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Posted on 29 October 2012

Sales

Analytics provides O.R. with fashion industry foothold

According to information obtained from a recent SAP Performance Benchmarking analysis, fashion companies on average are able to track fewer strategic Key Performance Indicators and less able to use analytics than their peers in the retail and consumer products industries.

Every season, fashion companies from Paris to Bombay and beyond, launch new styles, fabrics and colours into a hungry marketplace – it is one of the few industries unaffected by the economics of austerity. The fashion market’s reaction decides which new fashions to produce for the new season and which ones will become the next “must have” items for trend-setters the world over. Fashion companies use forecasting technologies to predict likely sales for every variation of a potential ‘hit’ item. Prediction is a useful anti-waste tool, since unsold products at the end of season are either sold at huge discounts, or destroyed in an attempt to protect the exclusivity of brand name.

Determining which designs to mass-produce is only one element out of many that defines success for fashion companies though. Surprisingly, on average, fashion companies are behind similar industries when it comes to their use of business analytics tools. Fashion companies traditionally have a hard time getting an accurate and highly detailed read on supply and demand in their world, as trends and tastes tend to be fickle. Most fashion companies have procurement lead times of 6 to 8 weeks, and this makes it hard to anticipate and respond strategically to lower or higher than expected demand for certain Stock Keeping Units (SKUs) or styles.

Some fashion and clothing-design companies are however setting utilising analytics to improve their forecasting and potential profitability. Under Armour, for instance, is able to plan in detail for the next 3-4 seasons by collecting critical market forecasts and inputs in quick and accurate manner. Another fashion house trading mainly on the web, Bluefly, is using business intelligence tools to help its marketing team monitor the performance levels of multiple marketing channels, in near real-time. These tools allow the company to identify best- and worst-performing partners and affiliates. Zara, the fashion chain owned by Inditex, is apparently able to take information from the shop floor on changing demand and get new designs to stores in a week.