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Archive for the ‘Apparel’ Category

I have never really given T.J. Maxx much thought. I can’t recall the last time I was in one of their stores, and going to T.J. Maxx has not been an obvious choice to me since I was in high school (and that tells you more about the shopping options in Manchester, NH, in the early 80’s than anything else). But now Fortune has an article singing the praises of T.J. Maxx — or more accurate its parent company TJX, which also owns Marshalls among other retail chains (Is T.J. Maxx the best retail store in the land?, Jul 24). The article is full of all sorts of interesting nuggets (TJX is basically the successor company of Zayre, another retailer from my childhood, who knew?!) as well as laying out seven “secrets” from the company playbook. Some of these are about positioning in the eyes of the customer (e.g., Put real treasure in the treasure hunt) or management talent (Find a CEO who gets retail). But many of their points go right to the stores operations and how it manages its supply chain.

The off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group, according to Morningstar. Indeed, the company is structured to whisk items through its distribution centers and stores—and a lot of items they are: TJX shipped some 2 billion units to its stores in its 2014 fiscal year (which ended on Feb. 1), up from 1.6 billion in fiscal 2010.

Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Sources say items typically go on markdown if the turn rate is slower than about seven weeks, which also contributes to the rapid flow.

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Gustin

One of my favorite topics to teach is the newsvendor problem, an inventory model for very short-lived products like newspapers and fashion goods. One of the points that gets made in that class is that variability is costly. Having to commit resources before knowing what will sell means risk and risk may be a reason not to be in the business. But that risk also suggests an opportunity: If one can find a way to reverse the order of things and commit resources only after knowing what will be demanded, then an otherwise unprofitable business can be a profitable one.

That is essentially the idea behind Gustin, a maker of high-end jeans. It initially sold its jeans trough boutiques, which bought jeans at a wholesale price near $80 but then marked them up to around $200. Gustin had to front all the cost of production and then wait for stuff to sell. Now, they have reversed the order of things and take orders directly from customers ahead of production. As the founders tell it on Marketplace, they have positioned themselves as a totally crowdsourced fashion company (Burning down the house that Levi’s built, Apr 8). You can hear the story here:

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photo-main

“Where does that come from?” sounds like an easy question to answer and at a high level it is. Which car models are produced at which plants is public knowledge so whether your Toyota was built in Kentucky or Alabama is easiest enough to figure out. But if you want to take it to another level — to know where different components came from and where the stuff that goes into the components comes from — is a lot harder. That is the conclusion reached in a blog post on Nautilus (The Secret Life of Everything: Where Your Stuff Comes From, Oct 29). Modern, global supply chains are so far reaching and support so much complexity that transparency (at least to the outside world) is lost.

I’d thought of [supply chains] mostly in terms of delivering Amazon orders and keeping Staples stocked. Those are just endpoints, the final few steps of a waiter carrying a meal on a tray. And what I really didn’t get was that supply chains don’t just carry components and ingredients, but synchronize their movements. Shipping a box of pens to Staples is the obvious part. Coordinating the arrival of barrels, caps, boxes, ink cartridges, and nibs (through which ink flows) at the pen factory—and also metal to the nib factory, oil to the plastics-maker, and so on—is the bulk of what supply chains do, and in the most efficient manner possible, with algorithms optimizing everything from shipping networks to the path of pallets through warehouses, with an eye to what happens when one of these many moving parts goes invariably astray.

The problem then is that unless you pick a real simple product — like a T-shirt — it is pretty much impossible to know where all the components come from and where all the various production steps are executed. NPR’s Planet Money took on this challenge of tracking a T-shirt from cotton field through production and shipping to the disposition of used American clothes in Africa. It’s an eye-opening  picture of global supply chains.

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This blog entry is a direct continuation of Marty’s post on Textiles in America and part of our ongoing posts on reshoring of work.  The New York Times Replica Edition is an exact electronic version of the in-print newspaper where I first saw these two nice pieces of data.  (I LOVE data.  Recall: “In God we trust, all others bring data”–according to quality guru Edward Demming.)

jobs evolution since 1990. (Source: Bureau of Labor Statistics, as reported in New York Times of Sep 20, 2013)

Jobs evolution since 1990.
(Source: Bureau of Labor Statistics, as reported in New York Times of Sep 20, 2013)

This chart provides hard data of the stories often told about job losses.  The huge transformation of textiles and apparel is striking–mind you, the data spans the relative recent 18 years!  I can only imagine the devastating impact to families working in that sector…  From an economic perspective, two key explanatory changes are: 1) offshoring to low cost countries after deregulation and 2) innovation leading to increased automation, and the substitution of capital for labor.  (I purposely use the “big” innovation word; later I shall also write about recent data linking innovation to offshoring.)

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I grew up just outside of Manchester, NH, home of the Amoskeag Manufacturing Company. The Amoskeag was once the biggest cotton textile plant in the world. A couple of my grandparents worked there, but by the time I was growing up, the cotton mills were gone as the textile industry bailed out of New England for the South. The old building on the river were beautiful but also a reminder of what had once been.

Of course, the southern textile industry isn’t what it once was. Many of the mills of the Carolinas closed as liberalized trade allowed the work to go overseas. But, as the New York Times tells it, parts of the industry are hanging on — even expanding (U.S. Textile Plants Return, With Floors Largely Empty of People, Sep 19). It’s just that it has required investing in new technology to reduce the number of hands involved.

This is in many ways in keeping with themes we have discussed before: Manufacturing in high wage countries requires a willingness to substitute capital for labor.

But there is another part as well. There have to be customers that value what the American manufacturer brings to the table. (more…)

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Big data is in fashion

Big data is, of course, one of the business world’s most in vogue buzz words. It may even be having an impact on how various industries function. Case in point, today’s Wall Street Journal reports that several firms are selling data and services to fashion brands and retailers (Fashion Industry Meets Big Data, Sep 9).

The forecasting companies offer analysis of fashion shows, data on the current market offerings and—for an added fee—bespoke research and consultancy services. The data are generated by teams of staff employed to trawl art exhibitions, events, restaurants and even scientific journals.

Fashion companies use the data to plan their latest collection or catwalk show, with the online services replacing the bulky and intermittent style books that designers and merchandisers used to receive. …

“[Fashion forecasters] have always been used but they’re more accessible now because of the technology,” says Marks & Spencer creative director Belinda Earl, who has just launched her first collection for the U.K. high street bellwether. “They are important, not always to lead but to re-evaluate and help confirm you’re on the right track.” …

Retailers are also turning to number crunchers to improve execution. U.K. start-up EDITD trawls the Internet to gather data on who’s selling what, how many products are flying off the virtual shelves and how much are they going for to guide companies in their merchandising decisions.

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I’ve been thinking over the last several days about the tragic factory collapse in Bangladesh. One question that comes up is why global apparel firms would choose to source their products from Bangladesh. CNN has a spiffy graphic that clearly shows that cost is one reason (Bangladesh vs. the U.S.: How much does it cost to make a denim shirt?, May 3).

tshirt-graphic

Of course, the US ain’t exactly the right benchmark here. The real alternative is China and  the Wall Street Journal reports that wages there are four times higher than those in Bangladesh (The Global Garment Trail: From Bangladesh to a Mall Near You, May 3). That kind of cost advantage together with a tariff advantage with the EU gets you growth like this.

AH-AJ309_BANGLA_G_20130505123603

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