Fashion Industry - Product Development (Study Guide)

Product Development Key Concepts ● The major advantages and disadvantages of the contractor system ● The six-stage process of developing and producing a line ● The major industry practices of licensing, private-label and specification buying, offshore production, CAD/CAM, the use of factors, chargebacks, and ● SIC/NAICS codes ● The supply chain management and the mass customization theory ● How bar codes, scanners, and RFID are integral to product development and supply chain management What is a Product Line and Who Develops it? ● Product lines of apparel and accessories are created and styled for wholesale presentation several times or seasons per year. ● A product line (normally just referred to as a “line”), not only encompasses a specific item, but the entire season’s production. The term “line” is used for moderate to popular priced apparel. ● The term “collection” describes an expensive line in the US and Europe. ● Lines and collections are divided into groups that have a common theme that link it together. That make it cohesive. It can be a story, color, pattern fabrics or style (or a combination). ● Clothing manufacturers produce between 4-6 lines every year (with the exception of fast fashion brands who will produce more). For women’s wear these are Spring, Summer, Transitional or Fall 1, Fall or Fall 2, Resort (ex. vacation), and Holiday (ex. Christmas). Role of the Merchandiser ● The merchandiser is the glue that holds the whole product development concept together. ● They are the liaison among the design staff, the production facilities, and the sales staff. ● The merchandiser is the person who channels the creativity of the designers and design staff so the six “rights” of merchandising can be successfully accomplished. ● The 6 “rights” are: ○ Right merchandise ○ At the right time ○ At the right price ○ At the right time ○ At the right place ○ In the right quantity ○ With the right promotion Role of the Designer ● They are the creative minds behind the designs. Designers normally work by either hand sketching or designing their ideas on the computer (CAD system). ● Besides artistic expression and creativity, designers must take into mind that their designs must be produced at a profit and within the firm’s wholesale price range. Consequently, designers must know the availability and cost of materials, the cost of cutting and sewing the garment, and the labor costs. ● Most designers in the U.S. fall into one of 3 categories: ○ High Fashion or “name” designer” ○ Stylist Designers ○ Freelance Artistic Designers Role of the Producer ● The fashion apparel industry consists of 3 types of producers: ○ Manufacturer: performs all the operations required to produce apparel from buying the fabric to selling and shipping the finished product. ○ Jobber: handles the designing, planning, the purchasing, the cutting, selling, but not the actual sewing operation ○ Contractor: sole function is to supply sewing services to the industry The Product Development Process Stage 1: Planning the Line Under the watchful eye of the merchandiser, designers & product developers concept the line. This is the overall theme for the collection. They research trends, colors, fabrics and any other inspiration. Stage 2: Creating the Design Concept Next comes the step for designing each individual design. Each one is sketched and or developed in muslin (no shape, no color, and designers use it to not waste their fabric). Stage 3: Developing the Designs The designs most likely to succeed are made up as finished sample garments. A pattern maker creates a production pattern in the garment size the company uses to produce its samples. From here the designs are presented to various executives and managers of the company (sales, purchasing, production etc…) who will select which designs will sell best and be produced. At this point they are officially part of the manufacturer’s line. Stage 4: Planning Production This is the stage where sourcing (determining where components of a garment: fabric, thread, trimmings etc..) will be purchased and in some cases where the garment will be cut and sewn. They must also decide if it will be made domestic or overseas. Finally the garment must be costed out so that the exact cost, wholesale and retail price can be determined. Stage 5: Production One of the most important steps of mass production is cutting of the garment pieces. In many companies, cutting is still a manual process although computer-aided equipment is becoming more popular and efficient. Once cutting is complete, the pieces are tied and bundled according to their size. The bundles are then moved to the manufacturer’s sewing operations, who may be on premises or in a contractor’s shop. Sewing can be done either single handed for high end pieces or through mass production machines. Stage 6: Distributing the Line Sales tickets and barcodes must be added. Then they can be sent to retailers by truck, rail, or air. Industry Practices Manufacturers Acting As Retailers ● An increasing number of manufacturers are opening their own stores. Larger profits are part of the attraction. The manufacturer can sell their product to the consumers at full retail price rather than wholesale (at least half the amount of retail). ● Ralph Lauren was the first company to do this. Many companies including Marc Jacobs, Donna Karan, Liz Claiborne would also start opening their own retail shops for a larger profit. Licensing ● The appeal of licensing is that merchandise is identified by a highly recognizable name. The advantages for designers are royalties they receive on the sale of each product (2-15%), greater exposure of their their name, and little investment in product development and manufacturing. ● Licensed products in the U.S. are estimated at $104 billion annually. Offshore Production ● Manufacturing goods abroad where labor is cheaper. Private Label and Specification Buying ● Private label is when manufacturers design merchandise specifically for a retailer. It’s only designed for them. Macy’s private label include Alfani, Charter Club, JM Collection. ● Specification buying is a type of purchasing that is done to the stores rather than the manufacturers standards. Gap is an example of this. They provide the standards and guidelines for the manufacturer of clothes they order. Standards cover everything from quality of materials to styling and cost. Use of Factors ● Apparel manufacturers and contractors need cash or credit to produce garments the season before they are sold. Some banks are reluctant to lend $ to apparel companies because of the high risk involved. ● Factors is an alternative means that advances cash based on accounts receivable. Their interest rates are higher than a bank. Chargebacks ● Financial penalties imposed on manufacturers by retailers. The reasons for chargebacks include mistakes in purchase orders, wrong ticketing & late shipments. SIC / NAICS Codes ● SIC, later replaced by NAICS provide industrial statistics through codes. Every classification in fashion has a code. Waterproof outerwear, Juniors dresses, Juniors shirts etc… Advanced Technologies and Strategies Bar Codes, Scanners and Radio-Frequency Identification ● Bar codes are made up of a pattern of dark bars and white spaces in various widths. They make tracking merchandise and collecting info easy, fast and extremely accurate. ● The scanner is the instrument that reads the bar codes. ● Radio Frequency Identification is an item level tagging device that stores data. It holds more info than a bar code. Mass Customization ● In mass customization, the idea is to tailor the product to fit one particular customer (one size does NOT fit all) and to supply thousands of individuals at mass prices, not custom made prices. Body Scanning ● This technology helps manufacturers, retailers, and customers get a better fit. Within seconds the scanner can take a 3D snapshot of the human form and produce complete and accurate measurement data. Industry Trends Brand Extensions ● A strategy where a company uses a successful brand name to launch new or modified products. Brand extensions save companies money on the high cost of promoting a new name and creates instant brand recognition. ● An example of this is the Fossil watch company, which started with watches, then expanded to bags. Globalization ● Finding both foreign competitors and customers. A global perspective to see possibilities in a business. A U.S. company might source fabric from China, manufacture goods in Vietnam, send them to Italy for custom design work, then ship to the U.S. for retail delivery.