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Posted Date: 2/24/2010

BEING SAVVY AS THE 2010 TURNAROUND EMERGES

contributed by Esther Lutz, Vice President, TradeCard, ELutz@tradecard.com

It's important for apparel companies and retailers to be prepared for growth in 2010 and beyond. But it's also important to prepare in a savvy manner.

Rapidly rehiring to recreate large departments or spending huge sums of money to finance inventory could be a step backward. Sustainable growth strategies in 2010 will be focused on doing more with less. That means maintaining a leaner business that can handle increases in volume without building up cost or sacrificing quality, performance or margins. Automation, collaboration and connectivity with all business parties will be key to achieving success in 2010.

Doing More With Less

There are ways to handle heavier volumes without adding staff and other resources. The key is to have a solution in place already when demand picks up. Picture a solution that electronically connects your entire network of trading partners and service providers to you and to each other, and allows them to communicate and collaborate instantaneously through automated processes and documents. Automation initiatives such as "procure-to-pay" or "source-to-settle" solutions save tons of paper. More importantly, they reduce manual data keying and eliminate mistakes. When purchase orders, PO amendments, packing plans, ASNs, freight cargo receipts, export documents, invoices and settlements all reside in one place, the buyer, seller and all key trading partners benefit from accuracy, efficiency and time-savings.

This level of automation will elevate your sourcing organization to higher levels of efficiency and enable it to manage higher volumes through monitoring and exception- based processing. When all processes are automated and all parties are connected on one network, an opportunity arises to operate a smarter trading partner network and to do more with less. Picture each party in your supply network having visibility to see what's happening across the network. Imagine being able to monitor all of those processes through an autopilot system that screens transactions and raises red flags whenever action is needed. Exception-based processing is key to handling heavier volumes and doing more with less. This practice allows you to monitor automated process flows and step in when needed. In the examples of procure-to-pay or source-to-settle solutions, instead of chasing purchase orders with several staff members, you might be able to manage the process with just a few.

Using Cash Wisely

Many apparel brands and retailers have been frugal with money and have created cash cushions in the past 12 months. It's important to invest these assets wisely. Cash can be used to expand the business or to buy more inventory. But a more strategic approach would be to invest in low-risk initiatives that provide infrastructure for additional efficiencies and savings. Instead of tying up capital in the supply chain, consider an investment in a system to facilitate invoice discount programs with suppliers. Programs like these not only assist suppliers in filling your orders, but self-funded invoice discounts and early payment programs provide a strong return on your capital. Instead of holding cash in a money market fund, consider a self-funded program that can deliver two or three times the return. When demand picks up, many of your suppliers overseas may be strapped for cash to fill your orders. You don't want to wonder about the ability of suppliers to purchase raw materials on time to begin the manufacture of a garment or shoe.

Some of the giants out there, such as Wal-Mart, have recently recognized this opportunity and are making it mandatory for their suppliers to take part in these types of invoice discount/early payment programs. They create a win-win scenario for the buyer and supplier. Cash is made available to the supplier sooner, at lower cost. The buyer receives orders on time and has a more reliable trading partner that can keep up with heavier business volume. Programs such as these that occur in a collaborative environment also reduce many of the risks associated with global sourcing today. And if the buyer is funding the program without the use of a financial institution, it creates a stream of new revenue. For companies extending their payment terms, this is a way to avoid cash flow bottlenecks for their suppliers.

Getting Started

The first step toward smart growth in 2010 is trimming away inefficiencies -this includes such things as removing paper from transactions with suppliers, or finding new ways to eliminate data keying and manual processes. A second priority should be automation of processes and documents not just between you and your supplier, but also for everyone in your network of trading partners. The concept of multi-enterprise collaboration is garnering more and more attention these days as apparel and retail companies understand the value and potential opportunities that exist when all of their trading partners are connected in one place -not just buyers and suppliers, but financial institutions, agents, logistics providers and other key parties.

The key to getting ahead in 2010 will be smart growth that ties in all of your business parties and empowers everyone, including you, to handle more volume and more demands while maintaining a high degree of flexibility for last minute changes -without adding staff and resources. The degree of automation and collaboration in your supply chain network will be directly reflected in your competitive advantage as the 2010 rebound emerges. Don't get left behind.

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