by [TC]²
Enterprise Competitiveness Council Seminar Termed Successful
Despite the surprise weather pattern that spread snow from North Carolina to New Jersey, most of the 126 registrants made it to the AAFA/ECC Seminar titled Shaping Strategies - Meeting the Dynamic Consumer Needs. Hosted by Liz Claiborne at their North Bergen, New Jersey Distribution Center, the seminar attracted people from all areas of industry and provided a great networking opportunity, along with presentations on several relevant topics.
An opportunity to tour the Liz Claiborne automated distribution center was afforded to those who arrived early. Groups of 35 to 40 people were dispatched in waves, at two minute intervals. With hosts from management, the groups each entered the work flow at different points, with one group starting at receiving, another at sorting, and a third at Quality Assurance. Each group moved briskly in what is obviously a well practiced tour sequence, stopping for commentary on what we were seeing, and with time for a question or two. The center processes over one hundred thousand garments each day, receiving cartons from distant vendors, inspecting for quality compliance, and putting away stock to be picked for orders, sorted, packed and shipped on outbound trucks. Picking is not done by individual order, but is instead “wave-picked”, with all of a given item needed for all the day's orders being loaded onto trolleys which are carried by powered rails to the sorter. The majority of garments are on hanger, with plastic bag coverings and a precisely located bar code tag on the shoulder area. The sorter for GOH, the term for garments on hanger, escapes the hanging items one-by-one into grippers that are attached to a conveyor chain running throughout the sorter. The sorter is capable of diverting the hangers onto any of 260 bars, which represent customer “doors”, the term for individual retail establishment locations. Thus, orders for up to 260 stores will be sorted at any one time, in a fluid, ever changing scenario. Flat folded goods are sorted in similar fashion, but are held in bins, that advance rapidly into position in front of packing operators, and as an order of flat folded goods is completed, it is dropped into a holding bin, below which is a packing station, where the GOH have been placed in a carton, dropping the flat folded goods from the holding bin allows them to be packed in the same carton. Each completed carton receives a telescopic carton top, providing a sturdy container to protect the goods. Cartons are conveyed down a line into one of two automated taping machines, where two strips of tape are simultaneously applied to the leading and trailing edge of each carton, securing the top to it's bottom. Automated label printing and attaching machines apply labels to ensure delivery to the correct customer, and to allow consolidating for shipment in carrier trailers. We were told that four years ago, four hundred people worked in the facility. As automated sorting and handling was implemented, people were shifted to other jobs, with a current workforce of 264 people now performing the same or more order processing. The sorter and packing area is in a high bay building, with mezzanines and catwalks that lead to different levels in this three-dimensional “machine” with people working inside. Computers track orders, and local controllers manage each mechanized function. For those who missed the tour, it will be worth another visit, if offered.
ECC leaders Rick Ludolph and David Roy thanked Member Stan Austin for hosting the seminar. The very nice fifth floor facility easily handled the crowd, with room for snacks, drink and lunch service. Launching directly into the program, the first speaker was Todd Werneke, Senior Product Research Specialist with Proctor & Gamble. Todd spoke on consumer insight and knowledge. His first postulate was “Consumer Is Boss”. Todd went on to say that a successful product development requires identifying “the Boss's” needs and that product developers must design an experience to meet the need. Unmet needs are of high importance, and create low satisfaction. Direct interaction with consumers is an imperative, and should involve the R&D team. Use one-on-one research as well as focus groups to better understand behaviors, motivations, and perceptions of your target customer. Discussion of the importance of keeping fresh products in the pipeline, and compressing the development cycle are also required in this environment of instant gratification, and desire for newness. Taking two years to develop a new consumer product places the product at a disadvantage. Competitors who can respond more quickly will grab early market share, and it is difficult to recapture. An interesting note, related to the fabric care nature of P&G's products, is that there is substantially less ironing done by today's consumer.
David Bassuk of KSA spoke on Product Development To Gain Competitive Edge. Effective product development demands newness, speed, and discipline. The value of speed is illustrated by examining three different retail models. The first, Traditional, achieves about 4.4 inventory turns, and produces a margin of 7%. Examples given are Lands' End and Talbots. The Updated Model , with around 5.5 turns and a 10% margin are representative of Gap, PacSun and Timberland. The New Model, with 6.8 turns, and delivering a 16.2% margin are the likes of H&M, A&F, Chicos, Zara, and American Eagle Outfitters. Thus, the replenishment model delivers less margin than the continual stream of new, updated merchandise. “Understanding Stephanie”, a euphemism for getting to know the customer better is an area in which many companies perform miserably. 68% of all manufacturers have not defined a target customer, while 74% have failed to integrate consumer input into the product development process. You cannot develop in a vacuum. Chico's drives seven inventory turns while producing a 20% net profit. We should expect a 50% - that's right, 50% reduction in cycle time for NPD by 2007. Key elements in using NPD to competitive advantage are: 1) Define your customer. 2) Define your product development strategy. 3) Define your assortment strategy and line positioning. 4) Speed- JCPenney and Gap have done a great job at “speed”, accelerate speed to market. 5) Balance efficiency and effectiveness. 6) Integrate sourcing and development activities. 7) Discipline - utilize an integrated process calendar and do not allow calendar violations. Enhance information visibility, aggressively manage the calendar, and develop a culture of adherence to the calendar. David drew a laugh when he said that product development calendars are like marriage - more than 50% do not work! In closing, the use of web based PLM tools was stressed as important going forward. Retailers have become faster than brands at product development. If you are not careful, you will get knocked off by your customer, who is able to move faster than you.
Irene Mak, Vice President of Technical Design for American Eagle Outfitters was co-presenter with Roxie Starr of Shapely Shadow. Their topic: Fast Fit- Digital Visualization To Speed The Approval Process. Irene told how American Eagle is dependent upon digital imaging as an integral part of the product development process. Citing that the old way of fit approval often required making six fit samples, shipping them by courier between point of manufacture and approval, and the cost and time involved in obtaining approval on one garment, today, through the use of digital visualization, no more than three fit samples are required, and occasionally only two. It is better, faster, and cheaper to use digital imaging to transport highly detailed images that can be rotated and viewed in a simulated three dimensional manner. These images can be sent instantly around the world, allowing time shifting and eliminating delay in communicating fit, and reaching the approval stage in days, not weeks. Starting with a design concept, they progress to prototypes, do fittings using visual imaging, and move into production and into stores in rapid-fire fashion. The old way requires the use of a fit model at every stage, at a cost of $275 per hour, plus an agency fee of 20%, so has a cost of $330 per hour, even if the fitting only requires ten minutes. Taking the $330 figure, times 10 minutes each, times 750 fittings per year, times six employees involved, and the total cost comes to $112,500 per development person per year. After installing the 360 degree image kit, the annual cost was reduced from $982,000 to $675,000. The 360 kit allows rotation and zoom magnification of the garment on a virtual model. The image is made up of stitched jpeg files, resulting in a small file size that is easily sent via e-mail to any contractor or manufacturer site around the world.
Lois Davis, Vice President of Logistics for Liz Claiborne spoke on Logistics/Product Flow and Allocations. A registered import/export broker, Lois spoke of factors that influence logistics decisions. This would seem to be a nightmare job, but speaking in a calm voice, described things that would keep any normal person up at night. The need to know what is taking place at any point around the world is key to making informed decisions. West coast port congestion is becoming a big problem. Ports were built for vessel displacement of 2,000 tons, but ships now are at 8,000 tons. Unloading these behemoths takes much longer. Crane operations can make 30-32 moves per hour per crane. What once required one day to unload, now takes two or three. West coast ports are at 97% of fully loaded capacity. What happens when the flow of goods resulting from quota elimination arrive is still an unknown, but it is known that it will not be good. There is a shortage of all vessels for water service through Panama. Only certain size ships can negotiate the canal. There is a growing equipment imbalance with rail service. Intermodal volume is up by 12.5%. Containers are in short supply. Railroads are dealing with imperfect demand forecasts. There is a shortage of assets and qualified engineers. Track maintenance is needed, resulting in long stretches of slow operation. The railroads will not carry if money cannot be made on the loads, so apparel competes with higher value goods for space on rail cars. Distribution centers must accept freight at odder hours. Some do not have yards for staging trailers, so are compelled to operate multi-shift, even if it is not necessary for normal operations. Drivers are leaving the industry. There is limited westbound freight to balance traffic and equipment utilization, making rates higher. Fuel surcharges are unpredictable. Decisions are made day-by-day on air freight. Hong Kong, Shanghai, and Manila have lower air capacity, and often cannot carry goods that had been destined for water shipment. Hong Kong remains the major gateway out of Southern China . After making a decision to move from the port of Aquba to Haifa, which would save four days in total transit time, strikes in Haifa by customs officials and dock workers required a return to Aquba, a less safe and longer route. These are just some examples of the factors that affect logistics.
Following the four presentations, roundtable discussion groups were assembled around the four topical areas, with two forty-five minute sessions, allowing anyone to be involved in two subject area roundtables. The opportunity to meet, share and network was great, and if all attendees received as much benefit as this writer, the next seminar will again be a sell-out.
Article by Jud Early , [TC]²'s Corporate Vice President of Research and Chief Technology Officer.
February 2005