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Posts Tagged ‘Apparel’

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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“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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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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Last week I posted on making toys in the US; this week it’s apparel — specifically, T-shirts and sweatshirts. Let starts with sweatshirts and a firm called American Giant. The story starts back in December with an article in Slate describing the company’s business model and extolling the wonders of its product (This Is the Greatest Hoodie Ever Made, Dec 4, 2012). In effect, American Giant uses technology to cut its distribution cost and rolls a good chunk of the savings into offering a superior product.

In the 1970s, when the fashion industry morphed into a mass-market business dominated by mall stores, its marketing and distribution costs began to skyrocket. To keep retail prices down, companies began to shrink the price of producing clothes. Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility.

American Giant has found a loophole in the process. The loophole allows Winthrop to spend a lot more time and money producing his clothes than his competitors do. …

American Giant doesn’t maintain a storefront, and it doesn’t deal with middlemen. By selling garments directly from its factory via the Web, American Giant can avoid the distribution costs baked into most other clothes. …

But there is really no comparison between American Giant’s hoodie and the competition. It looks better and feels substantially more durable—Winthrop says it will last a lifetime. When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well. And when you hear about how American Giant produced it, it’s hard not to conclude that one day, they all may be.

OK, so what do you think happens when such glowing press hits the web a few weeks before Christmas? Right, they sell out of everything. Here is a BBC report how they got hit by a tsunami of orders (American Giant: The problems of being an overnight success, Mar 10).

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luluSo Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).

The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …

“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.

Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.

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The New York Times Magazine has a long article on how Inditex and its main brand Zara have grown to be one of the world’s most influential fashion players (How Zara Grew Into the World’s Largest Fashion Retailer, Nov 11). They even have a spiffy video.

Not surprisingly, both play up the role of operations in the firm’s success.

A traditional ready-to-wear fashion company in the West sends the designs for its clothes to independent factories in countries like China and India, where the labor to make them is cheap. These clothes are then shipped back and stocked in stores in spring and fall, with smaller shipments throughout the year.

But a brand at Inditex will make a fall collection, for example, and then ship only three or four dresses or shirts or jackets in each style to a store. There’s very little leftover stock, few extra-smalls or mediums hiding in the back. But store managers can request more if there’s demand. They also monitor customers’ reactions, on the basis of what they buy and don’t buy, and what they say to a sales clerk: “I like this scooped collar” or “I hate zippers at the ankles.” Inditex says its sales staff is trained to draw out these sorts of comments from their customers. Every day, store managers report this information to headquarters, where it is then transmitted to a vast team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.

More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa. Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically. The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries. The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed.

That means that if Inditex stores in London, Tokyo and São Paulo all have customers responding enthusiastically to, let’s say, sequined cranberry-colored hot pants, Inditex can deliver more of these, or a variation on hot pants, sequins or that cranberry color, to stores within three weeks. The company tries to keep the stock fresh; one promise its stores make is that you will always be buying something nearly unique. Merchandise moves incredibly quickly, even by fast-fashion standards. All those thousands of Inditex stores receive deliveries of new clothes twice a week.

So is there really much new here? (more…)

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It’s time to clear out a bunch of articles of that I have had kicking around. First up, we note that it has been Fashion Week in New York and that has led a couple of interesting articles:

  • The New Yorker has a profile of Federico Marchetti and his company Yoox (The Geek of Chic, Sep 10). Yoox does a couple of things. It started by selling end of season luxury fashions. It won friends in the industry by just posting their own price with noting how much it was discounted off the list price. Luxury brands liked that this allowed them to unload unsold items without tying their brand to a 50% off sign. The interesting part is that Yoox was able to provide the brands with information they never had before (like what colors were selling where). Yoox has since expanded and now provides the backend and fulfillment for multiple designers’ web stores.
  • At a different end of the market, Wired had an interview with Yasunobu Kyogoku, the COO of Uniqlo USA, which is ramping up a big US expansion (Upending Fashion, Steve Jobs-Style: 10 Questions With Uniqlo’s Yasunobu Kyogoku, Aug 31). Uniqlo has a very different approach from, say, Zara.

Wired: Is it true Uniqlo orders from its suppliers a full year in advance? What’s the thinking behind that?

Kyogoku: Let’s say you happen to own your own factory, and someone says, ‘In September, I’d like to order 40% of your capacity; in October, 70%; in the rest of the year, zero.’ You’d say, ‘But there’s a gentleman who just came to me and said, ‘I will book 80% of your capacity for a year and in fact, let’s do a long term partnership. Why don’t we add an extra line?’ The more you produce, the more you help me reduce the cost. We pass that to the customer. The customer buys more. We have a positive cycle where everyone wins.

Wired: With a 12-month cycle, aren’t you worried customers will go to faster-moving competitors with trendier clothes?

Kyogoku: We don’t chase trends. People mistakenly say that Uniqlo is a fast-fashion brand. We’re not. We are about clothing that’s made for everyone.

  •  Adam Davidson continues to write great stuff. He has a New York Times Magazine article about making bespoke and made-to-measure suits (What’s a $4,000 Suit Worth?, Sep 9). As the article notes, you would think that loads of people in Manhattan willing to pony up for the perfect suit. And there are but does not mean that it’s an easy way to make money. The economics of bespoke suits aren’t like those of Uniqlo:

As Rowland explained to me, even with a century-old reputation and a profoundly loyal customer base, it’s nearly impossible to get ahead. “There’s no scalability,” she explained. “Whether we’re making 50 suits or 1 — each unit costs the same.”

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Pretty much every e-commerce site now allows customers to express their opinion about products. Such reviews can certainly be helpful to other customers, but how do firms use the feedback? According to the Wall Street Journal, some firms are now using the reviews to monitor for quality problems (Firms Take Online Reviews to Heart, Jul 29).

L.L. Bean Inc. noticed earlier this year that one of its top-selling products, Supima Cotton Fitted Sheets, was being slammed in online customer reviews.

The company, which pulled the sheets from its website, found that a wrinkle-resistance treatment mistakenly added by a contractor was causing the cotton fabric to unravel. It offered new sheets to the 6,300 customers who had purchased the set and destroyed the rest of the faulty batch.

“Before, it would have taken us months and months to figure out if something was wrong with the product through returns, if we ever would have known at all,” said Steve Fuller, L.L. Bean’s chief marketing officer.

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What makes for sustainable clothes? That is the focus of a Wall Street Journal article on an index developed by an industry coalition that aims to rank apparel based on a variety of factors (Which Outfit Is Greenest? A New Rating Tool, Jul 25).

The Higg Index (its name doesn’t refer to anyone but was chosen to clear copyright protections in 100-plus countries) looks at the entire life of a product from raw material to disposal. Brands can get points for asking consumers to wash items in cold, rather than hot, water, as Levi’s does, or for using recycled components like Nike’s polyester, made from used water bottles.

The graphic below shows how different fabrics stack up.

The index will initially be available to just industry insiders but the goal is to eventually have clothes in stores with tags that let consumers see the impact of their clothes.

Even in its early form, the Higg index is impacting how firms design and make clothes. (more…)

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There have been a number of recent articles that touch on some recurring Operations Room themes.

  • First up, big planes! We have had a number of articles on the travails of the Boeing company in launching the 787. Now the Wall Street Journal reports that they have reached an important milestone (Boeing Hits a Milestone, Jun 8).

Boeing Co. rolled out the first 787 Dreamliner from its main factory that won’t need major additional work before delivery, a long-delayed milestone that reflects streamlined manufacturing of the company’s flagship passenger jet but also points up the program’s enormous costs. …

Assembling the 787—the first jetliner made from mostly carbon-fiber composites—involves tens of thousands of steps, from installing galleys and complex electrical systems to fusing the wings to the body. Boeing, which started making 787s in 2007, had been sending them out of its main factory in Everett, Wash., with many of those steps—sometimes thousands—unfinished, due to parts shortages and design changes on the advanced new jet. Those planes went to a separate facility in Boeing’s giant campus to be completed.

The plane that rolled out this week—Boeing’s 66th Dreamliner—skipped that costly step. Workers had only around 300 mostly small assembly tasks left to complete, about 100 more than the company’s goal, but far fewer than the roughly 6,000 on the earliest Dreamliners, said a person familiar with the plane.

Boeing, in a statement, confirmed the plane “will be the first airplane to go straight into preflight operations” from the Everett plant. The minor tasks left for plane No. 66 can be handled outside of the factory before being prepared for delivery.

Note that this suggests that Boeing has now worked through (or at least isn’t adding to) the massive amount of inventory they had sitting around at the end of last summer. (more…)

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