OK, so what are all these discussions about “Old Economy - New Economy“? And when we look at the 200+ point swings in both the Dow and the Nasdaq, someone is always talking about the “new” and “old” economy. I thought we had just one economy.
Well, the truth of the matter is that there is only the “One Economy”, the one that is still governed buy the same good ol’ sound business practices that I recall determined a company’s destiny. Nothing, I assure you, absolutely nothing has changed here. Yet the business world around us seems to be filled with headlines many times dominated by the buzz of what’s going on in the world of the “Internet and this New Economy”. The one of many significant differences here however is speed., the speed by which all this “New” is moving. So hang on and buckle-up your seat belts folks; we are all in for quite a ride.

Listen up

“Those who obey the logic of the net (internet) and who understand that we are entering into a realm with new rules, will have a keen advantage in the New Economy . . . No other single force will be as powerful (and profound) in shaping our destiny . . .”
If this statement is in fact true, and I believe it is, we must then seek the knowledge and understanding of the forces that will shape our futures. In our brief discussions here, we will try to sort out a few misconceptions, address some vocabulary and transaction models, and convey a few points for your consideration in developing a successful E-commerce strategy for your company.

First, a view of the industry from 30,000 feet . . .

Manufacturer, Retailer, Mill, Converter, Importer, Marketing Company, Sales Agency . . . you name the industry segment. . . . competing in today’s marketplace, global or otherwise is as competitive as never before. Mexico and NAFTA continue to have their advantages, but certainly Mexico is not a panacea. Importing continues to have its challenges with continued long lead times, a lack of replenishment, and continued quota issues (at least for the time being before GATT takes kicks in January of 2005). Domestic makers continue to grapple with wage controls, plant and mill closures, and the cost of doing business. The CBI will offer many opportunities, yet the question remains can we take full advantages of this supposed windfall, or is it a bit late for any salvation. And watch our when the ripple effect of current oil prices at Gulf War levels hits us, we best be looking over our shoulders in advance. I am aware of few companies with bragging rights in counting their weekly visits to stand in the bank deposit lines.

All in all folks, let’s face it folks . . . it’s damn tough out there. Any grass growing under your feet here is unacceptable.

Getting Up to Speed . . . (at “Internet Speed”):
Most, if not all IT departments up until year-end were preoccupied with the Y2K issues. Globally, and billions of dollars later, real or not, these concerns took a major portion of focus up to year-end. And guess what, come Monday morning January 3rd. the lights came on and the heating and air conditioning worked, and yes our computers too, all worked just fine.
Now with all that behind us, we can get on with the program in addressing Supply Chain Management matters, organizational structure, developing accountability guidelines, and implementing what some are telling us are these web-enabled applications that we all suspect will pump big bucks to our bottom lines.
Stop right there . . . “Big Bucks from where?” Well, it certainly isn’t going to come from the cost of goods side of the ledger. The gross margin squeeze is tighter than ever before, and the cost of goods isn’t getting any less. The answers then can only be found in the lower costs of doing business, with less overhead, less indirect costs, greater efficiencies, and addressing the market on a global basis should we be so inclined. You and your company will need to be:
•Faster . . . better . . and more cost effective to market.
•Increase your sales while decreasing your overall sales costs
•Improve customer service while reducing your back office personnel and costs
•Improve across the board efficiencies lessening your risk and error factors
This is the “New Breed” of company . . . the leaner, meaner, quicker to market, fast to react, agile company of the New Economy. Understand the market dynamics here, and improvement to your bottom line will follow!

Knowledge For Success. . . (or a lack thereof) :

O.K., now that we know how tough it is out there, what’s and all this B-2-B, internet exchange business, all hype in doing something, what are my next steps?

Nothing short of a total commitment from senior management will be needed to bring you and your management team up to speed in understanding the opportunities that can be realized with the implementation of a truly web-enabled business strategy. This need be a more than just “happy talk”; for without a commitment of personnel and financial resources, your chances for success will be limited. Particularly in light of the fact that many companies have been working on their own private site applications, their own web based solutions, order management and so on for several years. If any of these companies are your direct competition, best you pay your entry dues now.

Consider a subscription to one of several excellent monthly Internet focused publications. A few of the better ones include: Business 2.0, Industry Standard, Redherring, and two recently introduced publications e-company, and Fast Company. A brief visit to Barnes and Noble or Boarders will quickly get you in the hunt. Attend current seminars, plan to attend the Connect IT Show in Atlanta in mid November Here, looking and working outside the box will have lasting benefits for you and your company.

Market Expertise . . .

In developing and executing your e-commerce strategy plan, your e-commence trading partner must understand the unique nature of each and every element within the Supply Chain. This goes way beyond a few superficial discussions. If the company has the necessary management in place, the technology platform and expertise, or a lack thereof, it will become apparent early on in your discussions. Do a little homework here; it will pay dividends it spades into the future.

Order Management:

On the surface, this is a no-brainer. Or is it? What may seem at first glance to be the easiest web-enabled opportunity to understand and implement, may not meet your specific needs at all. Integration here is important. Can you track your order throughout the entire supply chain process? Is the information you are pulling from a true relational database, or just a slick one-dimensional yellow pages directory? What about the data fields? Can you link directly with your factor or your internal financial departments? What about historical tracking, and can I sort and breakout my order information by season? Can I maintain control or sample orders, production orders, or simple RFQ’s? If the answer to all these questions is yes . . . super, you are on the right track. If not, best your drill a bit deeper to find the right web-enabled order management system with the appropriate business workflow and controls you need.

Show me the Money !

This is It folks. . . the whole nine yards . . .all of it in a neat little nutshell. Don’t allow yourself to get all caught-up in the hype of what the internet “might” bring to your company. You will need to get very specific here in working with your e-commerce trading partner to identify the specific areas where savings can be realized, and in real terms, not a bunch of happy-talk. Although in many circumstances, the risk factors are of little consequence, your commitment will still take management time and some allocation of resources. And once you have teamed-up with one or even several of the early movers, switching costs may be a prohibitive factor. Ask the hard questions here, set realistic expectations. If you get the right answers, your decision will most likely be the right one.

Systems Integration:

Of all our discussion topics here, this one is probably the most difficult to nail down, while at the same time will offer the greatest challenges. Webster tells us in the simplest form of the word that Integration is “to make entire”. No one wants to do double duty, enter everything, or anything for that matter twice. Some software providers have developed yet to be fully tested “middle-wear” applications. However, the e-commerce integration tools, as Kathryn Cullen at KSA states “are in their infancy, . . .(so) don’t expect that you’re going to go in and plug one into your system without any work or customization.“ This in itself should not be the limiting factor in developing a successful e-commerce strategy. The message here is to be certain that proper consideration is given early on with an open dialogue that the appropriate applications are being planned for, and that the most basic information of, for example style, color, size, etc. does have integration capabilities.

Disintermediation:

Add this on to your vocabulary, as this will become a regular topic for discussion. Disintermediation describes the elimination of the middleman; within Apparel and Textile markets, it means the “disintegration” or extinction of the middlemen, often refereed to as, you guessed it, the salesperson. Yet, my research indicates Disintermediation is a myth. Why? You may be able to eliminate the middleman, but you cannot eliminate the middleman’s functions. An understanding of the process here is critical, and how web-enabled tools, improved customer services and communications can all be used to enhance, streamline, and add efficiencies to the sales process.

A New Meaning to “Relationships”?

Trust me on this one folks; don’t ever underestimate the continued and absolute level of importance in relationships. When all is said an done, it is not what you know, the better solution you have developed, your marketing advantage, or the size of your promotional or advertising budgets. It is plain and simple, who you know and the creditability you have established with your relationships. With equal importance; your buyers, sellers, and your suppliers. Don’t miss the big picture or the little picture either. Pure and simple, it is the relationships that you have developed, your contacts, your one-on-one get to know the customer, big and small, and everywhere in between. Yet, some will say this principle runs contrary to the “rules” of the New Economy. In my book, this is the glue that holds the foundation of all businesses in place. It will be the enhanced communications and organizational tools offered within your web-enabled platform that will bring new meaning to the big “R”.

Summary

If past economic transitions are any gauge, as I believe they are, those who play by the new rules of this “New Economy” of ours will prosper, those who ignore them will not. At the end of the day, it’s all about optimizing Supply Chain Management, improving the efficiencies within the myriad of processes that make this very diverse, very fragmented, and sometimes very complicated textiles and apparel industry that we call home.

This is the way business, all business will be conducted in the future. These issues and brief questions we have discussed here combined with a myriad of other considerations will be necessary for you and your company to achieve e-commerce success. Have no doubt about it; whatever path you and your company take will be a major undertaking. Your success quotient will be a factor of your knowledge and understanding of the market dynamics and of course working with the company or companies offering the solutions best fit for your identified circumstances. Seek those companies that have identified the pain points of our industry, that have specific solutions those companies that possess industry expertise, knowledge, and understand what this “New Economy” is all about.

John R. Calvert has enjoyed a thirty year career in the apparel industry, was an early recipient of an Apparel Industry All-Star Award in 1987, has been a regular speaker at industry trade shows, and publishes regular articles in regional and national industry publications. For further inquirers, please email: jrcalvert@mediaone.net or phone 310-629-0836.