LEVI’S REEVALUATES $400M COMMITMENT TO HIGH TECH OVERHAUL
Byline: Matt Nannery
CHICAGO — Not even the world’s largest apparel manufacturer can go totally high tech overnight.
Levi Strauss is stepping back to reevaluate the massive $400 million investment in a broad technological infrastructure to support Quick Response it announced two years ago, according to Paul Benchener, director of global Quick Response at Levi’s.
At this time, the world’s largest apparel maker simply isn’t ready to implement such wholesale technological change on such a large scale, he said in an interview following his keynote address to the IQ1996 Conference at the Hyatt Regency here.
“It really comes down to business process reengineering,” Benchener said. “We automated our information processing with EDI and bar-coding several years ago, but our business processes stayed the same. Moving information faster only highlighted the inefficiencies in [other parts of] our business.”
Benchener said that amounted to a tactical error Levi’s does not want to make again. “Now, we’re really taking a look at efficiently implementing new technology,” he explained. “As we move forward with technology, we have to change the way we do business to make use of it. You can’t do this all at once.”
Benchener did not say Levi’s plan to upgrade technology has been abandoned altogether. Far from it. The company, which was one of the earliest proponents of electronic data interchange standards and bar-coding in the apparel industry, will proceed with many of its components. But it will do so in a methodical manner.
But, while Levi’s waits, the price tag on the entire project keeps growing. “That $400 million is now looking more like $850 million,” Benchener commented.
The move also comes as Levi’s principals, headed by chairman and chief executive officer Robert D. Haas, are heading up a stock buyback that will concentrate control in the company’s top execs.
But Benchener pointed out that the cost was not a factor in revising the plans. Right now, upgrading warehousing and distribution is at the top of Levi’s list.
“We are building three new distribution facilities with state-of-the-art technology,” Benchener said. “They are scheduled to open in the latter part of this year. And, once they’re open, we should be able to pick and ship single-unit orders as efficiently as high-volume orders.”
He added that the new distribution centers will also facilitate cross-docking.
The company is also moving forward with the implementation of advanced ship notices (ASN), the most notoriously tricky of the EDI documents to get right. An ASN is a sort of electronic bill of lading that is modemed to a retailer before the actual shipment gets to his distribution center. If the system is working correctly, the retailer can scan the bar codes off the side of each shipping container when the shipment arrives to make sure the shipment corresponds exactly to the ASN. The ship notice has already given the retailer all the information on that shipment, right down to quantity, sku’s, sizes, styles and colors. That information is already in the retailer’s computer systems, and cartons need not be opened nor their contents checked at the receiving dock.
While retailers say few apparel companies are producing accurate ASNs, Levi’s is already successfully sending ASNs to most of its larger retail customers. “Every one of our top 50 retailers are accepting ASNs from Levi’s,” Benchener said. “And that’s on all the orders they receive.”
And while many apparel makers complain that they are not getting the accurate point-of-sale (POS) information from retailers that they need to plan production and forecast replenishment, Benchener said Levi’s is getting more POS data than it can handle.
“We are getting as much or more POS information than we need,” he said. “And we are using that information to plan production.”
Levi’s is also using that data to replenish its stocks on retail shelves. The company is heavily promoting vendor-managed inventory relationships wherein it automatically replenishes retailer stocks by store based on the POS data retailers forward directly to Levi’s. It’s a method Benchener said Levi’s would like to export to Europe.
“Our VMI programs are highly developed here in the States,” he said. “And we would like to see more of that in Europe. But we are not getting good POS data from our European retailers. Generally, Europe is about three years behind the United States on everything to do with Quick Response.”
Benchener said radio-frequency (RF) tagging is one of the breaking technologies most attractive to Levi’s. Many in the apparel industry feel tags that emit a distinct radio frequency for each individual sku could eventually replace bar codes on merchandise. A radio receiver, rather than a scanner, would record the signal at the point of sale. That technology is already a reality, but the industry cannot cost-justify its implementation yet.