The Manufacturing Game

June 1, 2018

Anna

Take any piece of clothing in your wardrobe and read the label. Chances are, it will read “made in China” or “India” and “Vietnam”. Not to be confused with merchandising that deals with selling products, fashion manufacturing is about assembling and constructing products. Consider a factory that produces clothes and sells them in bulk to merchandisers, who will then decide which items will go on sale for each category or subcategory and where they will be distributed. In this example, the factory is the manufacturer.

When it comes to women’s apparel, manufacturers usually produce a few product collections annually and deliver them to retailers and merchandisers at certain time periods during the year. For fast fashion, the whole process moves faster and more frequently. From planning strategies to developing styles, it takes a whole production team of designers and buyers to source and purchase materials before creating samples to be presented to potential buyers in the retail industry.

But where does manufacturing happen?

Domestic vs Offshore Manufacturing

There are two types of manufacturing: domestic and offshore. While the former encourages better quality control and flexibility in production processes, the latter is most preferred for one major reason: Cheaper labor and raw materials. Let’s take United States as an example.

The share of domestically produced clothing in the U.S. in 2015 was 2.7%, down from 10.2% in 2005, according to the American Apparel & Footwear Assn in the Chicago Tribune. However, apparel consumption has grown more than 60%. So what gives?

“The reason is labor,” said Bjorn Bengtsson, professor at Parsons School for Design in New York. “Most U.S. manufacturers are having tremendous difficulty finding skilled labor. We have to train people. But even then, salaries are not going to be as low as in countries like Bangladesh and Myanmar.”

omnilytics retail data Made in USA labels waiting to be sewn on shorts, shorts & jackets at Birdwell

Made in USA labels waiting to be sewn on shorts, shorts & jackets at Birdwell.  Source: Allen J. Schaben / Los Angeles Times

Not only the salaries, but even raw materials are cheaply sourced from offshore. One can obtain low cost cotton from India or silk from China, for example. Hence, eliminating the need for domestically-sourced materials.

Consumers these days are unwilling to pay more for apparel, even bridal gowns can be bought on the cheap. A recent NDP Group survey found that 80% of Americans considered “Made in USA” labels important to some degree, yet only 23% said they would pay more for it.

So with all that said, how can the modern manufacturer gain more control of production and have more active power in determining their future collections for retailers and merchandisers?

Smart Manufacturing

By crunching the numbers and using data.

In this era where seamless and transparent data is integrated into the supply chain, manufacturing has no choice but to shift its approach. And the arrival of the latest software allows omni-channel retailers to centralise their data and allow more transparency among various parties in the manufacturing cycle.

With this data transparency comes a better understanding of a particular market. Everything a manufacturer would need to know about their client’s target demographic is available on one platform, from popular designs, patterns, materials used and colours.

Let’s illustrate. Imagine manufacturer X whose clientele have expressed interest in a collection focusing on ruffle tops for the Malaysia market at a mid-range price of RM 50 – 150. Before beginning the designing process, the manufacturer researched on the materials used for best-selling ruffle tops from popular fast fashion retailers, Zalora & Fashionvalet from 1st August 2017 – 31st December 2017.

omnilytics retail data blog Zalora & Fashionvalet best-selling ruffle tops material RM 50-100

 

omnilytics retail data blog Zalora & Fashionvalet best-selling ruffle tops material RM 100-150

 

From the pie charts, they can then determine the materials they would need to source for the collection – mid-weight chiffon and polyblend for tops at a lower price point, polyester and cotton at a slightly higher range. But that’s not all. They can even see the type of designs that have been best-selling for these two retailers. For example:

omnilytics retail data Top three best-selling ruffle tops in Zalora blog

Top three best-selling ruffle tops in Zalora

Instead of relying on intuition, manufacturer X can now use ‘datafication’ to revolutionise their processes and be in the driver’s seat for once.

A Bargaining Chip

And with fashion moving at such a rapid pace these days, the driver’s seat is certainly a hot one.

Tanya Menendez, Co-founder and Chief Marketing Officer of Maker’s Row, an online database that matches designers and business with fashion and furniture manufacturers domestically in the US said, “The main advantages for businesses are the quick turnaround times, the ability to collaborate with their factories, and then also the control.”

If manufacturers are able to develop products that they know the market will respond well to without spending extra time on ‘test and repeat’ processes, it will then create a unique selling point (USP) for them to attract new brands and retailers.

Back to manufacturer X from our previous example. Say their ultra-fast fashion client in the UK is looking into introducing dresses to their primarily basic collection. How can they then use data to their advantage without having to undergo repeated testing phases?

What manufacturer X will do is firstly find a benchmark, which in this case would be one of UK’s top retailer, ASOS. Next, they will compare ASOS’ stocked SKUs and sellouts for dresses to see if they are meeting consumer demands.

omnilytics retail data blog ASOS UK: Stocked SKUs and sellout rates for dresses from 1st January 2018 - 30th April 2018

 

While ASOS did stock up on mostly midi dresses, which was the most popular subcategory, they did miss the mark on demands for other styles such as ruffle, skater, wrap, shirt and bodycon dresses. Having seen this, manufacturer X can then advise the client to introduce these subcategories so as to meet consumer demands in the UK, thereby boosting their expertise as not just any traditional mass-market manufacturer but one who actually understands the market.

But what if the client is aiming for something bigger and more…. global?

Sourcing for New Markets

Not only do manufacturers now have the power to determine best-selling assortments and price points. They can also accurately assist designers in sourcing new markets at a faster speed due to their data-driven knowledge.

Now what if that fashion client in UK wants to start retailing their dresses in Southeast Asia? How would they know which styles will resonate best with a particular region or country?

That’s when manufacturer X steps in and flexes their sourcing prowess. With data, they will be able to show them this:

omnilytics retail data blog top five best-selling dress styles for five countries in Southeast Asia

 

The bar chart above shows the top five best-selling dress styles for five countries in Southeast Asia with reportedly the highest retail sales: Singapore, Indonesia, Thailand, Vietnam and Malaysia. Mini, midi, maxi, lace and off shoulder dresses seemed to be the popular choice for most of these countries. Overall, what we can deduce from the charts are:

  1. Indonesia’s best-selling dresses were concentrated in the mini dresses subcategory (43%).
  2. Consumers in Thailand and Vietnam have pretty similar tastes in dress styles.
  3. Singapore consumers are more liberal in their dressing with highest percentage of mini dresses sold as compared to the other four countries while;
  4. Malaysia, being a Muslim country, sold more maxi dresses and also a small percentage of plus size styles that were not as popular in the other four countries.

So manufacturer X can use this information to advise their UK client on which market would work best for a particular dress style, hence scouting potential without much risk.

A Shorter Supply Chain

Manufacturing is no longer relegated to only external parties. With decreased production costs, small brands are now able to manufacture small quantities of products at reasonable margins and build up their base. This “internalizing” of production aims to quicken the pace of manufacturing and meet consumer demands.

“It’s about delivering on the instant gratification that consumers are really seeking,” says Avery K. Baker, Chief Brand Officer at Tommy Hilfiger. “Closing that gap between the visibility of a fashion show and the moment of purchase.”

Gucci is a prime example. The luxury brand plans to launch a 35,000-square-foot Gucci Art Lab in Italy that will specialise in manufacturing leather goods and shoes. Famed fast fashion label Zara also credits their retail success to in-house production and ensures that their own factories reserve 85% of their capacity for in-season adjustments. This allows all-round flexibility in the assortments and frequency of newly-launched products.

The supply chain is definitely getting shorter, giving way for greater control over product development and material sampling. Add to that the availability of reliable, real-time data, and you have a manufacturing powerhouse ready to take on the world, one market at a time.

*All data shown in this article is for illustration purposes only and may not reflect actual numbers.

Are you a manufacturer and would like to know how to use data to improve your processes? Drop us an email at info@omnilytics.co and we’ll be in touch!

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The data above was obtained from Omnilytics, real-time market data platform. The numbers and statistics may vary, as the platform is updated every day. The time period of the information taken was between 1st August, 2017 to 30th April, 2018.