This article appeared in edited form in Ecotextile News Edition of April/May 2014.
Co-written with: Prof. Omera Khan, Prof. Alessandro Creazza, Dr. Terje Stolte
Global economic uncertainties, increasing legislative pressures and public scrutiny, are forcing companies to rethink their business strategies and models. The first and most obvious response was to focus on declining sales and poor performance in the market place. By assessing upstream and downstream processes and relationships that impact all the issues in question, effective supply chain management has become more important today than ever before.
Companies are facing increased complexity in their supply chain and volatility in demand. A lean approach, which in the past may have been the most economical and steady approach to managing the supply chain, today fails to keep up with the rapid pace of change and increasing requirements. Not even, for example, the Godfather of lean systems Toyota, was immune from the recession and in 2009 reported the biggest losses in the company’s history.
A more effective supply chain strategy in today’s unstable climate is by making a transition to agility. This strategy enables businesses to be more flexible, responsive and resilient to uncertainties in the supply chain, including risks that directly stem from sustainability related environmental and social issues. As well as enabling a company to run as usual after disruption, a responsive enterprise gains competitive advantage by being quicker than its rivals. Consider for example the contrasting reactions of Nokia and Ericsson to a fire at a key supplier’s factory: Nokia showed responsiveness and resilience, whereas Ericsson was slower and halted production because of supply shortages. In short, in lifecycle markets, among them textiles and fashion, there are harsher consequences for delays, the profits are slim and there is a high chance of obsolescence, so a more agile and responsive approach to managing the extended supply chain is required.
One of the ways in which fashion companies can be more agile, responsive and at the same time accounting for environmental and social requirements, is by integrating product design with the supply chain.
The design stage is usually the longest, most expensive and riskiest part of the chain. Additionally, research has shown that at least an estimated 80% of a product’s environmental (and to a lesser degree also social) impact is locked at the design stage into a product. Further evidence suggests that supply chain considerations are rarely taken into consideration at this important early stage, and valuable time is lost in the iterative product development process, increasing error rates – which subsequently may impacting waste quotas, product quality or production conditions as a consequence.
By integrating the product design with the supply chain, companies can compress non-value adding time and costs in their supply chains, increase responsiveness and mitigate supply chain risks – while simultaneously managing (improving) their sustainability performance without added costs or efforts.
The evident challenge is to find ways in which product development times can be reduced, sustainability requirements defined and suitably locked into a product or service, while at the same time feedback from the market place be obtained more rapidly and replenishment times compressed.
However, paradoxically, over the years, and as supply chains have become global in the search for lower costs, many lead times have in fact lengthened – which became a problem for retailers and brands of all sizes, as the market rhythm has, in contrast, quickened.
Unsurprisingly, last minute changes – never entirely avoidable – have been in several instance identified as one of the roots of long working hours at overseas suppliers. And as increasingly more products are being manufactured far from their final customers, the risks of failed products, both technically as well as in the market place, are high, subsequently increasing the total cost rather than it!
The challenges
In today’s market place, where short product lifecycles are the norm in most industries, delays in bringing products to the market can have detrimental consequences to sales and profit. Fashion and textiles is no exception to the rule, as the product cycles at mainstream retailers such as Zara or H&M prove.
In manufacturing environments, pre-production processes, including design, often require changes to be made quickly – often at the last minute – and are a vital pre-cursor to identifying and managing supply risk.
The earlier in the production cycle, and hence in the supply chain, such changes could happen, the better manufacturers would be able to avoid the risks of holding inventory, which means – as products are more accurately designed to the required specifications – they could reduce their pipelines, and hence reach their intended markets more quickly. This in turn would again reduce the time pressure on retailers, and as a consequence the retailer’s buying pressure on their suppliers.
Design decisions can impact agility, and very evidently also environmental as well as social sustainability credentials, in a number of ways.
Firstly, it is apparent that lengthy design processes can slow down time-to-market. This because design and pre-production processes are too often linear and sequential rather than integrated and concurrent. Charles Fine has highlighted the need to concurrently engineer not just the product, but also the processes and – most critically – the supply chain (3DCE: three dimensional, concurrent engineering).
Secondly, the need to bring suppliers, their expertise (and business interests) early into the design process is made apparent by the success of organisations such as Rolls Royce who have adopted these ideas. Doing so puts the focus on ways to improve the concurrent management, the social as well as environmental impacts of product, process and supply chain.
These ideas apply to any industries and supply chains where design plays an important part in the competitiveness of the final product and where designers’ requirements can – in reality – only be communicated and developed in direct interaction with suppliers. They are however particularly relevant for companies characterised by a high new product introduction rate, such as is the case for apparel.
A 2006 study on the design-production interface in textile and apparel companies showed that although the product life-cycle in the market place is getting shorter, product design and development time is still long with a total start to finish time of up to 26 calendar weeks. Most of this time frame goes on account of the actual design stage, and, alarmingly, the pressure to reduce time-to market is placed primarily on textile suppliers and garment manufacturers who are forced to produce and deliver within four to five weeks from order sign offs (and shorter for re-orders).
To this end, early supplier involvement can be seen as a powerful tool to obtain responsiveness and accountability of the supply chain by integrating suppliers in the development of the product, in order to respond to the emerging and fast changing needs of the market.
In this way, it is possible to anticipate product design problems early, rather than only when the product design has already been finalised, and to respond to problems more quickly and accurately.
Physically co-located design teams take the concept of concurrent engineering a step further. Here, the emphasis is not only on multi-disciplinary teams collaborating on product design but also on the operational functions contributing to the design and development of a new product or process by being physically located close to each other.
Whilst the effective integration of product design into the supply chain offers various opportunities such as risk mitigation (including environmental, regulatory, and labour), cost savings, serving customers more effectively, and opportunities for time-based competition (amongst others), the strategy also harbours a diverse range of challenges. These include relationship management, organizational versus supply chain foci, the current management of functions as well as fears of industrial espionage to name a few.
The challenges of integrating product design and supply chain can be classified into internal and external challenges.
Internal challenges arise from within an organization, whilst external challenges are concerned with challenges from the wider supply chain environment, its configuration and orchestration. Table 1 summarises challenges of integrating product design and the supply chain.
Table 1: Challenges of integrating product design and the supply chain.
| Internal challenges | Explanation |
| Isolation of functions | A key challenge of integrating product design into the supply chain is that functions are often managed in isolation of other functions of the supply chain. In fact, product design is often neglected in the strategic management of a supply chain. |
| Generation of mutually inclusive benefits | Benefits and goals across business functions, are often dissimilar. Hence the maximization of benefits between functions or businesses are often contradictory. Following this, a key challenge in the pursuit of integrating product design into the supply chain is to generate mutually inclusive benefits arising through working together more closely |
| External challenges | Explanation |
| Integration of upstream tiers | The integration of upstream tiers is largely underdeveloped. It appears that in most cases the upstream relationships are limited to the monetary, material or order exchanges |
| Integration of customers | It is becoming increasingly important for customers to be integrated in the design processes so that design teams are able to pick up customer trends more rapidly. |
| Geographical distance of Supply Chain partners | The geographical distance of supply chain partners or their functions is a significant challenge. Moreover, as supply chains have extended and have become increasingly dispersed geographically, supply chains have arguably distanced themselves from their respective market places in recent years. This complicates effective collaboration and increases the risk profile of such supply chains. |
| Industrial espionage | A Key challenge revolves around the fear of industrial espionage, complicating the external integration process for example the access to commercially sensitive data. |
Once the challenges are known, the subsequent question poses itself: What opportunities can be identified within a textile company’s supply chain?
Turning challenges into opportunities
To answer this question, a study was conducted with companies from the textile and clothing sector. The principle aim was to identify the opportunities pertaining to the integration of product design and supply chain. The companies are all UK based with global supply chains – an ideal scenario to develop a holistic perspective.
The following points summarise the lessons learned from the research:
-
Remove
functional silos:
A key stage of integrating product design into the supply chain effectively, requires organizational architectures to remove functional silos.
Removing functional silos enables companies to reduce time-to-market, total production costs and tol improvement in profit margins overall. -
Roll-out
concurrent design practises:
The improvement in communication through the elimination of functional silos enables the implementation of concurrent design practices. This will have a significant impact on the ability to respond to customers more effectively. -
In depth
knowledge of supply chain capacities, capabilities:
The research revealed that a significant opportunity to maximize benefits from integrating product design and the supply chain, resides in the recognition of an organization’s supply chain capacities and capabilities. This refers to the capability of a supply chain to produce certain products in the first place, as well as the understanding of performance capabilities regarding lead-times, volumes, quality and technical attributes realistically, and also environmental and labour regulatory and best practises. This capability allows organizations to make informed operational decisions about demand fulfillment processes, effectively mitigating downstream supply chain risks and planning resources accordingly. -
Make
vertical integration a reality:
This further enhances the ability to integrate suppliers as well as customers in the product design process. By way of this, supply chains can increase their responsiveness to customer demand, whilst reducing/eliminating a wide range of risks in the supply chain. -
KPI
Synchronisation:
Vertical integration requires the synchronisation of key performance indicators between different partners of the supply chain. It is essential to develop key supply chain partners by choosing the suppliers well. Building long-term relationships with them is ultimately a highly valuable competitive advantage. -
IP
preservation, industrial espionage prevention:
A great opportunity resides in the reduction of intellectual property risk and increased collaboration through mitigating against industrial espionage. A combination of patenting products using licenses for the use of products, as well as establishing exclusive collaboration contracts have until the present moment largely enabled the mitigation of industrial espionage. This in turn has led to increased collaboration and information sharing along the supply chains – and therefore helped its effective operation. -
Optimise
collaboration through geographic proximity:
An optimized level of collaboration between supply chain actors was more frequently observed where these were located geographically closely. The reason being that this increased the visibility of supply and demand, and provided therefore a basis for efficient demand fulfilment.
Table 2. Recommendations for maximizing opportunities of integrating product design and the supply chain.
| Recommendations | Opportunities | Challenges |
| Develop a cross-functional approach to the supply chain | Increase in communication and visibility of critical data | Aligning focus between relevant functions, particularly across organizational borders |
| Erode functional silos | Increase in collaboration and focus efforts | Synchronizing functional key performance indicators and establishing effective communication |
| Integrate key suppliers into the product design process | Increase in responsiveness to customer demand and reduction of supply chain risk | Identification of appropriate suppliers and relationship management |
| Integrate key customers into the product design process | Increase in understanding of customer demand | Generate customer interest in collaborating |
| Recognize the supply chain capacities and capabilities | More informed operational decisions in fulfilling demand and reduction of supply chain risks | Establishing an overview of capacities and capabilities |
| Introduce concurrent design practices | Reduction of time-to-market and production cost | Reorganize the product design process along with production |
| Locating operations close to key supply chain nodes | Increased visibility of supply and/or demand | Applicability (diverse markets, diverse suppliers) and ability (IT and infrastructure) |
| Mitigate against industrial espionage | Reduction of intellectual property risk, increase safety in collaboration | Relationship management, data protection |
Conclusion
Drawing from our research, we provide recommendations for supply chain managers looking to maximizing the opportunities of integrating product design and the supply chain. This extends to include the sustainability performance of products (environmentally and socially), as an estimated 80% of said impact is locked in at the design stage.
Whilst some aspects of supply chain integration are widely recognized as an effective strategy to establishing a competitive advantage in today’s increasingly turbulent markets, this article focused on a different perspective: the product design viewpoint.
The key lessons learned are: the higher the level of integration of product design and the supply chain, the higher the potential opportunities as well as challenges. As a result of this, demand chains must understand the supply chain in detail (with particular respect to capacities and capabilities). As part of this, the level of challenges that can be absorbed by the supply chain in the pursuit of opportunities must be evaluated.
It is clear from this research that the organisational structure and the setting of clear KPI’s – including without a shade of doubt environmental and social KPIs – which are shared across the organisation boundaries, rather than managed in isolation, could bring significant financial and operational benefits to textile and fashion businesses as the right products are made and sold at the right time in the right locations.
