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A wall of eight monitors resembling an airline arrival and departure board lights up the entry to Nygård International’s U.S. distribution center here.
This story first appeared in the December 11, 2002 issue of WWD. Subscribe Today.
Numbers fly by in hues of red, green, yellow and blue, with moving figures at the bottom of each screen resembling a stock ticker tape.
This is Vcom, short for Visual Communication, a real-time system that tracks garments along each step in the manufacturing process from design to delivery at retail distribution cites.
Nygård, the Canadian manufacturing powerhouse doing some $500 million in sales, about 50 percent of which is generated in the U.S. market, has just invested an estimated $5 million in this system, fully implemented in three, 100,000-square-foot facilities here on Aug. 15, with a grand opening gala.
The center was physically renovated at that time as well. Nygård operates three distribution centers in Canada, two in Winnipeg, Manitoba, and one in Vancouver, British Columbia, to be up and running by Jan. 1. The volume of goods the Gardena distribution center can ship is staggering — up to 400,000 garments per week of Nygård’s 11 lines: the bridge-priced Peter Nygård Signature, the better Nygård Collection, Nygård Sport, the better-priced Bianca Nygård, the moderate Tan Jay and Aliå lines and Aliå Sport.
The center also ships Dillard’s private labels Allison Daley, Preston York, Westbound and Investments, and services retailers such as Sears, Roebuck & Co., J.C. Penney Co., Kohl’s Corp., May Department Stores Co., Belk Department Stores, Beall’s Department Stores and Elder-Beerman Stores, as well as numerous specialty stores in the U.S.
Vcom was developed in-house by chairman Peter Nygård, after a search for a written software program that would fit his company’s needs proved fruitless. Nearly seven years ago, he began dreaming of a system that could essentially act as a technological watchdog, one that would keep tabs on where goods are, protect against manufacturing mistakes and help distribution centers anticipate inventory swells. With a team of 50 computer designers and architects in tow, he accelerated an effort in the last three years and produced Vcom.
For what it is capable of doing, one expects Vcom to look like a Seventies-style computer room filled with winding tapes, switches and levers. In fact, its inspiration comes from rather humble, everyday sights.
“I always marveled how well Fedex tracked their parcels,” Nygård said. “I walk by an airport and see all those screens, this huge system that tells people where they should be and at what time. I look at the stock market ticker tapes, can order a piece of a stock and see it actually happening before my eyes. That’s what I wanted. With Vcom, everything we do is at the speed of thought.”
This is how Vcom works: Highly detailed design information is entered into the system from designers in Winnipeg and Los Angeles, then beamed directly to sewing facilities as far away as China, Indonesia and Sri Lanka. Most of Nygård’s contractors are fully hooked into the system, which means they can download information to their own automated cutters, translating details as general as skirt length to something as specific as button hole widths.
“This program takes all the information in the construction of a garment,” said Ernie Chaves, director of logistics at Nygård. “It takes it from our product development system and sends it through the Web directly to the suppliers’ computer. There’s no paper trail. There are no patterns.”
The Vcom system allows designers to change details on a whim. In seconds, those changes are communicated to contractors who then immediately cut and sew goods exactly to the updated specifications.
After goods are sewn, affixed with proper hangtags, hung on hangers and bagged, they are scanned into the Vcom system, allowing the computer to track them as they are loaded into containers and shipped to the California distribution center. The system knows how long the goods will be in transit as well as when they will arrive.
Unforeseeable catastrophes such as a typhoon or a mechanically malfunctioning ship shows up in the system as red, indicating goods are late. Blue indicates goods are being transported by air. Yellow shows goods are on time and green identifies certified suppliers, those that have proven themselves with Nygård and are fast-tracked through the system with minimal inspections. On pick-and-pack screens, blue indicates that shipments will exceed employee capacity and that personnel must be shifted to accommodate the workload.
“It is virtually like an air traffic controller knowing which containers are coming in and which priorities we should deal with based on the color of the screens,” Chaves said.
Once at the distribution center, Vcom lets employees know how much time they have to scan the garments. It inspects their quality: 65 percent of suppliers are certified and can bypass a quality audit but the computer automatically triggers a sampling on every 10th shipment or so, and guides them on what and how many pieces should be picked, packed and, finally, shipped. Audits keep track of how fast goods are wending their way through the system. Workers are held to that schedule.
“If we are supposed to process 20,000 units in eight hours with six people and they go over, meaning, it took eight people, we’re running at 80 percent and that automatically affects their rate of pay for the day,” Chaves explained.
A typical team is four to six people. There are three teams at the Gardena facility at any one time but that number could double in hectic shipping periods such as fall (August through October) and spring (February through April).
The ultimate goal, according to Chaves, is having goods arrive on time, being able to turn them around and ship to retailers the same day they are received. Receiving goods early is not favorable because inventory builds up, he said.
Chaves said retailers’ orders are guaranteed to be 100 percent accurate, a claim that is supported by video surveillance of employees the company keeps on tape for a period of 30 days.
Nygård executives concede there has been a learning curve implementing the system. But it hasn’t been bad, they said.
“Because of the color coding system, it’s almost intuitive and has reduced the curve in terms of interpreting the information,” said Jackie Woloshen, director of Nygård’s IT Applications Development department.
Employees, who had been drowning under a mountain of receipts, sales slips, invoices, orders, journals and ledgers, according to Woloshen, laud the fact that the company is now 90 percent paperless. Nygård expects to be completely paperless by the end of 2003.
Keeping a tight rein on goods, most of which are produced offshore, is of paramount economic importance to Nygård. About three-quarters of its production comes from Asian contractors, while 25 percent of its contractors are in Mexico. The balance of its production is done in company-owned factories in Winnipeg.
“From a labor point of view, back in the mid-Eighties, it cost us 45 cents a unit to see, pick, pack and ship,” Chaves noted. “In the late Nineties, that cost dropped to 8 cents a unit. Now we are going to drop that down to 4 cents a unit.”
Retailers have been pleased with Nygård’s performance.
“Their shipping is probably one of the best in the industry,” noted Jack Wurzbacher, vice president and general merchandise manager of misses, petites and women’s dresses at Beall’s Department Stores Inc. in Bradenton, Fla. “It’s made a difference in our business. We’re especially pleased with them on their replenishment of basic items. We used to reorder once a month. Now we reorder once every two weeks, and soon, we will reorder once a week.”
A spokeswoman for Elder-Beerman Stores Corp. in Dayton, Ohio, said, “They have made more improvements in shipping more timely and it does make them a more attractive vendor to us. If you have to order too far out to guarantee shipments to arrive on time, then you can miss a critical selling window. And it is true that they have improved that.”
Nygård’s technology isn’t exactly breaking new ground, according to some industry observers. Emanuel Weintraub, president and chief executive officer of Associates I.N.C. Management Consultants in Fort Lee, N.J., said: “These technologies are out there. They’ve been around for at least a decade, but they’ve advanced and they can do a lot more.”
What sets Nygård apart, according to Weintraub, is the manufacturer is actually taking advantage of the technologies.
“They’re laying down a marker for other firms,” he said. “Too many firms are not using technology because they can’t appreciate their use. They don’t want to implement them. Once you do, it forces discipline on an industry that was largely undisciplined.”
Aside from Vcom, the distribution center itself has gotten a new look. Buildings have a fresh coat of paint, signage indicating what lines are processed here blanket outside walls of each facility, and colorful banners of Nygård’s logo mark every few feet, giving the workplace an almost festive atmosphere.
Employee common areas have been spiffed up to include a cafeteria built from a warm combination of wood and stone. Outside seating areas in a grassy lawn rival better Southern California cafes.
Inside each warehouse, there are renovated slick rail systems on which garments literally flow, speeding from trucks through quality control and ending up in shipment. The constant movement of goods means the lacquered floors are never cluttered and shipping areas remain neat and clean.
“Nothing is stocked,” said Chaves, noting company executives would rather refer to the distribution center as a service center because of its efficiency. “Nothing is transferred from a moving trolley to a dead bar. That means we are not holding inventory.”
As for why a distribution center was set up in California, the answer is simple. Los Angeles is the first port of entry for Nygård’s goods. A facility anywhere else would require backtracking to Nygård’s retail customers on the West Coast.
The next step, according to Chaves, is linking Vcom to retailers’ distribution centers. That idea strikes a chord with analyst Ellen Schlossberg of William Blair & Co., who notes that one of the biggest retail concerns is getting goods on time.
“If retailers had this on their desktop, it would save a lot of back and forth maintenance calls and give retailers a better feeling of control,” she said. “Even now, they should certainly get some insight into how long their goods are in transit and that would be very beneficial. Also, it would help them with their labor planning.”
Julie Eng, national buyer of moderate coordinates at Hudson Bay Co., said the Toronto-based chain does not use the California distribution center, but has experienced some of the same technological advances at Nygård’s Winnipeg distribution centers.
Eng said Nygård has implemented numerous projects and tests that have helped the retailer facilitate orders.
“Nygård’s purchase worksheet orders download into our systems,” Eng explained. “I can literally go through 40 or 50 in a working day, whereas another buyer processing another vendor could probably do four or five orders a day.”
Next spring, Nygård will do a test with Hudson Bay called Orient Direct. Through Vcom, Nygård will ship goods from its Far East sewers directly to the retailer’s distribution centers, shaving some two-to-four weeks off of normal shipping times.
“My ears popped when I heard this,” Eng said. “I thought, ‘You’ve got to be kidding me.’ I said, ‘Why can’t we test this now? Why wait for spring?’ It’s amazing what they can do with computers these days.”
Will Nygård soon go direct with U.S. retailers? “Absolutely,” Chaves said. “Because of our technology, our suppliers’ accuracy is just as good as ours. This has been tested over the last year-and-a-half. It’s really eliminating warehouse distribution, maybe even our service center in North America.”
A $5 million investment notwithstanding, that would be OK with the boss.
“We’ve been plowing the money into that area,” Nygård said. “There’s no question that what we really bring to the table is the technology issue. It’s our biggest creative product today. I think this may be my legacy, ironically. A long time ago, the company’s watch words were ‘where fashion meets technology.’ I didn’t even know why I was using it. Now, it’s very apparent to me.”