Causes And Solutions Of High Inventory In Garment Industry

Today China

The main problem facing the industry is "high inventory". It is not only the OEM manufacturers affected by the European debt crisis, but also the well-known brands in China, such as: fans, Metersbonwe, Lining and so on.

It is easy to see Lining's annual report from 2007 to 2010.

The trend of gradual increase was more than 62% in 2010 compared with 2007.

At the same time, according to the relevant data of Hong Kong stocks, as of June 2011, Lining's stock grew unabated, reaching nearly 1 billion.

High inventories not only generate additional storage and pportation costs, but also waste a lot of capacity.

When production capacity is used to produce a product that later proved to be unsalable, it means less production of another product that may sell well.

It can be said that inventory is the most important factor in losing profits.

This paper intends to systematically analyze the causes of the high inventory of garment manufacturers, and use similar enterprises abroad as a reference, and then propose solutions for domestic manufacturers.

Reason 1: demand escalating step by step.

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For every 1 items sold, manufacturers should prepare at least 2.5 items for inventory turnover, sometimes exceeding this proportion, resulting in a large number of stocks.

For example, terminal customers actually need 100 pieces, retailers think they need 150, distributors will expand to 200, and it will become 250 when it comes to manufacturers.

Although the demand for terminal customers has not fluctuated very much, after the enlargement of retailers and wholesalers, the order quantity has increased at the first level, and the larger the supply chain, the greater the order deviation.

In this marketing activity, the phenomenon of amplification of demand variation is popularly known as the bullwhip effect.

Reason two: mode leads to time difference.

China's clothing production mode still stays.

Mode, relying on downstream distributors, not consumers, to provide market information.

All kinds of clothing brands will be ordered every spring, summer, autumn and winter in the two quarter. Enterprises will guide the merchants to order by ordering the site models and shopping guide commentaries, and then arrange production and sales plans according to the order quantity.

In this mode, the real demand becomes a product that takes longer time.

Most manufacturers in China need an average of 90 days from receiving orders to finished products, and some can reach more than 120 days.

Just imagine that if consumers see a fashionable brand in a brand shelf for 3 months or even 4 months ago, the sales volume of this brand is lower than expected, resulting in a backlog of inventory.

If we ask the cause of the high inventory in the industry, the answer is likely to be "production and sale mismatch".

A salesperson who interviewed me once said, "we are producing the latest fashion in the current period. We are always catching up with the trend instead of leading the trend."

It can be said that Chinese garment enterprises do not lack the manufacturing ability and imitation ability, but are far away from customers.

Reason three: underestimating consumers

In recent years, it has often been reported that Chinese movie stars hit shirts with foreign movie stars when they participate in the international awards, which means that two or more people wear similar styles on the same occasion.

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Movie stars are the most fashionable and personalized groups. Frequent occurrence of this phenomenon shows that China's fashion design is basically in keeping with the international trend. This is a good thing.

But at the same time, producers also believe that "the current international fashion can be sold in second tier and three tier cities after being sold in the first tier cities in China," which can only lead to a backlog of products - they ignore the power and role of the Internet.

I was on a business trip in Huxian, Shaanxi in 2011. When I was driving a taxi, I found the driver chatting up in Kappa.

The driver said, "clothes were bought locally last year, not seasonal fashion, not very satisfactory."

It can be seen that the perception of popularity has penetrated into Guanzhong County, a small county town. The development of micro-blog, mobile Internet and other technologies has really leveled our world.

The end of consumers may be losing market and profits.

Of course, besides the above reasons, there may be other factors leading to the inventory pressure. Moreover, clothing manufacturers have introduced relevant policies to digest inventory.

But even so, it is the right way for domestic manufacturers to find solutions to both problems and inventory problems.

Here, the experience of ZARA is worthy of reference.

Domestic manufacturers should learn from ZARA mode

ZARA is both a clothing brand and a franchise ZARA.

The chain retail brand, founded in Spain in 1975, is ranked third in the world and ranked first in Spain. It has more than 2000 apparel chains in over 56 countries around the world.

In the past five or six years, the average growth rate has reached 25%. Even in 2008, when Europe was in recession, its growth in the third quarter was still 18%.

What ZARA most needs to learn from the concept of "what kind of clothing the consumer needs" is its "fast fashion" mode.

The so-called "fast fashion" mainly includes three aspects, that is, the delivery time is fast, the price is fair and the fashion trend is closely followed.

Consumers' demand for fashion is far less than their psychological needs. Fashion involves satisfying consumers' psychological appeals, such as aesthetic experience and self actualization.

And fast is the foundation to satisfy these demands.

In the fashion innovation mode, the general companies participate in the whole process or join from the latter half, which is high cost and low risk.

ZARA is just the opposite. His product design can intervene and achieve small-scale production at the early stage of launch, and then achieve rapid production, rapid sales and rapid exit in the next early stage of leadership.

The industry can see clearly that the real achievement is mainly based on the following three aspects: fast production and distribution, close to the market and efficient commodity planning system.

First of all, the average ZARA product is only 14 days from design to store (10 times faster than some domestic counterparts).

To this end, ZARA dug up 200 miles underground in Spain and set up an underground conveyor belt network to connect 500 of its foundry terminal factories.

Take the latest orders according to the latest fashion.

Reaching the terminal plant on time ensures overall time requirements.

The ultra fast production and distribution process makes the style update faster, adds freshness and attracts consumers to keep patronizing.

Secondly, ZARA headquarters has a fast and pparent channel to master market information.

For example, the stores distributed around the world, they can directly feedback the opinions and ideas of customers in the sales process to the headquarters, and also design teams. They also take the fashion trend information captured in different places for the first time to feedback.

So close to the market mechanism will undoubtedly make ZARA's clothing always in the forefront of fashion.

The third is the efficient planning system, which is the buyer's model we often talk about.

ZARA is not fully designed and developed, but more inspired by other fashion brands' conferences.

But domestic clothing is also imitated, but little success is due to the lack of accumulation of goods and related frameworks.

In short, the current inventory problem of Chinese clothing brands can not be denied that there are sudden factors, but the deeper reason is structure and mode. It is probably one of the solutions to effectively refer to ZARA's "small batch, quick turnover and hot pursuit fashion" mode.

Under the background of the new round of industrial upgrading and pformation, the garment industry has been greatly impacted. It is believed that the enterprise that can survive is inevitably "close to customer needs, leading fashion and providing products in a shorter time".