Operational Performance
Did you know that…
“20% of the most successful companies are those that invest more in logistical network strategies1”?
In this age of information, companies have little choice but to reassess the management of their supply chain, this reality is especially true for companies in the apparel industry.
Today, the apparel industry faces several distribution challenges such as the integration of the entire set of supply chain links. Due to the unique nature of this market’s demands, seasonal renewal of collections and the uncertainty of satisfying consumer needs, companies have no choice but to improve the management of their inventory and overall speed in order to respond to the ever-changing market.
In fact, consumer’s interest about new collections is difficult to predict. Often the fashion industry’s reaction is to delay the re-production of collections for as long as possible as a means to obtain a maximum amount of information on the season’s trends. As a result, high inventory levels typically result in end-of-season sales, ultimately reducing the product’s profit margin. Low inventory also results in poor customer service, losing sales to competitors and negatively impacting a company’s reputation.
Information Technology... The differentiator
Designing an efficient, agile supply chain is not an easy task, especially when suppliers are located in low labour cost countries. Information technology systems therefore become of particular importance to better manage supply levels. A centralized system responds quickly to constant changes by providing instant access to information. As a result, information technology improves service, offers an accurate view of your stock levels thus reducing inventory costs and the number of obsolete products.
An improved distribution approach helps develop systematization between the different members of the supply chain. Essentially, four (4) different types of information systems can be used:
Integrated point of sale… Visibility into your sales
When you try to synchronize operations with the entire supply chain you must first minimize the adverse consequences of the “bullwhip effect”. This phenomenon is the distortion of information from one end of the supply chain to the other. It is the result, among others, of the lack of clarity in the supply chain cycle, the inaccuracy of the information gathered in addition to lengthy delivery times. Point-of-sale solution systems (POS) and real-time data sharing amongst members of the supply chain can significantly reduce the “bullwhip effect”.
Warehouse management systems... Clarity of your inventory and speed of execution
One of the prerequisites to having access to accurate inventory information is implementing a warehouse management system. This gives you complete real-time visibility into your inventory, in the interest of collecting performance indicators updates as needed. Additionally, warehouse management systems integrate and automate within your operations, best-storage-practices such as:
- Advanced methods of replenishment
- Advanced methods of selection (by batch, zone, group, etc)
- Container and command-line management
- Reversed logistics - management and disposal of customer returns
- Prepacking (predetermining the ideal quantity, size and content of the order for shipping)
- The integration of inventory tallying (cyclical, annual, by location, by product, etc)
Advanced Shipping Notice… Full integration of the supply chain
The Advanced Shipping Notice (ASN) is an electronic list that provides real-time detailed information of in-transit deliveries like: time of delivery, product type, weight, number of boxes, mode of transportation, etc. This notice reduces the amount of information needed at the reception entry point, simplifies operations on dock, pre-allocates in-transit inventory to customers and minimizes warehouse inventory.
Selecting an appropriate distribution approach
The trap is trying to automate inefficient processes rather than working the technology in accordance with a thoughtful and effective distribution strategy. Companies must first review their business processes and strategy before embarking on the acquisition of technological equipment and information systems. When defining an approach to distribution, it is crucial to consider the following questions:
- What is your procurement lead-time versus the frequency of your deliveries to retailers?
- Where is the best location for the deployment of your inventory?
Retailer ? Distribution Center ? Transit ? Supplier
- What is the acceptable level of service according to your market?
- How often and by what means would you like to share information with stakeholders in the supply chain?
Although there are proven operational methods, two distinct companies can have very different answers to these questions. Once your distribution approach is aligned with your business strategy, you can then select the best information system that will comprehensively support your logistical processes and meet your needs.
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- 1 INDUSTRY CANADA, «Global Business Strategy and Innovation: A Canadian Logistics Perspective Highlights and Key Findings», Last update on November 25, 2011, http://www.ic.gc.ca/eic/site/dsib-logi.nsf/eng/h_pj00528.html accessed on January 18, 2012.
