Section title

1
PLM Overview
Prepared for
OCTOBER 21, 2005
2
KSAs Delivers Value Across the Value Chain
Strategies, Organizations, Processes, Tools
STRATEGY AND GROWTH SERVICES
GROWTH SOLUTIONS
Operational excellence
Brand purpose/competitive positioning
PLAN
MAKE
MOVE
SELL
Product planning
Product development
Global supply network management
Logistics and warehouse management
Customer selling environment optimization
Consumer insights and connectivity
PRODUCT PERFORMANCE
TECHNOLOGY ENABLEMENT

• Assortment planning
• Demand planning
• Replenishment
• Pricing

• DRP
• Transportation management
• Sourcing systems

• WMS
• Labor productivity
• Supply chain visibility

• CRM
• Space planning
• Labor productivity

• Consumer data warehouse
• Trade promotions
• Customer profitability

PLM
TECHNOLOGY DEPLOYMENT
IT cost reduction Innovation delivery IT
strategy
3
The industry is focusing on the product
development process

• The last few years have seen a heavy focus on
  improving the product development process in the
  apparel vertical. This has been driven by
• Desire to improve gross margin through faster
  speed to market and greater responsiveness
  enabling more market right product
• Need to gain better leverage on GA costs through
  more efficient processes
• Consolidation in the offshore sourcing end of the
  supply chain, catalyzed by the loosening of
  quotas
• Entrance of new product development PLM
  software vendors from other industries who now
  enable product development process and
  organizational transformations
• THE common goal of every product development
  effort on which we work with our clients is SPEED

4
Why Speed? Speed Drives Results
Company Turns / Net Margin Avg. Turns
Margin by Model Notes1
Dicks Sporting Goods Williams Sonoma Coldwater
Creek Talbots Federated May Sears
4.5x / 6 4.8x / 9 5.1x / 4 5.3x / 10 2.7x /
7.1 3.0x / 4.8 4.5x / 2.6
Sears will introduce new apparel items and
accessories in stores every 4-8 weeks, rather
than at the start of each season Talbots
want customers to know that if they see
something they love, they should buy it now,
because it may not be here in a few
weeks Federated ...automatic replenishment
improves sales and inventory turnover of basic
items
4.3
Linked Supply Chain
6.3
Gap PacSun Limited Timberland Home Depot
5.1x / 11 5.1x / 12 5.6x / 13 5.6x / 14 4.6x
/ 10.6
Gap new product flow strategies at each brand
are helping drive traffic and regular-price
selling, which has resulted in improved inventory
turns Limited the lean inventory position
achieved has ensured maintenance of fresh stock
5.2
Faster Supply Chain
12.1
HM AF Zara (Inditex) Chicos Amer. Eagle
Outfitters WalMart
5.5x / 20 6.5x / 20 6.7 / 13 6.9x / 21 8.6x
/ 7 8.3x / 10.6
HM a garment can move from design to hanger
in just 20 days every store is restocked
daily Zara design, produce, and deliver a
new garment and put it on display in stores
worldwide in a mere 15 days Chicos been
able to sustain stellar sales growth because of
its reputation for flowing in new
merchandise Wal-Mart speed is important, and
so is the optimum functioning of our logistics
system
7.1
Future Supply Chain
15.3
Pre-Tax Net Profit Margin (Pre-Tax Net Income /
Revenues)
Inventory Turns (COGS / 3 Yr. Avg. Inventory)
Note Inditex financials used for Zara. All
financials represent FY 2003, with average
inventories for FY 2001-2003 Exceptions
JCPenney, Home Depot average inventories FY
2002-2003, May inventories FY 2003 1Source
10-K, Hoovers, News Articles, Press Releases, and
Earnings Conference Call Transcripts
5
In addition to Speed Results from PLM
Initiatives
KSAs clients have achieved high-impact results
after implementing PLM
What to Expect

• Inventory Efficiency
• Reduced development times
• Collaborative supplier relationships
• Reduced approval iterations
• Improved product hit ratios
• Improved direct sourcing capability

Results Achieved
20-50 Cycle Time Reduction

• Margin Management
• Integrated consumer insights
• Integration of PD and planning
• Earlier, more accurate costing
• Development closer to demand
• Reduced expediting costs

5-20 Margin Improvement

• Productivity
• Process automation
• Product data availability online
• Elimination of process handoffs
• Exception management
• Disciplined PD calendar and process
• Process metrics and measurement
• Leverage of existing labor for more

5-20 GA Reduction
Note Benchmarks are from results seen in KSA
clients (excluding high extremes)
6
The Benefits are Compelling

• Apparel manufacturers can expect to see dramatic
  results indeed we regularly develop 5 year ROI
  models for PLM projects with IRRs in excess of
  100. Common sources of hard benefits for can
  be found in
• Reduction of finished goods air freight to 10 to
  20 of shipments, resulting in 1 to 3 reduction
  in COGS
• Labor cost avoidance, as fewer new employees will
  be necessary to support added business due to
  streamlining of processes and elimination of
  clerical tasks. In fact we find that, on
  average, 30 of design and development labor is
  wasted on clerical and other redundant tasks
  related to lack of information.
• Raw material aggregation across styles and even
  divisions, resulting in 3 to 5 reduction in
  materials costs
• Shortened lead times causing a reduction in
  working capital and increased service levels.
• Chargeback reduction, to the extent that late or
  incomplete deliveries are an issue today

7
The Benefits are Compelling

• There are additional benefits that are more
  difficult to quantify
• Having a full collection / delivery arrive on
  time and together at retail,to maximize full
  price sell through
• Disciplined handoffs, freeing people to focus on
  their job, not having to remain involved further
  along the process
• Standardized systems, reducing support and
  infrastructure costs
• Being on the same page, with all parties, from
  design through sourcing, and including 3rd party
  agents, raw material suppliers, and contract
  manufacturers, working from the same set of
  dates, the same understanding of the product
  line, and the same product specifications
• Reduce SKU proliferation and over-development

8
Speed How do they do it?

• To realize exponential speed-to-market, companies
  must fundamentally change the way the game is
  played

90s Supply Chain Link activities
Plan
Develop
Select
Buy
Transport
Allocate
Source
Replenish
New millennium Supply Chain Do it faster
Plan
Develop
Select
Buy
Transport
Allocate
Source
Replenish
New millennium Supply Chain Do it faster
Next Generation Supply Chain Do it differently
Design, Develop, Select
Insight
Source
Future Supply Chain Do it differently
Move
Manage
Plan
Purchase
Place
To leap-frog improvements to exponential
benefits, activities must be done seamlessly in
parallel, across functional organizations that
often operate today as though they are countries
apart
9
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

10
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment.
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

Concept
Concept
Initiation
Initiation
Development
Development
11
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition.
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

Concept
Concept
Initiation
Initiation
Development
Development
Line
Line
Planning
Planning
12
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

Collaboration
Collaboration
Concept
Concept
Initiation
Initiation
Development
Development
Collaboration
Collaboration
Collaboration
Design
Collaboration
Collaboration

Material
Library
Sourcing
Line
Line
QA
Planning
Planning
Collaboration
Collaboration
Collaboration
Collaboration
13
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

Workflow
Workflow
Event Tracking
Event Tracking
Collaboration
Collaboration
Concept
Concept
Initiation
Initiation
Development
Development
Collaboration
Collaboration
Collaboration
Line
Line
Planning
Planning
Collaboration
Collaboration
Collaboration
14
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

Workflow
Workflow
Event Tracking
Event Tracking
Collaboration
Collaboration
Concept
Concept
Initiation
Initiation
Development
Development
Collaboration
Collaboration
Collaboration
Sample
Iterations
Spec/PDM
Line
Line
Planning
Planning
Collaboration
Collaboration
Collaboration
15
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

16
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

17
Barriers to Speed
Product development (concept to PO) typically
makes up about 70 of the overall cycle from
concept to shelf. If youre going to reduce the
overall cycle, starting with the product
development cycle is imperative.

• Typical barriers to speed in apparel product
  development.
• Delayed Decision Making
• Poorly defined consumer brand proposition
• Lack of a properly structured communicated
  merchandise or line plan. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to system
• Aggregated decision points and overly generic
  timelines
• Lack of Management
• Little information on the effectiveness and
  efficiency of the development process
• No ability to manage by exception and proactively
  focus on problem resolution
• Generally inadequate information on products and
  their status

18
KSAs PLM Definition and Requirements Help
Prioritize Needs
KSAs PLM Framework helps define requirements and
set implementation priorities.

• PLM can include many components
• Product Data
• Libraries of information
• Line planning and range optimization
• Vendor partnerships and management
• Workflow and process management
• Collaboration

Many companies start with a subset of the
framework and add on as they meet with success.
19
Software Vendors
There are many vendors providing apparel and
footwear-specific PLM solutions. The following
is a list of vendors that KSA have most often
appeared as part of client software selections
over the past year.

• Vendors that have always been apparel/footwear
  specific
• Freeborders (not to be confused with AI / Karat)
• GEAC Runtime
• Gerber WebPDM
• NGC
• Vendors that have migrated from other industries
  to apparel/footwear
• Matrix One
• PTC
• UGS

20
Differing Industry PLM Implementation Approaches
C
A
Many companies focus on collaboration, workflow
and tech design only
Some focus on all product development
functionality internally
D
B
Some add line planning and optimization to gain
the full suite
Some add Design and product spec data
Approach with greatest potential benefit
Most common approach
21
Typical Challenges Faced in PLM Implementations

• No well-communicated business case
• Lack of business owner sponsorship
• Shortcutting of process design
• Over-standardization of process
• Too little change management

1
2
3
4
5
22
Key Factors for a Successful Speed Initiative

• Define the product strategy. Are you a fast
  follower? A fashion leader? The low price
  option? All have a great impact on what your
  product development process should become.
• Start with the Process. The process needs to be
  re-thought, not tweaked, in order to achieve
  quantum leaps in speed.
• Align the Organization. Ensure that incentive
  systems, reporting relationships, and training
  are part of the implementation plan.
• Implement a PLM. The process integration and
  management required for success in todays
  complex retail-apparel supply chain can only be
  accomplished with robust systems support.