Sourcing - Eager to Limit Inventory Risk, Brands Push Lead Times Lower

Eager to Limit Inventory Risk,Brands Push Lead Times Lower
Some outdoor brands are pushing back their orders for final orders and greige goods for Fall 2009 and Spring 2010 and pressuring suppliers to shorten lead times and give up margin as a contraction in retail sales works its way up the supply chain, according to textile and contracting sources. “People are trying to trim the lead times,” noted Chris Parkes, national sales manager for Concept III International, which develops sources and produces apparel for a variety of outdoor brands. “No one wants to get stuck with product.”

Parkes cited one example where a client who normally commits to ordering 70% of the prior year’s goods by December had only committed to 40%. Still, he noted that Concept III recently got an unanticipated order for 9,000 square yards of technical fabric. “There still seems to be orders out there for fall/winter,” he said.

Some brands and retailers want to wait until after spring retail sales data comes in to adjust their final orders for Spring 2010, said one textile executive. “Brands are holding on as long as they can,” he said. “There is a trend for greige goods to be forecast later. That makes it more difficult for us to deliver on time.”

This in turn has shortened lead times for textile mills, according to Roger Berrier, EVP for sales, marketing and Asian operations at Unifi, which makes recycled polyester Repreve yarns used by outdoor apparel brands. “Today, mills will not give us a soft order until they have an order themselves,” said Berrier. “Instead of giving us six weeks notice, we are getting an order within two weeks of delivery.”

Unifi is shortening production runs, which raises its machine change over costs. That’s better, though, than being stuck with inventory “because some of these programs just get canceled with no warning.”

Sources also report that brands have pushed back plans to introduce new product figuring that neither retailers nor consumers would gamble on it in Fall 2009 and Spring 2010. Many, however, are pushing for innovations for Fall 2010 on the assumption the economy will improve by then.

Brands are also pushing for price cuts of 3 to 15%. But with Asian mills earning operating margins of 12 to 18 points compared to 40 to 60 once enjoyed by U.S. mills, such concession are hard to come by, said Parkes. The environment has incentivized apparel mills to cut costs. This has lead more intense quality control by U.S. brands, which have rejected fabric they would have accepted a year ago.

For retailers, all this could result in later deliveries on top of already light pre-season orders. That raises the likelihood that they will run out of stock on some items. That’s a risk many retailers favor over being stuck with inventory.

“Everyone is walking on egg shells,” said Parkes. “The Asian mills don't understand what's happening. They've never seen this before.”

Still, Parkes urged brands to push their suppliers to continue innovating and be flexible. “As you are closing down Fall 2010 and things change at retail, don't be afraid to go back to your suppliers and tell them this or that change has to be made,” he said. “Don't accept 10 weeks to develop. You will have to find suppliers who will work with you and turn things in four to six. In the past, brands could say ‘we will do that next season,’ but you can’t do that in this market. If you miss it, the consumer will buy it from someone else.”