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Posts Tagged ‘Apparel’

The dollar has been on a tear over the past year. Check out how much it has appreciated against the euro over the past year or so (A Shakeup in Currencies, Wall Street Journal, Mar 19).

euro

There are some obvious implications from this chart. For example, if you spent spring break in Europe, you have an impeccable sense of timing. Also, if you are US-based manufacturer counting on exporting to Europe, you are going to be swimming upstream (see, for example, Strong Dollar Stands in Manufacturing Sector’s Way, WSJ, Mar 15).

But if a strong dollar hurts US firms, it’s gotta be a godsend for European businesses, right? Well,maybe not. How a weak euro impacts European firms is going to depend on the structure of their supply chains. Check out this eye candy from today’s Wall Street Journal (Europe’s Fashion Retailers Under Pressure From Strengthening Dollar, Mar 24).

BT-AA741_RETAIL_16U_20150324180606

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Fast Company named American Giant one of its most innovative companies of 2015 (American Giant Guns For Gap By Doubling Down On The USA, March 2015). American Giant is purveyor of T-shirts, sweatshirts, and (most famously) hoodies. We have posted about them several times before. Part of American Giant’s pitch is that they make everything in, well, America. They cut and sew all of their items in facilities in California and North Carolina. This TechCrunch video offers a tour of their Brisbane, CA, facility.

Now one of the challenges of producing sweatshirts in the US instead of overseas is the increased labor cost. Check out this graphic from the New York Times (U.S. Textile Plants Return, With Floors Largely Empty of People, Sep 19, 2013)

cost

Assembling garments in the US roughly triples the labor costs. These are partially offset by lower duties and logistic costs, but they remain the primary reason why a US-made costs about 20% more than an Asian one.

But what can be done to make an American sewer more productive to reduce the labor cost gap? (more…)

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As you may have heard, West Coast ports are having some labor issues. The Pacific Maritime Association (which represents the shipping lines and terminal operators) and the International Longshore and Warehouse Union have been going at it, affecting about 20,000 workers at 29 West Coast ports. (Can’t name 29 Wet Coast ports? See here.) The LA Times has a nice summary of what is in play. In a nutshell, management claims that the union is engaging in a slow down (effectively striking while getting paid, see here) while the union claims that they are responding to safety concerns (at LA and Long Beach) and that management is misrepresenting their position. In any event, what has resulted is lots of delays and a  slew of ships waiting off the coast for their chance to unload. (Never seen a slew of ships? Check out these images.)

OK, that’s all well and good, but how is this affecting supply chains? The sheer scale of the problem is rather mind-blowing. If it were just a question of losing one port, things wouldn’t be too bad. Ships bound for LA, could be sent to Oakland or Seattle. But it’s the entire West Coast. If the goods need to be offload to an US port, that means going all the way to the Gulf Coast or the East Coast. It’s not clear that is an easy solution. Part of why LA and Long Beach are such busy ports is that they have an entire infrastructure to support them. Even if a ship could get to, say, Charleston, it’s not clear that it would do a lot of good for some of the customers whose stuff is on the ship. If a company’s whole logistics system is based on breaking bulk in the Central Valley, having a bunch of containers in South Carolina is, at best, an inconvenience. (more…)

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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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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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