Apparel Magazine spoke to Ken Watson, managing director of Industry Forum Services Ltd., and Bob McKee, fashion industry strategy director, Lawson Software, about Fast Fashion, which is transforming supply chains within the industry. Our conversation took place as they prepared for workshops that Industry Forum Services will present and Lawson will sponsor in New York and Toronto on June 14 and June 16, respectively. Industry Forum Services will present the Fast Fashion model, tools and techniques that have been successfully applied in Europe.  
 

Q&A

 

Ken Watson: When we first started talking about Fast Fashion, people would say, “Oh, that’s interesting, but it is too difficult or we don’t need it now or for our market. It may be important some day.” In Europe, where we are based, it is now probably the biggest supply chain trend. Three or four years ago, the major brands were only just beginning to realize the competitive threat. Now it is a critical activity of most of the major brands and retailers across Europe. So Fast Fashion has gone through the early adopters, and it is now entering the mainstream. 

 

Bob McKee: People call it Fast Fashion, but most of the principles actually still come from Lean and they really need to explore that. That’s where the struggle lies. Competitors look at Zara’s success or H&M’s success and they say, “OK, I know I need to do this, but I haven’t got a clue as to how to do it.” Fast Fashion is a paradigm shift in thinking. Trying to cherry pick the components that they think they want out of Zara’s approach isn’t necessarily going to work in their particular environment or culture.

 

Ken Watson: Right, Lean is the way you have to think about your processes in order to ensure that your fashions are designed and delivered to the consumer in the most cost-effective manner whilst meeting customers’ real needs for fashion. Fast Fashion is not cheap disposable fashion. Companies that succeed with Fast Fashion have a Lean model; they make the whole process Lean (and therefore quick and effective) from product design and development right on through to the customer. This enables the retailer to innovate with on-trend apparel more regularly and more consistently.

 

Ken Watson: Let me start a bit further back. The thing that surprises me most is the number of people who are not prepared to invest in Lean projects where the rate of return on investment is so high. At a U.K. Lean conference in the early 2000s, a presenter demonstrated that the average rate of return on investment for Lean was somewhere between 500 and 1,000 percent. And the question was asked, “Well, why aren’t people doing it?” And that’s the issue. Why aren’t people doing it? This is not a marginal rate of return, not a matter of shaving off a couple of points here or there. The problem is that companies fail to start on the process of change unless there is a crisis looming.

 

 

Ken Watson: The period of real price deflation of garments is gone. Garments are going to increase in price. That’s going to be a fundamental change and, I suspect, it will squeeze the industry hard. The companies that become more efficient will be the ones that gain market share. We have to think fundamentally about how we make garments and their useful life. If 50 percent of all products in Europe and the U.S. are sold at full price, the corollary of that is that 50 percent of them are sold at discount. That says that 50 percent of everything we produce in the garment supply chain, the consumer does not want at the price we want them to pay for it. That’s a huge, huge number, and it points to a very inefficient process when considering the product lifecycle.

 

Bob McKee: Prices of garments fell for a lot of reasons: quotas went away, China became the world’s exporter, and consumers sought out discounts during the global economic crisis. Now economic recovery is under way, and the industry can no longer view China as the source of all production. For a period of time, we’re going to have to become far more efficient in the ways we run our businesses in order to remain profitable. Those efficiencies are not going to come at the point of the sewing needle any longer. They’re going to come through innovative business practices and business policies and business models. And that’s what these workshops are about.

 

 

Ken Watson: Getting what they really want, something that really excites them. And that means we have to get much closer to the customer than we usually do now; using more trials, web exclusives, focus groups, interacting with consumers via social media and — this is a critical and often underutilized approach — using our retail outlets as windows to the consumer and feeding back consumer comments to the designers and buyers.

 

We can also use enabling technology, for example, a system that creates a digital signature of every shoe that is tried on. Clearly if no one has tried the shoe on, it’s not interesting, so perhaps we should discontinue it. 

 

 

Ken Watson: If you look at the objective of the corporation as being return on capital employed, a Fast Fashion model gives a higher rate of return. It’s quite clear. The second thing which is quite clear is that the performance of Fast Fashion within a retail environment is superior to a traditional model in terms of achieving “pedestrian footfall,” conversions, like-for-like sales and inventory turns. So if you decide that those are your objectives of business, which I would suggest you should, then you’d be looking very seriously at the Fast Fashion model. If, on the other hand, you want to incentivize your employees by using sales and gross margin, you will continue to think about using a traditional model. And you will get a lower return on capital.

 

 

Ken Watson: Let me give you a small example from the perspective of avoiding waste, which is a core Lean principle. If we produce a million T-shirts and consumers actually only want half of them at the price asked, we end up with 500,000 T-shirts that have consumed valuable resources. … Bob, help me calculate what a T-shirt consumes.

 

Bob McKee: Approximately 14 gallons of water, five pounds of chemicals, and x amount of oil have gone into creating each T-shirt and transporting it around. Multiply the cost of those resources by 500,000, and you are talking about real money. And you’ve tied up your operating capital for as long as it takes to dispose of the inventory.

Ken Watson: A lot of people look at the concept of sustainability solely within the   parameters of the manufacturing process. They don’t think of sustainability in terms of the total life of the garment. But that total life includes the length of time that the garments sit in a store, sit in a warehouse and then get discounted before we put them on a boat and send them perhaps to a discount market overseas, where we sell them for $.50 after spending about $5 to actually produce them. That, to me, is the real issue with sustainability. If you look at the discussions about carbon footprints and sustainability, these are things which relate to the cycle from production to retail, not from the point of design to customer purchase. Those two definitions of sustainability are completely different.

 

Bob McKee:  Ken’s definition is key to product lifecycle management (PLM). Many people adopt it to improve their product design and development process, but in fact, PLM actually runs all the way through customer returns and after-sale service. The technology to support Lean and Fast Fashion is already available. What’s been missing up till now is the willingness to undertake real change in the traditional retail model. Now change is being thrust upon us.

 

 

Ken Watson: We give them four big takeaways from our workshops: a vision of how things could be; actual cases of companies that have transformed themselves and realized the benefits; motivation to start a process of change; and approaches to implement some changes immediately. Will we give them a check list? Well, there will be some lists, but the danger with checklists is that people apply them in an inappropriate way, and that’s actually quite dangerous. We want people to embrace the whole principles rather than think that they’ve got a silver bullet and doing X, Y and Z will automatically make them successful. You really do have to understand the process and why you’re doing it. 

 

A: Who comes to these workshops?

 

Ken Watson: Every department, every functional area is affected by the changes that are required to adopt Lean and Fast processes, because you’re going from something which is quite siloed to something which is more team based. We find that, actually, we get the chief executive, CFO, buying director, merchandise director, design director, head of QA, head of sourcing, head of supply chain, buyers and merchandisers at the workshops. And I’d say to any manufacturers who are attending, try to persuade your customer and supplier to come along and to work together.

 

If one side of the business dominates, it is usually operations, mainly those that are involved with the trading environment. But senior executives on the business side need to lead this charge. Change management is removing the obstacle to adopting any new business model. In order for it to work, the chief executives have to say, “If we don’t change, we’re dead or doomed to slow extinction.” You really do need to have somebody at the top of the organization who is prepared to make a very bold statement and lead the way.