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Fast Fashion and Enhanced Design May Speed Apparel Firms to Success

Today I read an article at the Fashion Newspaper (Outsourcing May Be Slowing Down Apparel Firms : Stanford Graduate S...) that was based on a research paper from the Standford Graduate School of Business. The paper is about how, "Outsourcing May Be Slowing Down Apparel Firms". When reading the press release, I must say that "part" of it sounded to make sense, but other parts did not appear to me as fully logical.

For example, the article mentions that if a clothing firm uses both "rapid production" (shorter production cycles) and "enhanced design" (highly fashionable / trendy product), the company could earn "something more like 40%" increase to profits. Although the authors of this paper are a zillion times smarter then I am (literally), I have to challenge this point. Although not scientifically studied on my part, I am hesitant to believe that an apparel company can increase profit by 40% by reducing production lead time in combination with offering trendier fashion. For one, it is too hard to properly study if garments made in 4 weeks are more trendy then garments made in 4 months. If I have an amazing design staff, isn't it possible that my product will always be on trend... (simply to hard to evaluate and calculate). My primary challenge is simply, "if companies can increase profit by 40% producing in the USA (shorter lead time then Asia), why are most of our textile mills and clothing factories gone." If we look at this in reverse, wouldn't we have noticed our profits "lowered by 40%" when we originally moved from USA production to production in Asia??? Understanding that when we produced in the USA originally, we had shorter lead times. When we moved production to Asia (longer lead times) wouldn't we have experienced a sharp decline in profit. If we are assuming a 40% increase in profit when moving to shorter lead time, can't we assume 40% decrease when moving from shorter to longer lead time.

If I had a business selling 100,000 Leather Jackets per year. If I utilized "correct" trend forecasting / trend spotting and split my production 50% made in USA and 50% made in China. Does this research report prove that my 50% made in the USA (fast fashion) product will be 40% more profitable then the 50% of business that I would produce in China (longer lead time).

In the article it mentions,"The fast fashion system circumvents one particular problem that has long plagued the apparel industry: consumers who wait around for end-of-season sales." It goes on to say, fast fashion trains customers not to expect that highly desirable items will be left on the clearance rack, because supply is more accurately tied to demand, the good stuff doesn’t linger. I guess my question on this point is, "How does the consumer get trained?" Does the consumer know that the product took 6 weeks to produce rather then 4 months to produce? Does the consumer know when the retailer will actually put the product on sale? Is the product produced in 6 weeks truly more on trend then product produced in 6 months? Possibly the slow produced and fast produced product arrive to the store on the same day and are both actually on trend (good work you fashion merchandiser and trend forecasters...).

I think it would be interesting to study, how much "fast fashion" product makes it to the sale rack in comparison to fashion that comes in on the slow boat. The reality is that designers and clothing store buyers are purchasing both groups with the "intention" that it will all be in style (on trend).

OK, let me take some time to acknowledge the fact that the Stanford research report may very well be perfectly accurate. The comments that I am making above are based on my personal thoughts (not research or facts). There is absolutely no doubt in my mind that the authors of the report are beyond "way" smarter then I am now or ever will be in the future. Also, in all fairness to the authors I did "not" read the entire report so it is completely unfair of me to comment on it in anyway (I never said life is fair...). The fact of the matter is that the report is too complex for my understanding. By the way, I wonder if you can understand the formulas on pages 10 and 11 of the report (you can find the report at http://www.stanford.edu/~swinney/FastFashion.pdf). Anyway, with that said, I just was bored today and wanted to make my thoughts known.. That is the beauty of writing a "blog post" and not a "research paper".

Anyway, I am truly thankful to the authors did this study. Although I do not understand it in full, I am certain that this report is extremely helpful to retailers and other members of the fashion industry. Overall, very well done report. It was my pleasure to skim through and read parts...

By the way, here is my formula for why Outsourcing May Be Slowing Down Apparel Firms.

USA + Fashion Production Jobs = Good for America

Please do as much production as possible in the USA.

By the way, here is "another" meaning for fast fashion. And here is an article I previously wrote about the type of fast fashion discussed in the blog post above.

Views: 175

Comment by Maryanne on January 17, 2010 at 2:52am
fantastic blog.
Comment by Apparel1 on January 19, 2010 at 3:52pm
I communicated with the author regarding the research report and he has enlightened me further regarding the research. Here is some information that he shared with me that may help us all better understand the report.

"I’m glad to see your interest in this research. However, I believe there is a slight misunderstanding. The 40% number quoted in the article is certainly not meant to represent a typical profit increase from a fast fashion approach. That number was just a made-up example—meant to show that fast fashion is more than the sum of its parts (i.e., that 10% from rapid production and 10% from better design lead to a 40% increase in profit, not 20%).

In actuality, precisely how valuable fast fashion (or outsourcing) is depends on the specifics of the market, the product, and the company. For some companies outsourcing will clearly be the best alternative (ignoring social issues)—for some, local production will be better. But what our paper shows is that the components of fast fashion are complementary to one another—rapid production increases the value of better design, and vice versa—meaning firms may be able to do better than they initially think by implementing both of these strategies simultaneously."

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