Decision Support: Costing Contributes to Competitive Edge of a Luxury Handbag Company


Situation Analysis:

In the fashion business, time to market is critical, and rapid, efficient decision-making is essential to remain in step with the most current product trends. As such, moving a design through development, manufacturing, and into stores must be accomplished both quickly and at the right cost point. However, costing new designs is a time-consuming, negotiation-based exchange, with much iteration between designers and outsourced suppliers.

The company, a luxury handbag producer, experienced rapid growth with 100 percent outsourced manufacturing, primarily in Asia. The manufacturing environment in Asia is no longer a one-stop for cheap solutions; more often, supplier organizations are spread out over several countries, requiring companies to have nimble and efficient operations. This company had several large groups of external suppliers in different countries, and the need for speedy and well-orchestrated management of these relationships was becoming increasingly important in order to stay competitive.

That being said, the company wanted to find a way to make decisions more efficiently and get new designs into stores more quickly. It was imperative to shorten the design cycle while at the same time managing the supply base with fewer resources.

Discovery & Solutions:

Through our “Tools for Insight” activity, Strategic Decisions Group helped the client’s operations group significantly speed up the costing process to allow it to make quicker decisions regarding choice of supplier and price point for an entire upcoming season.

The SDG team performed a deep, detailed analysis of the company’s design process to determine the full scope of its suppliers’ cost drivers to create a handbag. Then, our team developed a tailored tool that incorporated all of the detailed elements of the design and construction processes, including labor, materials, and fabrication on the factory floor. It became possible to directly cost from the company’s digital design files, as this new tool allowed for a cost to be established in seconds, whereas it had previously taken weeks to determine.

By working directly with suppliers, the need for time-consuming negotiation was reduced significantly. Having a standard approach to costing also allowed supplier comparisons to be made, providing valuable insights into the relative performance of different designs.

Results & Impact:

The project turned what had previously been slow, intuitive, and negotiated decision-making processes into a fact-based, rational approach to supplier interaction that took a fraction of the time. Focus was shifted from spending significant management attention on minutia to an enhanced focus on the strategic decisions that needed to be taken. Several specific results were also worth noting, including:

  1. The ability to pre-cost at the design stage. Range decisions could be taken quicker, allowing relatively final designs to be taken to suppliers. With new designs being released on a monthly basis, taking two to three weeks out of the development timeline was a significant advantage.
  2. Product negotiations limited to the exceptions. A full 90 percent of designs were costed automatically through the tool, with client and suppliers agreeing on the costing principles incorporated into the tool. Significantly less management and admin time was needed, resulting in the ability to consolidate costing and planning functions. There were also significant headcount savings.
  3. Comparable supplier performance established. With common performance criteria built into the tool, agreements could be made on allowances for new location ramp-up and category acceptance—but with a clear agreement for improvement over time. This meant that underperforming (or over-charging) suppliers could be easily identified, and decisions on product allocation became fact-based and rational. Ultimately, potential cost savings through productivity of up to 20 percent were identified.
  4. Underpinning Strategic Supplier Decisions. Understanding the drivers of cost and productivity, relative supplier performance, future design trends, and the need to underpin future supplier strategy were all significantly improved. This allowed the company to quickly answer questions such as: “How fast can we expect new suppliers to get up the experience curve?”; “How much of our business should we move from country A to county B?”; “Has Supplier A “s performance been good enough to warrant extra allocation?”; and “Which suppliers are giving us the biggest commitment on productivity improvement?”
现况分析: 在时尚行业中,掌握市场时机是非常重要的,而快速、高效的决策制定对紧跟产品流行趋势来说是必不可少的。正因如此,必须以较快的速度与合适的成本对一个新设计进行开发、生产直到推入市场。然而,计算新设计的成本是一件耗时而基于协商的过程,期间需要与设计师和外包供应商进行反复的沟通。 本案例中的公司,是一家奢侈手提包生产商。这家公司正经历着快速的增长,同时,其生产制造工作是100%外包的,而外包工厂主要位于亚洲。目前亚洲的生产环境已经不再是“一站式”的廉价解决方案了;更常见的是,供应商散布在几个不同的国家,因而要求公司拥有敏捷和高效的运作能力。这家公司拥有数个分布在不同国家的大型外包供应商组织,因此,为了保持竞争力,如何高效而协调地管理好与这些外包商的关系成为了一件越来越重要的议题。 也就是说,这家公司希望找到一个使决策制定更高效、新设计转化为市场商品的过程更快捷的方法。因此,势在必行的是:缩短设计周期,以及用更少的资源来管理供应基地。 发现与解决方案 通过我们的“洞察力工具”行动,Strategic Decisions Group帮助客户的运营小组极大地提升了计算成本的速度,从而让他们在为下一季度选择供应商和定价位时得以更快地作出决定。 为了全方位了解供应商生产一款手提包的成本驱动因素,SDG团队对该公司的设计过程进行了深入、详尽的分析。随后,我们的团队开发了一款量身订制的工具,这款工具将设计和生产过程中所有的细节性元素都整合了起来,包括劳动力、生产材料及工厂层面的制造工艺。这款新工具使原本需耗时数周的成本计算工作在数秒钟以内得以完成,这也使得直接在公司的移动设计档案中进行成本计算成为了可能。 通过直接与供应商合作,我们大大减少了对耗时的协商环节的需求。标准化的成本计算方式也使公司得以更好地对各个供应商进行比较,并更好地评判不同设计的相对市场表现。 成果与影响 该项目将过去缓慢、凭借直觉、需要协商的决策制定过程变成了基于事实、理性的、耗时较短的供应商互动方式。该公司不再花费大量管理精力在琐事上,而是重点关注于需要作出的战略性决策。另有几个具体成果值得一提,包括:
  1. 在设计阶段进行成本预估的能力。范围决策可更快地进行,因此相对完善的设计终稿可以更早地送至供应商处。鉴于每月都有新设计发布,将开发周期缩短2到3周是一个显著的优势。
  1. 产品谈判局限于少量特殊产品。客户和供应商都认同的成本计算原则已被整合到我们设计的工具中,总共90%的设计是通过工具自动进行成本计算的。所需的管理及行政时间被大大缩短,这也增强了巩固成本计算及规划功能的能力。另外,这也显著地精简了所需的职工人数。
  2. 确立了比较供应商表现的方法。常见的表现评价标准已被构建入工具中,在制定协议时,可允许纳入新地点及新类别的变量因素——但前提是清晰地规定好后续的改良工作。这意味着表现不佳(或是收费过高)的供应商可以被轻易地识别出来,而对产品分配的决策也变得更为基于事实与理性。最终,我们从生产环节中发现了最多20%的潜在成本节省空间。
  3. 巩固了战略性供应商决策。对成本与生产力的驱动因素、相对供应商表现、未来设计趋势以及强化未来供应商战略的需求的认识全部得到了明显的提升。这使得公司可以迅速地回答诸如下列问题:“我们可以期望新供应商以多快的速度跟上经验曲线?”;“我们应该将多少业务从A国家转移至B国家?”;“A供应商的表现是否足以保障额外的任务分配?”;以及“哪些供应商为生产力的提高作出了最大努力?”等。