QUICK RESPONSE: AN EFFECTIVE TOOL OF ...

QUICK RESPONSE: AN EFFECTIVE TOOL OF FUTURE BUSINESS

BY: Chanchal Kumar Kundu Student, M.Sc. in Applied Textile Management University of Borås, Sweden Faculty Member Department of Textile Engineering Primeasia University Dhaka, Bangladesh E-mail: [email protected]

Abstract

Environmental changes, including intensive competition, unpredictable consumer demand, and market trends of variety and short product life cycle, compel the US Textile and Apparel industry to focus increasingly on the consumer as a way to meet these challenges and Quick response is initiated. Quick Response has established new business strategies , new relationships and new procedures to speed the flow of information and merchandise between retailers and manufacturers of apparel and textiles, all driven by the customer. QR uses information technology, flexible processes, and organizational structures to deliver a wide range of products and services that meet specific needs of customers on a mass scale obviously in right time. This paper explores Quick Response strategies used in the textile and apparel industry, examines how existing technologies can support these strategies, and sketch outs the areas that we need to focus in near future to ensure its better implementation as the concept has not yet been well accepted by the all levels of a business chain.

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Introduction

The rapidly changing culture, politics and economics of modern life deeply affect the industrial environment, especially consumer industries such as textile and clothing industries. And it is true that the global clothing industry has become more competitive than ever, and cheap imports from low labor cost countries made it more difficult for fashion retailers to maintain quality and profitability in clothing. At the same time, speed to market has become a critical factor in new product success, especially for the apparel and footwear companies. Both independent companies and private brands are under pressure from consumer and the retail channel demanding the right product at the right price in the right location-launched at the right time as the speed of new product introduction can make all the difference between success and failure. Today, consumers want to personalize the style, fit and color of the clothes they buy, and require high quality customized products at low prices with faster delivery. To address these challenges, QR was introduced as a new business strategy in the US textile/apparel pipeline by the American Apparel Manufacturers Association (AAMA).In short it can be defined as “a comprehensive business strategy incorporating time-based competition, agility and partnering to optimize the supply system, and service to customers” (ITAI News 1997).

Background Throughout the 1970’s, the industry was characterized by an emphasis on mass- markets and high volume manufacture of a slowly changing range of garments with low design content. In the mass production system ,all input and output are standardized to reduce defects and variety of product is minimized(Lowson,King and Hunter 1999).In 1984, a study conducted to analyze the textile and clothing industry in the U.S., showed 55 weeks of inventory time within the 66 weeks supply pipeline (Hunter,King and Lowson 2002 ).This high level of inventory time can be explained by the fact that ,throughout the pipeline, products are held by a supplier as finished goods and additional stocks are held by the customer as raw materials. Thus there are duplications of stock-holding between various processes, reflecting the lack of communication between the supply chain segment and its ultimate impact is forced markdowns means revenue losses in retailing. To address these various pressures upon the industry QR methodology was formulated as an improved way of conducting business in the US textile/apparel pipeline in 1984.

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Traditional Supply Chain and QR strategy

Traditionally, orders for products are made four, six or eight months in advance, based on forecasts in terms of volume, product mix and so on. That means the probability that these forecasts effectively reflect the reality is very low. It is impossible to satisfy the expectations of the final customers completely with advance orders of six months or more. Therefore, it is necessary to keep high cost inventory. In this type of conventional supply chain, we can experience the demand volatility and more we go back to chain, the more the volatility of demand due to the non co-operation among the links of the chain.

The only way to overcome these problems that are created by the approach of traditional supply chain is to integrate the total chain. As in figure 2, we can see an improved chain where the integration of all tiers and synchronization of all tiers has established from raw material sourcing to on-time delivery of finished goods to customers.

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Here, all the member of supply chain equally take part in planning, forecasting, point of sale information, inventory and other related information for the proper flow of products. The whole supply chain is linked to give the exact information regarding each kind of demand and then give the information to all supply chain partners.

Quick Response Concept and Definition

QR is a customer service strategy, (a pull system) that uses technology to make possible an industry pipeline so flexible and efficient that, ideally, retailers can continually replenish, with accurate speed of response, what is sold, and have the merchandise in store on time and in the right quantities, colors, sizes and styles. This ability is essential in an industry that is highly labor intensive, faces huge fashion volatility, and subject to massive import penetration. (Lowson, 1995).

A state of responsiveness in which a manufacturer seeks to provide a product to a customer in the precise quantity, quality, and timeframe required. In doing so, lead times and expenditures for labor, materials and inventories are minimized; flexibility is emphasized in order to meet the changing requirements of a competitive marketplace. (The Textile Apparel Linkage Council, 1988).

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Lowson et al. (1999, p. 77) defined QR as: A state of responsiveness and flexibility in which an organization seeks to provide a highly diverse range of products and services to a customer/consumer in the exact quantity, variety and quality, and at the right time, place and price as dictated by real-time customer/consumer demand. QR is based on a combination of the just-in-time system, introduced by the Japanese motor trade, and IT systems such as electronic point of sale (EPoS), electronic data interchange (EDI), computer aided design (CAD) and computer aided manufacturing (CAM), to enable the supply chain to become more efficient. A mode of operation in which a manufacturing or service industry strives to provide products and services to its customers in the precise quantities, varieties and within the time-frames that those customers require. (Gunston and Harding, 1987)

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The Quick Response Challenge The total fashion industry faces more pressure than ever to respond quickly to its market demands. At one end of the supply chain, say for a textile industry, the supply of fiber is controlled by suppliers who, due to their own processing and market constraints, may be compelled to hold or push inventories into the textile market. On the other end, there is a further consolidation of retail forces such as Wal-Mart™ and K-mart™. These retailers require just-intime responsiveness and goods at the lowest possible cost. Furthermore, offshore competition is becoming more intensive almost on a daily basis, resulting in faster and cheaper goods. These factors, among many others, are intensifying the industry’s need for greater responsiveness. Consider the following typical scenario. If the needed fiber is not available to a textile manufacturer, the lead-times for fiber purchasing and yarn processing can be as long as eight weeks, perhaps longer. By the time the right mix of yarn is available and the greige is built, it can take an additional two to four weeks. Given that the right greige is made available, the cycle times for dyeing and finishing can be as long as two to four weeks. The further process of cutting and sewing can take many weeks longer, especially since many of such operations are performed off shore. These kinds of lead times and cycle times can bring this industry’s supply chain flow to a crawl when it comes to meeting the needs of their ever-changing market demands. To make our entire supply chain optimally efficient and dramatically improve both measures of reliability and responsiveness, a tremendous change must come about both in process and technology.

Quick Response Elements Quick response is not a magic potion however; it’s process, paradigm, components may not be suitable or applicable to each and every industry or business. It is like its outcomes, flexible and contingent upon spatio-temporal considerations and this is the very strength of its philosophy. But the fact is that we have already noticed an immense development regarding technologies to support QR and here we can find some well-established tools. Bar Coding: A barcode is one unique 12-digit number represented by a Universal Product Code (UPC), a symbology which includes the style number, the national retail federation (NRF) color number, and the NRF size number (Hunter,King & Lowson 2002).By scanning bar code we can acquire PoS data and it can allow the comparison of buyer forecasts and pre-season orders with the actual consumer preferences as reflected in their purchases.

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RFID Technology: Radio Frequency Identification, or RFID is an emerging technology which can be a substitute for a barcode with some additional advantages. It has micro chip tags that carry data such as manufacturer ID, SKU, and an item unique code (Chandary 2005). This system can protect designer originals efficiently, prevent counterfeiting, monitor work-in-progress, expedite international processing, manage inventory, out of stocks and markdowns, conducts quick checkouts and facilitate convenient returns in retail (Hartenstein 2004). Computer Aided design (CAD)/Computer Aided Manufacturing (CAM): Kincade (1998) indicated that automotion in production processes using computer was a method for reducing time in the pipeline, and achieving shorter lead time and faster turn round. CAD/CAM systems allow a design to be generated rapidly and adjusted equally quickly without diminishing creativity, and provide better communication, integration and flexibility between product development systems (Istook 2000). Electronic Data Interchange (EDI): To speed up the communication of information between trading partners, EDI is really an excellent tool. With EDI technology, business data once communicated by fax or mail can be transmitted electronically. This system allows replacing paper documents with electronic documents as well as eliminating the time delay associated with using mail services and paper handling. PoS Sharing with Customers: Pos has proved as a pivotal tool for a flexible and responsive supply chain especially by the retailers. As we believe, Sharing of POS data between retailers and manufacturers can optimize the overall forecast through building more accurate item inventory and sales records, reducing and eliminating out of stocks through improved order planning, reducing forced markdowns via better re-order management, reducing the need for stock counts, and helping assure that the right goods can be provided to the customer in the right place. Small Batch Orders: Small batch indicates the flexible manufacturing system, to replicate orders, are in small and flexible lots. It will reduce lead time and on the other hand, due to less production, there will be minimum inventory in retailer distribution centre and will increase the service level and forecast errors decrease significantly. Business Process Re-engineering: Business process re-engineering , an innovative management technique, is offering potential for developing efficiencies and thus cost savings, in many types of business. The best known and most common application of reengineering techniques to retailing of department store-type merchandise is QR. When adopting QR, timing, amount and frequency of the acquisition and transfer of merchandise between resources and retailers has to be “reengineered”. The goal of reengineering is to determine the best method for producing and/or distributing products or services.

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VANS: The role of the value added networks (VANS) has changed significantly over the time. An example of this would be when orders are electronically received by a manufacturer and the orders are electronically processed by the internal host system of the supplier without human intervention. This system can eliminate certain “non-added value processes” and thus decrease labour costs to a manufacturer. These third party networks provide 'added value' by offering retailers and manufacturers alike the ability to 'translate documents' among various versions and computing platforms and transmit them more quickly than the traditional physical forms of delivery. Modularized and Unitized Design: Modularized design is to make functional analysis into products with different functions and specification in certain range, classify and design a series of functional modules, and compose different products through the choice and combination of modules to meet various demands. This is more familiar in case of electronic goods but it can be utilized as well in garment design and production module .

QR Implementation

The extent of the use of QR varies among retailers. QR partnerships between retailers and vendors reportedly are developing rapidly. Some partnerships are fully implemented; others are only partially implemented. Some retailers report that they are implementing QR when they are using EDI solely for the transmission of purchase and shipping information, while other retailers are using QR throughout much of their merchandise logistics. The retail firms which have indicated some involvement with QR implementation include a wide array of retailers, from specialty stores, to department and discount stores. On the other hand, there are some vendors which have entered QR partnerships with retailers, also based on the preceding sources. Most of the discussions about the implementation of QR have been on the value to be obtained from using this strategy with apparel, in which there is a wide variety of SKUs. However, even though the technique was developed and has seen most progress in apparel, it is apparent that QR is adaptable and applicable to many markedly different types of merchandise. The implementation of quick response is measured by Fiorito in 1995, and was summarized into six stages which are shown in figure 3.In this figure, stage one permits quick response regarding bar code, EDI and about the infrastructure for proper communications and exact sales data. In stage two, we are getting the information about quick response replenishment program, which makes the supplier ship demand more quickly and reduced lead times. In stage three, where replenishment is streamline and both retailers and suppliers jointly check the sales data, make plan and forecasts demand for future to maintain the inventory at minimum by using new techniques and also designed the stocks in such a way so that stores remains at optimum level. In stage four ,which tell us customise merchandise and replenishment by store and by retailer. In stage five seasonal goods and the fashionable goods are mostly used in the quick response and also reduce the lead times for new products. In stage six which shows, all the business processes are integrated into the firm regarding the quick response strategy. 8

Install enabling technologies

Frequent replenishment

Jointly streamline replenishment

Customize merchandise and replenishment by store

Joint creation of new products

Integrate QR with all the stages of business

Fig 3: Six Stages of QR Implementation

Partnerships In retailing, it is virtually impossible to plan or to schedule “production” – that is, the demand by consumers for specific merchandise, especially for individual stock-keeping units (SKUs). At any point in time, a retailer needs to try to have a wide enough variety of merchandise to satisfy the wants and needs of the customers who come into the store on that particular day. Thus, in order that consumers’ desires be satisfied, merchandisers must strive to maintain a complete inventory at all times. And to achieve this, focus will be go on the partnerships among the parties of a business chain .But incase of QR strategy; this relationship is quite new and different. These relationships generally are unlike those typically found either before a retail firm adopts QR or in firms which have not yet adopted QR. With QR, the retailer agrees to provide the vendor with sales data, by SKU (e.g. colour, style, and size). The vendor agrees to hold these data confidential – the data are to be used only as needed to fulfill the QR program with the specific retailer. Providing these data requires changes in retailers’ attitudes towards vendors. In the past, such detailed information has been held confidential by most retailers; typically, it has not been available outside the retail firm itself.

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The implementation of QR strategies requires significant shifts in the roles and responsibilities of people and functions in both the retail firm and the vendor organizations. For effective QR partnerships, retailers and vendors must understand each others’ need for information. Agreement must be reached on the information to be supplied to each, on the systems and equipment to be used for transmitting the information, on the timing of both the information and the inventory flow, as well as on factors which are involved in any vendor-retailer transaction, such as terms of sale. In addition, determination must be made concerning: • the levels of merchandise to be stocked in each store of the retail firm • the locus of responsibility for bar-coding prices and item descriptors • the frequency of merchandise delivery • whether the merchandise will be shipped to a distribution centre • if so, whether the goods will be separately bundled and marked for the individual selling unit Transportation systems and timing of merchandise shipments must be an integral part of QR if the process is to reach its full potential. Generally, without QR, most such dimensions of merchandising have been controlled by the retailer’s merchandising and buying staff. However, with QR the retailer and the vendor must reach agreement on these factors in advance of shipment of merchandise. Thus, with full implementation of QR strategies, the buying and merchandising roles in retailing generally no longer involve many of the aspects of day-to-day reordering which typically have required significant shares of the time and effort of buyers and merchandisers. Once a QR system is functioning, inventory plans should not be adjusted by either the retailer or the vendor. Any necessary changes are accomplished as reactions to the model of expected sales which has been developed by the retailer co-operatively with the vendor.

Virtual integration In some extent, QR is the “virtual integration” of the channels of distribution. Virtual integration is a form of virtual reality – integration is simulated in the former, reality is simulated in the latter. QR interrelationships between vendors and retailers produce vertical integration of operation and control of the channels, without integration of ownership of the channel. However, QR is not vertical integration in the usual sense. Vertical integration implies joint ownership as well as joint operation, but in QR there is no requirement that the vendor and the retailer be commonly owned.

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Current position of QR Despite different scattered uncertainties, all sectors have accepted that the entire system must be consumer-driven via PoS information and there is now a well defined movement towards one important aspect of QR; the major retailers have assumed leadership in implementing QR. As mentioned earlier, with many of these organizations, suppliers are now on notice that EDI is, or will be in the near future, a condition of doing business. The result is a scramble among medium Quick response sized and small vendors to acquire EDI technology; the large manufacturers are, for the most part, already equipped. The driving force behind this movement is the vision of inventory reductions at the departments and stores, particularly in the case of basic goods. These are year-round items, or those with long shelf lives, relatively unaffected by fashion. However, once EDI is in place, garments of every seasonality will be affected. Led by Wal-Mart, there is a growing realization that replenishment of basic goods could well become the responsibility of the vendor once he/she has been supplied with accurate PoS data. The interaction between EDI and both seasonal (12-20 weeks of shelf life) and fashion merchandise (ten or less weeks) is more complex. In addition to orders, invoices, and advance shipping notices, full implementation of QR for seasonal goods will require re-estimation/reorder procedures to ensure the correct volume and mix of SKUs on the shelf both during the season, to maximize customer service, and at the end of the season, to minimize the markdown effect. These are some way from being commercially developed. QR impacts fashion goods to a lesser extent than either basics or seasonal merchandise. Though shorter pipelines improve the forecasting and order accuracy of styles and colours, there is insufficient time in the selling season to correct design or buying errors. In the early days of QR, it was hoped that the domestic time contraction would help counteract offshore cost advantages. We now believe this will not be the case. Oriental suppliers have responded well to US retailers’ insistence on shorter lead times.

Future of QR

Short Term: In near future, the most pressing task for the industry will be to extend the use of EDI to all manufacturers as well as the smaller retail outlets and to forge better links with the textile producers and other suppliers to the garment industry. At the same time, the role of the VANS will also be the most pivotal in resolving the QR supply chain’s problems as they have the technical expertise to effect change among suppliers as well as it is more intensified among the competitive environment, as the trafficking of electronic documents has become a price commodity business, but also provide the independent brokerage service that will facilitate the full release and sharing of PoS data in the pipeline; sometime that is essential for quick response. Another task will be reduction of retail inventories, it means; that of balancing low retail inventories against desired customer service levels (the complement of stockouts) and supplier and DC lead times. Though this aspect of QR is not well understood, but progress is being made and it is a potential major contributor to retail profits. 11

Long Term: The QR paradigm has become clearer, however, and a number of initiatives have already been taken and it is also inevitable that a lot of practices we need to add to achieve the benefits of QR strategy. Say, the retailer who has already worked out how to balance lead times, stockouts, and vendor lead times, he should work to examine the end-of-season markdown mix of seasonal goods, with its attendant margin loss, and install procedures for re-estimation of demand and the appropriate reorders. While fashion is, almost by definition, impossible to forecast, we believe that certain underlying trends can be projected, but these projections will require extensive historical databases, and these are not yet being accumulated. Successful manufacturers will be those making use of PoS data, who can anticipate seasonal demands, estimate shifts from buyer projections, and keep inventories to a minimum, while keeping their textile and other suppliers informed of their own requirements. This kind of juggling act will require very sophisticated software and innovative management. It will also call for flexible and rapid production techniques. It is in these areas that the manufacturer can add real value to his merchandise and tie himself more closely to his customer. This is the surest way to increase competitiveness – increasing the switching cost for the retailer. It is certain that computing costs and speeds will continue to improve and we will soon be at the point where a new aspect of the apparel business becomes possible on a broad scale. This will be a wider use of CAD, extended to include interactive designing of garments with the customer – the retail buyer. At present, a great deal of time and effort is spent in making sample garments and carrying them round to buying offices. This time can be greatly reduced if the CAD images are reviewed electronically and modified as to colour and style before any cutting is done. A second step will be inclusion of the garment design in the price-sales catalogue, thus allowing sales preference data series to be established, and the possibility of true colour and style forecasting to open up.

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Conclusion Quick response management strategies facilitate responding to customer’s requests and preferences promptly and this response to customer demand is solely controlled by the integration and networking among different tiers of a business chain which indicates the effective information flow. And for efficient information flow, collaboration and communication between segments of the supply chain are significant. This means that suppliers need to build relationships with their customers and should have more concentration on implementation of QR systems to stay in business. It is also inescapable that IT is crucial for implementing QR. However, the utilization of information technology has not yet well penetrated specially in supplier’s level. It may be due to lack of knowledge of what is available to help their businesses or it may also be due to uncertainty about the long term future. But it is apparent like daylight that in future, business will be conducted through internet via E-commerce, as at the same time, QR strategies will enable delivery of products from anywhere of the world, at anytime. For successful achievement of the QR concept, the establishment of standards must become a priority, especially compatible data transfer among manufacturers or countries for prompt information exchange in barcodes and EDI systems which is a challenge of the upcoming days and hopefully future research will be focused on it. Then we will be able to achieve the true significance of QR as it is not just about products moving more quickly from the design stage to the stores, it is also about being keenly responsive to the needs of customers.

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References 1."Quick Response - Managing the Supply Chain to meet Consumer Demand" by Bob Lowson, Russel King and Alan Hunter. – 1999. 2. “Quick response – ten years later”; N.A. Hunter, P. Valentino; International Journal of Clothing Science and Technology; Volume: 7 Issue: 4; 1995; Pp: 30-40. 3. “Quick response in retailing: components and implementation”; Susan S. Fiorito, Eleanor G. May, Katherine Straughn; International Journal of Retail & Distribution Management; Volume: 23 Issue: 5; 1995; Pp: 12-21. 4. “The role of electronic data interchange in Quick Response”; Emma Jane Riddle, David A. Bradbard, Jane Boyd Thomas, Doris H. Kincade; Journal of Fashion Marketing and Management; Volume: 3 Issue: 2; 1999; Pp: 133-146. 5. “Supplier perceptions of quick response systems”; Grete Birtwistle, Susan S. Fiorito, Christopher M. Moore; Journal of Enterprise Information Management; Volume: 19 Issue: 3; 2006; Pp: 334-345. 6. “The promise of demand chain management in fashion”; Dany Jacobs; Journal of Fashion Marketing and Management; Volume: 10 Issue: 1; 2006; Pp: 84 – 96. 7. http://www.iimm.org/knowledge_bank/IFPSM/Omera%20Khan.pdf 8.http://www.infosys.com/offerings/industries/retail/white-papers/documents/speed-tomarket.pdf 9. Meeting the Quick Response Challenge: Adexa’s Solutions for Textile Manufacturers 10. http://www.ccsenet.org/journal/index.php/ass/article/viewFile/777/750 11. http://www.tx.ncsu.edu/jtatm/volume4issue4/Articles/May/May_Bae_full.pdf

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About the Author:

I have done my Bachelor of Science in Textile Technology from College of Textile Technology under the University of Dhaka in 2004 and after that, I worked as a production Executive in Metro Knitting and Dyeing Mills Ltd, Narayangong, Bangladesh and later I shifted to Colour Consult co, Dhaka, where I worked as a Technical Executive for their Textile Dyes and Chemicals Department. And the latest, I joined in Primeasia University, Dhaka, Bangladesh as a Lecturer for their Textile Engineering Department in 2006 and currently I am continuing my M.Sc. in Applied Textile Management in University of Borås, Sweden. Mobile: +46760832104 E-mail: [email protected]