Industry Characteristics and Trends

All successful companies cater to the needs of their customers. However, in fashion these needs may be more viewed as whims or temporary flights of fantasy than established trends on which you can base production and supply chain decisions. Case in point: how long has the Pentium IV computer chip has been placed on PC motherboards compared to double-breasted suits? Furthermore, in somewhat of a reversal, the requirements of fashion manufacturers are being driven more by the demands of the retailers that sell the clothes than the supplier.

A recent example between Levi's and Wal-Mart highlights a developing trend. Up until the early 1990s Levi's could pretty much deliver the merchandise and retailers would sell it. Now to do business with Wal-Mart, Levi's had to develop a new line of jeans to Wal-Mart specifications and meet very stringent guidelines regarding performance and cost control. While Levi's is still driving the car, Wal-Mart supplies the operating manual. This scenario is being repeated throughout the fashion industry as the balance of the scales shifts.

As you would expect in an industry with a diverse customer base, namely the general public, the life cycle of product is expressed in months, not years. To appease this public, a product is produced in every reasonable size and color combination. Consequently, the number of stock-keeping units (SKU) tends to be much larger than in other industries. Missing an opportunity window—that is short to begin with—may mean that you could be stuck with obsolete merchandise. Predicting the taste of the general public can, at best, be a crap shoot.

While outsourcing of production is not an unusual practice, in the fashion industry it has become a fine art. Shirt cuffs are made by one company; collars by another company; and buttons by a third company. The components are all brought together on the sewing floor to complete the finished product. Because operating and profit margins are meager, the outsourced companies can be spread throughout the world where labor and material costs are in cheap but plentiful supply. These factors create longer than usual lead times and constant managing of an extensive and far-flung supply chain. As a result, fashion is handicapped by a long time to market in the face of a narrow window of opportunity in which to attract the consumer's attention.

Illustrated in figure 1 is one of the simpler but common supply chains in fashion industry. Spread your suppliers across the Pacific Rim. Base your assembly operations in Europe. And, of course, there is a need for distributions facilities in the major population centers of the world. Accordingly, even a simple supply chain model grows in complexity as the channel partners grow in geographic distance.