can be used to balance production and
to optimize profits for manufacturing and integrate multiple merchandising
paths for brands and retail.
Integrated Micro Factory Income/Profit Applications
Each of the four basic production strategies creates a
different balance between volume and income.
This is because of the variation in production speeds for each
station. Balancing the productivity of
the stations is a critical factor in optimizing both operational cost and
maintaining customer deadlines. Once the
SKU is selected from the VI the digital printers and the heat press stations
can produce the highest volume while the cutting and sewing stations produce
the lowest volume per hour but the highest value added per unit.
Self Branded Online Sales
The highest profit application of the VI in
manufacturing is self branded online sales, however this is also the highest
risk application since it requires a manufacturing entity to design, market and
fulfill it’s own product line. These
skills, cost and risk are not usually core capabilities of a production facility.
Purchase Activated Manufactured Product Fulfillment
Partnering with an established product marketer in
the retail and/or the online selling space can reduce risk and cost while
increasing profit substantially. Care is
required to maintain silhouette discipline and to adopt other longer lead or
partial production products to level the demand on internal sewing assets. This relationship is a true profit sharing
agreement with the marketing partner because of assurance of sell-through at
retail price since the manufacturer is only producing pre sold product. Two of the best apparel products to start are
fast food uniforms and athletic wear.
Roll 2 Roll Demand Fabric
This application is most often used to balance the
load between coloring and cut/sewing.
The profit available is determined by the speed differential between the
digital coloring station and production’s cut and sew stations. Since the speed and labor cost of fabric
coloring using digital technology is continuing to improve the disparity
between digital print and dye productivity and the productivity of custom
cutting and sewing continues to be a major roadblock to full purchase activated
integration. The most successful
strategy to capitalize on this growing speed gap is to focus the additional
productivity of the coloration station by producing printed fabric for
traditional cut and sew contractors.
These contractors will increase their income by providing their clients
with higher quality prints with no required minimums or expensive setup
charges. Since this service has more
flexible deadlines that one-off pre-paid production it can be used to balance
the production stations in the micro-factory.
Even though the profit level difference between PAM and demand fabric is
often eight times higher for PAM the volume for demand roll 2 roll can produce
income to at least cover operations and G&A costs.
Wholesale Demand Replenishment
This income stream is the ultimate Demand Sourcing
strategy, it is also the most difficult to employ. Demand replenishment is the real time
production of finished goods based on actual sales transactions at retail and
online outlets. Daily production is
based on the quantity and velocity of goods needed to maintain the Days of
Supply (DOS) projected by the retail customer.
This strategy is most effectively employed at the brand level or at
retail and online sellers that can make consolidated daily inventory
projections. The biggest risk in this
income source is the accuracy of the POS data that drives the calculation of
the DOS daily production. The key to
deploying this strategy is to build from a single cut pattern that depends on
decoration to define customer value.
Licensed character products like children’s pajamas and entertainment
promotional item are a good place to start.
The value of this strategy is the ability of digital production to
change prints on the fly to support hot items or change slow movers to a new
image with out dumping non-selling conventional overproduction.
Demand Sourcing Brand Profit Applications
Brand level demand strategies are designed increase the
percentage of sell through by creating a vertical control path between the
retailer and the manufacturer or the consumer and the brand acting as a
retailer. These strategies free the
brand to design and test many different prints and colors without risk. The brand can also offer the retailer a
number of high profit low risk “store within a store” options like the Endless
Aisle.
Brand Store Demand Replenishment
True Brand stores and Factory Outlet locations have
the advantage of levels of operational control and reporting transparency. This relationship can provide some measure of
real time inventory management, the key ingredient for Demand Sourcing. With some brands these locations are the
perfect site for on site customizing with Direct-to-Garment (DTG) printing.
Purchase Activated Direct Online Sales
Brand operated online sites which are now often used
to clear excess inventory are much more profitable as custom fitted and custom
decorated consumer sites. They can also
be used to reality test new products and designs using actual consumer
transactions to measure sales potential.
Using a Virtual Inventory to support this site and products removes the
risk and cost of development and preproduction costs and minimums.
Wholesale Demand Replenishment
Demand replenishment of the brand’s retail locations
allows a number of new relationships to be developed. One such contractual change is the a “Style
purchase” contract which allows the retailer to change the decoration and color
of a product that is not selling while still offering the entire style
selection on line or through the “Endless Aisle”. The Style contract take advantage of digital
printing’s key opportunity, the ability to change colors and designs on the
fly. The Style contract limits the pattern
to the cuts and grades in production but allows for real time changes in print
or colors based on POS results. Currently the biggest risk to DR is the
inability of retailers to collect and report daily sales by SKU and to predict
DOS and style corrections based on actual sales. Brand verticality and POS data consolidation
and prediction algorithms in PLM software can resolve this risk. Style contract integrated with real time
product sales history can optimize individual store offerings to fit local
demand.
Demand Sourcing Consumer Sales Profit Applications
Purchase Activated Manufacturing (PAM) and POS based Demand Replenishment
(DR) can replace risky single mass purchase forecast based sourcing for high-risk
print based apparel. Now that the
technology is in place and production ready the missing piece to working demand
sourcing is consolidated daily POS reporting.
The addition of sales DOS algorithms to PLM software can add this
missing piece. Demand Sourcing allows
retailers to efficiently focus on customer product value by offering unlimited
choice and/or personal customization.
Demand Replenishment
The demand replenishment strategy allows retailers
and online sellers to use actual sales data to establish a product life path
for each SKU. By using algorithms based on
test market and actual sales. Weekly
replenishment allows for constant adjustment and even product revision or
replacement. The sourcing team becomes
much more of an inventory manager than a purchase negotiator. The ultimate goal of “Never overstocked and
never out of stock” becomes a retail reality.
Purchase Activated Direct Online Sales
Purchase Activated Manufacturing (PAM) is an
integrated sourcing and merchandising strategy that allows retailers to compete
with online sellers with the advantage of previous live personal contact and
huge virtual inventories. Retailers are able to offer customized and personally
fitted product with almost no inventory risk as compared to online only stores
which can face up to a 35% return rate.
Since retailers can establish a customer’s previous in store try-on
purchase record they can customize previous purchases to new colors or prints
or use sizes to offer new product to member customers.
The “Endless Aisle” Merchandising Solution
The “endless aisle” (EA) is a term for the
integration of the Virtual Inventory with consumer merchandising. In an EA scenario the consumer can directly
pick and customize product in a 3D/360° visualization from a vast inventory of production ready
products stored in digital form. To
simplify the scale of this concept think of a hundred thousand square foot
warehouse packed with apparel that can be digitally replicated on your
laptop. The EA cannot stand alone, it
only functions if the VI is directly linked to a PAM factory that can produce
and fulfill the consumer’s purchase on demand. The EA however has the advantage
of both a physical in store consumer experience for local shoppers and an unlimited
online choice for remote shoppers anywhere on the Internet. Boutiques and store-within-a-store specialty
retailers depend on consumer loyalty to produce the repeat customers they need
to exist. The ability of the EA to provide choice and personal experience can
ultimately be used to morph the virtual inventory into a personally tailored
set of custom choices for each store patron.
Summary
These sustainable profit strategies
allow retailers and brands to compete in the world wide market while retaining the advantage
of the customer reach in their geographic location. These strategies require a level of
cross-functional integration that is not currently the norm in most retail
organizations, therefore it is recommended that the implementation should be
specific to product lines that have the highest history of clearance discounts
or overstock risk. Many brands and
retailers have tried to implement programs using digital printing or visual
design software without complete integration of merchandising and sourcing so
far most have been spectacularly unsuccessful.
AM4U has spent almost twenty years and millions of dollars developing
the integration bridges, physical equipment and factory trials that have
allowed us to experience most of the roadblocks and incorporate most of the
successes of the Demand Revolution. We
are available to share that knowledge at bgrier@am4u.com.
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