Canadian Apparel E-Business Success Stories

Table of Contents

1. Executive Summary

2. About the Study

3. Case study 1 - Lambertrand

4. Case Study 2 – Howick Apparel Ltd.

5. Case Study 3 – Nygård International

6. Conclusion.

Appendix - Grants Available.

1. Executive Summary

As a follow-up to its e-Business study of the Canadian Apparel Industry, Richter Consulting was mandated by Industry Canada to conduct several case study interviews with apparel companies to document examples of successful e-Business implementations. By documenting successful practices and barriers encountered by Canadian firms already using these technologies, we hope to inform the Industry as to different experiences with respect to e-Business strategies.

Based on Richter's last e-Business study, many apparel companies see the Internet and e-Business as a means of becoming more competitive, reducing costs and improving service to clients. While the industry acknowledged the benefits of e-Business, it has been slow to implement these solutions. Major challenges to date are lack of information and funding. these challenges will be addressed in this report by presenting successful business models as well as available government programs.

Richter's three case study participants included Lambertrand, a small niche apparel manufacturer, Howick Apparel Ltd. (Howick), a mid-sized children's clothing manufacturer, and Nygård International (Nygård), a large women's apparel manufacturer. With varying size, resource capability and culture, these three apparel companies have demonstrated how e-Business has improved their competitiveness.

Lambertrand's strategy is to use e-Business as an overall strategic building tool and is attempting to integrate it in all facets of its operations. Howick, on the other hand, is taking a piece meal approach to e-Business. Foregoing the typical web-site investment, Howick chooses its e-Business projects carefully based on need and cost justification. With a total e-Business investment of almost $60 million and yearly savings of more than $10 million, Nygård is as much a technology company as it is an apparel company. Nygård has clearly demonstrated that there are definite benefits to e-Business and the Company's phenomenal growth could not have been possible without it. Three very different approaches to e-Business with one common goal – improve competitiveness and the bottom line.

Among some of the key success factors outlined by the case study participants was the importance of planning, communication and training within an organization in order to ensure everyone is working towards the same goals. The idea of shifting strategic thinking away from hard core return on investment (benefits not always quantified) to overall vision was also a common idea.

Among the major challenges encountered by our case study participants in developing and implementing e-Business solutions was the following: 

• Defining an e-Business strategic plan;
• Securing financing;
• Limited knowledge of e-Business;
• Integrating software systems from different vendors;
• Available software does not meet their entire needs;
• Willingness of independent retailers and suppliers to buy-in to paperless processes.

Our three case study participants faced one similar challenge of attempting to integrate software systems from different vendors. Other obstacles seem to be more a function of Company size and stage of e-Business implementation. Lambertrand, the smallest apparel Company struggled with the many complexities of e-Business terminology, strategic development and IT vendor search. The mid-sized company participant, Howick and the large apparel manufacturer, Nygård, agreed that finding existing software packages to meet their specific business needs was among the greatest concerns. Nygård, who is known within the industry as the e-Business guru, admits that getting all of its retailers and suppliers to buy-into its e-Business shared solutions has been among the Company's challenges.

Funding remains the constant and ever present e-Business hurdle.

Conclusion

However, Canadian Apparel manufacturers must address the e-Business issues in their strategic planning in order to maintain their short-term competitive advantage and avoid lagging behind in the near future when e-Business becomes common practice.

Top of document

2. About the Study

• In 2002, Richter Consulting conducted an e-Business study of the Canadian Apparel Industry on behalf of Industry Canada. The study indicated that: 
• Most respondents fear a loss of competitiveness if they do not implement e-Business solutions, especially in the face of continuing globalization;
• More than half of the respondents have made limited or no attempts to implement e-Business initiatives. Relatively few have pursued extensive e-Business strategies.
• In the next three years, many respondents intend to employ e-Business initiatives to attract US customers, reduce transaction and processing costs, and accelerate both the sales and production cycles;

Most respondents are interested in learning more about e-Business, as it relates specifically to the apparel industry.

the results of the survey highlighted the importance of pursuing e-Business initiatives as well as the obstacles to be overcome. One message was clear: respondents did not have a clear plan of how to achieve their goals.

In order to help address this issue, Industry Canada engaged Richter Consulting to complete a phase 2 study, with the objective of highlighting successful e-Business initiatives from vision to implementation based upon an examination of successful case studies. Each case study will address the following:

• How e-Business strategies are developed;
• Specific types of solutions implemented;
• Costs involved in purchasing and implementing these systems;
• Reasons driving such initiatives;
• Benefits obtained from such solutions;
• Timing of implementation;
• Major challenges encountered.

Top of document

2.1 Definition of e-Business

Electronic business or e-Business refers to automating business processes of all types through electronic means. E-Business processes include not only on-line marketing and sales, but supply-chain and channel management, manufacturing and inventory control, financial operations and employee workflow procedures across an entire organization. Essentially, e-Business technologies empower customers, employees, suppliers, distributors, vendors and partners by giving them powerful tools for information management and communications.

E-Business is often confused with "e-Commerce" which is limited to the buying and selling of goods and services over the Internet. Typically, e-Commerce initiatives are implemented as an initial phase of a company's e-Business strategy. As strategies evolve, companies tend to focus on broader e-Business initiatives that target operations improvement.

This study examines the full scope of e-Business initiatives, as opposed to the limited spectrum of e-Commerce.

Top of document

2.2 Brief Description of Methodology

In the summer of 2002, Richter Consulting began its case study selection process. The purpose of the case study candidate selection process was to derive a short list of possible participants displaying a certain level of e-Business aptitude. After discussions with several potential participants, the final three companies were selected in order to obtain a good cross section of e-Business solutions at companies of varying size, markets served and e-Business budgets. Detailed interviews took place with key personnel involved with the e-Business strategy and its implementation. Interviews were designed to outline participants' past and present e-Business experiences as well as future plans and opinions.

Top of document

2.3 Specific e-Business Solutions

Each case study highlights specific solutions deployed by participants. The reader is cautioned that Richter Consulting does not necessarily endorse or recommend deployment of any of these products. Furthermore, these case studies highlight only a few of the many e-Business solutions available to apparel companies. E-Business concepts not in use by case study participants (such as e-marketplaces or portals) are not described in this report and may be no less valid or appropriate than the systems described in this report.

Top of document

3. Case study 1 - Lambertrand

3.1 Background

Lambertrand was founded ten years ago by Mr. Pierre Bertrand and his designer Ms. Sally Bertrand. The Company designs and manufactures ready to wear women's clothing with a medieval/ urban inspiration. Like many small companies, Lambertrand originally operated out of the founder's home, in North Hatley, Quebec. Today the Company manufactures its niche apparel in Sherbrooke, Quebec and sells its garments through its own retail store as well as through 11 independent retailers across Ontario and Quebec.

Mr. Bertrand explained that his collection reflects the unique, energetic and innovative team that helps bring it to life. As a small business with 18 employees and less than one million in sales, the Company has sustained itself by focusing on differentiation. It not only differentiates itself by its specialty apparel wear but its relentless commitment to innovation and creativity.

Given the many challenges in developing a small business, Mr. Bertrand has had to be creative with all aspects of his business including financing. By creating strategic partners in order to reduce and share operating costs, exploiting government grant programs and continuously educating himself about technology and the industry as a whole, Lambertrand has set a platform for future growth and profitability.

We met with Mr. Bertrand who discussed his experience in implementing e-Business initiatives.

E-Business Overview

Solutions Implemented

• Intranet website for internal communications
• Transactional web site for distributors
• Transactional web site for consumers

E-Business Driving Forces

• Mr. Bertrand's personal beliefs as to the significant benefits to be derived (such as reaching new customers, new markets and improving internal access to information)

E-Business Budget

• Approximately $60 000 to date

Major Challenges Encountered

• Defining an e-Business strategic plan/ business needs Securing IT resources
• Securing financing
• Lack of knowledge of: 
• E-Business benefits
• E-Business terminology
• Software vendors
• Internet providers
• Web design firms
• Securing employee buy-in
• Integrating software systems from different vendors (technical and financial challenges)

Top of document

3.2 e-Business Strategy

Lambertrand employs e-Business strategies in order to increase sales as well as to improve business processes by improving information sharing.

As a small business operator with limited capital, Mr. Bertrand realized the tremendous potential the Internet offered to a small company to increase sales. However, Mr. Bertrand had difficulty finding the right web developer and hosting company to work with. Furthermore, from a pure educational point of view, the task was somewhat daunting. "the Web has its own universe, its own vocabulary, jargon", commented Mr. Bertrand. "You have to understand it well, otherwise, your specific needs get lost in the shuffle".

After considerable research, Mr. Bertrand developed his first e-Business plan in May 2000 and presented it to his lenders for financing approval. Although initially accepted, funding was subsequently rejected. "We were told that we were deviating too much from our core business, which was apparel and not technology" recalled Mr. Bertrand. Though frustrated by the refusal of his business plan, he continued to seek new and creative ways to fund his web project and overcome the difficulties faced in finding resources.

The following is a brief overview of the e-Business solutions adopted by Lambertrand: 

3.2.1 Informational Web Site

the Company's initial web site was simple and included a corporate description, a product listing and contact information (www. Lambertrand. com). In order to minimize costs, the Company used its own employees to design and update the site.

3.2.2 Transactional Web Site for Distributors

After obtaining a $15 000 grant to develop an Internet strategy, Lambertrand selected FRACTAL COMMERCE, a Montreal-based web system developer, to create their transactional web platform. "We selected this company because we felt that their vision and way of working was similar to ours", commented Mr. Bertrand. Although not fully implemented, the site will allow Lambertrand's distributors to book orders on-line and monitor their order status.

Overall, the development of transactional site, basic e-management tools, servers and service and updates are included in the full amount ($56 000) and including hosting of the site for three (3) years.

3.2.3 Transactional Web Site for Customers

Lambertrand has also created a transactional website called Mode d'expression (www.modexpression.com ), that allows shoppers to purchase on-line. This feature complements the Company's retail outlet. Customers can order from an on-line catalogue, pay for the item and request the shipping mode. If a shipping mode is not entered, the system automatically defaults to the least expensive option. Customers can also initiate returns via the web site.

Aside from increasing sales, the site builds loyalty in that customers can become members and receive regular newsletters. This allows the Company to build a database of its niche customers and establish a regular relationship with them, thus encouraging repeat sales and facilitating targeted marketing. In addition the company is welcoming certain retailers to join the site and sell their goods on-line in an effort to provide shoppers with more selection.

3.2.4 Intranet to Improve Internal Communications

the Company acquired an intranet system called CYBOZU in order to improve internal communication between facilities. The system allows Lambertrand to share internal information, communicate with a marketing agent in France and to exchange documents.

the system allows employees to share files and exchange internal memos. Employee timetables are maintained and managed on-line. Company-wide and personal address books are also maintained on the system.

the system took approximately three (3) months to implement at a cost of approximately $3 000.

3.3 Return on Investment

Mr. Bertrand is passionate about the benefits of e-Business.

It's a proposition that benefits the entire value chain. Linkages are drastically improved between the end customer, the retailer and the manufacturer. As a result, a company can solidify customer relationships, reduce order processing time, accelerate delivery time, improve inventory management and reach into new markets. these things are not easily quantifiable, but the benefits are real. Unlocking them requires vision and not a calculator.

Top of document

3.4 Future Projects

Lambertrand’s next major challenge will be to integrate the Company’s transactional web site into its accounting and manufacturing software systems. Fortunately, all three (3) systems were acquired with eventual integration in mind. While the Company expects to be challenged by the integration, it is confident that it will succeed as a result of its initial careful planning.

Lambertrand also intends to link its web site to strategic partners and marketing sources. The Company also intends to use the Internet to increase sales to its niche-targeted consumers around the world. Special attention is being placed on France. An office may eventually be established there to help penetrate the European market. All transactions between the overseas office and the head office would be conducted over the Internet.

The Company is also focusing future efforts on e-marketing. This includes internet marketing (through fashion portals), targeted mass e-mailings and analysis of web site visitors' surfing behaviour.

Top of document

3.5 Lessons Learned

Among the lessons learned, Mr. Bertrand pointed out that no one should underestimate the barriers and difficulties encountered while undertaking an e-Business project. The list of challenges faced by this small company and lessons learned is long: 

• Securing funding assistance can be difficult for small companies;
• A solid e-Business plan must be prepared based on your company's strategic objectives;
• Projects should be planned in small, achievable milestones;
• Projects need strong project managers in order to see them through to completion;
• Apparel executives must educate themselves as to the benefits of e-Business;
• Companies must conduct a due diligence on software vendors in order to understand which players have the real capacity and know-how;
• Integrating various software packages is complex and costly;
• Management and its personnel must "buy-in" to the initiatives and must be prepared to invest significant amounts of time to see these initiatives through to their successful completion;
• In a small environment, employees must be kept involved through regular punctual meetings. the power of the Internet inevitably increases their responsibilities. Promoting this helps to secure their buy-in.

Mr. Bertrand recognized that many small apparel manufacturers such as him will face similar challenges. Based on his experience and lessons learned, Mr. Bertrand created a new company, Clic Cité, with a mission to help apparel companies develop and implement e-Business solutions. The notion behind this new company was to help apparel companies with e-strategies and e-coaching and eventually develop a sort of e-Business apparel community where synergies could be formed. Lambertrand would be the first "pilot client" of Clic Cité.

Mr. Bertrand is keenly aware of the impact of globalization on the Canadian apparel industry. He feels that his counterparts see e-Business as too adventurous and that they fail to see the process as a way to create competitive advantage and to differentiate themselves. In the mid-term, he believes all companies will have to adopt e-Business to avoid competitive disadvantages. "Sooner or later, they will have to move if they do not want to die. Canadian apparel companies have an opportunity to be leaders today to help compete globally."

Top of document

4. Case Study 2 – Howick Apparel Ltd.

4.1 Background

Howick Apparel Ltd. (Howick) was founded in 1938. The company manufactures and distributes both children's and young adult's garments under the Oshkosh, Ikeda, Tricolore and Bastille brand names. The Company sells to nearly 600 retail customers and has 150 suppliers.

Howick operates out of two (2) manufacturing plants in Montreal, one (1) in Saint-Sauveur, and three (3) independent contracting plants located in Quebec. With over 300 employees in Montreal and Saint-Sauveur, Howick produces woven jeans, overalls and pants, and knit t-shirts and sweatshirts.

The majority of Howick's sales are in Canada with the balance exported to the United States. Much of the Company's growth has come in the last ten (10) years following its acquisition of the exclusive Canadian rights for the Oshkosh label. As a manufacturer of "better" priced clothing, its products have been historically distributed through national department stores, regional specialty stores and independent retail shops.

We met with Mr. David Long, Executive Vice President, Ms. Patty Lapkwosky, Sales -National Accounts, Ikeda/ Bastille) and Mr. Roger Blanchette, Shipping, who discussed the firm's experience in implementing e-Business solutions.

E-Business Overview

Solutions Implemented

• On-line sales analysis
• Web-based shipment scheduling
• Web-based automated shipping carrier selection
• EDI
• Design specification sourcing and communication
• On-line banking

E-Business Driving Forces

• Pressures from a major customer
• Commitment to controlling internal costs

E-Business Budget

• Approximately $45 000 per year

Major Challenges Encountered

• Funding
• Available software does not meet their entire needs
• Integrating various software systems from different vendors

Top of document

4.2 e-Business Strategy

Howick employs e-Business strategies in order to increase operating efficiencies. It is a prime example of a company that is continuously educating itself on e-Business opportunities while maintaining a strict zero-based budgeting mentality. Only solutions that have clearly outlined benefits will be considered.

Howick follows a piece meal approach to e-Business implementation. Specific needs are identified and targeted solutions are found. Howick also capitalizes on programs offered by its key trading partners. This has resulted in the implementation of a multitude of low cost solutions to meet their needs. Many of these solutions centre around streamlining processes with key customers.

The following is a brief overview of the e-Business solutions adopted by Howick.

4.2.1 On-line Sales Analysis with Sears

Howick recognized that it had substantial internal process inefficiencies with respect to managing its Sears Catalogue business. In 2000, the Company acquired a low cost software system, Simtrak, that allows the Company to seamlessly connect to its top retailer in order to monitor inventory levels and selling patterns.

The Simtrak System, developed by Montreal-based SOFTMAKERS SOLUTIONS, is a cross-platform supply and inventory management program developed with senior managers in mind. The system aims to help companies improve supply chain management by increasing customer service levels and reducing excess inventories. Essentially, the system is used to download retail sales information available on the Internet and reproduce it in a manner that allows companies to rapidly analyze the data. As a result, companies are better able to forecast retail sales and help retailers become better merchandisers.

After investing $2 500 (March 2000) and about two (2) days of implementation time, real tangible benefits were seen. The system allowed Howick to reduce Sears Catalogue processing time (to download information from Sears, print it out and then transfer to excel) from ten (10) hours to approximately ten (10) minutes. Although the savings did not translate labour reductions, it has allowed the Company to drastically increase sales without adding additional order entry personnel. Aside from rapid processing time, other benefits include: 

• faster identification of slow-moving inventory;
• alerts for trends;
• greatly improved forecasting capabilities.

"You can be proactive instead of reactive", commented Ms. Lapkowsky. She added that there was also less human errors, since before using Simtrak, all information had to be manually retyped and reconciled.

4.2.2 On-line Sales Analysis with The Bay

A key element of Howick's e-Business strategy has been to streamline processes with its major customers. As such, Howick has always maintained an open mind toward solutions offered by its major customers. One such example of successful partnering has been the use of The Bay's Vendor Workbench.

The Bay provides its suppliers access to sales performance via the Internet. Access to this tool is provided through a mutual agreement at no cost and requires minimal training. Although less sophisticated than Simtrak, the tool essentially allows Howick to review weekly and historical product performance by store.

Like Simtrak, this information is used to improve forecasting and inventory management. As with many e-Business solutions, the benefits of this system are not easily quantifiable. Nevertheless, it has become a key source of management information to reducing inventories, improving their ability to assist the retailer in merchandising, improving key customer satisfaction and ultimately increasing their own profitability.

4.2.3 Web-based Shipment Scheduling

In yet another example of streamlining processes with key suppliers, Howick takes advantage of The Bay's LOGITEK system. This web-based tool allows Howick to schedule shipping appointments to The Bay. The retailer replies within two (2) minutes of having received a request to confirm a shipping appointment date and time.

This system has reduced the number of phone calls and resulting human errors to simplify and greatly improve shipping scheduling.

4.2.4 Web-based Automated Shipping Carrier Selection

Howick implemented the Scancode shipping system in order to improve the efficiency of its administrative shipping processes. Howick uses the system to automatically negotiate rates and select carriers such as Canada Post, UPS, Purolator or Canpar.

In general, the Scancode system provides management of freight (truck load, LTL, courier, multi-modal, fleet and messenger service). Features include carrier and customer compliant labels, EDI, freight rating and payment, load building, serial/ lot numbers and manifests. The system helps goods flow through carrier distribution centres more efficiently and allows for shipment visibility from pick-up through proof of delivery. The system can be used as a standalone or can be integrated with major ERP and accounting applications.

This on-line system eliminates duplicate data entry, develops real-time and historical reporting, improves overall productivity and audits invoices. The system is scaleable in order to meet different business needs.

Howick spends approximately $14 000 per year to lease the Scancode SYSTEM (including upgrades and support). the system required approximately two weeks to implement. This has allowed the Company to ship 40% more units with no need to hire additional staff in the shipping department.

4.2.5 EDI

Howick utilizes electronic data exchange (EDI), for various types of transactions including purchase orders, invoicing and advance shipping notices (ASN). Approximately 40% of orders are received via EDI and all are downloaded into Howick's order entry system. In addition, the Company sends an ASN rather than manual "faxed" packing slips. Although certain retailers will insist on transacting through EDI, other retailers will voluntarily accept to transact with Howick using this method. the initial cost to implement the software was approximately $20 000.

4.2.6 Design Sourcing Specification and Communication

Howick uses the Oshkosh web site designed specifically for the brand's manufacturers. This web site allows Howick to search a database of Oshkosh designs. the database includes all required product manufacturing specifications and images.

Howick selects the item to be manufactured and forwards all the electronic information from this site to the manufacturing facility. This process ensures clear communication and maintenance of design standards and quality requirements between Oshkosh, Howick's head office and the manufacturing plant.

By using this system, Howick is able to dramatically simplify the communication process. Errors are greatly reduced, quality is maintained and delivery rates are accelerated.

4.2.7 On-line Banking

In 2000, Howick began using tdfacilitrade. com to allow electronic processing and efficient management of letters of credit. The investment was limited to one day of training. Using this software has allowed Howick to: 

• Electronically transmit Letter of Credit and Amendment Application forms to the bank using databases and templates customized for their own specific needs;
• Receive a letter of credit number within minutes of transmitting the letter of credit to the bank (subject to credit authorization);
• Electronically retrieve full letter of credit details;
• Obtain daily reports of all letter of credit activity;
• Initiate repeat letters of credit;
• Increase data entry controls, thus reducing the number of errors and reprocessing of documents.

Top of document

4.3 Return on Investment

As seen from the above examples, Howick has implemented an array of solutions with minimal investment.

As mentioned previously by Mr. Long, it is more often than not, difficult to perform cost/ benefit analysis for e-Business initiatives. However he stresses the importance of considering the non tangible benefits just as much as the tangible ones. Thus, most initiatives are not necessarily based on a pre-calculated payback. The Company is convinced that its e-Business initiatives have generated a return on investment through improved operating efficiencies and customer satisfaction.

"Customer expectations are changing" noted Mr. Long. "they don't care about the industry cycle. They expect to find the right product in the right place at the right time all year long. Customer buying patterns have also changed. This has a great impact on our industry namely on our cycles. Howick has reduced in some cases the normal fashion time cycle from 8 months to 8 weeks. We have to fill stores with what the customer wants. As such, we need to share information. We need to be able to act on it on a day to day basis. This is why we need good communication. Good communication throughout the supply chain will give us the ability to respond better and faster to customer wishes. E-Business is one solution".

Top of document

4.4 Future Projects

In response to these growing needs, Howick is planning to have a seamless flow from EDI order to shipment, for all its customers. As such, they plan on pursuing EDI integration with their smaller customers. "the major project to come" noted Mr. Long, "will be a web based ordering system".

Top of document

4.5 Lessons Learned

We asked Mr. Long why most of Canadian Apparel companies were not embracing e-Business. "Understanding what E-Business is implies major education" commented Mr. Long. He said that the willingness and ability of apparel companies to bear the cost of e-Business investments was still an issue. "Apparel companies have a hard time to understand returns. The average size of apparel companies does not support maintaining an "in house" capability. They have to rely on consultants and third party developers" commented Mr. Long. On the counterpart, he believes that the customer readiness for e-Business is very high.

Mr. Long described e-Business as a necessary evil that some apparel companies believe is forced on to them. Overall, Mr. Long believes that a few of them see the real benefits of it. "I would advise other apparel companies to take into consideration the intangible benefits brought when embracing e-Business".

Mr. Long noted three major constraints when it came to adopting e-Business solutions.

• Funding
• Available software does not meet their entire needs
• Integration between software is costly and becomes complex

"Take for example our web site. There is none for now" says Mr. Long. Because funding is always a consideration, the Company prefers to take on e-Business projects on a prioritized basis.

Nevertheless, since customer expectation is constantly changing and evolving, Howick believes that having fast access to valuable information and being able to exchange this information will give them the ability to respond better and faster to customer wishes. It is a question of survival.

Mr. Long is keenly aware of the competition and uses the following analogy to describe the pace of their e-Business implementations: "Two hikers come across a bear. One hiker stops to tie his shoes. The other hiker looks at him puzzled. Why are you tying your shoes? You can never outrun the bear. The other hiker responds, I don't have to outrun the bear, I only have to outrun you".

Top of document

5. Case Study 3 – Nygård International

5.1 Background

Nygård is one of North America's leading apparel manufacturers. With sales nearing half a billion dollars, facilities in Canada, United States and Mexico, 10 000 employees worldwide and a customer base of over 500 retail stores, the Company considers e-Business initiatives as key to their success. "No company will operate globally in the 21 st century without being fully committed to IT & e-Business," says Mr. Peter Nygård founder and Chairman of Nygård.

It is this sort of thinking that is at the heart of Nygård's e-Business success. Backed by a $60 million investment and counting, the founder's vision -WHERE FASHION MEETS TECHNOLOGY - has made the company a high-tech leader in the industry.

We met with Mr. Len Nicolas, Chief Operating Officer, who discussed the firm's experience implementing e-Business initiatives.

E-Business Overview

Solutions Implemented

• Internet commerce for retailers
• Internet commerce for suppliers
• Online showroom

E-Business Driving Forces

• Chairman's total commitment to e-Business

E-Business Budget

• Approximately $60 000 to date

Major Challenges Encountered

• Available software does not meet their entire needs
• Willingness of independent retailers and suppliers to buy-in to paperless processes
• Integrating software systems from different vendors (technical and financial challenges)

Top of document

5.2 e-Business Strategy

Nygård's experience with e-Business dates back to the early 1980s when Mr. Nygård, began his mission to automate and computerize his business. "E-communication was engrained in Mr. Nygård before we even knew of fax machines" says Mr. Len Nicolas, Chief Operating Officer. With limited technology packages on the market at the time, Mr. Nicolas was assigned the difficult task of developing e-Business systems in-house. In 1990, the Company rolled out its ambitious Paperless Agenda strategy. Mr. Nicolas was responsible for eliminating paper and other non-value added processes as well for writing applications that would provide real time information.

Today, Nygård is considered one of Canada's top companies when it comes to information technology. What began with EDI links to EATON's and The Bay in 1990 has grown into a sophisticated web of e-communication that spans from overseas supplier to store front. "Mr. Nygård is a 'virtually' hands on Chairman – he rolls up his sleeves and works with the IT department in order to understand and find improvements to existing processes" says Mr. Nicolas. "That is the key to our success with e-Business".

Nygård is computerized in almost every aspect of its operation, from design, sourcing, costing, forecasting, distribution, re-ordering, etc. As a result, clients can place orders, receive bills and pay accounts electronically. According to Mr. Nicolas, 75 percent of Nygård's customers and 95 percent of its suppliers use e-Business applications.

5.2.1 Internet Commerce for Retailers

Nygård's vision of a paperless system led to the development an impressive manufacturing system, called NS2000. NS2000 is a fully integrated system that controls the supply chain seamlessly from the start to finish through best-of-the breed modular solutions and Nygård proprietary software. At the centrepiece of the NS2000 is the Product Development Management (PDM) system, an internally written program that kick starts the process at the design and costing level and then manages the product's flow through the entire process. At a cost of $3 million to write, the PDM is internet enabled and includes costing, scheduling, PO systems and other common EDI functions.

Nygård's Winnipeg-based manufacturing facility, called ARTS2, is one of the most technologically advanced manufacturing facilities in the world. ARTS2 (Automatic Re-order to Sales) is also the name of the information system that allows Nygård to electronically connect to the cash registers of its customers. The facility has successfully integrated product development (Product Development Management System), manufacturing (CAD/ CAM systems) and sales (ARTS2 replenishment system). This system allows Nygård to generate re-orders, monitor sales activities and continuously replenish inventory levels. ARTS2 feeds orders into the CAD/ CAM (Computer-aided design and computer-aided manufacturing) system so that the PDM and all the platforms run computerized design, manufacturing, distribution, etc. Successful innovation has allowed Nygård to offer a 72-hour maximum produce-and-ship time for electronically placed orders.

A great advantage to the ARTS2 is that garments are made only when needed, reducing high costs associated with inventory holding costs. In addition, Nygård's premium distribution system ensures retailers receive the right products at the right time. Accuracy is ensured by using computer controlled barcodes on each garment that track shipped and received garments and automatically updates the system. A 24 hour surveillance system oversees the entire process.

5.2.2 Internet Commerce for Suppliers

This internet-based secure system provides Nygård's suppliers with complete and accurate product specifications and bills of material at the cut & style level. This link is crucial in providing customers with just in time delivery of merchandise. Nygård's continuous replenishment system drives its Internet Commerce for Suppliers platform. the platform is an in-house developed supply chain management system that links suppliers to Nygård's main system. This system was developed by a team of five employees over a two year period.

Once the main PDM system determines optimal manufacturing requirements based on retail orders, major suppliers are automatically notified. The ICS sends suppliers, via the internet, exact instructions from cutting instructions to units required and communicates and co-ordinates the flow of all component parts (fabric, zippers, trims, buttons and hangers). the ICS system goes as far as instructing fabric suppliers on how to load the material into their trucks so that it corresponds to the sequence in which Nygård will use it. This ensures the fabric is uploaded directly onto cutting tables and reduces downtime.

With over 80 makers and 40 mills around the world, Nygård has gone through great lengths to get their suppliers to embrace e-Business. By developing and individually training its suppliers on the ICS, Nygård ensures the supply chain management system runs efficiently. Every year, the company also holds Internet Commerce for Suppliers conferences where suppliers are invited to training sessions to review the latest updates to the system and refresh on it existing functionalities.

5.2.3 On-line Showroom

Nygård has adopted a partnership approach in dealing with its customers. While some of the larger retail chains push for automation, some of the smaller retailers are less open to the concept. Nygård concentrates its efforts on getting smaller accounts and specialty retailers on-line using their web based product called RFX Showroom. RFX stands for Retail Fashion Expert and replaces the need for EDI for these smaller accounts. Sales representatives train their customers on RFX and take the time to explain the benefits of paperless transactions.

Nygård encourages its retailers to use its online RFX Showroom. This system allows retailers to see the entire Company product line, with an easy to use order entry or assortment planning interface.

Nygård has also developed a powerful web-based business intelligence software called SHOWME, which allows merchandisers, sales people & retailers to view how well Nygård products are selling in their respective stores. It uses business intelligence to track the order histories and, based on certain trends, to better forecast its designs for the future. As a result, says Mr. Nicolas, "we know what we've shipped to the customer and we know how well it's selling on the floor." When that information is reviewed, it allows the Company to put out more stock immediately and helps them design the lines for next year based on the sale of current designs. What was originally intended to be an internal tool used solely by Nygård's own retail operations, has evolved to the point where its retailers (over 20 major and 500 independent retailers) are requesting access to the system over the Internet.

Nygård can also compare the performance of products across different stores in order to better understand why popular garments may not be selling as strongly in other stores. "We can find out that maybe it's not displayed properly, or maybe it's not even displayed at all but is in the back room," says Mr. Nicolas. He adds "We can tell our retailers what we think will sell in their stores and what will not, based on historical data. Retailers want help in selecting items and the more guessing you take out of the process the more they will be confident about their purchase and the more they will be loyal".

5.2.4 Training

Nygård's commitment to technology is also evident in its employee training initiatives. Non-manufacturing employees spend up to one third of their time on computer training. the company devotes 5 full time employees to head orientation sessions and seminars. Classrooms are equipped with computer labs and teach Nygård employees about the use of Microsoft Outlook to integrate e-mail, tasks, scheduling and organize meetings.

Another key element to the success of Nygård's e-Business projects is the teamwork and integration mentality. In order to ensure that Nygård's manufacturing system is properly implemented, 4 full time IT people work side by side with the operations people within the business segments where new technologies are being implemented. "This has proven very successful because there is a quick response team on hand to support users in understanding and using new systems", notes Mr. Nicolas.

In order to ensure employee buy-in and successful implementation of its e-Business initiatives, Nygård established a committee called "Delta Force". This 50 member team consists of group leaders who are responsible for ensuring the proper training, implementation and fine-tuning of technology projects. Leaders are accountable for any delays or problems encountered and use the committee to discuss and resolve issues. "Sometimes you have to force change" admits Mr. Nicolas. The Delta Force is the Company's way of ensuring change happens efficiently and effectively.

"We are often referred to as a technology company that makes apparel", says Mr. Nygård. The Company is also very committed to helping the Canadian apparel industry develop technology capabilities. It is this sort of thinking that has fueled Nygård's vision of becoming an IT training centre for the industry. The company intends to market its ARTS2 system and make it accessible to the industry. Nygård continues to negotiate with federal and provincial governments to establish a $10 million high-tech training centre in Winnipeg. This centre will focus on information technology and electronic commerce.

Top of document

5.3 Return on Investment

"The savings are staggering", boasts Mr. Nygård. The Company claims to be saving over $10 million a year through e-Business technology which has created huge efficiencies. The benefits include quicker flow of products, a better understanding of what people want and lower operating costs due to administrative streamlining.

According to Nygård, 85 per cent of the lead time in production comes from administrative delays all the way from the retail side to the factory, which can add three months to the supply and demand process. IT has reduced this dramatically. This saving of time and labour has, according to Nygård, prevented clothing prices from rising for the past decade. "the cost of goods fall as electronics drive the economy" adds Nygård.

E-Business has also allowed Nygård to increase its production capabilities. Eight years ago, a single production facility was producing 30 000 garments a week, now its pumping out more than 60 000 a week due largely to technological advances and increased efficiency. An order that used to take four employees a few days to process is now done by a computer in minutes.

Nygård's computerized system boasts a 99.9 per cent accuracy rate and has reduced cutting labour by more than half. Under the old manual system, it cost 40 to 45 cents per unit to ship a garment versus six to 10 cents per unit with the new system.

Nygård stands by the accuracy of its systems and guarantees it customers 100% accuracy in every carton shipped (electronically downloaded orders) and same day shipping on all repeats and continuous replenishment products. The Company has yet to give away any free product yet and adds that its policies not only increase customer confidence, but also help convince retailers of the benefits of electronic commerce.

To bring its customers and suppliers into the electronic age, Nygård has had to use both incentives and penalties. Nygård actually charges its suppliers $2 per page for paper transactions (which must be sent to a conversion centre where the information is entered into the computer)

Evidence of Nygård's efficient and trim operations is they're remarkably small IT department compared to the level of their e-communication. An electronic network of over 100 suppliers, hundreds of customers, and facilities around the globe are maintained by a team of 40 employees.

With yearly savings of more than $10 million since 1997, the Company has clearly demonstrated that there are definite benefits to e-Business. The Company reiterates that their phenomenal growth could not have been possible without it.

Nygård's very trim mindset ensures that all investments are cost justified – "we may not be able to quantify the exact cost savings but we do need to understand the benefits involved". "It is very difficult to calculate a return on investment for our projects, however we must cost justify and understand the savings involved" adds Mr. Nicolas. He stresses that apparel manufacturers need to abandon the sewing machine mentality where one can calculate the ROI of each machine and adopt a new way of thinking. "In the long run, e-Business is the best strategy and a required one in order to stay in business".

Top of document

5.4 Future Projects

Nygård intends to continue to employ e-Business to establish and maintain long term customer relationships. Among the Company's future plans is an initiative to use its system's internetivity to develop visual merchandising for its customers. The system will be able to show customers how merchandise will look like on the sales floor and how best to display it. "We want to help retail buyers take the guess work out of their job", says Mr. Nicolas. With historical sales analysis by store and virtual display merchandising, retailers can make intelligent and knowledgeable decisions.

Top of document

5.5 Lessons Learned

According to Mr. Nicolas, the majority of overseas suppliers have access to the internet and are actively using it. When asked why Canadian apparel manufacturers are not using email to connect with suppliers he offered this "it's not just simply a matter of sending an order via email – the information being transferred is key - you must ensure that all instructions, from spec sheets to sewing instructions are outlined and easily understood. Apparel companies are more comfortable with traditional phone calls and faxes where replicated tasks and administrative overhead are tolerated. E-Business demands a level a discipline and structure at the forefront and requires a revamping of processes – an exercise many apparel companies are not yet prepared to make."

Mr. Nicolas also points out that apparel companies are very competitive. As a result, they are reluctant to share information. This impedes communication, a trademark of e-Business. He points out that most apparel manufacturers use advanced technology only when forced to by major retailers. The resulting poor communication and coordination remain the major hurdles to responsive production.

Top of document

6. Conclusion.

6.1 Summary of the Canadian Apparel Industry's Progress

All the evidence gathered in both e-Business studies confirms that the Canadian apparel industry recognizes the need to adopt E-Business strategies to be competitive in the future. The three case study participants, despite the differences in locations, size and markets served, have all made substantial strides towards automating their business processes. their stories demonstrate that effective E-Business strategies may begin with small investments, chosen wisely and implemented incrementally. Such investments are within the means of nearly every apparel firm in Canada, and the benefits they produce, in terms of increased efficiency, improved customer satisfaction and higher visibility, can justify the expenditure in the long run.

Top of document

6.2 Overcoming e-Business Barriers

Industry preparedness is a major barrier to the adoption of E-Business. In order for apparel companies to properly adopt e-Business initiatives the following factors should be considered.

6.2.1 Understanding what e-Business is

A major education and outreach program lies ahead. Apparel executives should continuously improve their e-Business education and understand how it can be applied to improve their operations.

6.2.2 Availability of industry specific solutions

Apparel companies can not be expected to know all solutions available and specific to their industry. they can call upon industry associations and independent apparel consultants for planning and implementation assistance.

6.2.3 Willingness and ability to bear the cost of e-Business investments;

Apparel companies may not have the financial means to support certain e-Business initiatives. Fortunately, the government has created several programs to help the industry. See Appendix 1 for details.

6.2.4 Commitment to undertaking a detailed planning process

A company's overall business objectives should be clear before launching any e-Business initiative. E-Business and other technological improvements should be used as tools to defend against competitive threats, optimize opportunities, improve customer service, streamline processes and reduce costs. Once objectives have been defined, a Company can then build a game plan.

6.2.5 Having a road map to help implement e-Business solutions

While many companies may have the best intentions with respect to improving their operations, implementing change can be an exhausting and frustrating process. This is why outlining a detailed road map becomes crucial to the overall success of any project. E-Business initiatives are often left on the drawing board because companies get caught up on the day to day demands of their business. Creating a committee (made up of employees and management) is beneficial in ensuring responsibilities are allocated and progress is monitored. This committee would be responsible for ensuring planning and implementation goals are achieved.

Top of document

Appendix - Grants Available.

In an attempt to help apparel manufacturers successfully adopt e-Business initiatives, several government programs are available. Industry Canada has developed a web site dedicated exclusively to e-Business adoption and lists all programs available. This website includes a list of all federal and provincial financing programs available for e-Business initiatives. Details of this program are available at Ebiz.enable.

On December 11, 2002, Industry Canada officially introduced its newest $33 million grant program called "Canadian Apparel and Textile Industries Program" (CATIP). This program is designed to assist manufacturers in becoming more innovative and covers 50% of eligible costs and will pay up to $100 000 per project. The program will also subsidize diagnostic studies undertaken to identify a company's technological requirements and develop a strategic plan. Details of this program are available at CATIP web site

In Quebec, "Les Affaires Électroniques", a government run e-Business support program, offers companies up to six hours of free consulting, including: 

• Positioning a company with respect to its e-Business preparedness;
• Helping define its e-Business strategies;
• Providing resources in the planning of e-Business strategies;

Additional information regarding any other grants offered at the provincial level may be available by contacting local apparel associations.

Prepared for: Industry Canada
February 2003

Top of document