By  on March 20, 2007

The competitive advantages of extensive sourcing expertise once held by major apparel manufacturers has been winnowed away by technological advances and the increasing pace of globalization.

Manufacturing executives from VF Corp., Liz Claiborne Inc. and Jones Apparel Group presenting at this year's WWD Sourcing Leadership Forum said speed has increasingly become the key differentiator and has forced company-wide strategy shifts in recent years. (Coverage of the forum appears on pages 16 to 19.)

Gary Ross, vice president of global manufacturing and sourcing for Liz Claiborne, offered an overview of how dramatic changes in the retail landscape have forced large apparel companies to reexamine their sourcing strategies. At Claiborne, the challenge rests with producing goods for some 40 apparel and accessories brands that sell across the spectrum of retail channels. This diversity in product mirrors the manner in which today's consumers shop.

"There is no longer a social or economic stigma attached to shopping different channels," said Ross. "Being a smart shopper is just as important as wearing prestige brands."

Ross believes consumers' shopping patterns will continue to change and evolve through the remainder of the decade. A proliferation of new retail concepts has resulted in an oversaturation of the market as well.

"Consumers have more choices today than they've ever had," said Ross. "There's too many stores, with too much product chasing too few customers."

Online shopping, for instance, has grown 12 percent a year for the last four years and now represents a $9.2 billion retail channel, according to Ross.

Consumers' willingness to spend is also uncertain. Expendable income has increasingly been diverted from apparel to personal electronics, consumer confidence has begun to drop in the face of rising energy prices and, most recently, concerns over whether the housing bubble has begun to burst have come to the fore.

With global sourcing, the barriers to entry into the apparel industry have also significantly lowered, resulting in increased competition for floor space.

"Anyone with cash and a designer can start their own apparel line," said Ross.

For companies like Liz and Jones, the rise of the private label business has made their own customers their largest competitors. In this type of environment, Ross said only product and execution could be a company's advantage.Claiborne executives studied several companies outside the apparel industry in an effort to glean insights about how to better their own operations. The companies they examined included Toyota, Campbell's Soup, Best Buy and Dell. The industry they found that most closely mirrored the apparel industry was the food industry.

"Fashion means freshness, fashion is perishable, fashion has a limited shelf life," Ross said of the similarities.

Claiborne plans to open what it terms a "technical excellence center" in Asia that will allow associates to make approvals on things like colors and samples. The ultimate goal, said Ross, will be to eliminate the "ping-pong effect" across oceans and time zones often created in product approval. Over the next four years, the company also plans a more than 40 percent reduction in the number of countries where it sources and the number of vendors it uses.

John Strasburger, vice president and managing director for VF Corp.'s Americas sourcing segment, discussed some of the advantages and challenges involved with sourcing in the Western Hemisphere. VF opened an office in Miami in September 2005 to focus on sourcing from duty free Latin American locations such as Mexico, the Caribbean Basin, Central America and the Andean Region. Today, the company works with 91 vendors and a third of Strasburger's staff is "in-country local nationals."

Strasburger and VF believe risk levels in Latin America are low. The region is politically stable, has good weather, an established infrastructure and reliable access to water and electricity. One area can be problematic, though, admitted Strasburger.

"Telecommunications at times can be a problem," he said.

There are also a finite number of top-tier vendors in the region.

"We see the number of really good vendors declining in Mexico and steady to slightly increasing in Central America, Peru and Columbia," said Strasburger.

He recommended once a good vendor is found that companies stick with them.

"This was one of the hardest things in working with some of our younger people in sourcing across the different brands," said Strasburger. "There's a tendency, if they're not hitting on all eight cylinders, to move to another factory."This strategy, given the smaller pool of potential vendors, creates more problems than it solves, said Strasburger. Companies often turn to the Latin American region expecting to reap the benefits of its close proximity to the U.S., but "it has some limitations," he said.

According to Strasburger, some companies try to hedge their bets by sourcing two-thirds of a style in Asia and planning to produce the remaining third in Latin America. The expectation is that the items will be identical and speed to market will be achieved.

"It's very difficult to do because in most cases you're working with two different base fabrics," said Strasburger, adding that the yarns and dyes used can also vary, causing the products not to match.

Strasburger advised those making sourcing decisions to understand the strengths of their vendors and not seek to narrow their vendor pace by giving them products outside their expertise.

"I took some product into some of my bigger partners and I really got outside their sweet spot," said Strasburger. "If you start asking them to produce something not really in their core competency, you get in trouble."

The threat presented by private label was significant enough to push Jones Apparel to launch an overhaul of its product development cycle in 2003. Chris Lorusso, executive vice president of production, said the initiative started with the company's offerings for the moderate segment.

"Our business was struggling because of private label and the operating margins were not as good as they should have been in the moderate sector," said Lorusso. "Our chief executive officer realized we weren't really built for speed."

The new program required changing the mind-sets of everyone from middle management to pattern-makers. A new technical design department had to be developed.

"It was really a struggle to get everybody on the same page to understand that you were changing, that you were going to put the responsibilities on the factories and that we couldn't do everything that we used to do here," said Lorusso. "We had to push it overseas."

The implementation of the program started on three moderate brands and was eventually rolled into the company's better segment. Widespread implementation has resulted in significant reductions in development time."I think four years ago we still had almost five months production time," said Lorusso. "Now, we're all lucky if we get three. I think it's changed drastically and I think it's going to get worse."

The rules of sourcing changed dramatically for those considering getting into the fast-fashion business, warned Munir Mashooqullah, president of Synergies Worldwide. Most things must be sacrificed for speed.

"Fast decision-making means there's not too much testing going on," said Mashooqullah.

It also means having to accept a lower quality standard and frequent chargebacks.

"If you're going to do fast fashion, don't expect to have top-tier vendors. It's a denial," said Mashooqullah. "You just can not have the best quality if you're going to work with that kind of cycle. This is again something we need to recognize."

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