Supply chain management: Lessons not learned
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
Despite exhortations to change spanning two decades, our supply chains continue to be built for mass, not speed.
Consider this: In 2001, the Demand Activated Manufacturing Architecture Project (DAMA) completed a seven-year project funded by the Department of Energy (DOE) through the American Textile Partnership (AMTEX). This project concluded that it was possible for the soft goods industry to improve consumer responsiveness while still reducing by 50 percent the time merchandise sits in the supply chain pipeline.
The theory argued for more frequent, smaller shipment and assembly closer to the point of demand in the U.S. — specifically in Mexico — while pointing to the benefit of the internet in delivering faster communication and responsiveness from fabric manufacture through product ideation and delivery.
Apparently, the only folks who actually read the report or acted on it were fast fashion companies like Inditex (Zara), H&M and Forever 21.
What went wrong? Some of the problem is caused by what I call “the tyranny of turn.” Theoretically, bringing product in at the beginning of the month gives the merchant the longest possible time to sell it, even if the aisles are choked with merchandise. If a merchant is compensated based on inventory turn, it’s in his best interest to do so anyway.
The remainder of the problem is based on two concepts: 1) “This is how we’ve always done it” and b) “we buy for mass; we don’t buy for precision.” Unfortunately, the days of mass retailing have been traded in for much more personal retailing. Millennials (the current key buyers) prefer curated assortments geared to their tastes and fresh product more frequently. They also generally prefer “experiences over things.” In other words, it’s a world made for Fast Fashion.
Our Supply Chain Execution report coming out in November will provide further evidence around retail’s fast and nimble challenges. I’d also recommend that you read the “tired, old” DAMA report. We haven’t got that part done yet, and if we do, many of the problems retailers identified in the new survey may be solved by “this old thing.”
- Supply Chain Management: Lessons Not Learned – RSR Research
- DAMA Final Report – Department of Energy
DISCUSSION QUESTIONS: Why do you think retail’s supply chains are still largely built for mass selling instead of speed? Do you see that changing in any significant way?