AN Apparel EXCLUSIVE REPORT

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Executive Summary

Apparel magazine and Gartner have joined forces for

the seventh consecutive year to collect and analyze information about the technology spending plans and trends that fashion, apparel, footwear and soft goods industry participants have for the coming 12 months. Apparel companies are exploring a wide range of options for improving the health of their businesses, reaching beyond the cost-cutting focus of recent years to find the next big thing to improve efficiency and support innovation. We are pleased to provide insight on the apparel industrys attitudes and behaviors relating to technology budgets, planned expenditures and spending priorities in the context of this search for the next competitive edge. The discussion supporting the data is designed to help companies identify new opportunities for creating business efficiencies while also creating the agility to support increasingly diverse and global shopper constituencies. We sincerely thank all those who participated in the survey; it is the willingness of executives to contribute information that makes it possible for this report to provide a comprehensive view of the apparel industrys spending plans and priorities.

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www.epicor.com/retail

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An Apparel Exclusive Research Study & Analysis

Strategic IT a Must to Drive Innovation, Channel Growth

For many apparel companies, technology has made the transition from being considered primarily a means to increased efficiency and is now regarded as a strategic enabler for balancing efficiency, innovation, and the demands of ever-broadening channel and geographic reaches.
By Janet Suleski, Research Director, Supply Chain & Apparel and Lucie Draper, Researcher, Research Data & Analytics, Gartner

n this years Top Technology Trends in the Apparel Market Survey, participants report spending an average of 4.5 percent of their total revenues on IT budgets in 2012, down from 4.8 percent in 2011. Additionally, the number of companies expecting to increase their IT budget for next year moderated slightly to 41 percent, down from 45 percent that reported plans to increase spending the previous year. Notably, among companies that plan to increase their IT budgets in the coming year, the amount they expect to up their spending continues to increase. Among this years survey participants that plan to increase spending in 2013, the average expected increase is 12 percent, up from 10 percent in 2012 and 8 percent in 2011. In many apparel companies, technology has made the transition from being considered primarily a means to increased efficiency and is now regarded as a strategic enabler for balancing efficiency, innovation, and the demands of ever-broadening channel and geographic reaches. Funding badly needed technology upgrades is now accompanied by strategic investments to set the stage for future business growth. However, companies took the lessons of the last recession seriously and often create a plan b reduced IT budget in case of sudden shifts in the economy. Fewer apparel companies expect increased sales in existing categories to drive future growth, with 77 percent of companies viewing this as one means to support revenue growth, down from 83 percent in 2012. International expansion, the addition of retail stores globally, and acquiring or merging with another company as means to drive growth all increased over 2012. The business initiatives that survey respondents indicated will support growth plans appear to have shifted substantially from reduction of product costs to improvements in executing business processes to bring those products to market more successfully. Twenty-three percent of survey respondents named reducing product costs to improve marginsas their top business priority for the coming year, down from 29 percent in 2012. Instead, 16 percent indicated that improvements to new product commercialization and launch processes will be the most important business initiative. The number of respondents

indicating that lead time reduction will be their top business initiative nearly tripled from 5 percent in 2012 to 14 percent in this years survey. Supporting this emphasis on the execution of new product launch and related supply chain processes, 16 percent of respondents pointed to supply chain planning as the No. 1 application area with which they are most concerned, up from just one percent in 2012. Heavy emphasis on implementing and expanding the use of PLM technology in recent years appears to have paid off for companies, with just eight percent indicating that it is their area of greatest concern, down from 26 percent in 2012. E-commerce and merchandise assortment planning also came in at eight percent, indicating that many apparel companies see room for improvement in the applications that they currently have deployed. Additional survey work shows that apparel companies have turned the functionaldial on improving speed to design products and improving the quality of products they bring to market. With PLM processes maturing, the focus in many apparel companies has shifted to optimizing the processes and technologies used to bring those products to market successfully. As enterprise growth and financial health increasingly rely on international expansion and the strategic growth of new channels to market, technologies that deliver scalable, integrated ways to support the decision-making required for truly international supply chains, global sourcing and localized assortment management while providing relevant, secure visibility to enterprise functions and trading partners are likely to substantially absorb increases to IT budgets in the coming years.

Who Responded?
The survey was conducted throughout October 2012. We collected 85 responses via a web-based survey. Forty-four percent of respondents identified themselves as apparel manufacturers, brand marketers or wholesalers, up from 31 percent in 2011. Twenty-nine percent identified themselves as vertically integrated retailers (companies that produce and sell apparel), 20 percent as retailers (companies that sell multiple brands,

4 Strategic IT a Must to Drive Innovation, Channel Growth

An Apparel Exclusive Research Study & Analysis

possibly including private-brand merchandise), and 7 percent as other qualified companies that participate in the apparel industry. The portion of companies that indicated they have annual revenues of greater than $500 million was 34 percent, while another 37 percent reported annual revenues of $25 million to $499 million. The remaining 29 percent reported revenues of less than $25 million, compared to 39 percent in 2011. Readers that review the survey data year-over-year should take into consideration the shift in the respondent base this year to larger companies and how this may impact survey results. This year, 35 percent of survey respondents came from the ranks of corporate management, nearly identical to the 34 percent in last years survey. IT and systems management professionals accounted for 21 percent of respondents, and 24 percent came from product development, sourcing/procurement or production. Among survey respondents, 65 percent operate at least one store, and 28 percent operate 100 or more stores. Among the companies that today do not have physical store locations, 43 percent sell direct-to-consumer only, and 18 percent plan to launch a direct sales channel or open one or more stores in the next two years. The number reporting that they have no plans to sell direct to consumers or open store locations in the next two years fell from 49 percent to 39 percent. We are confident that the survey results reflect trends in technology spending plans among the apparel industrys line-ofbusiness and decision-makers and technology leaders that are designing and making funding decisions about business and technology strategies in 2013 and beyond.

Key Business Initiatives

In previous years reports, we noted that survey respondents had started to shift from focusing on reducing product costs to maintain margins toward looking for new ways to provide value to customers and shoppers. While the search for value continues, Gartners work with apparel companies has uncovered a great deal of interest in improving the likelihood that a new product or new product category will live up to the financial, volume, sales channel and other metrics the company sets for it. To capture the interest in this area, this year we added a new response to the question asking survey participants what their most important operational business initiative will be in the coming year improving the new product commercialization and launch process. As in prior years, the top initiative companies named as the most important for the coming year was reducing product costs to improve margin. However, the number of companies naming this as their No. 1 initiative has declined significantly over the past four years, from 39 percent in 2009 to 23 percent in 2012. A total of 30 percent of survey respondents named improving new product commercialization and launch or reducing lead time for new products as their top initiative. This suggests that companies are more confident that they are designing the right products for their target consumers, and now they are looking for better ways to bring the product to markets successfully. Increasingly, apparel companies are tar6 Strategic IT a Must to Drive Innovation, Channel Growth

geting improved alignment between new product development, supply chain, sales and marketing, and merchandising and store operations groups. The mechanism being most heavily explored to achieve the desired results is expanding the governance role of the sales and operations planning (S&OP) process as a critical means to improve new product launch. Investments in supply chain technology are being pursued to improve the information that can be brought to the table for the more frequent and increasingly important S&OP meetings. International expansion continues to rank as one of the most important business initiatives for many apparel companies. While a substantial number have at least some stores outside of the United States, expanding international distribution, whether through channels, franchises, or owned-stores, remains a hot button for business leaders as companies seek to lock in market share, diversify customer bases to diffuse financial risk, and tap new sources of inspiration and fashion sense. Trending downward this year is the number of companies naming business intelligence and analytics as their top business initiative, with 8 percent of survey respondents naming that as their top business initiative in 2013, down from 13 percent in 2012. In 2011, we added introduction or expansion of mobile application capabilitiesas one of the answers companies could chose as their most important business initiative. Three percent of survey respondents, or 4 companies, chose this answer last year; in 2012, 5 percent, or two companies, chose this answer. While caution is advised in interpreting this data, responses over the two years suggest that mobile investments cannot be described as dominating IT spending decisions.

Growth Plans
This years survey participants reported plans for supporting future growth that remain largely consistent with the plans indicated in last years survey. As the global economy has stabilized and recovered to a certain extent over the past three years, growth plans have become more consistent as apparel companies adjusted to external conditions and focused internally on aligning operational activities with strategic goals that increasingly focus outside-in to provide more value to shoppers. Year over year, apparel companies moderated expectations that growth would come from increased sales volumes of existing products, with 77 percent reporting that growth would be driven by existing products, a figure that is down from 83 percent last year. Among this years survey respondents, vertical retailers were the most cynical, with 64 percent naming existing products as a source of growth. Rather, expanding internationally, adding new sales channels, or acquiring or merging with another company stand out as areas that vertical retailers will explore in 2013. Retailers are the most optimistic about increasing sales of existing products, with 88 percent naming this as a growth driver for 2013. Few retailers expect to acquire or merge with another company, but mobile technologies remain a highly attractive area for growth. Nearly half of retailers expect to introduce or expand mobile selling activities in 2013.

An Apparel Exclusive Research Study & Analysis

Figure 1: Most important operational business initiatives

9% 7% 5% 3% 7% 10% 12% 13% 9% 9% 7% 11% 5% 16% 14% 12% 8% 1% 2% 5% 5% 6% 8%

Other Rationalizing supplier & manufacturer base

14% 3% 7% 12%

Increasing supply chain visibility of product status Introduction/expansion of mobile application capabilities* Improving or expanding CRM capabilities Increasing supply chain agility Improving or expanding business intelligence/ analytical capabilities International expansion Reducing lead times for new products Improving the new product commercialization & launch process Reducing product costs to improve margin

27%

29%

23% * New in 2011; Customer acquisition/expand customer base only asked in 2010 (4% included in other)

2010

2011

2012 Apparel manufacturers and brand marketing companies expect that growth will primarily come from introducing new products or categories of products and increasing sales of existing products. Notably, 32 percent of apparel manufactures see growth coming from international expansion and 22 percent may grow by acquiring or merging with another company. Like retailers, apparel manufacturers are becoming more global in their strategies and outlooks. As retailers and vertical brand companies push supply chain segmentation and the strategic alignment of product type fast fashion, seasonal or basic to global networks of suppliers, apparel manufacturers realize they need to go global to serve their customers better. And, apparel manufacturers and marketers with their own retail business units may realize a unique opportunity to acquire manufacturing capacity in markets they serve through retail outlets, or add retail outlets to markets where they will build or buy manufacturing capacity.

Figure 2: Plans to support future growth goals, by industry sector

Vertical Retailer Increase sales volume of current products Introduce new products or categories Add new sales channel Retailer Manufacturer
64% 88% 78% 56% 59% 81% 48% 35% 32% 44% 47% 22%

Add retail stores to your own chain

Add retail formats to your own chain

16% 35% 11%

Expand internationally

52% 24% 32%

IT Spending
Apparel companies average 2012 budgets for technology, including capital and operational costs for hardware, networking, telecommunications, software maintenance and licenses, third-party IT services and internal headcount, was 4.5 percent among survey respondents, down from 4.8 percent in 2011. The number of companies expecting increases in IT budgets in 2013 moderated slightly to 41 percent, down from 45 percent in last years surStrategic IT a Must to Drive Innovation, Channel Growth 7

Acquire or merge with another company Introduction and/or expansion of mobile sales channels

16% 6% 22% 20% 47% 22%

An Apparel Exclusive Research Study & Analysis

vey. The number of companies expecting no change in IT budgets jumped to 54 percent from 44 percent, drawing from both the pool of companies expecting budget increases and the pool of companies expecting decreases. Overall, IT budgets are expected to increase by 4.1 percent in 2013, up from 3 percent in 2012. The jump in the expected average increase is driven by the remarkable 12 percent mean percentage increase expected among apparel companies with plans to grow their IT budgets. With major PLM implementations behind many companies, expected increases will likely be absorbed to compete more effectively on the global and mobile stages. Apparel company growth and financial health are increasingly relying on growth from international markets and on maximizing reach to customers that increasingly shop using mobile technologies. As a result, investments in technology that deliver scalable, reliable and integrated ways to support decision-making activities across geographies, supply networks and selling channels will be demanded by apparel companies in 2013 and beyond. Companies fiscally healthy enough to support a 12 percent increase in IT budgets may see the opportunity to put additional competitive distance between themselves and industry peers by investing now in the technologies that will enable the next stage of international growth and efficiency. Much as last year, IT budget plans differ significantly among the three apparel industry sectors surveyed, and differ substantially from the previous years survey findings. Vertical retailers IT spending plans for 2013 more closely mirror 2011 than 2012, with 55 percent of vertical retail survey respondents reporting plans to increase IT budgets, up from 32 percent. Growth in IT budgets among companies planning increases averages 4.6 percent, up sharply from 1.8 percent reported last year. After a year of restrained growth in IT budgets likely focused on deploying and ramping up already-purchased technology, vertical retailers are ready to resume investigation of new technologies, many of them related to improving new product commercialization and launch and supply chain planning and execution functions. Additionally, many vertical retailers see substantial opportunity in pursuing further international expansion, and these efforts may require additional technology investments. Retailers are largely planning to hold IT budgets at the same levels as last year, with 61 percent reporting no plans to increase budgets. Thirty-nine percent plan budget increases that average 3.4 percent, down from average planned increases of 5.2 percent coming into 2012. After years of delaying needed or desired technology investments, retailers felt substantial pressure to begin the process of upgrading aging applications in the store. And, many software vendors have made great progress in expanding and enriching retail applications in recent years. Retailers that purchased new applications in 2012 may take 2013 to implement, optimize, and expand the reach of these applications before moving on to the next wave. Among apparel manufacturers, the trend is also toward holding IT budgets steady. Fifty-nine percent of responding manufacturers plan to keep IT budgets the same in 2013, up from 47 percent who planned to hold budgets the same in 2012
8 Strategic IT a Must to Drive Innovation, Channel Growth

Figure 3: IT budget as a share of revenue and budget directions for next fiscal year
Decrease No change Increase Q. What is your companys IT budget as a percent of revenue in 2012? Q. Is your companys IT budget for the next fiscal year increasing, decreasing or remaining the same? By what percent? Growth: 2.1%
11% 10%

Growth: 3.0%
6%

Growth: 1.7%

52%

44%

54%

37%

45%

43%

2010
% of revenue budgeted for IT: Mean 5%

2011

2012

4.8%

4.5% 12%

% change in IT budget among those increasing: Mean 10% 8% *includes both capital and operational costs for hardware, networking, telecommunications, software maintenance/licenses/infrastructure, third party IT services, and internal head count.

as 2011. The bulk of this shift came from manufacturers who last year increased their IT budgets, as the percent expecting increases dropped to 34 percent from 43 percent in last years survey. With the shift away from a cost-cutting focus and toward improving business processes and collaboration happening in the apparel industry, manufacturers may be holding current investment levels steady as they wait for signals from their retail customers about the kinds of capabilities both technology and process that the retailers will want them to provide in the next one to three years before revising their IT spending strategies.

Trends in Technology Areas of Concern

Spending in individual technology areas would ideally be like weaving threads together to create a pre-defined pattern in a fabric with the desired quality, resiliency, density and drape. The truth is that the end results of spending and deployment strategies are often uneven, a reality that apparel companies responding to our survey pointed out in no uncertain terms this year. This year, when asked to characterize their current portfolios of business applications software, 31 percent of survey respondents indicated that their portfolios are not sufficient to support their businesses. Another 13 percent characterized them as integrated and ineffective, while 10 percent described them as standalone and ineffective. With 54 percent of industry respondents stating that, on one level or another, their applications portfolios are not robust enough to take them to the next level of enterprise

An Apparel Exclusive Research Study & Analysis

Figure 4: Change in IT budget next fiscal year, by industry sector

Decrease No change Increase Q. What is your companys IT budget as a percent of revenue in 2012? Q. Is your companys IT budget for the next fiscal year increasing, decreasing or remaining the same? By what percent? Growth: 3.9%
6%

Growth: 3.4%
9%

Growth: 4.6%

59%

62%

36%

55% 34% 39%

Manufacturer/Brand Marketer (wholesale)

% of revenue budgeted for IT: Mean 3.9%

Retailer

Vertical Retailer

collaboration, cross-functional synchronization, and analytics to support rapid and intelligent tradeoff decision-making will be needed to close the gap between todays supply chain systems and the needs of the future. Store and cross-channel applications such as POS, advanced selling technologies (including mobile) and e-commerce platforms dominate the attention at 18 percent of companies responding to the survey, indicating that fashion and apparel companies continue to work on providing robust systems to support activities both within and across channels, as customers increasingly expect seamless service across buying experiences and channels. Merchandising applications that reach across channels and geographies and yet allow tailored assortment down to the individual store level remain an applications goal for many apparel enterprises as well. Among apparel enterprises, the applications focus actively shifts yearover-year, and as expected the current shift has carried attention and investment dollars to supply chain investments. It is likely that replacement and upgrade cycles for merchandising technologies many of which were installed prior to the 2008 recession will ramp up over the coming 12 to 24 months.

3.4%

6.2%

The Role of Mobile Technology

The use of mobile technologies such as tablet computers and smart phones in retailing has a wide application beyond the in-store technologies that grab attention in mainstream media. While usage is still limited, mobile technology, along with social, cloud and information technologies, is rapidly reshaping the use of technology in business enterprises of all kinds. In 2011, we added a question to this survey to assess in which areas apparel companies were applying mobile technologies. We asked the same question this year, and note that the adoption of mobile capabilities has been rapid among companies participating in the survey. This years survey participants once again indicated that the most rapid adoption of mobile capabilities is happening in the e-commerce space, with 18 percent reporting that they are fully deployed on mobile technology in this area, 12 percent planning to deploy in the next 18 months, and 24 percent in pilot testing or deployment. Overall, 70 percent of survey respondents are engaged in some form with using or evaluating mobile technologies for e-commerce activities. Use of mobility in warehouse management systems (WMS) and business intelligence tied for second place, with 45 percent of survey respondents using or evaluating mobile technologies for use in these areas. Apparel companies are actively bringing the power of mobile technology to POS and advanced selling, merchandise/assortment planning, and allocation/replenishment activities, with 35 percent or 36 percent of companies experimenting or deploying mobile in these areas. Further behind is use of mobile technologies in supply chain activities such as sourcing, supply chain planning, and customs and logistics management, with full mobile deployments in each area in the single digits. Reasons for slower deployments of supply chain functionality on mobile platforms are plentiful,
Strategic IT a Must to Drive Innovation, Channel Growth 9

maturity, the challenge of layering in capabilities to synchronize internal teams, collaborate effectively with external trading partners, and achieve further lead-time reduction, improve success in new product launches, and effectively segment supply chains remains a tremendous challenge for the industry. Once again, we reviewed IT applications of greatest concern in two different ways: rank-ordered by areas of greatest concern (Figure 5) and grouped by business area (Figure 6). As an individual area of concern, supply chain planning outranked all other areas, with 16 percent of survey respondents citing it as the one application area with which they are most concerned, up from one percent in last years survey. Core supply chain ranked as the business area in which companies are most concerned about their applications, consistent with the overall finding that apparel enterprises have turned their attention to detailed assessments of new product commercialization and launch processes and lead time reduction beyond cutting time out of product design processes. PLM remains an area of concern, with 18 percent of companies naming product development, product design or quality assurance as the application area of top concern, and another three percent naming sourcing. The enterprise systems that underpin supply chain capabilities, providing transactional support and master data management, ranked as the No. 1 concern for 15 percent of companies, meaning that a total of 44 percent of companies ranked either core supply chain or supply chain enabling applications as the application area with which they are most concerned. As apparel companies look to the next wave of business strategies and applications to give them a competitive edge, technologies that provided supply chain

An Apparel Exclusive Research Study & Analysis

Figure 5: IT Software application areas of greatest concern

Q. Of the major application areas mentioned, which ONE category are you most concerned about? Supply Chain Planning Product Development Merchandise/Assortment Planning E-Commerce Financials Product Design Warehouse Management Systems (WMS) Quality Assurance POS/Advanced Selling Technologies Supply Chain Collaboration Allocation/Replenishment RFID CRM Sourcing BI, Analytics & Performance Management Master Data Management None of the above
3% 3% 3% 3% 8% 5% 5% 5% 5% 5% 5% 5% 6% 8% 8% 8% 16%

Note: Customs & Global Trade Management, Lifecycle Pricing and Logistics & Transportation were available answer options but not chosen.

Figure 6: IT software application areas of greatest concern, grouped by business function

Q. Of the major application areas mentioned, which ONE category are you most concerned about? E-Commerce POS/Advanced Selling Technologies RFID Financials CRM Bl, Analytics & Performance Management Master Data Management Product Development Product Design Quality Assurance Merchandise/Assortment Planning Allocation/Replenishment Supply Chain Planning Warehouse Management Systems (WMS) Supply Chain Collaboration Sourcing None of the above
3% 8% 5% 5% 5% 16% 5% 5% 8% 3% 3% 3% 8% 5% 5% 6% 8%

Store & Cross-channel

SC Enabling

PLM

Merchandising

Core Supply Chain

Note: Customs & Global Trade Management, Lifecycle Pricing and Logistics & Transportation were available answer options but not chosen.

10 Strategic IT a Must to Drive Innovation, Channel Growth

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Figure 7: Use of mobile technologies by business area

Evaluating Fully deployed No plans to deploy in the next 18 months Piloting/testing or deploying Plan to deploy in the next 18 months Q. Please indicate how, if at all, your company is engaged with mobile technology (such as tablet computers or smartphones, but not including barcode scanners) in the following areas: Product Design Product Development CRM SC Collaboration Sourcing Quality Assurance Customs & Global Trade Management Warehouse Management Systems POS/Advanced Selling Technologies Merchandise/Assortment Planning Allocation/Replenishment Lifecycle Pricing E-Commerce Supply Chain Planning Logistics & Transportation Financials BI, Analytics & Performance Management Master Data Management RFID
6% 10% 8% 16% 4% 6% 2% 4% 6% 10% 12% 12% 2% 8% 8% 2% 2% 2% 4% 12% 6% 76% 76% 12% 8% 16% 10% 10% 12% 8% 4% 6% 8% 4% 4% 2% 22% 16% 20% 8% 8% 2% 10% 8% 10% 2% 2% 24% 18% 4% 20% 6% 6% 2% 6% 80% 12% 77% 73% 67% 55% 30% 2% 64% 64% 65% 8% 6% 6% 10% 8% 6% 2% 8% 2% 10% 2% 82% 55% 4% 8% 6% 8% 78% 74% 68% 72% 67% 62%

12% 12% 16% 12% 14%

from software that is not yet enabled for mobile devices to fears of security related to use of smart phones and tablet computers. Currently, apparel companies are investigating mobile technologies to share information efficiently, such as supplying reports on supply chain statuses, or where collaboration is a natural part of the process, such as presenting a retail buyer with a customized assortment of products from which they can choose. While its possible to imagine a time when core product design, manufacturing, logistics and store operations applications may be deployed to mobile technology, it will be some years before apparel companies pursue this kind of mobile deployment strategy in meaningful numbers.

Figure 8: Changes in budgets for mobile technologies and usage in 2012 over 2011, by industry sector
Increase Remain the same Decrease

33%

29% 39%

Supply Chain Technology and Lead Time Reduction

One of the most important shifts in the apparel industry is the shift away from a cost-cutting focus to an emphasis on improving new product launch and commercialization processes and reducing lead times for bringing new products to
12 Strategic IT a Must to Drive Innovation, Channel Growth

67%

71% 61%

Total

All Retailers

Manufacturers

An Apparel Exclusive Research Study & Analysis

market. Apparel companies have trimmed time out of the product design, sourcing and development processes in the past few years, and are now turning their attention to improving coordination and decision-making in supply chain processes. We ask survey participants for information about the length of time spent on typical processes for new product development and launch. While recognizing that each apparel company is unique in its lead time requirements, it is useful for companies to get a snapshot of the typical lead times experienced by peers in the industry. To smooth out year-to-year fluctuations in the data, we have averaged together three years of data about how long it takes apparel companies to conduct each of seven typical processes in the new product development launch process. Figure 9 provides the results. Product design, development and approval processes continue to take a substantial amount of time, with 48 percent of survey respondents taking 30 days or more to complete this process. To combat this, apparel companies are using intelligent segmentation of products and developing processes to fasttrack fashionable items that need to hit the market quickly to generate maximum impact and margin, agile processes for designing seasonal products that may need tweaks to the fundamental design as data comes in about consumer response to similar products, and cost-efficient but perhaps slower processes for basic products that the apparel company always carries but refreshes from time to time. Not surprisingly, the single longest process for most companies is the manufacturing of products. In this case, we are seeing apparel companies applying supplier segmentation strategies to single out strategic supplier relationships to cut

production time for time-sensitive fashion products. In these cases, apparel companies are making intelligent tradeoff decisions such as paying their invoices to these suppliers much more quickly than average to create and maintain a good working relationship with the supplier. Creating these strategic relationships provides apparel brand companies and retailers with additional leverage in sourcing manufacturing capacity and fabric. So in exchange for accounts payable metrics that may make a company look like it is too quick to pay its bill, the apparel company is able to get priority for capacity assignment and more timely information about where the products are in the in the manufacturing process valuable currencies in the world of fast-fashion products, but less important for most seasonal and basic products. The end benefit to the apparel brand and retail company should be greater full-priced sell through and better margins that more than offset any added costs. Many apparel enterprises are taking a broad-based approach to addressing lead time challenges. In this years survey, we added a question asking participants whether or not they have any active initiatives in place to reduce lead times in their companies, and if so, what initiatives they are pursuing. The results show a combination of technology and business process initiatives that point to where apparel companies will be spending supply chain IT dollars in the coming year. Seventyone percent of all respondents have an active lead-time reduction initiative in place, with 26 percent pursuing tighter integration of product development, planning, and supply chain applications and 15 percent upgrading product development and PLM technologies.

Figure 9: New product development and launch timelines, by process (2009-2012 average)
Shipment to North America (factory to customs) Transit from DC to stores (incl. time to a retail DC)

Number of days the process takes

Product design

Sourcing/ ordering mfg. capacity & fabric

Color & fit sampling and approval

Production at manufacturer(s)

Transit from customs to DC/warehouse

<5 5 to 10 11 to 15 16 to 19 20 to 29 30+

12% 17% 8% 5% 10% 48%

13% 13% 12% 4% 9% 49%

11% 16% 17% 12% 12% 33%

7% 6% 9% 9% 17% 53%

9% 15% 8% 13% 21% 35%

42% 31% 9% 7% 5% 6%

43% 31% 9% 6% 5% 6%

Strategic IT a Must to Drive Innovation, Channel Growth 13

An Apparel Exclusive Research Study & Analysis

Figure 10: Companies initiatives to reduce lead time to bring new products to market
Q. Does your company have an active initiative to reduce the lead time to bring new products to market? Q. Please select the types of initiatives that are currently in place.

71% Have an active initiative

Improving internal process alignment More tightly integrating product development, planning, and/or supply chain applications Upgrading product development/PLM technology Requiring shorter lead times from your suppliers Re-designing your supply and/or distribution networks Building relationships with third-party supply chain service providers Bringing supply chain functions that are currently outsourced under corporate management (insource) Other
3% 3% 6% 6% 12% 15% 26% 29%

For the 29 percent pursuing improved internal process alignment, Gartners work with apparel manufacturing and brand companies is showing that an important part of these initiatives is driving better alignment between new product development and S&OP processes. For retailers, improved alignment is being sought between the new product pipeline, both for private-label and branded products, and merchandise, inventory and operations execution (MIOE) processes. Technologies for supporting this improved alignment include applications specific to S&OP process data gathering and presentation, internal and external collaboration tools, improved demand forecasting, rapid merchandise allocation and re-allocation planning, product portfolio planning and analysis, and business intelligence and analytics. With new product failure rates, defined as a new product failing to achieve one or more target metrics set for it, hovering at 50 percent or greater for companies across all industries, the drive to improve alignment has taken on new urgency. While apparel companies will not abandon the pursuit of technologies to make their operations more efficient, efficiency is no longer adequate for achieving competitive advantage and for serving global, connected, cross-channel and fickle shoppers.

Closing Thoughts
Among the 41 percent of survey respondents that plan to increase their IT budgets in the coming year, its easy to understand why the average expected increase has grown to 12 percent.

The force of social, mobile, cloud and information technologies is being felt on apparel companies IT budgets even as apparel brands, manufacturers and retailers continue to grapple with the very physical world of design, production, distribution and selling. The nexus of these forces is the apparel supply chain, and as a result, more apparel companies are prioritizing business initiatives for new product commercialization and launch and lead-time management than are prioritizing product cost management. Supply chain planning technology is now the single leading area about which apparel companies are concerned, and core supply chain areas topped the list of five applications categories in terms of concern. PLM dropped to second place, as many apparel companies completed major PLM initiatives and turned their attention to bringing the new products designed in those PLM systems to market more effectively. Survey results hint that the next wave of apparel technology spending may be merchandising-focused, as companies look to upgrade or replace technologies that were in many cases implemented before the start of the 2008 recession. We see 2013 shaping up to be another very active year in IT spending and initiatives for the apparel industry as companies move from a cost-cutting focus to an optimized-operations focus and seek applications that can deliver much needed analytics, visibility, and collaboration capabilities that help the people in apparel enterprises make the business decisions that lead to fresh, timely and innovative products reaching shoppers at the right times and in the right quantities.

14 Strategic IT a Must to Drive Innovation, Channel Growth

An Apparel Exclusive Research Study & Analysis

ABOUT THE AUTHORS Janet Suleski, Research Director, Supply Chain & Apparel, Gartner Janet Suleski brings more than 16 years of experience working with retailers and software vendors to her role as research director, supply chain & Apparel, at Gartner, and is a founding member of the retail advisory practice. Janet is primarily responsible for researching, analyzing and writing about the technologies, best practices and trends in key retail software segments, including retail ERP, product lifecycle management and business intelligence applications. Prior to her current role at Gartner, Janets research and analysis focused on fresh item management, point-of-sale, price optimization and customer loyalty software and business processes. She has also covered inventory optimization, strategic sourcing and procurement, collaborative planning, forecasting, and replenishment (CPFR), supplier collaboration and supply chain event management.

ABOUT GARTNER INC. Gartner, Inc. (NYSE: IT) is the worlds leading IT and supply chain research and advisory company. We deliver the technology and supply chainrelated insight necessary for our clients to make the right decisions, every day. From CIOs and senior IT and supply chain leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, we are the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, we work with every client within the context of their individual role, to help them move their key initiatives forward. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants serving clients in 80 countries.

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Lucie Draper, Researcher, Research Data & Analytics, Gartner Lucie Draper brings more than 17 years of deep domain expertise to her role as a senior researcher at Gartner. She is responsible for conducting quantitative market research, which includes designing questionnaires and samples, conducting field interviews and surveys, and performing statistical analysis of research data and reports. Lucie works closely with AMR Research clients on custom primary research-based engagements that help those clients with their product and marketing strategies. Lucie has written extensively about trends in IT adoption and IT budgets and worked with clients such as SAP, IBM, Microsoft, Oracle, and EMC. Her research has been quoted and published in many business and technology

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ABOUT APPAREL MAGAZINE Apparel magazine has been the industrys leading publication for more than 50 years. It offers technology and business insight from concept to consumer, providing competitive, actionable information to executives representing the worlds most successful apparel brands, retailers and manufacturers. Apparels targeted content addresses Retail Intelligence, Supply Chain, Sourcing & Logistics, Concept-to-Spec and Fiber-to-Fabric. An Edgell Communications publication, Apparel also produces Apparels Sourcing Summit, the Apparel Executive Forum, Apparels Business & Technology Leadership Conference, Apparels Tech Conference West, numerous web seminars, research supplements and newsletters and apparelmag.com.

Copyright 2013 by Edgell Communications Inc. All rights reserved.

Strategic IT a Must to Drive Innovation, Channel Growth 15