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Chapter 1 & 2 Notes

by: Emylee Smith

Chapter 1 & 2 Notes RFPD 3830

Emylee Smith
GPA 3.4

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These notes will be on the first quiz on Tuesday September 13th
Product Deviation, Evaluation, and Distribution
Lisa Williams
Class Notes
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This 21 page Class Notes was uploaded by Emylee Smith on Thursday September 8, 2016. The Class Notes belongs to RFPD 3830 at Ohio University taught by Lisa Williams in Fall 2016. Since its upload, it has received 26 views. For similar materials see Product Deviation, Evaluation, and Distribution in Retail Merchandising and Fashion Product Development at Ohio University.

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Date Created: 09/08/16
Chapter 1: The Role of Product Development in the Apparel Supply Chain Note Outline What is product Development? “The strategic, creative, technical, production, and distribution planning of goods having a perceived value for a well-defined consumer group; these goods are designed to reach the marketplace when consumers are ready to buy.” In other words – Product Development is……  Planning- strategy, creative, technical, production method, distribution  Defining the consumer  Timing- reach market when consumer wants to buy Retailers as Product Developers Before 1980 – distinct differences for each segment of apparel industry. Retailers wanted to bypass the wholesale manufacturers Wanted more exclusive products At first, knocked off competitor products Wholesalers opened stores to compete Supply chain becomes more flexible What is a Supply Chain?  Suppliers and/or vendors who fulfill consumer demand  May have direct involvement - design, materials, components, manufacturing and distribution.  May have indirect involvement (auxiliary businesses) – software provider, sourcing agents, creditors, consultants, testing labs, advertiser, etc. Page | 1  Flexible and complex  Core competencies - what they do best  Sourcing - finding the vendor that can provide what is needed in the time needed  Is collaborative, unique and can be short lived Supply Chain Management  Business is risky  Globalization adds other complications such as logistics and differences in language, time zones, level of technology and infrastructure  Must evolve constantly  Supply chain managers offer services to develop and distribute brands  Use software to monitor materials, information, movement of goods, delivery status and finances  Helps reduce waste, inventory and idle capacity, shortens order to delivery cycle times, develops flexibility and agility. Product Lifecycle Management (PLM)  Software that deals with information from initial concept to product retirement throughout a company and its supply chain.  Developers can increase their speed to market by using PLM  Includes: o Seasonal concept o Line development o Definition and specifications o Sourcing/Costing PLM – Seasonal Concept Includes: Page | 2  Business and marketing plans  Concepts/mood  Color palette  Materials/trim/silhouettes PLM – Line Development Includes:  Merchandising plans  Line boards  Material usage  Market calendars  Product tracking PLM – Definition Includes:  Initial specification  Adopted specification  Production specification  Special size specification  Multichannel specification PLM – Sourcing/costing Includes:  Vendor collaboration  Vendor allocation  Multisourcing Page | 3  Estimate costing  Quality Growth Industry Terminology When products are first introduced, the price is high and some consumers are unable to purchase them. As the product drops in price, the products have growth potential through:  Market Saturation – New customers or new markets  Market Penetration – increased market share in a given market Mature Industry Terminology Suppliers must compete by maintaining differential advantage Differential Advantage – Competitive edge through:  Lower price  Superior qualify  Unique product features or aesthetic  Minimal carbon footprint  Unique fit  Speed-to-market The following contribute to profit for a mature industry in addition to differential advantage:  Volume  Market share  Profit margins  Capital investment  Inventory levels Acquisitions and mergers may be a way of strengthening competitive position Page | 4 Mergers and Acquisitions Help Position Companies to….. Better compete globally Reach new customer demographics Acquire companies with innovative new ideas or investing in emerging designers Expand capacity in new product categories Expand expertise in online marketing and social media What is Vertical Integration? Consolidating companies at different stages in the supply chain. Gives a firm a competitive advantage of getting the product to the consumer at the right time for the right price. Helps reduce or eliminate stages in the supply chain that do not add value to the product such as warehousing. Allows wholesale brand product developers to open signature stores Diversification Expands product mix for:  Brand recognition  Increase sales  Become efficient for higher profit May be accomplished through licensing or acquisition Globalization  Growth in overseas markets  Global brands for diverse customers The Role of Product Development  The supply chain must operate efficiently to meet and interpret the changing demands of the consumer  This is very important at the product development stage.  Standards are needed to communicate with offshore sourcing partners.  Product development varies based on the type of product being developed. These include wholesale brands and private brands. Page | 5 What are the characteristics of wholesale brands?  Created under a proprietary label.  Sold at wholesale for distribution to retailers  Sold at department stores, specialty stores, chain stores, discount stores  May compete against the store’s own private brands  Wholesaler may sell products online or through signature or outlet stores, but this is not the majority of their business.  Wholesale product developers may have their own manufacturing facilities. Private Brands  Products that are developed and merchandised for exclusive distribution by a particular retailer.  Sold by mass merchants and department stores to compete with wholesale brands also sold by the retailer.  Some specialty store retailers only sell private brands and can offer a complete assortment of privately developed products under their own labels in their own distribution channels. o Examples – Gap, J.Jill, Chico’s, Abercrombie & Fitch  Obtained by: 1. Development by the retailer’s product development team 2. Buying exclusive merchandise from wholesale brand companies and replacing the brand label with their own private label  May require that the styles are adapted to meet sizing, color or fabric specifications of the private label to make them unique.  Allow the retailer to customize merchandise for their specific customer, apply higher margins and control timing of markdowns. 3. Buying the rights to a brand.  May be 15-50% of a mass merchant or department store’s merchandise mix - wholesale products make up the remainder  Private brands are composed of: o Store brands o Private label brands Page | 6 What is a Private Label Brand? Private brands developed to compete with wholesale brands. Page | 7 Chapter 2: Business Planning Note Outline What is a Business Plan? The central decision making process. Provides structure to a process that is continually adjusted to respond to consumer demands. A business’  Aims  Objectives  Strategies for the future Dependent on whether the firm is a manufacturer or retailer and whether the firm markets itself as a wholesaler, retailer or combination. Basic Business Functions Must be included within the structure of the firm. These include:  Merchandising  Production  Finance  Operations  Marketing  Sourcing Merchandising includes:  Determining the content and diversity of the line  Fabrications  Styling  Pricing  Timing of product development cycle Distributed among three sub-tracks:  Merchandising  Creative design  Technical design Page | 1 What is production?  Making the product  Activities o Approving technical design o Developing specifications o Determining cost o Making patterns o Grading for sizes o Developing markers o Cutting o Construction o Finishing o Arranging for distribution What is Finance? Responsible for all of the accounting activities of the firm including:  Expenditures for materials and equipment  Salaries  Business budget Operations Oversees:  The upkeep of equipment  Warehousing  Distribution activities for securing materials and shipping finished products. Marketing Page | 2 Determines advertising and promotional objectives Recommends sales goals Creates marketing programs and tools The sales team is part of the marketing function Gather data about the target market Sourcing Procuring materials and production Has become very complicated – 95% of apparel sold in the U.S. is imported Supply Chain Management helps streamline Strategic Planning The top level of business planning where the big picture is defined and business goals are established. Strategic Plan is:  Developed by executive management team  Based on Mission, Vision and Values  Links target market and product line to financial goals  Guides decision making and allocation of resources Core Values What it holds important as a business Must be authentic Page | 3 Mission, Vision and Values help the firm establish:  Sales and profit goals  Market positioning and competitive advantage  Target customer  Channels of distribution  Breadth and depth of product mix  Brand portfolio and image  Managing investments and growth opportunities  Strategic partnerships  Corporate culture and social responsibility Budgets Strategic business plan focuses on profit Written plans for anticipated monetary income and expenditures of the firm Established during strategic planning phase Dictates the percentages of projected sales that will be assigned to developing, producing, marketing and distributing the goods. Also covers all administrative costs and overhead. Apparel Product Planning The second level of the business plan The 4 areas must interact seamlessly 4 areas of apparel product planning:  Merchandise planning  Creative planning  Technical planning Page | 4  Production planning Apparel Product Planning – Merchandise Planning  Consists of line/merchandise planning, line development and presentation of product lines.  Products are selected that are suitable for the target market with regards to pricing, assorting, styling and timing  Merchandising starts with the Merchandise Plan or budget – identifies resource needs to meet profit, sales and margin objectives for a specific season by a company division.  Historic data is analyzed.  The information is delineated through a Line or Range Plan – this sets sales and margin goals for groups or lines within that division.  Evaluates the merchandise mix, forecasting merchandise to meet budgets and planning merchandise assortments  Assortment Plan – Breaks down the line plan into components that meet customer preferences – what product, how much of it, what colors, what sizes and when it should be delivered  A well-assorted product presentation allows for enough available product without overstocking Merchandise Calendar  The basic/core merchandise schedule is the commonly used model that provides a continuous flow of new apparel products into the marketplace.  The Fashion goods schedule is used for fashion forward lines distributed by traditional retailers and fast-fashion firms Page | 5  Delivery dates to the retailer are the most significant points on the apparel product development calendar.  Product developers work backward from the delivery dates to establish the time required for distribution, production, sourcing, production samples, production patterns, selling design samples, design and trend analysis for each product line.  Merchandisers review and edit the line, monitor costs and are part of the team that sets prices to meet sales, margin and profit goals. Apparel Product Planning – Creative Planning  Tracks trends  Interprets trends for target market  Determines: o Color combinations - Seasonal color palette and approve color standards o Textiles - Fabric stories and development of new prints/fabrics o Basic design - style silhouettes Apparel Product Planning – Technical Planning  Further defines styles by developing: o Fit standards - sizing grade rules o Materials - fabric specifications o Construction and labeling requirements  Match new styles with styles from past seasons and interpret changes.  Provides technical sketches  Evaluate prototype of sample garments and determine changes to be made.  Make sure color standards are being met and fabrics/garments are tested  Perfects a style before it is approved for production Page | 6  Specification packages (Spec Packs) are used to direct production activities and to form the basis of contracts between supply chain partners and for the evaluation of vendor compliance.  Work with contractors or production staff regarding any styling, fit or construction issues. Apparel Product Planning – Production Planning Links merchandising, creative design, technical design decisions to actual construction of products. Traditional construction occurred near where garments were designed Today most construction is done by vendors far away from the product developer. Production planners must understand:  Cost of materials, trims and value added finishes and processes – may need to negotiate  Quality criteria – order prototypes  Assembly process necessary to produce the product – assign production contracts, inspect factories, schedule production  Transit methods and timelines  Redulations- Duty or tariffs, quotas, import/export regulations The Apparel Product Development Process Apparel product development includes all the processes needed to take a garment from design inception to delivery of finished product to the final customer. Stages of product development:  Line Concept - from trend research. Includes mood, theme, and key elements which contribute to the identity of the line.  Line Development - design team translates line concept into garment groups to be delivered through the season. Page | 7  Line Presentation - showing proposed line to technical designers and sourcing managers for selection of style to be included in the product line. Classification of Products Used for record-keeping so everyone in the supply chain recognizes the quantities and types of garments being produced. Need the following to define day-to-day activities and positioning their products within the marketplace:  Product categories  Pricing categories  Sizing categories Industry Classification Systems Harmonized System (HS)  Collects global trade statistics as a basis of tariffs and coordination of customs and trade procedures  Data includes: Country of origin, quantity, monetary value  Six digit number used based on name, use or material used  Used globally Harmonized Tariff Schedule of the United States  Used in the U.S.  Based on the Harmonized System  Uses a 10 digit system to further delineate the individual product categories and separate imports from exports North American Industry Classification System (NAICS)  NAFTA presented difficulties because the U.S. uses the English measuring system and Canada and Mexico uses metric Page | 8  Helped to facilitate synchronization in trade information among the three nations. Product Categories Product styling, specification development and production vary with each product category. An apparel product category is defined by the use for which the product is intended. Some firms create products in several categories Others only create products in part of a category Product Category Examples Women’s wear Men’s wear Children’s wear Size Range This is one of the first decisions in planning the merchandise mix of products Includes:  Overall shape  Body dimensions  Garment Ease Product Positioning Most firms define their product type by selecting the price point or price range that their intended target customer would be willing to pay for products they produce. This price category helps the product development team decide on positioning their designs against the competition in the marketplace Page | 9 Positioning - How the garment relates to the competition in:  Style  Complexity of design  Fabric  Quality  Price Price Categories The next decision is to establish a price range or price point for the category. Some products have a single price point Others may have more than one price point based on materials and construction techniques used. There is an implied relationship between cost and quality. Customers have higher expectations for more expensive products. Categories:  Couture  Designer  Contemporary Designer  Bridge  Better  Moderate  Low-end Contemporary/fast fashion  Junior/tweens  Mass Merchant Designer Ready-to-wear (RTW) Known as Pret-a-porter The most expensive off the rack garments More profit oriented than haute couture Page | 10 Uses high quality fabrics and are beautifully designed and constructed. Trend forecasters look here for next trends Examples: Armani, Gucci, Marc Jacobs, Prada, Chanel, etc. Contemporary Designer and Bridge Contemporary Designer – Subset of designer category. Offer clothes with younger vibe and lower price point than Designer RTW. Examples: Marc by Marc Jacobs, Alexander Wang, M. Missoni Bridge – Similar in price of Contemporary Designer. Name refers to the price point between designer and better. Examples: Elie Tahari, Eileen Fisher Mass Market The majority of consumers make their fashion selections from mass market brands sold in department stores, chain stores and mass merchants Department stores tend to have merchandise in several price categories Subcategories  Better  Moderate  Contemporary fast fashion  Tween  Budget/category killer Better Market and Moderate Better Market – Priced under contemporary designer and bridge brands. Targets working women who want well-made, classic apparel. Examples: Jones New York (brand), Talbots, Banana Republic (retail chains) Page | 11 Moderate – Priced below better price point. Appeals to women who are price conscious and want functional and easy to care for apparel. Examples: Sag Harbor and Merona (brands), Target and Kohl’s (Mass Merchants) Contemporary Fast Fashion and Tween Contemporary Fast Fashion – similar in price to moderate but trendier styling usually with a junior fit. Examples: H&M, Forever 21, BCBG, Zara Tween – Came from parental reaction to edgy and sexy fast fashion. More age appropriate fashion. Examples: Justice dELiA*s Budget/Category Killer The lowest price point that is available in volume quantities. Examples: Wal-Mart and K-Mart Season A critical consideration during the planning stage. Season – the time of year products will be worn or used Influences fabric selections, colors and styles Reflects the weather conditions and consumer needs for that time of year. Designed far ahead so they are available when consumer wants them. Branding Branding – A competitive strategy to distinguish and market the brand through product development, advertising and promotions. Page | 12 Organized around a message to encourage purchase and repurchase of products from the same company. Examples: packaging, advertising, store environment, association with a celebrity or lifestyle, customer service, etc. Creates an emotional connection with the consumer. Licensing Licensing Agreements – Allow a business partner exclusive rights to produce or sell products under a proprietary brand name. Are used to:  Expand a brand’s product mix  Expand distribution into a global market  Capitalize on the popularity of a proprietary character  Partner with another brand to maximize the value of the combined brands  Provided exclusive product to a particular retailer. Brand Image The consumer’s set of assumptions and feelings about products and/or services provided under the brand name. The brand’s promise of authenticity, customer satisfaction and quality Brand Extensions and Lifestyle Brands Brand Extensions - expanding a brand’s reach by adding to the brand’s assortment or entering a new product category often through licensing Lifestyle Brands – Going beyond a single product category to include additional apparel and accessory categories, perfumes, cosmetics and home goods. Brand Equity Page | 13 Brands need to stay relevant The value that builds to a brand for a customer, who may be willing to spend more for the promise of a brand-name product. Also provides an asset for launching new products and influencing business operations A high-profile brand can launch variations of its product at price points that appeal to different target customers. Brands can experience a decrease in brand equity, in the form of market shrinkage at the end of their life cycle. Brand Portfolios and Brand Umbrellas Brand Portfolio – The management of multiple brands by a single company Brand Umbrellas – Brand portfolios that are transparent or obvious to the consumer. Example: Gap division of Gap, Old Navy, Banana Republic and Athleta Other Brand Licensing Variations Exclusive Brands - A licensing arrangement giving a retailer all rights to distribute a product under a brand name in a particular product category or categories. Co-Branding - A variation of an exclusive brand where the names of both partners are included in the new exclusive brand offering. Example: Vera Wang for Kohl’s Page | 14


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