The traditional fashion buying cycle occurs 1 year before a season, with leads for orders placed 6 months prior to product launch. Thus buying is based on long-term forecasts based on historical sales (Birtwistle et al., 2003). However, there is a risk of such forecasts being inaccurate as a result of out-of-date data and difficulties in predicting popular sellers, resulting in out-of-stock best sellers and excess stock poor sellers, requiring mark-downs and reduced margins (Birtwistle, 2003). When product is manufactured in low-labour cost countries such as the Far East replenishment/re-manufacture is not practical due to long-lead times. Many companies now use a combination of manu- facturers for supply, with low-cost basic lines supplied by the Far East, fash- ion lines supplied by North Africa and Eastern Europe, and replenishment/ re-manufacture from UK manufacturers (Birtwistle et al., 2003). Such a sourc- ing strategy results in higher overall costs, but reduced excess stock/mark- downs and out-of-stock/lost sales. Fashion buyers are managing a complex array of suppliers to achieve and deliver this sourcing strategy.
Traditionally, fashion sourcing focussed on sourcing product with the cheapest landed cost, usually overseas sourcing with a single delivery prior to the sales period (Mattila et al., 2002). The buyers’ plan, which is developed up to 8 months prior to the selling season, was used to determine the volume and assortment of goods. However, companies are now recognizing that a quick response (QR) strategy can result in forecast accuracy as high as 95 per cent, with 95 per cent sell-through and goods delivered directly to store (Mattila et al., 2002).
An off-shore/local sourcing mix is one sourcing strategy a retailer may adopt. Although offshore sourcing may appear to be the optimal strategy when considering gross margin as a result of lower product costs, such a strategy often results in increased mark-downs at the end of the season (Mattila et al., 2002).
Companies in the fashion industry are increasingly using time as a factor for enhancing competitiveness. In addition, reductions in lead-time facilitate companies in addressing an increasing demand for variety. Development cycles are becoming shorter, transportation and delivery more efficient and merchandise is presented ‘floor ready’ on hangers and with tickets attached (Birtwistle et al., 2003). Companies are taking advantage of lower-priced prod- ucts from overseas in an attempt to improve competitiveness, and discounts can be between 15 and 35 per cent for products sourced from Asia and Africa (Lowson, 2001). However, distance is key in today’s turbulent fashion mar- ket, and goods from China can have a shipping time of 22 days, compared to 5 days from Turkey (The Financial Times, 30 Aug. 2005). This means that com- panies such as New Look, Tesco and Primark often look to source fast-fashion items, which need to be highly responsive to market demand, from countries that are closer to the UK.
Fast fashion has become an important factor within the UK clothing indus- try, and the objective of getting clothing to stores within the smallest lead time possible is of paramount importance to companies. This has resulted in an increasing number of ‘seasons’, and shipping times from suppliers needs to be taken in to consideration at sourcing (Mintel, 2002). Retailers are now moving as much of their sourcing away from the Far East, where shipping times can be as long as 6 weeks, to Eastern Europe, where shipping times can be as little as 2 to 3 days. However, fast fashion does not apply to the whole range in stores, and as much as 80 per cent of goods may be core and basic lines, with fast fashion accounting for up to 20 per cent (Mintel, 2002). Zara is an important example of a fast-fashion retailer, with repaid stock turnaround and vertical integration creating greater control over product lifecycles.
Companies in the Far East are becoming increasingly adept at moving from manufacture of commodity products to incorporating design and branding. For example, Episode, the women’s clothing chain, is owned by the Fang Brothers Group, which is based in Hong Kong, Giordano, and Hong Kong based brand now has 200 stores in Hong Kong and China, and a further 300 stores throughout South East Asia and Korea (Jin, 2004).
Challenges of fashion buying and merchandising 59
QR
QR approaches to supply chain management were developed by the apparel manufacturers in the US during the mid-1980s in order to maintain competi- tiveness with offshore manufacturers through reduced lead times and accur ate forecasting (Birtwistle et al., 2003). By using QR companies are able to reduce both excess stock holding in the supply chain and risk associated with fore- casting. Suppliers, manufacturers and retailers establish long-term supply relationships in order to see reductions in time in manufacturing and distri- bution processes. Trusting and co-operative relationships between buyers and suppliers are important factors in such a strategy. When operating by QR methods the buyer schedules production time but product specifications are not finalized until nearer to delivery. This is as a result of the QR focus on demand rather than forecasting, which requires close partnerships between the retailer and its suppliers (Birtwistle et al., 2003).