Principle 6: Building A True Demand Manufacturing Factory

Manufacturing Capacity is Set by Distribution Path

There are specific differences between a demand manufacturing plant and a traditional assembly line mass manufacturing plant. The primary profit approaches are very different. A demand plant is built to deliver product from a virtual inventory and to assure a profit by replacing product that is presold at retail price, preventing clearance dumping. In mass manufacturing the buyer produces profit by leveraging the cost through volume and manufacturing efficiency.  The basic personnel organization of the demand plant is in integrated independent modules that move product traffic through a series of control and quality check points. The mass manufacturing plant, on the other hand, produces a continuous line of production ending in the final inspection of a finished product.  In demand manufacturing the emphasis is on individually addressable accuracy instead of common factor volume efficiency.

Product Discipline

After over twenty years of experience and many painful learning moments the AM4U team has generated a flexible blueprint for true demand production. For years the apparel industry product design has been limited by the cost and risk of decoration because of the minimums and technology of traditional printing and dying.  New technologies like Direct-to-Garment (DTG) and Active Tunnel Infusion (ATI) have enhanced digital printing and dying to virtually remove minimums and time to market risks, enabling unlimited apparel decoration. This ability to print or dye whatever and wherever the designer wants reduces sew in colors and can create thousands of designs from the same blank silhouette or common print.

Silhouette discipline can help with easier adoption of demand manufacturing
changes by limiting the number of pattern and sewing issues and expanding
the opportunities for print and color designs that can be tested without risk.

One of the first rules in designing a demand facility is to understand the range of items each production line is expected to customize on demand. The ability to customize on the fly does not open the opportunity to re-purpose production from shoes to dresses for instance but the modular station structure does allows for the ability to use common functions to create a custom product path.  The demand product path and its modular station structure allow ultimate flexibility to adapt to changing demand volume and customize a range of generic product production; however, product silhouette/print discipline is a fundamental key to quality assurance. The production paths below illustrate this inherent flexibility.

Production Flexibility

This ability to rapidly adapt to changes in specific product demand or product category addresses the key structural danger inherent in demand manufacturing.  Since every level of production ultimately depends on consumer demand the structure of the factory must embrace the peaks and valleys of production at a capital equipment and personnel level.  During the research and design period of our development of a fully integrated PAM site we anticipated the possibility of personnel flex based on demand cycles, however the flexibility required after we began actual production required significant additional creativity. It took years of adjustment and trial and error to develop the structure, technology and techniques to deal with the new challenges of leaving the production schedule in the hands of the consumer.  The critical requirements needed for multi dimensional flexibility described in the next pages will provide a path through the minefield that transforms high risk forecast driven mass manufacturing into a high profit, virtual inventory, purchase activated system.

Critical Requirement One: Flexible Coloring Technology

The single most important technology requirement is shifting the sampling and production coloration from traditional mass production spot color to modern digital process color.  Mass production requires the man hours and cost of color separations, custom color mix, dip approval, screen making, registration, and production printing and drying, which, cannot match the change-on-the-fly instant capability to change the print and colors on a digital printing unit.  

Rotary Screen Presses require color separation, special ink mixes, individual
ink mixes for each color, screens are then constructed and installed, then
registered.  Fabric is then printed in repeat based on cylinder size.  When
complete the press is broken down cleaned and the process repeated.

The textile industry and it’s research organizations focus on tuning old technology and the time and money they have wasted on mass spot coloration has blocked much of the integration required for change-on-the-fly coloration.  If they had spent one percent of those resources on process color we would be changing colors and prints on the fly just like the color printer on your desk.  Digital process color printing, like the printing units that businesses use every day, operates with four or six fixed colors and creates color by adjusting the density of the dots of each color.  The variations in density allow your eyes to process different colors from the reflections of light from the different concentrations of dots.  This is how everything from magazines to labels are printed today it is even how your television and smart phone send you images. The problem is this is not how 99% of apparel is colored today, that process hasn’t changed in hundreds of years.  Digital process color can remove the pre press costs and press preparation labor as well as post-printing cleanup. Process color can make a significant difference in throughput capacity as well as cutting and sewing time.  For instance, digital process color can reduce the number of pieces and seams and sewing steps because colors could now be printed in rather than cut and sewn-in.  In addition the ability to change-on-the-fly reduced the employee headcount and the production waste to a minimum. Financially, the impact of producing daily inventory matching demand created weekly billing and a steady stream of cash flow from customers.  One method of balancing the workflow was to create a second stream of income by producing a house brand product for direct consumer orders and capturing retail income for a flexible shift of B2C online business.  This second channel requires a merchandising staff and may require extra head count in the fulfillment section.  A secondary e-tail channel should only be attempted if the demand facility is linked with an online marketing service and product graphics sources.

Digital inkjet have great versatility to print on fabric, donor paper for sublimation
and even directly on shoes and other accessories.  They change colors on the fly
and can have a color pallet of millions of colors.

Other technologies like optical recognition cutting, piece and automated garment handling systems are important but change-on-the-fly digital coloration is the primary technology adoption that enables a virtual inventory and the associated increase in profits.  The shift to process color is will be very difficult, there is hundreds of years of “we do it this way” mentality to overcome, in addition retraining separators, screen makers, printers, designers and merchandisers to a new more efficient streamlined system will encounter more gate keepers, rules, resistance and more delays than getting a five year old to eat their veggies.  In addition to these roadblocks the performance and color durability test procedures designed by the current authorities are not designed to evaluate, support and create care labels for process color and there seems to be little interest in change.

This is a detailed list of the prep and labor actions that drive print providers to
charge surcharges or require minimums.  Ultimately causing clearances
and dumping losses and operating funds risks for retail and brands.

Critical Requirement Two: Accurate and Timely POS Data

Since there is no demand manufacturing without demand, it is critical for manufacturing to have direct access to consolidated POS data.  This data needs to include distribution path protocols and transit times as well as status of retail on hand sales inventory.  One of the biggest problems with demand manufacturing becoming a reliable source for retail replenishment is POS systems that do not consolidate and order in real time.  The speed and accuracy of inventory movement data is a basic component of building an effective and efficient virtual inventory.  Knowing the characteristics and trends of a products movement is critical to establishing a safe and appropriate on hand inventory and a consolidated Days-of-Supply (DOS) for production scheduling.  Product movement mapping is critical for manufacturing and distribution scheduling, as well as establishing on-hand DOS inventory safety levels at every product movement stop between raw materials sourcing and final customer fulfillment.

Logistics Track

Working backward from the retail consumer transaction POS data is used to build two integrated tracks of information.  The first and critical short-term track is logistics.  This track controls, distribution and transportation in the traditional mass manufacturing structure, however; in a demand structure with a virtual inventory the purchase information actually drives the real time manufacturing of the product and all the associated generic stock unit (GSU) inventory levels and supplies.  The critical accuracy of this information and its timely processing and consolidation will determine everything from manufacturing error rates to the matching of on hand inventory with actual product movement and retail profits.  Expanding current ERP, PLM and EDI capabilities will determine the scope of change and retail recovery over the next few years.

Forecast Track

The second track for POS information is planning.  This track is less immediate but just as important for long term profitability.  The difference between a planning track and a traditional forecasting track is mostly about extending real transactional information as a planning tool versus using associated trend projections as a planning tool.  Forecast models in DM are built on formulas derived and populated with actual sale information.  These extensions include details like sizes and search information as well as micro merchandising preference projections.  Demand assumptions are based on much smaller purchase populations when you are operating from a virtual inventory in a DR or PAM environment.  Forecasting will not disappear but it will be reduced in importance as an actual ordering and financing tool. This occurs because of two factors; first the ability to test market real product in real sales transactions is available through PAM and the customizability of a virtual inventory.  Products and trends can therefore be pretested in store or online without the cost of minimums and with the ability to tweak designs on the fly.  Second, the time from manufacturing order to retail sale can be reduced to ten days or less without minimums or large order stocking requirements.  

Currently apparel retailers are averaging selling
about 27% of a products on hand inventory before
clearance pricing begins.  The inventory glut discount robs
their transactions of the after COGS profits
needed to operate their stores.

 This significantly reduces the risk of overstock or under stock which trend forecasting was supposed to predict but, long manufacturing lead times and the additional inventory cost of short adjustment runs has made forecasting a tool to only predict trends but not to set inventory levels. This was further exacerbated by the focus of software producers on reducing the time of design through sophisticated pattern and 3D visualization software.  This availability of fast product development seduced brands and retailers into more offerings produced through the old mass production system.  This glut of product choice without the development of virtual inventories has constipated the retail track, which is forced to sell more products at greater discounts.  This increase in sales without corresponding profits has created an unsustainable retail environment resulting in todays cascade of retail failures.  Monthly apparel sales data from www.acceleratedanalytics.com shows retail sales volume up year over year in August 2017 while clearance sales of price reduced inventory drive gross profits down below sustainable operating cost levels.  

Critical Requirement Three: Strategic Physical Structure

The third critical level of flexibility is the manufacturing structure.  The assembly path of the product defines most manufacturing layouts.  In demand manufacturing the assembly path is a major factor but the quality control system is an equally important design requirement.  The importance of efficient quality management is simple math.  A production error in mass manufacturing when the minimum is 3,000 is an acceptable 03% error rate, but when the minimum is one, any error is a 100% error rate.  It’s important to remember there are no “production seconds” in Purchase Activated Manufacturing (PAM).  An efficient assembly path and no product quality rejections define manufacturing efficiency equally.

AM4U developed a team quality control system, which combined assembly path “stations” with quality oversight to produce an efficient and accurate production model. The product and the physical surrounding structure influence all manufacturing layouts and training, but the essential difference between mass and unit production must be designed into the production structure of the factory or the outcome will not be sustainable.  Further detail of the “station” production structure, technology and training will be discussed in Principle 10. “Total Quality Manufacturing Depends on Team Building”.

Setting the Production Output

To be successful, Purchase Activated Manufacturing (PAM) for the individual consumer and Demand Replenishment (DR) for wholesale inventory replenishment depends on one key feature, delivery on time.  Sustained quality delivery depends on detailed prior planning and timely accurate purchase information.  In this section the focus will be on the elements of planning and startup.

Planning starts with the marketing plan instead of the traditional business plan.  This sequence is crucial because almost all the decisions about cost, timelines and production are driven by demand.   Establishing a consistent demand structure is critical to a stable manufacturing structure.  Dramatic changes in demand cause dramatic changes in workload and efficiency.  Fluctuations in demand will affect the manning table directly and the sewing module specifically.  Mixing the customer base with both PAM and DR orders allows for the continuous employment of quality sewing in both modular and progressive sewing production lines.  Modular (sample sewing level) skills are more expensive and are usually required for PAM production, but since PAM sales are retail direct-to-consumer they produce a much higher profit margin that absorbs the higher labor cost.  Progressive sewing lines are used to produce DR products at higher volumes, but at lower wholesale price levels.  Progressive sewing skills are determined by machine type and are task specific, and increased volume at lower labor costs offsets income per unit that is significantly lower.  Factory scale is set by balancing enough digital output of parts in one day to match 2-4 days of output in sewing and fulfillment.  The line personnel ratio is 5 in digital production (coloring, printing, cutting) to 11 in sewing (8 progressive, 3 modular) and 3 Supervisors (Station Manager Digital, Station Manager Sewing and Fulfillment, Production Mgr.) total 19 employees per production line.  Production of standard woman’s leggings per 8hr shift is DR 125-150 and PAM 45-55. Since the digital stations are capable of producing up to1000 individual custom leggings unit bundles per 8-hour shift the total production of the integrated mini factory is based primarily on the number of sewing lines.  This is a standard DR/PAM configuration there are a number of variations like manual cutting, piece drops, outside sewing contracting that AM4U staff tested with varying benefits and results.

The Starting Point

Because this is demand manufacturing not traditional capital intensive mass manufacturing the starting point is a single manufacturing line.  One of the differences between a demand plant and a traditional plant is the agility of the capital equipment.  With the exception of a few pieces of dedicated equipment (like specialized sewing machines) all the manufacturing machines and software are capable of change-on-the-fly task orientation.  This means that the capital equipment outlay and footprint specifications for a complete Integrated Mini-Factory (IMF) are a fixed cost no matter what the product offering.  For instance an IMF to demand manufacture fashion dresses is the same cost as an IMF that makes bicycle clothing.  This feature makes the starting point for building a DR and PAM capability and the resulting profit from a Virtual Inventory tied more to the demand level of the marketing plan than the traditional cost and projections of a traditional business plan.  The IMF is constructed based on actual demand and the scaled by adding appropriate modules based on actual purchase volume.  Each independent module can be tasked to produce a different product or can be attached to a different line to support a spike in demand or a technical interruption in production.

Building the Key Modules

Construction of the Customer Demand and Digital Production modules is a function of identifying and connecting tasks by priority.  For instance, not all of the functions listed in the Consumer Demand Module are required to complete Level 1, Catalog Level, of the Micro Merchandising Plan detailed in Principle Three.  Based on the overall marketing plan the acquisition of functions is a progression based on growth.  Some functions and acquisitions shown in red are critical to the initial planning.  By looking at the entire list however, planners can avoid costly back tracking as they progress to level 3, the Individualization Level or the highest merchandising profit level.

The Consumer Demand Module

The Consumer/Buyer module is the source of the demand information that drives the entire IMF.  The accurate and seamless functioning of SKU, volume, schedule and location information will determine the success of the entire system.  Managing information and graphics from diverse retail ordering systems is the most critical and difficult transition point in adoption of demand manufacturing.

Some brand and retail gatekeepers will use color matching
to resist changes to their current seasonal order routines. 
Establishing an initial color match can help reduce
friction to change.

One shortcut that has worked in the past is to work with brands to identify which fabric, design and garments they want pick to begin building the catalog.  Establishing this color and image base allows the manufacturing module to deal with the inevitable little disconnects that occur during startups. Watercolor Flamingo below is an example of the extension of a print and design across a number of garment and fabrics. 

This approach allows POS and buying functions to sync with virtual inventory, scheduling, production and fulfillment to establish efficiency and confidence in a Demand Replenishment (DR) system.

The Digital Production Module

The Production Module is the most difficult to build, because the development of the equipment and expertise has occurred without any cross pollination of overall direction.  For instance the inkjet companies are not concerned with dot gain and situation because their profit comes from selling ink.  The digital design companies are not concerned with feeding the RIP which translates their visual RGB color into printable CMYK color a key component of color matching.  Remember the single overall goal is a working Virtual Inventory, if any vendor or “expert” does not understand that… find someone else!

Taking full advantage of the Virtual Inventory and Digital Demand production still takes some graphics skills in the conversion of design files to printable nested garment layouts.  However, once the graded parts outlines are nested the task of filling with different prints and colors and storing the SKU in the virtual Inventory  is not difficult.  Finding a SKU in the inventory for production can be difficult if you have not established a uniform naming convention in advance.  Just for reference the normal physical to digital inventory comparison is 1TB of digital equals a full 100,000 sq. ft. warehouse of finished apparel inventory.  A key shortcut for building an efficient and accurate virtual inventory is to build a least one white version of every new SKU and size to check the Tekpak and fit before filling the digital version with color and print designs.

Key Planning Questions

What are you making?

Manufacturing scale, path and fulfillment speed is a function of product type, customer interface and distribution lead-time.  Over the years AM4U has developed a dynamic model that calculates capital cost (purchase or lease), manning table, break-even, and profitability risk based on daily projected capacities, sell-through and fulfillment/distribution speeds for different apparel products.  Once you determine what your primary product will be and the secondary products that the production technology and marketing synergy can support the model is easy load.  The process flexibility of virtual inventory, process color and digital cutting allows wide, no minimum, product selection in the fast section of production.  The slower task and machine specific sewing and finishing sections can be fed from a hub of coloration and cutting.  Matching the output per shift of the faster coloration and cutting modules with the slower sewing and fulfillment modules sets the production integration levels between modules. The fixed capital, materials and labor cost of the coloration and cutting modules compared with the variable capital and labor costs of the sewing and finishing modules makes the gross profit and delivery calculation for each order easy to compute, quote and schedule. 

Who are you selling to and How are you selling?

Integrating the production planning with both promotional PAM merchandising and seasonal DR retail customer promotions can both level production and sustained growth.  Balancing planning for hot PAM selling periods like Mother’s Day, Christmas or “back to school” when selling direct to the consumer may require additional personnel, first in fulfillment and finishing and then in the sewing module.  When scheduling overlapping PAM and DR a key feature of planning manufacturing volume based scheduling is the seamless transition between the production period required for DR distribution to retail customers (3-5 weeks) and the production lead times (5-10 days) for PAM orders.  This DR lead time allows part time and/or overtime employees to have the highest level experience and cross-training competence when individual and rush orders arrive.

Summary

In short, virtual inventory demand manufacturing integrates retail, brand and manufacturer growth and profit goal into one unified plan.  High profit Integrated Mini-Factories (IMF’s) using clean digital coloration and cutting while pulling product from vast virtual inventories is available today.  Brands are already feeling the pressure retailer’s are feeling today from the unsustainable pursuit of profit through volume leverage versus customer valued product customization and clean manufacturing.  Integrated Mini-factories will impact the apparel and textile segment just like micro brewers and vintners are impacting the beer and wine market.  

AM4U has spent the dollars and time to build the bridges, techniques and technology required to integrate visual design, digital merchandising, virtual inventories, demand driven production, and real time testing of the critical concepts of PAM and DR integrated factories.  

E-mail me at “bgrier@am4u.com” and we will help you test demand manufacturing for yourself.

Five Real Reasons Retailers are Failing

The Retail Collapse is Really Just Suicide

While the business pundits and politicians blame the Internet and foreign competition. American retailers just keep loading the gun, spinning the cylinder and pulling the trigger. Sure, online sales are increasing, but they are only about 10% of consumer transactions.  The real problem is retailers and brands have crawled in a corner and shot themselves in the wallet.  Here are five of the bullets that are aimed at the retail and brand market.  They must stop spinning the cylinder and playing the bad odds or a major segment of the economy will collapse.

 Dependence on Malls for Store Traffic

Bullet one impacting store closings is dependence on common mall locations from anchors like Sears, J.C. Penney and Macy’s and specialty stores like; The Limited, Wet Seal, Bebe, BCBG, Guess, Crocs and many more. For years, malls brought shoppers together for a social experience. They were more than commerce centers they were social hubs for seeing friends, planning weekends and sharing experiences.  All interactions that now are more efficient and personal on social media.  Losing this segment of social traffic and the attached peer pressure to purchase left many retailers and brand outlets without the store traffic they depended on to support impulse purchases.  Most malls were not financially prepared to counter this loss of traffic so as the ecosystem collapsed the dependent stores became memories.

It is important to remember that all malls have not suffered this fate some are huge successes and support retailers that have adapted to this new environment.  These sustaining commerce centers fall into two categories.  The entertainment based mall is the most spectacular and although most of the largest are outside the U.S. there are still some impressive examples in the states.  These malls draw with live shows, amusements, rides, giant multi screen cinema complexes and restaurant level food venues.

Another successful model is outdoor shopping centers usually anchored by a superstore like Wal-Mart or chain box store like Home Depot or Lowes.  Non-competing specialty stores or food or service outlets, like fast food franchises and personal services, surround these anchors.

 

Anchor store based mall

 

 Nickelodeon Universe at entertainment based
Mall of America

Stocking by Season Not by Product Movement

One of the technical differences between superstores and traditional department and specialty stores is their buying decision structure.  Most super stores have enough buying leverage to create flexible purchase contracts, which allow them to stock and display product based on consumer purchases derived from their POS data.  Simply put, in superstores consumers drive the product availability.  Many of the retailers currently in trouble still use seasons to drive product stocking.  This is especially true of the apparel sector where stores buy in bulk thinking that lower volume pricing will insure profits. Six to twelve months before every season they spin the cylinder and pull the trigger based on the best possible forecast.  Every retailer believes that they will spin up a winner but there are too many risks loaded and sooner or later the inevitable happens. This outdated forecasting system sourcing leaves retailers with fashion losers, odd sizes and excess merchandise when the next seasonal shipment is on the way.  Discount and clearance sales blow away all the planned profits leaving limited cash to operate the store leading to self inflicted bankruptcy.

Modern POS stocking is an exercise in constant product resetting based on the velocity of consumer product purchase.  Restocking and repositioning are mapped by computer and tied to simple formulas like, “Gross Profit X Inventory turns” product indexes (GPxT=PI).  This index competes with other products in the same category for on-hand inventory, product display position and replenishment orders. This is why many of us have experienced going back to Costco and finding that the product we bought three weeks ago is no longer on the floor. This process creates much less risk of product “backfire” since actual sales drive the inventory not dangerous forecast roulette that blow away profits.

Many of the current and pending retail and brand closures have been caused by self inflicted clearance discounts caused by out dated stocking, antiquated POS systems and seasonal based buying.  Coordinating sales and manufacturing in real time is the path to saving jobs in both manufacturing and retailing.

Discounting Retail’s Omni-Channel Advantages

Omni-channel retailers have a huge selling advantage with consumers.  They can address the customer at every level of value gratification.  With some merchandising restructuring retailers can satisfy instant, delayed and deferred gratification much better than online only stores.

A Touch Screen endless aisle of touch it, feel it, try it choices for the consumer and a virtual inventory with no risk for the retailer and brand.  The consumer can choose fabric, color and print from thousands of virtual SKU's and pick-up in store or ship to home in three days.

First, retailers need to recognize today’s customer is no longer an impulse shopper manipulated by advertising or sales.  According to Forrester Research, over 83% of retail purchases are influenced by information gained online.  This data defines today’s customer not as a traditional shopper but a dedicated searcher.  Retailers without an informative presence on the inter-net cannot compete to satisfy modern consumers.  Web presence only gets retailers the opportunity to compete the real advantage is the physical customer interface.  Touch it, feel it, try it, gives the retail experience depth and value.  The instant gratification of immediate possession only happens at retail.  The delayed gratification of customization and later pickup or home delivery is the most profit making change available to retailers today.  It can be as simple as the custom paint counter at the home center or a custom printed holiday card or even custom dyed, printed and fitted clothing sent to your home or picked up at the store.  Deferred gratification is satisfied, by allowing the customer to create the perfect fit by creating their body avatar at the store and then building a wardrobe around their “digital body” at home.  This technology available today is seen every day on HGTV by custom home decorators to visualize different coverings on furniture in the customer’s home.  For the retailer, selling from a virtual inventory with no stocking cost or risk, retail price and purchase driven production insures a profit in every sale.

Ignoring New Production Coloring Technologies

Removing this bullet is both the most critical to profits and the most difficult to install.  For hundreds if not thousands of years color has been applied to fabric by essentially the same process. First you mix the color of choice, then you apply it to the fabric and then fix the color through heat, steam or drying.  Next, operators prepare for the next job by must carefully cleaning the equipment and then mixing a batch of the next color.  If your printing each color must be separated, mixed to match, burned to a screen, registered to each other and after printing carefully cleaned for the next run.  All of these actions cost the dye and print house time and lost income.  In the end that cost is passed on in the form of sir-charges and minimums preventing the brand or retailer from quick replenishment or custom orders based on actual sales.  This process of individual premixed colors is the single greatest obsolete manufacturing technology causing product risk and excess labor costs.  Separating, printing and/or sewing in dyed or printed colors cost labor time and over production and eventually extended delivery time and inventory risk.

  

Current screen printing requires each color to be separated, mixed to match, burned to a screen, registered to each other and after printing carefully cleaned for the next run.  Screen print is currently over 90% of all printed textile and apparel production.  This mass production technology cripples profits in the garment and textile markets.

 

The irony is that all this time the technology that solves this manufacturing dilemma has been sitting on the desk at your office.  Ever wonder how that desktop printer produces all those colorful charts, slides and pictures, instantly without mixing inks, making screens and time consuming cleanup between each print?  This coloring technology is call “process color” and it has been producing the brilliant colored point-of-purchase and fabric based display art at shows, conferences and stores for years.  The technology and equipment is available today to create the same “change-on-the-fly” pollution free colors and prints on apparel and textiles.  The industry continues to resist while they hope that better data, design and PLM software will save them from over production and the inevitable clearance sale bullet.

Digital process color printing changes on the fly with little or no downtime and produces to match sales without dangerous pollution or separation and screen costs.

Obsolete Merchandising and Sales Methods

 Today many stores operate on a “buyer knows best” merchandising strategy where the brand/store buyer determines what product will be offered to the customer.  This strategy assumes the stores or brands customers all have similar taste and style.  This provider centric strategy is demanded by factors like mass production, long transportation and distribution lead times and dedicated floor space that must be filled.

Making the fundamental change to a customer centric merchandising strategy has baffled most of the retail chains because it requires changing manufacturing, sourcing, real time POS, customer interface and online design.  The customer centric store operates with at least these key customer participation features:

•   Purchase Activated Manufacturing either while-you-wait in the store (Direct-to-Garment) or at touch screen kiosk for unlimited color choice and at home delivery.
•   Optional personal take home avatar for individual fitting at home.
•   Endless aisle touchscreen access to virtual inventory.
•   Sales associate guided product customization.
•  Access to personal closet of previous purchases and product virtual lay-away.
• Automatic POS linked production replenishing actual sales.

All these technologies are available today but retailers shun their use for a myriad of reasons from “wait and see” to “there’s no hope” while continued inaction just spins the cylinder and…

Principle 5: Consumer/Buyer Participation Determines Product Value

Consumer Value Creates Sustainable Profits

Consumer/Buyer Participation Determines Product Value… Direct integration with the consumer/buyer sales offer creates value through participation in product selection and individualization.  Consumers can individualize product and buyers can create/test exclusive and private label apparel without inventory risk.

Product Value

Product value can have a number of different connotations, for instance, product value to a consumer could refer to price, fit, durability, peer aceptance or all of these and more.  Product value to a retailer or a brand often is more related to profits or corporate identity and to a manufacturer the term often refers to profit through ease of production and productivity.  If value relates to all these different propositions then how does consumer/buyer participation impact all these diverse definitions at each level of the supply path. 

Consumer Value

For the consumer the ability to select and customize a product represents the highest level of personal relevance.  That personal attachment translates into a willingness to pay more for the product because the personal value is based on more than price. Even more important, the participation of the consumer indicates exactly what he or she wants to buy and therefore the probability of a final transaction becomes much more reliable.  This ability to shape the product replaces much of the desire to shape the deal in the mind of the consumer creating a much higher attachment to the content of the product rather than just the price.  This identification with the personalized product has both a positive value in the desire to complete the transaction and a negative impact if the product is not readily available.  This need for instant gratification is the weakness of the online sales experience and the strength of the retail experience however, online merchants are way ahead in mitigating this gratification delay by providing instant downloading of products like aps, books and financial services and heavy investment in developing technology to provide quicker physical product delivery.  The ever present downside for both online and retail is; that in order to satisfy this important consumer value proposition the seller must hold greater volumes of inventory in anticipation of the consumer’s desired product features.  The only practical solution to this conundrum is to invest in Purchase Activated Manufacturing (PAM) with it’s integrated virtual inventory.  A virtual inventory is an endless aisle of customizable product held in the digital state and converted to a custom physical product on demand in a Purchase Activated Manufacturing facility.  This facility can be the paint counter at ACE or a direct-to-garment digital printer in a retail store or a production line in the corner of the regional distribution center.

Retailer Value

For the retailer and indirectly the brand the value of consumer participation is simply sustainable profits.  Consumer participation creates higher sell-through of product, which directly raises profits.  Selling higher percentage of on-hand inventory helps produce higher profits for the entire supply chain because, it reduces unsold inventory the single greatest profit killer in retailing.

Based on 6000 units, Landed Duty Paid cost $18, Retail price $45, Sell through and markdowns based on current U.S. women's retail apparel averages.

Retailers and brands need to remember that the funds they leveraged and paid  for unsold product is by far the most expensive funds they risk whether the funds are borrowed or advanced, selling one to pay for three is an unsustainable proposition.  When sell through averages only 28.5% of on-hand inventory (according to Accelerated Analytics, Inc. POS data), discounts to clear inventory wreck profits.  The search for lower labor prices and the adoption of time-to-market design software create more inventory and only make this problem more expensive and more of a death sentence.  

Summary: Participation = Value = Profits

Focusing product decisions on the consumer with active cunsumer participation allows a retailer, e-tailer or brand to work from realtime trend data instead of forecasts that hope to predict trends a year in advance.  Using real time sales data and demand replenisment, retailers can tweak product and designers can use today’s 3D design platforms to feed a virtual inventory and PAM production with time-to-purchase restocking of 10 days or less.  This strategy reduces unsold product losses and creates customer loyalty while insuring sustainable profits.

The New Era of Searchers vs. Shoppers

What is the difference between today’s consumer and buyer and the consumers and buyers of the past.  The quick answer, assumed by the pundits and today’s failing retailers, is that every consumer and B2B buyer is shopping on line.  Yet by far the bulk of apparel actual sales still occur in a retail store.  The origin of this misconception/excuse is rooted in two key facts about the consumer purchasing experience.  First, according to Forrester Research, Inc. well over half of the retail  apparel purchases are influenced by online information and second the “social” traffic that used to be automatic at the mall has been replaced by social interactions online.  In short visiting with your friends is a lot easier online in a virtual world of social media than the real world of crusing the mall.

Based on this data and the reality of hundreds of specialty apparel retailers circling the drain, it’s time to redefine the apparel consumer.  We are no longer dealing with a shopper but rather today’s consumer is a searcher.  The ineffecient “mall crawl” has been replace by meta data and cookies the help explore the vast inventory of the internet.  These searchers are no longer limited by location or local culture they can explore product from all over the world while floating down an “amazonian” river or trekking through “googleland”.

Today’s retail store buyer has an even more complex reencarnation.  With the advent of the UPC code and more recently the RFID tag, stores are capable of mapping their floorspace and tracking product purchases in real time.  Today’s buyer can get daily reports from store operations and know product successes failures in as they happen.  Even though, buyers may get the data to know what’s happening, there is little they can do except reducing price to drive sales.  Reducing prices drives “deal” shopping and ultimatley kills profits needed for store operations leading to layoffs and closings.  For buyers and merchandisers the dream state is, “never out of stock, never over stock”.  Getting to that state requires unique product and flexable contracts that are tied to actual sales.  The ability to create custom product with supply fexibility and weekly varible shipping that can support retail searchers and safe product availability sustaining product value and profits.

What’s Next?

How valuable would your smartphone be if you couldn’t choose the apps you wanted?  Would you want paint that wasn’t exactly the color you chose?  What if you could always be sure that the apparel look you wanted was always a perfect fit for your body!

Those three questions represent the three levels of apparel buying consumer participation online or on retail store kiosk.

Level One Virtual Inventory Catalog

Level one is the VI Catalog Level.  Just like the app catalog on your smart phone provides almost unlimited choice of product, an online catalog of apparel choices allows the searching consumer to find their look without hours of shopping.  Pictures of finished apparel usually shown on models and often used to offer unsold or discounted merchandise out of season characterize current catalog page layouts. Catalog level online is a digital version of the old mail order catalog with an online search and purchase twist. These product displays are the easiest to design and update.  This picture or object based format is the most compatible with multiplatform and omni-channel applications.  Catalog page layouts can get highly sophisticated with 3D/360° views, product comparison and magnification flash screens.

Catalog layouts represent product already in inventory and therefore depend on price and features selected by the seller.  Because the inventory is already purchased and in stock the risk of profit loss from further clearance discounts and unsold product is still very real.  This application of digital display technology can create a discount platform and if properly synchronized with social media can drive additional sales volume.  The down side is that since the product represents the seller’s vision to the consumer/buyer the price often becomes the key value criteria.  This price-based value can force discounting of on hand inventory to increase sell-through and in turn drive down profits.

Level One Objectives:

·      Develop a template for the search experience and test consumer use and reaction in store and online.

·      Build a direct HD link to 3D/360° between your design software and the catalog template.

·      Build a direct link to 2D print and piece nests between your design software and the Virtual Inventory server.

·      Build, sample and produce your products in process color.

Level Two Mass Customization

Level Two adds a consumer/buyer Mass Customization features to the catalog.  This user driven configurator software allows the consumer/buyer to change colors and/or prints as well as adding certain embellishments like lettering, edge treatments and embroidery. Although these additions are limited to digitally manufactured choices already prepared and tested they still represent significant customization choices to the consumer/buyer.  The configurator level product offering level can usually be identified by a menu of user driven choices shown in a side panel of the display screen.  This menu can be as simple as “Choose Your Color” or a complex set of colors, fonts and objects.

 

Click the link below to experience EMBODEE's "state-of-the-art" online product customizing.

 EMBODEE GBuilder Configurator

 

Many companies at all levels of the sourcing chain (retail, brand and manufacturing) resist configurator level offerings because their enterprise management software (ERP, PLM, POS etc.) is not agile enough to handle this multi faceted data stream.  Manufacturers are also faced with creating agility in technologies previously dedicated to the efficiency of common product volume.  Because of this resistance many online displays that look like configurators are actually level one search plugins that help the consumer/buyer navigate a large on hand inventory. While this solution provides more choices it may not allow for future upgrades to additional merchandising opportunities.

Level Two Objectives:

·      Find a configurator that places objects in a format compatible with catalog and printer outputs.

·      Produce a HD 3D/360° rendering of the customized garment.

·      Build a search and retrieval system for consumer/buyer designed SKU’s.

·      Create consumer specific personal collections for individuals to reorder or redecorate.

Level Three Contour Fitting

Level three; consumer participation is based on the most important historical value in apparel sales, the individual ultimate value of personal fit.  The ability to tailor clothing to a customer’s body shape has always represented the ultimate value in a personal wardrobe.  The digital capability of creating and grading a garment in real time to the body shape of an individual consumer is the key to insuring sale of apparel at full profit.  A number of technologies in scanning, measurement algorithms and 3D photographic interpretation have been able to produce holographic visually functional models of consumers.  However, creating an accurate 3D measurable and drape ready hologram is only one third of the solution.  The second piece of the solution is a 3D/360° display version of individually fitted apparel that is of sufficient resolution and detail to place in the personal catalog of the customer with the ability to rotate and magnify as well as customize. The last third of the solution is the ability to produce a 2D production pattern, and nested RIP compatible color print file including printable placement of embellishments and accurate working sewing instructions. 

 This early Microsoft Retail scenario demonstrates the ability to capture shapes and visualize products in an Omni-channel experience.

Level Three Objectives:

·      Create individual fitted catalogs for “loyalty premium” consumers.

·      Gather fitting data for specialty micro-sizing of new products.

·      Identify a test market base for future product releases and embellishment choices.

After extensive testing our team has concluded that two companies are at least two-thirds of the way to a full solution but as of mid 2017 no seamless complete software is on the market.  Unfortunately although the current software allows PAM demand manufacturing and mass customization it does not yet support seamless, integrated Level Three, Fitted Purchase Activated Manufacturing.

There is however current technology available that creates the ultimate level of consumer satisfaction and engagement and will support a level of productivity and profit that sustains jobs and domestic manufacturing in this important segment of our economy.

The misguided reluctance and delayed action of the current apparel industry to transition from “supply and demand” to “demand and supply” and to directly link the individual consumer to the final product is the primary cause of today's collapse in apparel and retail jobs.