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Next Gen PLM: The Multiple Meanings of Material Management

Copyright October 2013

In the apparel and footwear industry, the term material management can
mean a lot of different things you may recognize it as concept and design,
product innovation, supplier selection, quality and testing, bulk buying and
purchasing, production planning or even material libraries.
Material management is a complex task given the way goods are sourced and
manufactured so far from the brands home base; and the ebb and flow in cost,
availability, geo-political risk, and competitive nature that comes along with the
commercialization process.
Cotton prices are rising again, like they did in 2010 during the Cotton Crisis,
finishing 4% higher in September 2013. Expectations of continued stockpiling in
China and concerns over weather and the US crop yield continued. Weakness in
the U.S. dollar due to continued Fed stimulus resulted in additional upward price
pressure in U.S. dollar terms, as did the rebounding of both the Pakistani and
Indian currencies.
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This year, raw material costs remain the leading economic concern in the industry over wage
rates and logistics issues. For instance since 2009, cotton has become a declining commodity
which inflates cost creating issues for the global market. As a result, consumers have to make-
up for the difference through higher costs in apparel and footwear. To minimize the complexities
within material management, brands and manufacturers need to collaborate holistically in order
to remain agile by maintaining a competitive edge, ensuring their supply meets the consumer
demand as well as reducing any risks that arise within the market.

What is Material Management?
Material management in the softlines industry encompasses the planning, organizing and
control of materials from raw to finished products as they flow from the purchasing process
through to distribution. As a critical process in the supply chain cycle, material management can
deliver high product ROI and margin from cost savings when purchasing, committing or
reallocating raw materials. This serves as a function for organizations to access and distribute
materials efficiently at a minimized cost, but a higher quality.

When turning a profit from your product, its critical that manufacturers coordinate and share Bill
of Materials (BOM) information across the parties in the organization. By developing this level of
cross-functional collaboration, brands and manufacturers can reduce the communication gap

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J udith Russell, Sourcing J ournal, Cotton Prices Rise in September, but Spinners Remain Cautious, October 1, 2013.

ecVision Whitepaper:
Next Gen PLM: The Multiple Meanings of Material Management

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Next Gen PLM: The Multiple Meanings of Material Management
Copyright October 2013

and improve efficiencies within the process. Therefore, by unifying the design and sourcing
capabilities, organizations can secure their competitive edge within the volatile market.

Staying Ahead of the Market
Even if your company isnt a retail giant, fine tuning your supply chain is
imperative in order to stay competitive and ensure long-term continued
existence. Apparel and footwear companies need to make actionable
changes to their business operations in order to thrive in todays
competitive retail scene. When brands effectively collaborate with
the raw material suppliers at the start of a product lifecycle,
retailers and manufacturers can cut costs and gain competitive
advantage. A reflection from industry consultant group Kurt
Salmon tell us that their experience shows when a company
implements more advanced material management programs, it will
have a considerable competitive advantage, meaning material buy
costs will reduce from 4% to 8%.
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The initial accuracy of information about estimated materials needs and utilization can help
companies maintain control over the development process through preproduction planning
meaning materials can be sourced, suppliers vetted and selected, and production capacity
organized in-line with their customer and consumer demands.

In order to stay ahead of the game, its crucial to plan ahead by bridging any gaps from
beginning to end of production. Product sampling allows for brands and suppliers to estimate
costs and ensure material quality. How organized the manufacturers are has a direct impact on
the cost and time associated with production towards a finished product.

Having the Supply to Satisfy the Demand
When it comes to supply and demand, being successful boils down to what brands are willing
to purchase and at what cost. Truth is, the product is only as good as the components; so as
consumer demands for higher quality, reliable and safe products at a reasonable price are
multiplied, it just gets tougher to deliver on all of these factors.

In order to speed up the shelf life-cycle of new products, the supplier must fulfill the obligation
they hold to the buyer through visible collaboration from design to shipment and throughout
each phase of the commercialization process. Analyzing the most dependable and unfailing
suppliers within the material management processes is a best practice that reassures that
brands will have the capabilities to provide quality products as well as be agile enough to meet
the demand. A supplier pre-screening program can make a strategic difference for an
organization's ability to provide continued improvement in the supply chain while reducing costs
and future risk.

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Billings, A., Salmon, K., & Burns, A. (2012, Aug). Looking for Cost Savings in All the Right Places. Apparel. pp. 24.

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Next Gen PLM: The Multiple Meanings of Material Management
Copyright October 2013

Brands Insulating Against Risk

The supply chain can make or break a brand and if a company is not utilizing the right tools and
strategy throughout the entire production process is a major indicator for failure. Sourcing
leaders strive to mitigate the risk in their supply chain by having an increase in visibility of raw
materials, forecast needs of raw materials and a clear understanding of suppliers production
capacity by thorough analysis of demand patterns. According to the 2012 Gartner survey, 42%
of retailers in the U.S. feel raw material purchasing and consolidation is a cost savings strategy
that will heighten sourcing procedures. These strategies can significantly reduce the
development process of new styles and speed up the product-to-shelf lifecycle turnaround
which can help insulate brands from potential risk.

Companies rely heavily on their unique styles and brands because its what sets them apart in
the market. They aim to develop a clear understanding of the components that go into a finished
product meaning there is complete visibility throughout the supply chain. Planning ahead results
in reducing future risks that can destroy a brand. Through global multi-sourcing, brands can
focus on risk management in the supply chain. Diversification of suppliers allows organizations
to insulate against the risks of overages in the production capacity or cost inefficiencies. Having
a guaranteed capacity for the retailer means they are given the ability to trace, replenish and
reduce lead times of trends which is ultimately improving the speed to market.
Conclusion
With the economy toiling uphill, the retail industrys leading concern is continuing to grow; with
an overwhelming demand of raw materials, the industry finds themselves in a rut determining
forecasted goals for product supply thus leaving retailers and manufacturers in question over
their supply chain strategies. That said, organizations are in search of efficient material
management solutions that match the supply with the demand in the supply chain process. With
raw materials becoming the heightened area of focus, buyers and suppliers collaborate to find
solutions that effectively speed up the material management processes from raw materials to
finished products.

With concerns like cost and speed to market arising, solutions like ecVisions Material
Management Best Practice offers the accountability and agility necessary for material
management optimization. The Collaborative Material Management Best Practice helps brands,
retailers and suppliers work closely together to deliver more innovative products, manage the
sampling and testing process, as well as plan, forecast and reserve raw materials. Such
strategies can significantly reduce the development cycle for new styles and speed up the
replenishment cycle for existing styles.

Directly managing raw materials supply and demand can have a significant impact on the
retailers ability to make design changes based on sell-through/markdown data. Here retailers
can see greater full price sell-through as high as 80%; improve fill rates by up to 25%; as well as
boost gross margins by as much as 2%.
To learn more about ecVision SuiteMaterial Management Best Practice,
contact us at us-marketing@ecvision.com.
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Next Gen PLM: The Multiple Meanings of Material Management
Copyright October 2013

About ecVision
ecVision streamlines supply chain processes from design to delivery in a cloud based
collaboration platform called ecVision Suite

. Its customers, who are leaders in the apparel and

footwear industry, utilize the platform's best practice applications to streamline their workflow,
increase visibility and integrate external systems to consolidate data. Through real time
collaboration, the retailer's internal teams, suppliers and service providers can improve the
accuracy, pace and flexibility of doing business globally. Today over 22,000 brands, retailers
and suppliers use ecVision to shorten product lifecycles, lower product cost, improve sourcing
and logistics efficiency and minimize supply chain risk.
Visit www.ecvision.com to learn more.