Information Technology Is In Fashion This Season
Think fashion, think Italy, think France, think Spain. The regional fashion industry is celebrated all over the world for its creativity, innovation and impeccable style. Luxury brands, such as Gucci, Versace, LVMH, Armani and Prada, command a worldwide following of devotees, while high-street brands, such as Diesel, Zara, Etam or Benetton, are synonymous with high quality for a wider customer target.
Despite its global credibility, the industry has been through tough times of late. Following a period of rapid growth in the nineties, in which major fashion companies acquired new brands and boutiques like it was going out of fashion [forgive the pun], the current business climate is strictly focused on cost control and improving internal efficiency.
“Up until 2001, the fashion industry was growing rapidly, particularly the luxury brands,” explains Mimmo Solida, vice-president in charge of CSC’s EMEA South & West region fashion business unit. “The priority was to follow demand and grow through acquisition, with less focus on the cost of doing business or process efficiency. “However, as a result of September 11 and shrinking demand in the US, Japan and other markets, companies are having to take stock and change internally to optimize their operations.”
Among the luxury players, the challenge is to optimize internal processes to gain tighter control of production, quality, distribution and logistics. The main priority is to have a tighter rein on the entire production process—from raw material to finished product—and to ensure that each step is managed to maximum efficiency.
One way in which companies are trying to do this is by buying and running their own shops. “Fashion companies increasingly want to own the whole distribution chain,” says Angelo Calabrese, solution delivery manager for CSC’s EMEA South & West region fashion business unit. “If they have greater control over the final sale to the customer, they can better understand what they need to produce in the first place. And they can build customer loyalty through the service they provide in their outlets. They have more opportunities to build their brand in the customer’s imagination.”
In IT terms, this trend requires companies to build tighter links between point-of-sale information about what the customer is buying and the processes further down the supply chain. Such information – delivered in real time – helps companies better anticipate consumer demand and organize production to meet that demand. This is particularly vital in a fast-moving industry that has moved from the traditional two season collections (spring/summer and autumn/winter) to four or five collections every year.
Forecasting and planning tools are also becoming more sophisticated in order to maximise the efficiency of procurement and production.
“One of the problems for retail and fashion companies is that they often need to buy fabrics before they know what quantities of products they need to manufacture,” says Calabrese. “The risk is that they produce too much and end up with a lot of unsold stock. They are trying to create simulation models, based on historical data of what they have sold in particular markets, to better understand their requirements for fabrics and other raw materials. Traditionally, this was an informal, paper-based process, based on the individual knowledge of buyers.”
Another factor affecting IT requirements is the increasingly global nature of the industry. Although luxury brands tend to keep local production operations (e.g. in Italy, in France…), because of the high value of the “made in Italy/made in France” hallmark, high-street players are increasingly outsourcing production to low-cost economies in Eastern Europe and the Far East. Their challenge is to build organizational processes to optimize a highly distributed – and often complex – value chain.
“Such companies need solutions that can manage inter-company processes and information flows,” explains Calabrese. “For example, the production house in China might deliver its goods to a distribution house in Australia that is responsible for distribution to outlets in the entire Asia-Pacific region. The technology solutions to support this model are increasingly web-based, because they allow companies to maintain centralized control of their distribution, while allowing access to these systems to entities all over the world.”
This changing business climate has meant a shift in the services CSC provides to its clients. CSC works with over 150 fashion customers, including the best-known international brands. Its Stealth software, specifically designed for fashion and retail companies, has become the industry standard. With supply chain management, CRM and business intelligence functionality, this web-based solution helps fashion companies contain costs, meet customer expectations and plan their strategies across multiple locations. CSC has adapted Stealth over the years to meet changing business needs, but has also witnessed growing demand for its consultancy and systems integration expertise over the last few years.
“Two or three years ago, companies were asking us for specific tools to do a specific job, such as supply chain management or business intelligence,” says Solida. “Now they need an integrated technology infrastructure on which to run the entire business. This has resulted in a greater demand for our systems integration, application vendor management and outsourcing expertise.”
Fashion and retail companies increasingly demand systems that are interoperable and can run uninterrupted 24 hours, seven days of the week – all over the world – and are looking to CSC to help them maintain their applications and infrastructures. The spate of acquisitions throughout the nineties has been a further catalyst for systems integration projects.
Up until 2001, the priority was to bring acquisitions on board quickly to build market share, but without much consideration of the different systems used by the different companies. But now with the increased focus on cost-cutting and efficiency,fashion companies want to integrate systems and processes across their operations to reduce waste and duplication. Technology is the only glue they have to control and bring together operations around the world.
What does the future hold for the fashion industry? The worst of the negative business cycle since 2001 seems to be over, but companies will continue to exploit efficiency and cost-cutting opportunities offered by technology. Over the next two or three years, fashion companies will continue to migrate from the proprietary systems model of the eighties and nineties to a web-based model, based on open architectures. They will keep an eye on new technology developments, such as radio frequency identification (RFID) tags, which will help them reduce logistical costs and tighten up supply chain management.
The challenge for fashion leaders is to face up to the increasingly global nature of the industry. Whether it is serving new markets, such as China, or outsourcing production to the Far East, it is clear that global dynamics will continue to influence the industry’s future.
In the meantime, brands remain synonymous with quality and style – to the extent that even businesses operating in low-cost economies are prepared to locate production in Europe just to take advantage of this moniker of quality.
