As radical changes sweep through the Apparel, Footwear and Accessories (AFA) landscape, the traditional lines between industry verticals are becoming increasingly blurry. Companies are constantly morphing as they chase more stable and profitable streams of revenue. Retailers are acquiring or developing apparel brands and outsourcing the manufacturing. Manufacturers and wholesalers are becoming retailers. E-tailers are opening stores. Most brick-and-mortar retailers are present online. More and more organizations are shifting to a vertically integrated model – from source to store.
In this changing and competitive environment, flexibility and vertical transparency across the entire supply chain are key to your company’s success. You must be able to make the same kinds of strategic changes your competition does; and you must be able to make them quickly. In this context, your information systems shouldn’t restrict you from moving in new directions.
Zara: Exception or Norm?
When it comes to vertical integration, Zara is the exception rather than the rule. The brand represents the ideal model of vertical integration due to its focus on being the most agile fashion retailer in the industry. The company’s structure integrates the entire process, including product design, sourcing, production, delivery and retail sales. Its whole model is about staying on trend, owning the whole supply chain and getting its products to market as soon as possible. Put simply, if people aren’t buying a style, Zara swiftly reacts by getting it off the shelf and replacing it with something fresher to drive consumers to the store and keep them coming back for more.
Zara pioneered the “fast fashion” concept that has dramatically redefined the retail rule-book. It has achieved spectacular success by centralizing its operations and integrating its supply chain. Zara’s example has made more and more brands realize the benefits of owning the entire supply chain and being able to quickly react to consumer preferences and adapt to new trends. Now, the trick lies in how to operationalize this model.
Point Solution Vs. Integrated Platform
Traditionally, software vendors used to develop and market their applications for specific business types: one set of software applications for retailers, another for wholesalers and manufacturers, and so forth. As a result, software buyers had to use disparate applications from multiple vendors to manage different processes. Often, the applications didn’t interface well with one another, which limited the business’ capacity to scale, innovate and quickly respond to changes in the marketplace. The old legacy architectures were simply not designed to face the challenges of today. Fragmentation of business, technology and data models couldn’t deliver the agility required to offer an individualized experience at the moment of truth.
Today, the walls that once separated distinct market segments are breaking down. But while it’s clear that the traditional lines separating manufacturers, wholesalers and retailers have blurred or disappeared completely, only a handful of software companies have managed to adapt and provide integrated systems to address this new paradigm. Fewer still, have devised a modular architecture that can deliver both scalability and flexibility.
Integrated Approach = Supply Chain Agility + Data Transparency
These evolving business models call for technology that can manage the processes from end-to-end on a single platform. Speed and data availability are key demands of the fashion industry and its consumers. For a timely response, the software needs to connect all the business units in such a manner that there is free flow of information (i.e. inventory and customers), enabling frictionless operations across the organisation (e.g. collaboration, planning, distribution, replenishment, sales, etc.).
As discussed earlier, point solutions – i.e. applications that only cater to a specific business area – can bring value in the short-term, but in the long-haul, they create bigger problems as they generate siloed data centres. Making these disparate systems “talk” to one another traps the IT staff in an endless loop. Moreover, it’s expensive to achieve seamless integration and the risk of fractured connections always exists. This “forceful fit” approach, directly affects your brand’s agility as your technology stack isn’t independent.
On the other hand, vertically integrated enterprise software unifies your supply chain and optimizes your business processes. You don’t run the risk of faulty data integration, third-party expense for connecting disparate systems, overlapping services or a decrease in systems speed because of multiple layers of integration. Additionally, an integrated yet modular platform gives you the flexibility of adding more functionality as your business requirements change over time. The fashion industry is competitive, so the system you choose to power your operations can make or break you.
The benefits of integration are substantial. From a technical standpoint it can enable you to achieve lower cost of implementation and ownership because you only need to run one platform, thus harmonizing processes and reducing administration. From a business perspective, it not only optimizes your processes but also creates new sales opportunities (e.g store-in-store, pop-up stores, etc.).
Evaluating and Selecting the Right Software
Retail and wholesale professionals face a dilemma when they evaluate software to run their businesses. They struggle to find systems that are capable of supporting their current operations and accommodating future needs. Should they choose software that takes care of their present requirements? Or should they pick solutions that will be able to cater to their processes in the next five to ten years? The right answer should be both. Still, this is a challenging predicament for three reasons:
With vendors providing both faster implementation and a low total cost of ownership, it’s now possible to consider replacing legacy systems with modern platforms, instead of implementing multiple point solutions for each new opportunity.
Anticipate and Exceed Customer Expectations
An all-in-one approach can shorten the time to market for your products, boost collaboration across the supply chain and provide complete visibility, flexibility and agility. Vertically integrated software can help you achieve your objectives with fewer resources and expenses, while reducing overall IT overhead and facilitating future growth – so you can focus on understanding your customer’s needs and creating a remarkable customer experience. The future of retailing belongs to vertically integrated organizations.
With such dramatic changes occurring all around your company, can you say with confidence if you will you be doing more retailing, wholesaling or sourcing? What would be your technology strategy to navigate this uncertainty? Point or integrated? Or both?
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