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Soft Goods Retailing: Where to draw the boundaries?

On behalf of : Anup Kumar

Should retailers continue with 'Make to Stock' or adopt 'Make to Order'? Apparels industry has moved on to force fit the consumers in one of the five defined sets - XS, S, M, L, and XL. The question that needs to be answered is how to address the changing consumer demands. A consumer may still like to go ahead with one of the five sets, but they have continued to evolve in terms of the selection between color of the dress, texture and fabric of the cloth, design and fashion trend, etc. Though consumers have been picky on these aspects ever since the industry existed consumer demand has evolved to find out what offer is just exclusive for them. Now retailers need to redraw the boundary between the traditional way of fulfillment and the way to address the changing buying pattern of the consumers.

Consumer demand pattern is captured through fashion shows, exhibitions, in-store and online buying behavior, etc. Based on preliminary assessment about demand pattern, designers / retailers initiate the production plan. Even after going through this due diligence retailers find out that few products are fast moving and some remain dead rubber. The question remains - how to assort the products better in order to not over stock and better manage the lead time?

The complexities of 'Make to Stock' consists of, though not limited to:

• Uncertainty in the quantity to be stocked
o Opportunity cost in case of stock outs for fast moving goods
o Rising inventory holding cost in case of slow moving goods
• The lead time to be maintained so as to capture the latest trend / fashion

By bringing 'Make to Order' in the offerings along with 'Make to Stock' some of the above complexities can be addressed better. Steps to be added in current production plan could be:
1. Extend the pilot run - produce sample products and connect with consumers to understand additional requirements about color, texture, etc.
2. Use multiple modes of connection - use online variants, magic mirror, social networking polls, etc. to gauge real time feedback from consumers
3. Forecast and revisit - assign connection period for three to four weeks. Post first two weeks of data start projecting orders of fast moving vs. slow moving and revisit the orders at the end of connection period

This mix-and-match strategy could be the way forward to better assort the products at the production stage itself. Assortment of products would enable better inventory management and also manage the lead time in accordance to the fashion trend. A few organizations - Nike (Apparel, Accessories) and Toyota (Auto Manufacturer) have empowered their customers to design their products online. On the same lines it is important for apparel retailers to empower their customer to design what they want to wear. Enhance the customer's experience and in turn better manage inventory cost. Extend the boundaries - let the customers into the production stage and balance a mix between 'Make to Order' and 'Make to Stock'.

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