December 31, 2002, 12:00 AM

How the web bests the beast of private brand production

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All of these applications help a brand manager to better control and react to unexpected changes in their supply chains. With the right information soon enough, they can make alternate plans to avoid being without the right product for an important selling season, and to avoid having to sell products that arrived too late at sharp markdowns.

New Generation Computing specializes in the market for retailers that can integrate supply chain data from multiple sources that include company-owned as well as outside-contracted factories. “We can manage all details for factories that retailers own, and also work with outsourcing factories, so that all information comes back to headquarters for one consolidated view of work in progress,” Brooks says.

Girard of AMR notes that New Generation appears to control the niche for production monitoring software that sits on servers at the factories themselves as well as at the retailer’s headquarters. “Every retailer’s ability to manage sourcing depends on the factory’s ability to track work in process and commit capacity,” says Girard. He adds that if factories have effective planning and process control systems, they have better insight on production capacity and can better meet production deadlines. In some cases if the retailer is a big enough customer, the retailer can influence the technology that the factory uses. “So there is one view in headquarters, regardless of whether information is coming from company-owned or outsourced factories,” Brooks says.

Controlling the calendar

Many of the web-based supply chain management tools include events calendars that help retailers and their suppliers monitor production deadlines. At the beginning of a production cycle, for example, a retailer and supplier would work out a series of production dates-say, Jan. 15 for a factory to receive fabric and color dyes, Jan. 20 to receive fabric trimming, and Jan. 25 to begin sewing. It’s traditionally been difficult for brand managers to get updates on these deadlines in time to react to any interruptions. But with the automated systems, production workers must log into the system to record the completion of each step. If they do not do so, the retailer gets an automatic notification that a step has missed deadline.

Brooks notes that suppliers often declined to provide brand managers with useful information on production updates because it was either too time-consuming or because the supplier did not perceive any benefit in transferring the information, which was typically maintained in spreadsheets and not set up for data transfers. But by participating in a web-based management system, suppliers are forced to report status to the retailer. Suppliers in turn can see how well their own materials are moving through the supply chain.

Brooks says the price to license ETMS, including set-up fees, averages $5,000 to $10,000, depending on the number of factories. There is also annual maintenance fee equal to 18% of the licensing fee. There are no transaction fees. ETMS and related modules of New Generation’s e-SPS suite are currently being tested by retailer Wilson’s The Leather Experts Inc. and Kellwood Co., a manufacturer specializing in private label apparel.

In addition to looking into a supplier’s factory, the web enables retailers to collect information from throughout the supply chain, including data related to logistics for both raw material and finished product. Having up-to-date logistics information such as that available from SupplyChainge’s software is helping retailers consider more cost factors when determining the true cost of sourced product, Girard says.

“The focus now for earnings is to reduce finished goods inventories, which expose the retailer to markdowns,” says John Thorbeck, CEO of SupplyChainge. “There’s a new urgency, because of the poor economy but also from a demanding investment community, that insists on better profit performance. The habits of the large inventory environment-high-markups, high markdowns-are no longer acceptable.”

Broader thinking

SupplyChainge is conducting pilot programs with two retailers, including a large private label apparel retailer.

SupplyChainge’s Lead Time Optimizer tool enables retailers to conduct what-if analyses that factor in the costs of logistics and inventory warehousing as well as the costs of sourced products themselves. This enables them to predict overall costs related to keeping products that don’t sell out during expected selling seasons. Thorbeck says the Lead Time Optimizer tool can help lower the risk of ordering raw materials for finished goods by shortening the lead time for ordering them. “The retailer can react to changes in sales close to season and even in season,” he says.

“We’re not a sales forecasting tool or a merchandising plan,” says Thorbeck, who is former president of footwear manufacturer G. H. Bass & Co. “We’re providing information to help retailers decide when they should pull the trigger on committing inventories and when they should delay their decision on making a commitment to receiving finished goods.”

Information that retailers use in SupplyChainge’s Lead Time Optimizer tool integrates with their back-end enterprise resource planning systems and can be shared over the web with trading partners throughout the supply chain.

As promising as the new brand-sourcing software is, successful implementation will require retailers to think more broadly when figuring costs of merchandising private labels. “They’re giving retailers the ability to prioritize their sourcing strategy in view of the fashion and season risk,” says Girard. “But retailers will have to break cultural norms and common metrics of how buyers’ performance is measured, such as including logistics costs.”

Click Here for the 2003 Guide to Web-Based Supply Chain Solutions

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