Does this submarine make my Boeing 767 look fat?
- Posted on August 24, 2010
- in CEO Speaks, Merchandising, Retail
- by Sue Welch
When was the last time Boeing changed the color of their planes because yellow was really, really hot? And then changed it again 4 weeks later because yellow was now the kiss of death for selling airplanes?
How often does General Motors introduce a completely new line of cars? And have a 50% off sale on inventory that is over 8 weeks old?
Is anyone agonizing over how to better merchandise the new self driving car to drive additional sales of submarines?
These questions are worth pondering for retailers considering the next great technology leap to increase sales and improve profits through private label and proprietary brands. In an almost lemming’s type rush towards a PLM solution, they may be overlooking some very basic facts to weigh in their selection process.
For highly engineered products such as airplanes, cars, and even submarines, your standard PLM software is great. For the companies we affectionately call the Triplets (Dassault, Seimens and PTC) the primary focus (and 92% to 97% of their revenue) is on discrete manufacturers. Manufacturers with lengthy design cycles of eight months to ten years that involve hundreds and even thousands of parts and subassemblies. In their world a three year production run can be a whopping 360 units.
In short (probably not possible at this point), the majority of customers serviced by the Triplets are not coordinating the delivery of 7000 to 100,000 or more SKUs from around the world that must arrive on the sales floor in multiple flows that are constantly being adjusted to meet consumer demand. A demand that is often measured in terms of weeks, not months or years. And where the whole process – from concept to consumer – can be repeated up to 16 times a year.
That is the retail world where merchandising is key and new lines of products are introduced mid season. The seeming chaos and emotion of retail is in direct conflict with the methodical, logical Mr. Spock approach of the discrete manufacturer. In retail, the sudden death knell of yellow as a key color can throw off the visual presentation – and sales – of an entire category of goods. Obsolescence and disposability reign supreme.
For retailers, product design and development don’t occur in a vacuum. Because it all happens so quickly, sourcing, supplier management, production tracking, and order management are part and parcel of the design process. Robust profiling of far flung suppliers to understand capacity, performance and capabilities as well as social, legal and ethical factory and product compliance must also be built into the design process. Having 8 to 14 systems to accomplish all of this can no longer be the norm. Each integration point introduces risk and implementation uncertainty.
Which is why we at TradeStone believe that PLM for retail is much broader than just the product design and testing. And because retailers are merchants and live and breathe the word MERCHANDISE, we have redefined the PLM requirement as Merchandise Lifecycle Management, or MLM. MLM offers the retailers one holistic infrastructure that unifies design, specification, sourcing, sampling, testing, order management, production, delivery and payment. It can be deployed in chunks as best of breed or as system of record. And whenever we speak to execs in the retail industry about MLM, they get it – immediately. They understand the difference and embrace it.
We must be doing something right. Recently we heard that one of our competitors (yes, a Triplet) was very unhappy with us, complaining that TradeStone was confusing the market with all of our talk about MLM. The confusion certainly isn’t on the side of the retailers, who refuse to accept their narrow PLM definition that attempts to shoe horn an end to end retail process into a very narrowly defined technology that does a great job at designing planes, cars and submarines. However, we will try one more time to help our dearly beloved competitor understand the difference by quoting directly from our respective boiler plate descriptions of what we do:
(Unnamed Triplet) provides discrete manufacturers with software and services to meet the globalization, time-to-market and operational efficiency objectives of product development.
TradeStone Software helps retailers, brand manufacturers and suppliers increase market share and improve margins through the use of Merchandise Lifecycle Management solutions that unify the design, sourcing, ordering and delivery of their private label and branded goods.
Tags: Dassault, Merchandise Lifecycle Management, Merchandising, MLM, PLM, Private Label, PTC, Retail, Seimens
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Great article Sue. Love the title and context of what you are presenting on Retail SKUs and Merchandise Lifecycle Management. Reminds me of that all important question…..’does this make X look fat?’ in comparison too perhaps buying too much or the wrong product that cold increase expenditures vs. managing the right mix with right tool that is right for a particular company. It really begs the question to the technology buyer of what do I really need to manage my process in my business.
In this case, let me posit a question for discussion. If MLM is the clear choice for retailers and others who are not discrete manufacturers, why do they still use the rigid PLM as defined by the Triplets? Is it a resistance to change or is there something in PLM that can still apply? What can MLM still learn from PLM?
Right, for retailers, there are three fundamental issue unique in their managing private labels merchandise which separate them from the engineering-intensive industries the triplets serve (and serve quite well for that matter): speed, agility, and volume. In practical terms:
Speed means 1) bringing a new style or other fashionized item to market in weeks with the aim of selling the item through in 13 weeks or so and 2) doing this at least four times a year, if not six or more times annually
Agility means responding to unexpected changes in market trends and chasing it
Volume means, for large retailers, handling 100s of style ranges or assortments every year with thousands of individual styles. For every retailer volume means handling:
- a design ideation pipeline of at least 3X, maybe 6x, the number of styles that make it to their shelves
- a handful of attributes for each style in that pipeline, and
- possibly 10s of choices for each attribute
It gets worse, or better, depending on whether the retailer makes or doesn’t make plan on its private label lines. Retailer alone holds the whole bag. There’s no vendor or brand to absorb at least some portion of the cost of failure in markdown allowances. But, if the retailer makes plan, it reaps all the rewards.
With private label strategies retailers are betting they’ll win more often than not. The evidence suggests they are, or at least some of them are. Retailers with successful private labels earn higher gross margins and have greater flexibility in setting price points and the like.
There’s a critical piece of the puzzle at the front end of the MLM process which no one in the MLM or PLM space supplies, that’s technology which helps retailers pick more styles, price points, and assortments that will ultimately reach or exceed their unit and gross margin plans.
At IDC we’re tracking how retailers are using technology and science to do just that. Proof points are coming in, and the top tier business press is paying attention. In fact, I just finished an interview with a Fortune reporter this morning on this very subject.
Ping me at ggirard (at) idc (dot) com if you want to learn more about this.
The thoughts here are dead on with what we speak to retail and brand clients about every day. The extention of PLM to MLM is a solid line of thinking — where I believe MLM needs to go next is to incorporate demand-shaping capabilities to create consumer-centric product development and delivery.
We speak about customer needs management for PLM in non-retail industries – we should avoid the mistake of applying this term to retail so we don’t end up with a “terminology mismatch” the way we did with PLM. But expanding the definition of a product to encompass a retail “experience” in terms of pricing, promotions, links to social media, etc. would be a powerful weapon for demand-shaping activities to support true private label management.
Looking forward to your next post, Sue!
Good comments, Sue. There is a world of difference in the PLM needs of retailers and discreet manufacturers. The enormity of SKUs, high levels of supply chain risks and market agility requirements are constant complexities that retailers need to deal with at all stages from source to shelf. Merchandise lifecycle management is constantly evolving for large and mid-size retailers in an ever-expanding cross-channel retail environment. In fact, sourcing, ordering and delivery stages are the most challenging for retailers in terms of dealing with several supplier risks, on-time delivery uncertainties, and quality compliance.
Hi Sue,
5 years since we met in Manchester. And with the outsize market your title brings back memories of my former business!
Anyone who thinks end to end on the overall demand / supply chain should get the principle of MLM. Even 2 season home shopping companies view this season / this week sales data and feed back to inform product decisions for the next like season. It’s not Zara but still shows full lifecycle thinking. If others don’t get it they’ll continue to operate in discrete areas of the business cycle only.
My question – What’s the Tradestone view on the role of ERP alonside MLM – Which processes sit with ERP, where are the links. Are there even some businesses where ERP is no longer required?