The industry is focusing on Product Lifecycle Management

1
The industry is focusing on Product Lifecycle
Management

• 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 overhead 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 these vendors are
  significant in size, dedicate large funding to
  RD, and bring experience from other industries
  that have complicated products and global,
  multi-party supply networks
• BUT now as fashion retail evolves, the REAL
  competitive advantage our clients seek through
  PLM is SPEED

2
Speed has taken on a new meaning
SPEED
NEWNESS AND EXCLUSIVITY
FLEXIBILITY AND RESPONSIVENESS

• GREATER RESPONSIVENESS AND CYCLE TIME
• New process models
• Strategic vendor partnerships
• Geographical shifts in where activities are
  performed in supply chain

• GREATER VISIBILITY TO INFORMATION
• Collaborative Design and Development
• Product Lifecycle Management tools (PLM)
• Exception based management

• FAST FASHION BECOMING A REQUIREMENT..
• More frequent product introductions
• Greater perception of freshness
• More innovation

• GROWTH IN PRIVATE LABEL
• Consumer need for uniqueness
• Retailers are competing with brands
• Retailers becoming Value Chain leaders

3
The Bar Is Rising The Industry Keeps Getting
Faster
Days -360
In Store 0
Seasons/Year
-270
-180
-90
Yesterday
2-4
Today
4-6
Next Generation
6-8
10-12
4
Leaders are Using Blended Process Models
In-Store Date
Standard
Infusion
Speed

• What is different?
• Operational differences per track
• More product thru speed track
• Potential for multiple sourcing tracks
• Strategic, dedicated resources
• Vendors dedicated to speed
• Metrics monitored by track

• Results
• Stronger capabilities
• 50 reduction in cycle times
• Stronger execution and timeliness
• More sustainable
• Accountability
• Greater profitability in speed tracks

5
Leaders think in weeks not months

• Liz-Quik (Liz Claibornes 14 week PD model)
• Moving to 14 weeks changed the way they design
  and sell in to retail

Removes market week barriers to speed
Creates accountability for success
Eliminates useless tweaking of recommended
assortments
Success Factors Dedicated teams, decisions made
without senior involvement, final decisions only
made when they have to be, meet weekly to review
trends and sales and make new decisions, upper
mgt support, strict adherence to operating
guidelines, clear roles, enhanced technology
Liz-Quik (Liz Claibornes 14 week PD model)
Concept 2 weeks
Sales 1 week
Manufacturing 8 weeks
Logistics 3 weeks

• From 19 to 2 weeks
• Concept boards as selling tools
• Restructured color and fabric approvals

• From 6 to 1 week
• Sell virtually with boards and swatches
• No sales samples
• No changes to line during sales process

• From 12 to 8 weeks
• RM and mfg are done in same country
• Source criteria is speed not margin
• Approvals in the field for color
• Inventory some raw materials (basics denim,
  etc.)
• 2 strike rule for vendors

• From 9 to 3 weeks
• 100 airship
• Separate DC
• 5 day turn in DC

Source Liz Claiborne speaking notes, AAFA
Conference
6
The benefits of speed can be significant
Company Turns / Net Margin
Like-for-like sales 1
3.0x / 6 5.3x / 6 4.7x / 9 3.6x / 8
4.8x / 8
0 n/a 2 3 n/a
Sears will introduce new apparel items and
accessories in stores every 4-8 weeks, rather
than at the start of each season Coldwater
Creek because inventory levels are cleaner
and more current, we have also realized higher
margins 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
Cabelas Coldwater Creek Talbots Dicks
Sporting Sears
4.3
TraditionalModel
7.4
2
J. Crew Gap PacSun Limited Timberland
5.9x / -10 5.3x / 11 4.2x / 13 5.3x /
12 5.8x / 15
17 0 7 4 3
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
5.3
Updated Model
8.2
6
HM AF Zara (Inditex) Chicos Amer. Eagle
4.3x / 20 5.1x / 19 5.1x / 15 5.5x / 21 7.6x
/ 14
n/a 2 9 13 21
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
5.5
Future Supply Chain
17.8
11
Net Profit Margin (Pre-Tax Income / Revenues)
Inventory Turns (COGS / 2 Yr. Avg. Inventory)
Like-for-like sales (1 year)
Notes Source 10-K, Hoovers, News Articles, Press
Releases, and Earnings Conference Call
Transcripts Inditex financials used for Zara.
All financials represent FY 2004 (except Inditex
financials are FY2003), with average income and
inventory for FY 2003-2004 1 One year same-store
comp
7
PLM helps to achieve these benefits

• PLM is a critical part of any product development
  effort aimed at achieving real and lasting
  benefits. However, you must extend PLM beyond
  PDM and
• manage the entire process for speed
• link with merchandise planning
• integrate with supply chain partners

8
The Benefits are Compelling

• Companies can expect to see dramatic results
  indeed we regularly see 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.

9
The Benefits are Compelling

• There are additional benefits that are more
  difficult to quantify
• Developing product closer to market for more
  fashion-right assortment. We have seen clients
  measure anywhere from 1 to 3 points of additional
  maintained margin from product developed on their
  fast track programs.
• 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

10
PLM easily replaces the functions of a Spec
Package

• Product Information Style, colors, sizes
• Sketches / Graphics
• Construction Details, Measurement Grading
• Bill of Materials, Initial Costing
• Version control revision history

Spec/PDM

• Prior season styles, bodies/silhouettes, colors
• Developed, tested, certified, and negotiated
  fabrics and trims and where used history
• Lab Dip Tracking
• Fabric Testing
• Proto / Sample Tracking
• Approval History

• Product hierarchy
• Top down assortment plan
• Metrics and seasonal targets
• Units, Price, Gross Margin / Intake Margin, Cost,
  Projected Sales
• Style Adoption Status and Add/Drop tracking
• Sourcing and QA tracking and definition

11
But many implementations stop far short of full
workflow
In order to be effective, this capability should

• Be completely integrated with the core Spec,
  Iteration, and Line Planning functionality
• Provide an accurate, daily (or even hourly),
  prioritized to do list for each role in the
  organization
• Drive the organization toward achieving key
  milestones (e.g. Retail Deliveries, Sales Shows)
• Consider the seasonal and product hierarchies in
  defining tasks and inter-related schedules

Simple, linear merchandise calendars by style do
not address the need adequately. Detailed
functionality includes

• Task definition and duration
• Flexible, comprehensive task / product hierarchy
  relationship
• Working schedule configuration by location
• Multi-task predecessor / successor relationships
• Task responsibility assignment by role
• Automatic workflow template / product association
• Lead time variations (e.g. Complexity, Geography)
• Task status tracking
• Workflow notifications and alerts
• Development cycle status dashboard

12
PLM Definition and Requirements Help Prioritize
Needs
A 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.
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 product development.
• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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

14
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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
15
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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
16
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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
17
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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
18
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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
19
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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

20
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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

21
Integrated PLM eliminates Barriers to Speed

• Delayed Decision Making
• Poorly defined consumer brand proposition,
  causing second guessing of designs
• Lack of a properly structured communicated
  merchandise or line plan to keep people working
  on the right products. No flow and delivery
  plans prioritizing decisions.
• Low levels of employee and partner
  empowerment, causing management bottlenecks
• Process Friction
• Late or incomplete process handoffs
• Designers that stay involved far too long
• Re-keying of product data from system to
  spreadsheet and vice-versa
• Aggregated decision points and overly generic
  processes and 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

22
Does your System Coverage Look Like This?
Workflow Event Tracking


Collaboration
Concept Initiation Development
Design Material Library
Collaboration
Collaboration
Sample Iterations
Spec/PDM
Line Planning
Sourcing QA
Collaboration
Collaboration
23
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 Qwest Runtime
• Gerber WebPDM (FLM)
• Lectra
• NGC
• Vendors that have migrated from other industries
  to apparel/footwear
• MatrixOne (now owned by Dassault)
• PTC Flex PLM
• UGS
• Other smaller startups to be aware of
• MSC, Vertex, Yunique PLMon, zweave

24
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 System. The process integration
  and management required for success in todays
  complex retail-apparel supply chain can only be
  accomplished with robust systems support.