Apparel brands and retailers are nervous in today's uncertain economy, as the news media continues to focus on record store closings, high-profile bankruptcies, and declining retail sales.
However, many forward-thinking companies are prospering during the economic downturn, making strategic decisions that can position them for long-term success and continued sales growth.
One of the key areas of technology investment for fashion, apparel and footwear brands and retailers is PLM (Product Lifecycle Management). According to PLM industry analyst firm CIMdata, Because of the far-reaching impact of PLM and its expanding footprint across the enterprise, [PLM] is now widely regarded as a do-or-die competitive necessity in a turbulent global economy where companies leveraging these solutions will likely be among the top performers in the coming years.1
CIMdata goes on to say that the PLM market experienced a stronger-than-expected 13.5% growth rate to reach an estimated $24.3 billion in 2007 and that PLM investments are forecasted to continue their steady climb over the next five years, increasing at a compound annual growth rate of approximately 9.8% and expanding the market size to nearly $40 billion by 2012.
Investing in supply-chain technology such as PLM may seem counter-intuitive at a time when companies are squeezing costs out of their business wherever possible. Yet PLM, along with software that helps companies manage global sourcing, is essential in positioning companies for sustained growth and profitability. Here are five key reasons why:
Improved profit margins. Companies that invest in PLM systems report significant gains in their profit margins. For example, Casual Male achieved a full point of gross margin improvement after implementing a PLM and global sourcing system, according to retail industry publication RIS News; the article goes on to say that Casual Male expected further improvements of 150 to 200 basis points as a result of the software. Even a small lift in profit margin can have a big impact on brands and retailers that are competing in today's tough economic climate.
Reduced cycle times. PLM systems enable a high degree of collaboration and visibility at every step of the product lifecycle, allowing companies to get their product from design concept to the retail floor in the shortest possible period of time. Companies that implement PLM systems also have the opportunity to analyze their business processes and streamline their workflow, further improving efficiency. Many PLM systems include automated calendars and exception management capabilities, which trigger alerts when events and activities don't happen on time. As a result, brands and retailers can gain precious time in the design and production process and begin designing closer to the trends ensuring they're delivering the products that consumers really want.
Rapid response to fast-moving trends. By shortening the product lifecycle, PLM solutions enable companies to design much closer to the fashion trends. This helps brands and retailers deliver the merchandise their customers expect, increasing full-price sales and minimizing markdowns. When companies have real-time communications throughout their supply chain, they can also make last-minute decisions that can make the difference in meeting or missing profit goals. For example, consider what happens when sales data shows that long-sleeve blouses in a certain style are unexpectedly moving much faster than the short-sleeve version. With PLM and global sourcing software that provides real-time communications to remote factories, a company can immediately instruct the factory to shift all materials to the long-sleeve version before the fabric is cut, thus driving increased sales.
Increased sourcing agility. The ability to quickly shift the sourcing mix has become increasingly important, given significant rises in the cost of labor in China, political instability in countries such as Pakistan, and increased shipping costs. Companies that have integrated their PLM software with global sourcing operations can make rapid adjustments, changing manufacturers as needed in order to lower the costs of production, reduce shipping costs, ensure on-time deliveries and a host of other reasons.
Better product quality. Today's best-in-class PLM and global sourcing systems can help companies improve their product quality ensuring a level of consistent quality that protects brand reputation and builds long-term customer loyalty. For example, when integrated with PLM and global sourcing solutions, quality systems can help companies detect problems at remote factories, allowing manufacturing defects to quickly be resolved before goods leave the factory. The result is significant savings in time and money.
PLM software, of course, isn't a cure-all. But with the proven ability to boost profits, increase speed to market and improve product quality, PLM can be a key to not only surviving, but thriving, in today's unpredictable economy.
Mark Burstein is Vice President of PLM Solutions for New Generation Computing (NGC), a leading Fashion, Apparel, Footwear and Retail software company. For more information, visit www.ngcsoftware.com.
1 Industry spotlight: Executives discovering value of PLM software, Manufacturing Business Technology, 5/26/2008.