By
Tom Ryan, Managing Editor, RetailWire
While the shift toward at-once programs, or just-in-time inventory, has been going on for years in the apparel and footwear industry, it is clearly accelerating due to the tightened credit market and consumer slowdown. But vendors remain concerned about how the counter trend toward fewer pre-season buys is reshaping futures programs.
For retailers, it's become even more necessary to keep inventories to a minimum to preserve cash flow and meet lender requirements in today's troubled economic climate. Increasingly, many retailers are foregoing the often deep discounts offered in pre-season bookings to avoid being stuck with huge markdown risks at the end of the season, retailers told Sporting Goods Business.
But stores have been pushing for better at-once programs for years because buying closer to the season and even in-season leads to more accurate buys around consumer demand instead of waiting up to nine months for futures orders. Working on leaner inventories also enables retailers to chase hot product instead of waiting for last-seasons' slow-sellers to clear off the sales rack. Finally, frequent in-season deliveries help stores manage their cash better.
But many retailers claim vendors have been reluctant to share the inventory risks and build up adequate in-season inventories to meet their fill-in needs.
"The retailers have to have more support from the manufacturers on having replenishable merchandise rather than up front orders where the retailer takes all the risk and financing responsibility," stated a head merchant at a major regional full-line sporting goods chain who declined to be named.
Said an assistant GM at an independent sporting goods store, "Many product categories can get into an over-inventory situation using futures orders. The more we can use fill-ins and at-once orders, the better control we can have.
"While vendors clearly don't want the inventory risk, they also note that futures programs enable the discounts that bring the coveted high-margin buys to retailers. Many also believe the shift away from futures programs will ultimately hurt product development and bringing new ideas to market.
"The industry will see less demand, which will mean less of a buy with our factories," said Brian Good, senior manager of credit and A/R at Puma. "When or if the product becomes in demand and the customers want to do at-once business, they will be unable to fill in due to the decreased buy which will affect all...Only those companies that have lines that repeat every year will be in stock. Brands that have new styles year after year will become very hard to get a hold of."
Brad Gruber, national sales manager at Grendha Shoes Corp, said that with vendors being forced to forecast narrow and deep, there will be little differentiation between retailers and margins will consequently suffer.
Said Eric Tung, president of FERA Intl. Corp., "There are limits to how fast product can be packed, shipped, delivered, and out on the floor. So there is greater risk for the retailer of lost sales."
Discussion Questions
for the BrainTrust Panel: What are the merits of at-once versus futures programs in the soft goods industries? What are the risks of increasingly relying on quick-response programs to meet inventory needs?
RetailWire Instant Poll Results:
RetailWire BrainTrust Comments:
As retailers continue to reduce their inventories, the only way that this can possibly benefit them is if they get significantly better at forecasting. But that most likely will not happen. So what we will have is more out-of-stocks on-shelf, resulting in slower sales, and then a drop in sales, which will result in more product sitting in someone's warehouse.
The fact is, whether a product is sitting in the manufacturer's warehouse, or the retailer's warehouse, as long as it is not out on the floor, it is not going to sell. That is why Costco works so well. There is no warehouse. Product ships from the manufacturer and ends up in the store, and ends up being sold. Inventory belongs on-shelf. When the retailer starts to forget this, the retailer loses their value proposition.
Joel Warady, Principal, Joel Warady Group
| Peter Grimlund, CEO, Seeonic, Inc., Says: |
 Significantly high levels of out-of-stocks exist because POS systems will never be good enough to support J.I.T.
What do you say? Send us your comments here |
Zara does design, order, and on the floor in 3 weeks. That means it is possible. Of course their supply chain is different, so the communication between retailer and contractor works well. With collaboration, that kind of communication can at least get close to this. Without collaboration and trust between vendors and suppliers, this process won't work and the market will go to those companies who do make it work.
Camille Schuster, President, Global Collaborations, Inc.
Just-in-time delivery of merchandise to the retail floor is only as good as the accuracy and timeliness of the consumer demand signal. Significantly high levels of out-of-stocks exist because POS systems will never be good enough to support J.I.T. Item-level RFID can tell everyone in the supply chain, from the retail store manager all the way back to the manufacturer's production team, what is selling now; where it's selling; what inventory is available to replenish against that demand; and, perhaps most importantly, provide the timely and accurate data needed to feed the analytic and predictive analytic engines being used to model and predict consumer demand and production forecasts.
Peter Grimlund, CEO, Seeonic, Inc.
The problem here is that manufacturing and delivery lead time for the vast majority (99%?) of CPG vendors exceeds the order lead time most retailers want to work under. Yes, JIT ordering for retailers IS the answer. And with an immense amount of cooperation, planning and mutually beneficial self interest, it can be accomplished. But not on the scale it would require for retailers.
The problem isn't with the "vendors," it's with reengineering the supply chain. The CE industry has tried to do this for the past decade, with limited success (partially as a result of the geographic location of finished goods production). The auto industry accomplished this...by developing a completely domestic supply chain shared by the Big 3 and supported by them. The entire supply chain had to be reconfigured so that the flow of materials from one stage to the next was managed and no one single point had to bear the inventory risk beyond its capability.
Given that the vast majority of products are manufactured overseas, the complexities of building a JIT supply chain that delivers to multiple product categories are beyond the skills, resources, and economic interests of most vendors. Mattel has tried...and failed. Liz Claiborne has tried...and failed. For a retailer to effectively institute JIT ordering, ALL of its vendors would have to be reconfigured to support the new demands.
Using Zara as an example is simplistic. Zara doesn't manufacture according to the shifting demand of a portfolio of retailers...the Zara system is based on assessing consumer responsiveness and leveraging the relatively flexible nature of apparel manufacturing. This model DOES NOT APPLY across all product categories, or even across an apparel model covering multiple demographic and lifestyle segments.
In other words...this is just not going to happen.
Don Delzell, Chief Executive Officer, Future Merchants
Read the entire story and RetailWire discussion at:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13414
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