McCormick+Schmitz Handbook for value chain research on - PACA

Just-in-case inventories have given way to ‘lean retailing’ in which retailers keep as little
inventory as possible. Lean systems depend first on in<strong>for</strong>mation technologies that allow
retailers to keep close track of their sales and remaining stocks. When a customer makes a
purchase, not only is the amount of the payment recorded, but also the detailed
in<strong>for</strong>mation contained on the bar-coded ticket. This in<strong>for</strong>mation then becomes the basis
<strong>for</strong> inventory control and reordering.
The lean retailing strategy is taking place against a backdrop of other changes in the
industry. One of these is the multiplication of fashion seasons. In an ef<strong>for</strong>t to boost sales,
producers and retailers have replaced the traditional spring, summer, fall, and winter
seasons with to at least six and in some places, eight distinct selling periods.
A second change is the clear distinction between standard and fashion clothing. Standard
goods are those which change very little from season to season or year to year. Socks,
basic T-shirts, underwear, and ‘traditional’ jeans are examples of standard clothing.
Fashion clothing, as its name implies, changes significantly over relatively short time
frames. Women’s dresses are the best example, but other items, such as designer jeans,
men’s dress shirts, blouses, and sweaters can also be fashion items. In managing their
inventories, lean retailers are likely to treat standard and fashion garments differently.
The lean retailing strategy has ripple effects back into manufacturing and through the
manufacturers to the labour <strong>for</strong>ce. We look first at the impact on the manufacturing firms.
Manufacturers of standard goods are least affected. Here the retailers’ main concern
remains what it has always been: getting a good quality product at the lowest possible
price. They are willing to buy in bulk because these items are likely to turn over quickly
and to be saleable over more than one season. As one writer put it, “If The Gap is going to
sell a million blue polo shirts year in and year out, Mexico or China is the place to make
them. Lead times may be long and the supply <strong>chain</strong> inflexible, but you can’t beat the
price.” (The Economist, 29 April 2000).
Fashion goods, which can be further subdivided into high and mainstream fashion, are
another story. High fashion tends to be price-insensitive and few developing countries are
involved in its production. Mainstream style, on the other hand, makes up a significant
proportion of retailers’ stocks. To control inventory costs, retailers are placing smaller,
27