Cloud Computing Asserts Itself

April 28, 2017 Leave a comment



The New York Times
The New York Times

Friday, April 28, 2017

The Amazon headquarters in Seattle. Amazon Web Services is the leader in cloud computing services, but Microsoft and Alphabet are investing heavily to close the gap.
The Amazon headquarters in Seattle. Amazon Web Services is the leader in cloud computing services, but Microsoft and Alphabet are investing heavily to close the gap. Elaine Thompson/Associated Press
Look to the Cloud
It’s been said before but it bears repeating: If it were not for its cloud-computing business, would have difficulty reaching profitability.
On Thursday, we were reminded how important Amazon Web Services, or A.W.S., has become to the company’s finances. For the first quarter, which ended March 31, Amazon’s total net income was $724 million. The company said the $890 million in operating income from A.W.S. accounted for most of its overall profits.
Can that last?
A.W.S. is far and away the leader in cloud computing services, but Microsoft and Alphabet, the parent of Google, are both investing heavily to close the gap, and both are willing to undercut Amazon on price. Other big tech companies like IBM and Oracle are also aggressively investing to get a piece of the cloud action.
Amazon’s biggest business is still retail, of course. But the razor-thin margins in retailing could never generate the kinds of profits generated by a computing business.
That’s one area where Microsoft and Google have a big advantage: Microsoft’s traditional software business is still one of the most profitable enterprises on the planet, with only a few rivals. One of those rivals is the Google ad business.
Few would be surprised if the two companies cut prices even further to draw away A.W.S. customers.
Jim Kerstetter

Cloud Produces Sunny Earnings at Amazon, Microsoft and Alphabet


The impact on quarterly results announced Thursday was particularly acute at Amazon, far and away the leader in online computing services.

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Amazon Results: More Evidence that Retailers Can’t Rest Easy

April 28, 2017 Leave a comment


The Achilles heel that wasn’t

Author: Andria Cheng

April 26, 2017

Amazon’s relentless rise has made it a source of fear and a topic of conversation in retail boardrooms. Based on the results Amazon reported on Thursday, those retail conversations are only going to grow more pressing.

The online retail giant reported a better-than-expected 23% jump in sales, thanks to the 24% gain in North America, nearly 60% of Amazon’s total sales, and a 16% increase in international markets and a 43% surge in Amazon Web Services cloud-computing unit.


Amazon.comSales data broken out by region, segment and category

By themselves, the gains are impressive, but it’s the fact that sales moved sharply higher in tandem with strong profit growth that should grab retailers’ attention.

For years, Amazon was criticized for boosting sales at the cost of profit, potentially a long-term vulnerability that could threaten its spending flow. It has proved skeptics wrong. Amazon on Thursday posted its eighth straight quarter of profit, as a 47% surge in AWS’s operating profit helps offset loss overseas, where Amazon has expanded and provided more services in countries from India to Mexico. Free cash flow, one of CEO Jeff Bezos’s favorite financial measures, rose 52% to $10.2 billion for the trailing twelve months.

“Amazon is putting a lot of pressure on everyone to raise the game,” said Marc-Alexandre Risch, chief retail officer for beauty giant L’Oréal USA, at a WWD Retail 20/20 conference in late March. In fact, at the event, pretty much all of the speakers mentioned the disruptive force of Amazon.

It’s not just Amazon’s disruptive impact on their business that’s being felt. One speaker asked the roomful of about 200 mostly beauty and fashion industry attendees to raise their hands if their household has a Prime membership. All but a few put their hands up.

Amazon said Thursday that its retail subscription services, which include Prime membership fees, jumped 52%, excluding the impact of currency translations.

Amazon doesn’t disclose the size of its Prime membership, but Consumer Intelligence Research Partners, or CIRP, in a report earlier this week, estimated Amazon Prime, a key feature for keeping users engaged in its ecosystem, had 80 million US members as of March 31, up from 58 million a year earlier. CIRP estimated that Prime customers spend on average $1,300 a year, compared to about $700 for non-member customers.


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Prime member growth “has been very strong,” Amazon’s Chief Financial Officer Brian Olsavsky said in the earnings call Thursday evening, without providing details. “Q4 strength has continued into Q1.”

It’s not just online front Amazon is innovating. The retailer is planning to open six more bookstores, bringing the total to 12. Its Amazon Go grocery store, a test that allows consumers to grab items without a checkout, also has “a lot of potential,” Olsavsky said. He said Amazon also is looking at popup stores.

“It’s a way for us to connect with consumers and see where they are,” he said.

The company also continues to show that its disruptive force extends beyond books and electronics to categories like fashion. A Cowen & Co. study published in January showed that Amazon’s apparel purchase growth is well above its peers. For instance, between Q1 2014 and 4Q 2016, Amazon apparel sales rose an average of 27%, compared to declines at both Walmart and Target.

Photo credit: Gerard Ferry/Alamy Stock Photo

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How to Use Facebook Live 360 Video for Marketing…and more

April 10, 2017 Leave a comment


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The Enterprise Guide to Omni-Channel Marketingfrom eMarketer Daily Newsletter.

April 10, 2017 Leave a comment


There’s been a big shift in marketing, and the linear conversion process is gone. These days, your users call the shots when it comes to how they interact with your brand, and it’s your job to keep up.

That’s where omni-channel marketing comes in. You’re creating an aligned experience for your users across every touch-point, from your apps and website, to ads and real world interactions like your in-store experience.

This raises an important question: what makes an omni-channel strategy effective, and how do you build it from the ground up? We’ve got your answer right here, in our
latest FREE eBook: The Enterprise Guide to Omni-Channel Marketing.

In this guide, you’ll learn about:

● The data behind why omni-channel marketing works
Features of a successful omni-channel strategy, & how mobile comes into play
Key statistics to convince your executive team to get on board
Real-life inspiration from brands who are seeing results


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From cotton fields to high street racks, fashion bids to be 100% sustainable

April 10, 2017 Leave a comment


Conservation charity WWF and online brand AwayToMars aim to make desirable clothes that have zero impact on the environment
For AWAYTOMARS’s spring-summer collection both the process for making the fabric and the cotton fabric itself were sustainable, as a prelude to the WWF project.
For AWAYTOMARS’s spring-summer collection both the process for making the fabric and the cotton fabric itself were sustainable, as a prelude to the WWF project. Photograph: Gleeson Paulino

It is not a brand synonymous with style, but WWF, the world’s biggest conservation organisation, is teaming up with a London-based online fashion community to produce what it claims will be the world’s first 100% sustainable clothing range.

Big-name stores including Selfridges and Harrods are being lined up to sell the range in the UK, but WWF wants to make this a global project. It is determined to prove to the fashion industry that it is possible to design and produce clothes with zero impact on the environment.

“It’s hugely challenging,” says Alfredo Orobio, founder of the online community AwaytoMars that is working with WWF. “Everything from the buttons, zippers, labels, tags and packaging to the fabric and production process itself – all of it has to be sustainable.”


Orobio says WWF approached him at the end of last year, attracted by the way his crowdsourcing platform allows anyone, from anywhere in the world, to have a hand in making clothes. Participants in the community upload their design ideas and the best ones will be chosen for the final collection. All profits from the venture will go to WWF.

The clothes will use a newly designed cotton fibre, from a German startup called Infinited Fiber, that can be recycled an infinite number of times and which won’t, in theory, wear out. But this project goes way beyond the fabric, Orobio says. In a detailed 150-page document, WWF has stipulated “all the things we can’t do”.

“So it’s about finding the right suppliers, for example, and not using any pigments, only natural colour,” he says. “The whole of the production process has to be sustainable, even the lights and energy. The seamstresses must be paid a living wage, all the packaging will be recyclable, the trimmings, the labels, the tags.”

All of that is expensive, perhaps prohibitively so, which is one of the main reasons that sustainable fashion has yet to take off. But Orobio believes the bigger barrier is the lack of consumer buy-in and the fact that most shoppers are unaware of how polluting the industry is – fashion and textiles, says bestselling US designer Eileen Fisher, are second only to the oil industry as the biggest polluters on the planet.

Tom Cridland’s unique selling point is the 30-year guarantee he attaches to his T-shirts, jackets and trousers.
Tom Cridland’s unique selling point is the 30-year guarantee he attaches to his T-shirts, jackets and trousers.

It is not just the energy-intensive process of making the garments, the reality is that most of the clothes we wear end up in landfill. According to a recent Greenpeace report, the average European consumer now buys 60% more clothing items a year and keeps them for half as long as 15 years ago.

Synthetic fibres are one of the biggest problems. Manufacturing polyester, for example, which is already present in 60% of clothing, produces almost three times more carbon dioxide than organic cotton, and it can take decades to degrade – as well as polluting marine environments with plastic microfibres. And around 21 million tons of polyester was used in clothing last year, up 157% from 2000.

“Cheap fast fashion is a huge obstacle to a more sustainable industry,” says Tom Cridland, who started his own green fashion brand three years ago with a £6,000 government startup loan. “Theoretically, a 100% sustainable fashion collection is not impossible but we need more brands to promote buying less but buying better.”

Cridland’s unique selling point is the 30-year guarantee he attaches to his T-shirts, jackets and trousers. The notion that we can buy an item of clothing and keep it for much longer is taking off, he says, with sales now over £1m a year.

Karinna Nobbs, a lecturer at London college of fashion, thinks WWF’s involvement could make some difference, but ultimately sustainable fashion needs big-name front-runners to make it more of an industry norm.

“If that doesn’t happen, I think we’re truly in danger of ruining the planet,” she says.

Stella McCartney’s latest collection is 53% sustainable.
Stella McCartney’s latest collection is 53% sustainable. Photograph: Peter White/Getty Images

Some big-name designers are already putting sustainability at the forefront of their brands. At a recent speech on sustainability at London college of fashion Stella McCartney declared that her industry was “getting away with murder” yet even her latest collection is only 53% sustainable.

One of the key barriers to consumer take-up is that the expense involved in turning every part of the life cycle of a garment green means the cost of sustainable clothing is out of the reach of most. Current prices at AwayToMars, for example, range from £50 for a T-shirt to £390 for a wool jacket. Cridland’s signature 30-year jacket costs £190 while a T-shirt is £35.

Of course Cridland and the sustainable fashion movement argue that you end up spending more in the long term with a fast-fashion route, but others say that is part of the attraction – the ability to buy clothes and discard them when fashions or fancies change.

Fashion lecturer Nobbs believes the industry is close to a tipping point. “Prices will normalise – they will have to as more brands get involved in sustainable clothing,” she says.

Orobio agrees that price is an issue but says he is undaunted. “My main goal is to be affordable – I don’t want to exclude the people who design for us,” he says. He believes that people will want WWF collection pieces because they will be “buying a piece with a huge story. It’s very different form buying something from Zara that was just copied”.

His online community will start having their say on the new WWF project from next month, and the aim will be to come up with six to 10 different looks. The prototype of the collection will be shown at the Helsinki fashion show in July.

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Huge Wave of Store Closings Still to Come, Study Finds

April 7, 2017 Leave a comment

 eMarketer Retail

Macy’s, JC Penney, and Gap among retailers that may need to lose more stores

Author: Andria Cheng

April 5, 2017

Daily headlines about store closings and bankruptcies may seem like a death knell for American retail. It’s not the final chapter, but there are a lot more store and mall closings still to come.

As many as 2,000 stores combined may still need to be closed from retailers including JC Penney, Macy’s, Gap, Ascena Retail Group and others, Cowen & Co. said in a study released Thursday. It added that retailers including Macy’s and Penney may need to accelerate their store-closing targets.

For instance, while Macy’s has said it would close 100 stores, or about 14% of its store fleet as of the end of Q2 2016, Cowen analyst Oliver Chen said the retailer may need to shut about 21% of its doors instead. Meanwhile, for Penney, the analyst said the mid-priced chain may need to shutter as many as 26% of its store locations, compared to management’s announcement that it would close about 14%.

Too Many Stores, not Enough People

The issue is not just that retailers have failed to entice customers with must-have fashions and other hot items. Neither is it only about Amazon and other online retailers stealing consumers’ wallet share—Cowen’s consumer tracker and studies showed that customers still prefer to shop in physical locations 75% of the time.

Nor is it simply that evolving millennial-driven consumer spending has shifted in favor of shelling out for entertainment and experiences over buying material things.

Mainly, it’s just a sign that the retail sector as a whole is finally coming to terms with supply and demand.

UP TO 20% OF MALLS WILL HAVE TO BE REPURPOSED OR CLOSED.The US is “overstored” compared to other markets, Chen said in a video presentation to clients. “Up to 20% of malls will have to be repurposed or closed.”

In the US, Cowen found, there is the equivalent of about 23.5 square feet of shopping center space per person. By comparison, the figure is 16.4 square feet per capita in Canada. And in the UK, France, Spain and Italy, it’s less than 5 square feet per capita.

US mall growth has significantly outpaced population growth over the past 50 years The number of US malls increased roughly 4X, from 306 in 1970 to 1,220 in 2016, the Cowen study said. The US population, in the meantime, has increased by only about 1.6X.


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“We believe 2016 was likely the high water mark in terms of number of malls in the US,” the Cowen report said. It added that up to 240 malls, or about 20% of the total, could be on the chopping block or “repurposed” in various ways.

As dramatic as the closings are, it’s not like malls are breathing their last gasp. Most of the troubled malls are so-called C and D malls, which generally are in less-coveted locations, are more run down and have less-desirable brands. They represent a third of malls in the US and generate less than $350 sales per square foot, compared to A malls, which occupy prime locations and have coveted tenants like Apple.

In fact, those A malls, while only about 28% of U.S. malls, generate sales square foot of at least $530 (with trophy malls getting more than $825) and represent about 70% of total US mall value, Cowen said, citing Green Street Advisors data.

The Cowen study also showed that malls actually represent only about 15% of US shopping center square footage. Measured by the number of shopping centers, malls only represent about 1.1% of US total of nearly 116,000 shopping centers. Strip malls and convenience stores make up 60% all shopping center count, according to the Cowen study.

“Despite significant concerns regarding the end of malls and traditional brick & mortar retail, malls are only a small percentage of total retail in the US,” the report said.

And while store closings may be necessary for some retailers, there are others that are outperforming and winning share in the shifting consumer spending climate, or those that Chen called “un-Amazonable.”

TJ Maxx and Marshalls parent TJX and rival Ross Stores, for instance, could increase their store count by 50% to 60% while beauty product chain Ulta Beauty can increase store number by 60%, he said. Costco, which Cowen’s study showed is increasing membership among the coveted millennial group, can open about 90 stores over the next five years from 500-plus currently, Chen said.

Photo credit: Flickr

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PAM Principle Two: Efficiency= Manufacturing Agility

March 28, 2017 Leave a comment

Building a Virtual Inventory Purchase Activated Manufacturing Structure. Capturing lost profits from discounted and unsold inventory.

Saturday, March 25, 2017

Principle Two

Efficiency = Manufacturing Agility
Manufacturing agility must match variable demand in speed, scale and choice…

For many the concepts of manufacturing efficiency and mass production will be difficult to change. To understand the requirement for change we need to first understand the theoretical basis for efficiency in mass manufacturing. For Henry Ford, who is often given credit for developing the first highly efficient assembly line, the underlying motive was to capture total control. Workers banked at the Ford bank, lived in Ford housing shopped at Ford stores. Ford controlled everything, from control of the sales force to control of the suppliers to ultimately control and uniformity of the product. The final outcome of this universal control approach was a high degree of efficiency and ultimately a low-priced product.
As we all know the limitation was you could have any Model T you wanted as long as it was black. This high degree of efficiency became the model for assembly lines all over the world. These assembly lines became the embodiment of the industrial revolution they produced massive amounts of product for constantly expanding markets, and that was the key, the markets were expanding.

Now 100 years later the expanding market basis for the mass production assembly line as for the most part run its course. New expanding markets are mostly driven by new technology opportunities and the huge retail base and online marketing makes access to these technologies universally available, which shortens the period of time that they are in a phase of expansion. Once a product is finished its expansion phase it enters a share phase, a phase, which is described as a pie of a known size which is divided into pieces which constantly change in size based on the popularity of a version of the original product. Each version of the original product must demonstrate some kind of differentiation in order to capture a larger share of the pie. This need for product differentiation conflicts directly with the underlying philosophy of the traditional assembly line where efficiency was designed around the sameness of product and the controlled cost of repetitive movements in manufacturing.

The Computer is not a Copying Machine

The quest for lower labor costs and production efficiency has lead to a misguided romance with the computer and single task robotic automation and an extension of the rules of mass production. Building data driven single task robotic automation to replace humans on the assembly line is an extension of the Industrial Revolution deep into the Information Age. Vast amounts of money have been spent to harness the power of the computer to group and measure predetermined automated manufacturing actions to creating the simulated information driven manufacturing system. Although experts have coin numerous names like “Digital”, “Lean” or even variations of “Demand” the process is still tied us firmly to pre sale inventory and the accompanying risks and costs. Back in the 1960’s the first attempt at demand manufacturing was euphemistically called, ”just in time” (JIT) production. Although JIT seemed to integrate much more efficient communication systems through the supply lines, and ultimately the Internet, the goal was to reduce inventory to a few “days-of-supply” (DOS) for the final manufacturer.  The basic purpose of JIT was to reduce the cost and risk of inventory on hand for large corporations. Since the smaller sub assembly and parts manufacturers were required to meet the product specifications dictated by their contract and hold the inventory until needed. There was no real reduction in either the cost or risk in sourcing or new opportunity for truly quick response. In fact, they put an undue burden on the sub-assembly and small manufacturers who now have to hold inventory in order to supply the final assembly point “just in time” components. If the specs changed the smaller players were left holding the inventory.  This inherent cost of inventory losses forced these companies to become importers rather than manufacturers costing millions of manufacturing jobs and erasing a major segment of the economy.

Self Inflicted Wounds

In 1992 the DOE and Wall Street spent hundreds of millions of taxpayer and investment dollars on developing the B2B communication systems, the infrastructure and ultimately the software that spanned oceans and borders. Expenditures like the Demand Activated Manufacturing for Apparel (DAMA Project) spent $220,000,000 taxpayer dollars to create an internet driven sourcing system. The tragedy was that in the end this shortsighted 1990’s government expenditure promoted the movement of small manufacturing and sub assembly jobs including 90% of apparel manufacturing offshore.   Breakthroughs in efficiency produce less cost and could produce more profits if they had been linked to full price sales, but since there was such a major fundamental disconnect between the supply side and the sales side bulk retailers and financiers use this new found importing efficiency and cost reduction to support even more promotional discounting and sameness and product.
No matter how much money was spent on developing their communications and better analytical software the inventory dinosaur was still in the room. Developing faster time-to-market software did not relieve either actual production time or the risk of inventory forecasting, in fact, it increase the pressure to create more products. The net effect of these internet and communication advances was even more aggressive pursuit of cost reduction and a whole new requirement for dumping excess product. Since almost all of these projects dealt with cost and risk there was little incentive for the industry to make the massive change from supply to demand-based manufacturing. What was needed was a new initiative that was based on product value profit not discount sale margin.

Efficiency = Agility

True efficiency and manufacturing can be defined in two words, “no minimum. The capability to build individual product or multiple products without slowing down the assembly line is true efficiency and that efficiency comes from the agility of the technology you employ. The ability to substantially change the product on-the-fly is the key ingredient to linking the agility of the virtual world with the reality of the physical world. Any technology, which promotes this link, is an important piece of creating the ultimate efficiency of agility. Unfortunately most of these technologies were created independent from each other and often unknown to each other. Finding a way to link these silos of opportunity is the key to creating an integrated PAM.

Wide format digital DTG printer

Every  garment can have a different print.

The word integration in this case does not just refer to the assembly line but to the development of the software that links the customer’s virtual inventory choices produced through modern DTG, CAD and 3-D technology with the physical inventory produced for sale from the PAM site. That key software bridge can allow a direct link to consumers or to buyers which because of the agility of the manufacturing system can provide exact replenishment or individual product that provides ultimate value in the form of profit to the buyer and perfect fit, color, print and shape for the consumer. Since the manufacturing plant is capable of producing one or hundreds the assembly line can be tied directly to purchases at both retail and the individual level.

Sell-Through is True Efficiency

Efficiency can always be measured in time and motion but the true measurement requires that the total production is measured against the source of income and how much it satisfies that source.  Satisfying that source of income, the consumer, is an individual task requiring levels of production agility that are generally available only through online services.   One exception is the aforementioned paint counter at your local hardware/home center. The development of the digital inventory of millions of colors and the ability to access and produce that inventory through low-cost spectrophotometry has changed the paint and industry from a high inventory risk to the efficient profit engine it is today.   Everyday consumers buy paint to match their personal taste instead of settling for premixed colors dictated by cost and trend analysis at the brand or manufacture. This consumer demand final assembly creates profit and consumer value for the retailer and the supplier’s brand and saves the manufacturer millions in regulatory, environmental and production costs. This strategy capitalizes on establishing a key building block of demand manufacturing close to the consumer as thereby allowing consumer participation to increase intrinsic product value.

The Key is the POA

This building block called the “point of agility” or POA is the critical determinant of the efficiency of marketing and manufacturing integration. Without a clear and disciplined POA there is loss of production focus and the merchandising chaos that follows causes almost certain failure of purchase integration and collapse of the virtual inventory. The book definition of the product POA is that it is the last point in the production process where a generic raw product can be customized to fit the demand of an individual consumer.  In accounting terms this is the point when low risk multi-use inventory becomes a high risk SKU awaiting sale.  In the textile and apparel supply chain it is when white fabric is colored or printed.  It is important to remember that the POA can only be defined by the intersection of generic mass produced product and integrated “change-on-the-fly” technology linked to virtual inventory, purchase activated by a B2B customer or retail consumer. Understanding the POA is easiest by examining three different current business examples each of these examples as a unique demand integration point between marketing and manufacturing.

Onsite Consumer PAM

At the paint counter the consumer creates the SKU awaiting sale.

First, is the example of the previously cited consumer driven paint counter. Matching colors with the personal choice of a consumer can be a tricky proposition. Oddly enough this capability is the perfect integration of two widely diverse silos of technology. The story behind this development integrates low-cost spectrophotometers originally designed to detect counterfeit currency and the highly accurate pumps used in lifesaving surgical procedures. Integrating these two technologies and adding color identification software along with stored virtual inventory mixing recipes created a massive virtual inventory of colors that could be detected or requested and manufactured at the consumers demand.
Once the digital detect and mix on demand manufacturing counter was installed the inventory was reduced to supply of primary and secondary colors stored in the machine. The only requirement for space was the anonymous white base that provided much of the volume to the paint being sold. This anonymous white base was the last point in the manufacturing path where mass production made sense. So the process of providing just the color paint the consumer wanted on demand became a customization of the white paint base, which made it the POA of the paint manufacturing business. This establishment of the basic POA allowed the industry to focus on other features beyond just color such as durability, application ease and other features we see today in the indoor and outdoor paint market. In addition the merchandising side of the paint industry was now free to license any color or any emotional hook from Disney to Martha Stewart and have the capability without inventory risk to provide a unique and differentiated product to the market. This unleashing of the constraints on product design and merchandising themes without the risk of guessing wrong is one of the most important side benefits of creating retail, supplier (brand) and manufacturing demand integration.

Virtual inventory frees designers
and marketers to create product
difference without inventory risk.

Often the selection is emotional and complicated and depends on a previous color or previous attitude about color. The ability for the paint counter mixing station to match the exact demand of the consumer depended on the ability to either detect or mix (from an obscure description) the exact color that satisfied the consumer and possibly other parties involved in the decision. Before the digital detection and mixing station was invented, hardware stores had to stock pre mixed white base and primary colors as well as many seasonal and trend colors. This process of stocking the shelves was often the product of trend analysis, sales history, and simply guessing what hot color should be produced in this round of production. The stocking level and the shelf life of the paint inventory created a huge loss of selling space and ultimately a loss in unsold inventory. Stores that sold paint and agreed to mix custom colors were often defined by the expertise and the personal selling relationship of the person who mixed the paint. This skill set and the dependent relationship with the huge dedicated inventory space made the paint section of any hardware store a required but high-risk department.

 Third Party Post Sale POA

Second, is the example of the smart phone with its unique POA that integrates customization with third party vendors. The smart phone represented a huge risk in inventory because it depends on expensive high technology to produce a consumer interface, which could easily become the key competitive feature as the market became one of shared expansion. This ability to control the key variables that would determine long-term survivability in a viciously competitive share-market required innovative integration design between manufacturer’s base unit and the applications that would drive consumers to purchase the product. So in the smartphone market the POA is the basic phone and the custom element that drive sales is often the applications that third parties have provided to be used on the phone. Building these applications into the basic phone or POA can be a risky business but using third parties to test the viability of a feature reduces that risk. A perfect example of this is the map feature that is built into almost every phone. Specialized third-party GPS application producers developed the intrinsic capabilities of the map application. Attempts by the base producers of the phones to capture and update their own version of these map applications before the application was clearly defined by consumer use often required huge R&D outlays and produced a number of embarrassing errors exploited by competitors.

These integration hiccups with huge amounts of capital on the line where the result of a dangerous agile-manufacturing pitfall. This is the case of “ we’re going to make it because we can!” this loss of discipline can destroy the integration between manufacture, supplier and seller. One company (Apple) that survived these growing pains built a structure of integration because they were the manufacture, the supplier and the seller. Ultimately, even Apple suffered from over production as competitors divided the market into shares. Other companies which were unable to control their application customization have suffered a number of both financially and reputation embarrassing failures. One example is the recent attempt to add more features to the POA (base phone) instead of tightly controlled vendor supplied applications. Many believe this overloads the basic phone structure and in at least one product recall case caused dangerous and explosive life-threatening repercussions. Keeping a tight rein on changes in the POA protects the efficiency of the manufacturing process and reduces risk from a fundamental failure that can affect a multitude of products which are produced as a customization of the POA. The unique case of the smartphone and its ability to produce a cornucopia of features at the user’s demand is a perfect example of moving the POA as close to the consumer as possible. The distance between the POA and the final consumer product has a direct relationship to risk and ultimately loss of profit, the closer, the safer and the higher the consumer value and profit.

Customer Design Activated POA

The third example of manufacturing agility occurs in one of the most immobile and complex industries to adapt. The apparel industry is characterized by massive inventories driven by the variables of color, pattern design, prints, fabric selection, sizes and fashion trends. The traditional mass manufacturing solution to creating a profit while dealing with these complex variables is to try to predict trends and colors then present them to potential consumers as “the look” through the vehicles of fashion shows, lifestyle magazines, and more recently online fashion blogs. By creating this demand in the market merchandisers hope to protect the inventories they had to buy to cover minimums or get the lowest possible cost per unit.  As the industry has moved to more casual apparel and away from off-the-shelf fashion the opportunity to apply purchase activated manufacturing has intersected with new technologies in manufacturing and new opportunities to reach the consumer in online merchandising.

Retailers in specialty apparel shops, are closing all over the country, over 1400 are listed in a Forbes, March 22, article.  Many of these stores are dying from inventory “constipation” because they can’t turn the volume of inventory are forced to by months in advance to hit cost targets.  In short the have nothing new to offer because the can’t create value other than price reduction and subsequent profit loss.

“The answer lies in one critical point, which is that consumers are looking for personal style,” says Richard Passikoff, founder of marketing research firm Brand Keys.

On site garment printing can eliminate the
risk of size, color and print inventory mistakes
while providing instant consumer gratification.
With a simple display and touchscreen retailer could
offer unlimited choice with instant on site product from
digital printers,

Retailers have dictated the market through trend merchandising for years while the requirement for personalization slowly erodes their base.  Now consumers can buy direct using their own choices, causes and style from “Direct To Garment” (DTG) and other digital demand printers of apparel.  The shame is that any one of these collapsing retail icons could have dedicated a space the size of the paint counter at a local home canter and produced purchase activated product from a huge virtual inventory while the customer is shopping.  DTG printers and sublimation stations can produce fully printed apparel in minutes with just the decoration the customer has selected on a touch screen on a purchase the consumer can take home immediately.  Retail stores can offer instant gratification a selling feature that online sellers cannot match but retailers remain mired in the “supply, discount and dump economic model.

Building a PAM Supply Chain

Making apparel is a complex process often involving many different manufacturers in many different locales. A recent NPR feature tracking the production of a white T-shirt move through five continents from cotton fields to the retail sale. Making this chain of events into agile integrated manufacturing is a huge undertaking that requires more than a linear time-to-market solution. The current approach is to focus on the design prototype, sample, production and market time segment. This focus has produced some progress but is still similar to the JIT strategy of other large brands and retail solutions in that it punishes the supplier by increasing risk without sharing benefits. This solution does not address transportation cost, labor conditions or environmental impact, which are all contributors to the fundamental risk of overproduction and profit loss through clearance and dumping.

The apparel industry is like many other manufacturing segments is incredulously resistant to fundamental change. Part of this resistance is based on the inability to link the manufacturing stations on the track from raw production to the sale of the finished goods. Some companies have worked diligently to coordinate a vertical production/retail path only to meet regulatory and tariff barriers that block the process with impossible standards or unreasonable costs. One example is the Clean Water Act of 1972 and the evolving standards, which it make it very difficult to traditionally color or print fabric in the US, the EU and other countries concerned about pollution and water use. This reasonable concern is based on the excessive use of water and the resulting toxic waste created by conventional textile dye and printing processes.

Another barrier to change is the huge amount of sunk capital and process protocols dedicated to reducing cost through aggressive sourcing and reducing risk through trend and market forecasting. These jobs represent the human cost of the fundamental system change to true demand manufacturing. The reality facing the defenders of these barriers is that, change is happening piece-by-piece all around them every day and will eventually erode the current unsustainable structure at every level, not just the retail failures occurring today.

The apparel industry like many others is in the eye of the perfect storm. The combination of instant information, new manufacturing technologies and multi-platform selling strategies has eroded the dominance of retail control. Retailers no longer own the only place where the consumer meets the product, brands are selling through factory outlet stores and manufacturers are beginning to realize that they can reach the consumer directly online. This new multi-platform and multi-source selling environment demands an overall change in the relationship between sellers, suppliers and manufacturers.  Strategically the players need to recognize the change in leverage that is a result of consumer access at all three levels of the production/sales path.

In this chapter the focus is on the manufacturer and the changes and opportunities of adopting agile Purchase Activated Manufacturing (PAM). The first step is to review all the materials and functions of the manufacturing path especially the timelines and actual costs of outside services that add time and transportation to the product production.  The purpose of this review is to establish what materials can continue to be produced in mass and which materials and production steps will contribute the most to reducing inventory and promoting consumer value. This process is extremely complex and may require outside help to avoid the entry of company politics and change friction that can influence the information required to implement change. Identifying the production path will require detailed knowledge of sourcing, transportation, manufacturing technology, distribution, outside contractors and consumer or customer fulfillment. Mapping this path and the associated actions with an accurate and detailed status of the product at each location will provide a diagram all the actions required to produce your finished product.

The Complete Production Path

Most of the key management personnel in the apparel trades have very little idea what it takes to make a garment.  Even sourcing managers often have little knowledge about the processes outside of their direct purview.  This lack of detailed knowledge makes it difficult to compare new technology without intimate knowledge of the current methods.  An important example is the printing of fabric.  Printers or converters as they are often called in the industry operate with special charges for minimum runs and/or surcharges to color fabric.  Coloring and specifically printing fabric requires a number of time consuming and costly prepress tasks before the first meter of fabric can be printed.

Each color requires a separate printing station.  Separation of colors
from the original composite design is a major cost in prepress.

Proofing the initial test print also can involve all the prepress tasks of color separation, cylinder exposing or engraving, fabric prep, image registration, drying and post treatment.

Individual color cylinders must be made,
installed and registered for each print job.

Remember if your print multiple colors each one must be separated, imaged on a cylinder, placed

in the printer and registered with all the other colors before you can see the first test print.  Once the printer is loaded and registered it can take hours to setup the next print job.  All these time and materials cost contribute to the calculation of minimums and surcharges.  Since there is one setup that can be amortized over thousands of meters of printed fabric, cost is calculated on the basis of volume.  The more you print the lower the cost per meter.  If however these thousands of meters of fabric don’t sell the total cost of all that printing can be a huge loss.  This relation to volume/cost/income is the risk equation of mass manufacturing.  If you win the production bet you can be rich if you forecast wrong your gone.

The comparison is digital printing with very little prepress cost, no separation, no color cylinders, one setup to start the day and no stoppage between printing jobs.

Digital textile and apparel printers come in
all sizes and technologies. Choosing the correct
equipment is the last step in planning a
PAM structure.

Cost is based on area of print and there are no minimums.  Capital expense is much less but volume is set to match direct purchases or distribution system days of supply or orders in hand.  The important detail is that digital printing is completely different than conventional volume printing, the main difference is the color in the printer never changes, but the color you see on the fabric is unlimited.  Digital printing gets its change-on-the-fly capability from using a technique called process color just like the printer on your desktop never changes ink color but the output can be any color.  The logical question is why don’t we use digital printing now?  The two main reasons other that resistance to change are: first, our current supply and demand structure rewards volume as a measure of productivity and digital printing is designed to support a demand and supply structure based on high sales volume not just production volume cost savings.  The second disconnect, is sunk capital in current equipment and experience supporting mass production at every level from retail to supplier to manufacturer.

Consistent color reproduction in digital
printing requires understanding and
control of all of the variable that produce
the final color.

Digital printing is not difficult but is does require training and discipline, when a device can make any color it takes knowledge to make the color you want consistently.  It sometime difficult for experience in one technology to transfer to a new approach, but moving from spot color to process color shares many common steps as illustrated in this Color Cone training representation of the steps needed to reproduce the desired process color consistently.

Knowing this path in detail is critical to establishing the POA at a point in the path that will allow the most efficient application of technology and marketing skills to reduce the inventory to zero or at least the minimum that can be delivered in a timely manner. After you have identified and plotted product path it is possible to then apply both cost and marketing information to identify the most strategic point to locate the POA on the product map. There are many points along the path that can be used as a POA, remember the afore mentioned examples of the paint counter, the smart phone and apparel. The paint counter was closest to the consumer and therefore reduced requirement for variety in the inventory and left the final decision and therefore value in the hands of the consumer. The smart phone however did not reduce the manufacturing technology required however it did simplify the inventory and therefore lower risk because even though the manufacturing cost was still significant the final value of the product was added by the consumer through the form of apps which they chose that were not required to be inventoried but still provided some income. The comparison between these two, the paint counter with its low-cost and simple production of white base and tints added on demand versus the high cost smart phone which still may only have one base version with multiple memory chips seems to create very different POA’s. The advantage of both of these examples is however fulfillment and delivery time both create almost instant value and gratification through the participation of the consumer. The apparel example is much more complicated because it occurs farther away from the consumer and requires much more activity to create a product differentiation and therefore the personal value to the consumer. Remember, value to the consumer the ultimate source of all funds is a key ingredient to producing the demand to sustain an inventory free consumer demand PAM production strategy. By establishing POA as close to the consumer as possible you can be assured of the most agile manufacturing and the most flexible value-producing product.

Establishing a product POA is only part of creating maximum manufacturing agility. Finding and integrating agile manufacturing equipment is also a key to the agility required for consumer demand manufacturing. Reducing preparation time by finding equipment that requires only digital information to perform a task is a key ingredient to creating the virtual inventory required to feed agile manufacturing. This can take the form of digital optical cutting which does not require detailed patternmaking or peace placement or it could be digitally driven assembly robots which can create custom finished products by selecting different parts and assembling individual products. One of the most common agile tools is digital printing used every day in home and office environments. This tool is taken for granted today but not so long ago typing and typesetting as well as page makeup, stencil making and volume pagination were all prepress steps required to produce a printed page in volume. As digital printing, evolved to new substrates beyond paper it became a critical piece of point-of-purchase advertising, book printing, labeling and now textiles and apparel.  The latest breakthrough is the development of 3-D printing. Although it is now in its earliest stages of development 3-D printing offers huge opportunities to expand the reach of virtual inventories through both finished product and key assembly pieces. From car parts the buttons to finish shoes 3-D printing can provide a critical link in expanding the reach of consumer driven manufacturing.

Finding the POA is the responsibility of a cross functional team made up of sourcing, production/manufacturing, marketing, merchandising, accounting and sales. With the team as diverse as this group reaching a decision would require setting a priority to the key elements of the POA. The first task is to find the point where the greatest number of individual products can be created from a dependable technology modifying a common source. Once you’ve determined the point of greatest variety the second element is to look at that point from the point of view of the consumer and the value of their participation in making the product unique for themselves. Once those two points have been determined the next step is to determine the technological feasibility. The mistake many companies make is to focus on technology instead of value. Technology especially in the digital age is a constantly moving target, finding the technology that can be adapted to create the most valuable for products from your POA is often a product of research of the marketplace and adaption and integration of current tools that may be used to create other products. In summary, first look for choice, second look for consumer participation value, then, look for the technology to produce the product.

Manufacturing agility allows companies to focus on product differentiation without the risk of meeting mass production minimums and the resulting risk of losses from dumping an unsuccessful product variation.  Adopting agile manufacturing machinery and technology also allows a company to test product for success and scale production and investment to meet product success.  It is important to remember however, that successful agile production must be driven by demand from the ultimate source of funds, the consumer.  One of the dangerous aspects of agile manufacturing is that it is easy to loose focus and loose the production/profit emphasis and chase product because you can make it not because it’s what the system was designed to make.  Agility can become production chaos if the demand based system becomes pure product testing.  Agility produces significantly higher profits if production and quality discipline is built into the design and integration of the demand process.

Lessons Learned about “Efficiency through Manufacturing Agility”

Four basic structures must be built into the agile manufacturing design:

Step One: Using a cross functional team establish the critical Point of Agility “POA” for the product.

Step Two:  Integrate purchase and production information with virtual inventory product selection.

Step Three:  Select manufacturing equipment that is Mass-parallel scale-able.

Scale-able workforce:  Build a production path that requires minimum high tech training and facilitates flexible employee movement between production stations.

Posted by Bill Grier at 2:09 PM

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Labels: apparel, apparel profits, demand manufacuring, inventory control, jobs, onshore, pollution free

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