What is Inventory Localization in fashion retail?

inventory localization

Blog Written By | K3 Technologies

Digital Versus Physical: Understanding Inventory Localization in Fashion Retail

Technology has made mind-reading seem commonplace by customizing our online lives. The content availed to us on various social media platforms is relevant, comfortable and familiar because of algorithms that ensure we see exactly what we prefer.

This concept is not lost on digital fashion retail platforms. They too have adopted these strategies to maintain the attention and interest of clients, and boost sales as a result. Products displayed online to customers are based upon answers to a few questions, as well as previous searches and purchases alike.

Physical stores are then placed at a disadvantage in this regard. With such personalization online, most consumers have little to no patience for the traditional style of shopping. Walking in and out of various stores while searching through racks of clothing, then fitting a  few before purchasing is tedious for the modern-day consumer. As a result, physical stores are facing extinction if they don’t adapt quickly.

The reality is that it is virtually impossible to customize physical stores in the same way as digital stores.

But Perhaps There Is A Way

Physical stores, particularly franchise stores, have always standardized everything, their products, customer service, right down to how clothes are organized in the store. This can no longer work in this digitized age; standardization is dying and localization is rising.

Localization involves using vast amounts of data collected through online platforms and from in-house staff on the ground to customize a customer’s entire experience in a physical store. This will certainly affect the strategy of inventory management retail stores employs due to inventory localization since the products carried by the stores will be informed by the unique picture painted by the data analysis.

Success Stories

Some brands have successfully implemented inventory localization for their brick-and-mortar stores. One such brand is H&M. After dealing with years of poor sales and losses due to bad market predictions, H&M employed the use of big data and analytics for nearly perfect product prediction which then helped in pricing and proper stocking of inventory. They analyzed data from product returns, loyalty cards, and receipts to better understand their clientele at each location and facilitate a suitable localization retail strategy.

Zara is another leading fashion brand that has found success in inventory localization. The brand invested in technology by attaching a microchip to each of their garments. This enables tracking all the way from their warehouse to the point-of-sale section at their stores. By analyzing this data, Zara is able to determine which designs are selling fast and need to be restocked, which ones are not and need to be pulled or re-deployed to another store. Therefore, Zara ensures that its customers in varying locations are getting exactly what they want when they want it; which is about as close you can get to the effectiveness of digital retail.

How Exactly Does This Work?

Localization requires data collection from various sources, primarily:

  • Online stores and platforms
  • In-house stock tracking
  • Sales management and staff reports
  • Receipts
  • Loyalty cards
  • Returns

Data collected from these sources is then analyzed to give a clear picture of each physical store and respond to its needs rapidly and effectively. In fact, data from online platforms can be used to provide a seamless online to an in-house experience for a customer. The customer can order an item online and come to an in-house store to fit and collect it before taking it home. Or a client can return a product ordered online to a physical store and collect their refund or replacement.

This convenience is quite appealing to the modern-day shopper and can greatly boost customer loyalty and increase revenue for the store. It is also within the reach of many apparel stores that may not have unlimited resources to collect data. By simply merging their online presence with their in-house stores (by adopting an omnichannel strategy), great improvement can be witnessed in a relatively short period of time.

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Why is Change Management Key to ERP Implementation Success?

erp implementation

Blog Post Written By | K3 Business Technologies

It’s one of life’s contradictions: When you are making improvements, facing even the most positive change is hard, it can feel like a bad thing. In the retail industry, ERP implementation is a very good example. The advantages of ERP software for the fashion and apparel industry are proven, from increasing profits through improved forecasting to optimizing your organization’s operations to simply save time, but the journey of implementing and landing a new system is long and hazardous.

Once the most suitable ERP system has been picked, your entire organization will be staring down a huge shift. And while you’ll all know intellectually that the improvements are great, the new systems and new interactions are bound to involve discomfort, high emotions, and yes, bunches of stress. The key to overcoming the awkward elements of change so you can fully realize the benefits of ERP? That’s where a concept know as Organizational Change Management comes in.

Panorama Consulting Solutions puts it in perspective this way:

“These changes in business processes, which are inherent in any successful ERP implementation, create changes in corporate culture and climate. Though less obvious, perhaps, than changes in job functions, these subtle shifts will be very important to your staff and must be managed to avoid resentment, fear, and anxiety.”

A couple of key steps

Here’s a bird’s eye view of the key steps involved in applying OCM as you begin your ERP flight:

1. Take time to establish a project charter

The project charter is simply your retail EP team’s concise statement of core goals, objectives, and intent that can serve as a map for whatever comes next, according to ERP Focus. if you skip this step, you miss the chance to establish a vision for your project.

2. Present an overview and share knowledge with everyone affected (and that’s everyone)

Employees need more than training to understand the need for (and importance of) the new ERP system implementation in the company. At a minimum, you’d need to do your best to communicate why your company chose ERP, how the system will improve jobs and how their particular position will be affected. 

3. Do an ample amount of training

While the retail business is famous for its quick learners, you can’t underestimate the amount of training you’ll need to implement ERP for lasting business success. Remind yourself that literally the entire organization has experienced a disruption in its flow and duties, and plan education and training accordingly.

Start with ERP-related training to ensure that employees learn the software, sure, but also bear down on the kind of training that lets everyone learn the new business processes. Follow through with training that emphasizes the new corporate culture and any shifts in employee interactions. it will be tough and take a while, but the shift to an optimized and highly-profitable business model through ERP will be worth all the effort.

4. Be sure your support is evident from the top down

One of the best ways to manage the change that comes with ERP implementation is to make sure everyone knows the whole company is dedicated to its success. So present a unified front. Executives, in particular, should support the change fully and make sure employees company-wide know they’re behind the effort. If top management doesn’t engage with the process or implementation, employees will notice and their own commitment will flag.

K3 business technologies have a number of solutions for the retail industry, to find out more contact us on  info@allonline365.com or  +27 (21) 205 3650.

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Optimizing Time to Market in Fashion

time to market

K3 Technologies Optimizing Time to Market

Getting fashion merchandise to market with greater efficiency is not a matter of fixing one facet of the supply chain or another. Success requires a holistic, end-to-end approach. Learn how business process transformation and integrated ERP technology can help.

There is tremendous pressure to shorten cycle times and get fashions to market much faster. This need to optimize time to market impacts almost every link of the supply chain, from design to delivery.

For too many apparel retailers, inefficiencies are eating away at their competitiveness. Executives recognize that decisions made closer to the market are bound to bring stronger results, and they are looking for solutions that are fast and easy to implement. These solutions need to address multiple pain points where time and money are lost, from pre-season planning and design through production, logistics, and allocation to end-of-season markdowns and liquidation.

Aided by the latest integrated ERP technology, there is an opportunity to squeeze time out of traditional processes and perform tasks much more efficiently. By doing so, fashion companies can streamline the concept-to-consumer cycle and book sales at the highest possible profit margin.

Within each supply chain segment, an end-to-end IT solution can help apparel brands and retailers to:

  • Execute activities concurrently instead of sequentially
  • Standardize processes and data
  • Automate communications
  • Integrate and centralize information so that there is one version of the truth.

Pre-Season Business Planning: Greater Visibility into Reliable Data

During the critical planning phase, many apparel decision-makers have had to make commitments without the benefit of current trend information or reliable forecasts. They often have had to pull historical sales data from separate wholesale, retail and e-commerce systems to forge the best-laid plans they possibly can. But by the time they are creating sales orders for the upcoming season, there could be business factors playing out that would materially change their current course – if they only had clearer visibility into those factors.

To combat this problem, companies can utilize ERP technology to more fluidly compare plans to forecasts. As pre-season planning progresses, the business can evaluate forecasts, which will change based on actual sales, customer behavior and market information. They can see how forecasted results affect gross profits, volumes, and sourcing. Then they can adjust their future business plans accordingly and take steps to mitigate issues that may be building up during the current season.

An accurate forecast may only be available weeks before a season starts, whereas the business plan typically is in place months or a year in advance. When fashion professionals can truly leverage both, they can better see the best mix of product types they need to stock and sell to hit their gross margin targets.

For example, after one week of pre-season spring sales, there could be a new forecast showing a 10 percent decline in sales vs. a planned increased of 5 percent. The business can then take action to try to address this discrepancy, both for future seasons and the spring season. Planners and salespeople can look into their ERP solution to see the margin made on sales orders by both the order line level and the overall order level. This provides helpful clarity into where orders might be adjusted during this forward-sales phrase before garments are actually produced. The fresh insights from the forecast also can be used to make adjustments in material procurement and production capacity commitments for future seasons.

Putting greater emphasis on planning and leveraging stronger data can help companies enhance product lifecycle management, says Sonia Hernadez, and associate partner with The Parker Avery Group, a strategy, and management consulting firm focused on the retail industry. “Many fashion firms are struggling with the high rates of change in collections and assortments,” she says. “Customers want season change more frequently than twice per year, and assortment planning tools and processes are not keeping up with the desired amount of change needed.”

By using technology to get a better read on the business, companies have a chance to get the product’s lifecycle, beginning with the plan, off to a stronger start. “Some firms focus on the front-end (product sourcing), and others focus on the back-end (markdowns and end of life), but too many are missing a good plan that is data-driven for end-to-end product lifecycle management,” Hernadez says.

In his blog post, “Predicting Buyer Journeys and Inventory: Retail Future in a Nutshell,” Sabir Anand, vice president of research and principal analyst, EKN Research, also addressed the missed opportunities when plans are built without the latest insights. “A sizeable volume of inventory is not based on customer science, reliable forecasts or likely demand scenarios related to prospective shopping patterns or sales trends,” he said. “These problems exist not only due to lack of reliable and timely customer insights but also due to legacy ERP, business intelligence, demand forecasting, and inventory management systems.”

With newer technology, such as predictive analytics, “retailers can analyze customer and marketplace information that can be used to triangulate demand forecasts with merchandising plans and to respond to changing market dynamics in real-time,” he said.

Design and Pre-Production: Standardize for Faster Speed

One of the greatest time-to-market challenges facing fashion enterprises is a lengthy design/development process that starts very early, long before designers can see which trends are hottest. This traditional calendar drives huge volumes of work on styles that may never see the light of day. By some estimates, only about 30 percent of early concept sketches make it into final collections.

Product design often begins nine to twelve months before styles are due to land on the retailer selling floor. Multiple fashion businesses study the same sources of trend information while trying to maintain unique looks targeting their consumer markets. Of the initial designs they create, companies may drop half of them as they get closer to the market and decide some styles are not winners. Yet before that happens, weeks if not months could be spent developing samples, conducting fittings and making revisions.

This problem can turn into a crisis as companies face intensifying pressure to turn out more frequent collections. Demands mount on teams as they are forced to manage more products without automation to help them or meaningful market data to guide them. “Commitments on end products are made six to twelve months in advance of demand, sometimes longer,” Hernadez says. “Many companies are still trying to get closer to demand signals with little in the way of data intelligence tools and/or teams with product and customer analytics skills. ”

When the information that helps creative teams know what to design is significantly better, there is a major reduction in workload and incurred costs. To buy time and wait for clearer market insights, companies must reclaim precious hours, days, and weeks (or more) currently being drained by production-intensive processes, such as sample making, and rounds of unstructured communications about specifications and product details.

“The bottom line in all of this – the necessity to get it right the first time and build and protect the brand for the long term – requires a holistic, end-to-end approach to brand-related requirements management, as anything less than results in suboptimization, continued inefficiencies, and islands of disconnected automation and information,” said PLM consulting firm CIMdata in its paper “Delivering the Brand…and the Business: Can Your Current Processes and Tools Support Today’s Complexity?”

There are integrated ERP solutions with robust product development capabilities geared to help fashion businesses standardize their pre-production processes and communications. For instance, newer systems allow technical design teams to work on perfecting pattern blocks and developing standard fits separate from the regular flow of seasonal design work. This approach is much more efficient than trying to finesse the fit of every single new style.

These solutions also provide standardized libraries for materials, colors, and artwork, plus standard technical pack reports to capture details for suppliers as they build samples and ultimately production orders. In addition, suppliers can access all product information through cloud-based portals, which serve as gateways for sharing details, bidding on projects, and exchanging production progress updates between brands, suppliers, and service providers. For designers and planners, pre-defined choices, drop-down menus, and aggregated views enable efficient handling of multiple product dimensions.

When this front-end PLM functionality is integrated with downstream business processes, it also allows teams to easily access and apply historical sales data and the current financial metrics, such as gross margin and recommended retail pricing, to their line plans.

The sooner businesses make the transition to this type of integrated technology, the better, according to CIMdata, which stated: “The key point is to not delay, as every product developed and launched from within your current environment is probably leaving money on the table as well as carrying a high risk of failure.”

Managing the Product Lifecycle: Pre-Season to End-of-Season

While the acronym PLM often gets associated with pre-production activities, the work of product lifecycle management never really ceases until the product or collection reaches its true end of life. As collections fall into place, companies enter a whole other realm of decision-making – one in which integrated technology is more important than ever.

With a single system of record, companies cut down on confusion over calendar management. When teams access a shared calendar, they gain a much greater understanding of the overall business and how decisions and delays affect workflow and work pressure. “Holistic calendar management is a common challenge,” says Hernadez. “Historically and even today, many fashion firms have a merchandize or planning calendar, a marketing calendar, and possibly a separate sourcing calendar. Without the ability to integrate all components, and align the key milestones, there will always be obstacles in understanding and improving time to market.”

To streamline and reduce complexity in pre-season planning, some apparel brands are pre-allocating products based on rules. With this practice, they can increase customer satisfaction and reliability by pre-allocating future stock to a customer early in the planning process based on order and/or customer priority. Advanced ERP solutions can automatically alert the brand if there will be any issues in actually allocating the promised goods, at which point the company can immediately update and change sales orders, possibly replacing some products with available goods to ensure delivery. Throughout the season, this automated allocation based on rules continues, and teams only have to deal with exceptions or situations in which the planned product distribution is not possible.

In planning for the optimal stock, fashion businesses also can institute more pre-packs into their portfolios. Instead of selling “open sizes”, which allows customers to pick and choose any size assortment, the fashion brand can offer pre-packs with relevant size breakdowns based on their knowledge of regional markets and the customer’s target consumers. As a result, apparel manufacturing runs can be more predictable and profitable because the company can optimize fabric utilization. Then the expense of producing sizes that have less demand, such as XXS, is spread evenly across more orders.

In addition to helping optimize manufacturing efficiencies, the use of pre-packs minimizes human intervention and manual handling when products reach the retailer. Cross-docking and bonded warehousing also can reduce the need for manual handlings, such as unpacking sorting, repacking, by the retail customer. Both cross-docking and bonded warehousing require solid administration and clear instructions, all of which can be systematically and centrally controlled within the enterprise solution.

The centralized nature of an end-to-end ERP solution also is critically important for managing end-of-season planning, logistics, and markdown modeling. Retail teams need access to a single version of the truth and clear rules and guidance on when to adjust prices and move merchandise from store to store or to off-price outlets. All of this ties back to the core margin planning tools so instrumental in setting optimal stock to begin the season. The ERP solution helps guide managers as they try to sell the most merchandise within the target time window and quickly act on overstock situations. These decisions and tasks need to be managed centrally so as not to burden retail store personnel, increasing costs and consuming time.

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Resource Credit | K3 Technologies

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