Reducing cycle T imeimpRoving SouRcing

pRoceSSeS going gReen voice oF cuSTomeR

PLM trends impacting the Retail, Footwear & Apparel, and Consumer Products industries.

brought to you by

How Leaders Are Surviving–and Thriving–in Today’s Volatile Global Economy

In today’s challenging economic environment, retailers and brands are struggling for their

very survival, with little cause for optimism on future sales growth. While some companies

are in a month-to-month triage mode, many forward-thinking companies are considering

the implementation of technology solutions that not only will help weather the current eco-

nomic storm, but also deliver performance benefits in the long term.

In this white paper, we analyze four key industry trends that are relevant to the economic

situation, and examine how leading retailers and brands are embracing Product Lifecycle

Management (PLM) solutions to enhance bottom-line efficiency in a tough economic cli-

mate. We’ll discuss:

• Reducing cycle time– shortening cycle time so design-and inventory-level decisions are made as close as possible to retail delivery.

• Improving sourcing processes– quick turnaround times can only be achieved with a collaborative sourcing process, based on strong relationships across the supply chain.

• “ Going green”– eco-conscious consumer preferences and recent EU REACH legislation are challenging companies to leverage PLM to meet green design goals and environmental compliance.

• Incorporating the voice of the customer– as sophisticated consumers become more selective in their spending, successful companies are engaging the consumer early in the design phase to reduce the risk of overbuying a product or simply missing a trend.

For each trend, we will discuss the meaning of the trend, its impact on the business process,

how PLM helps manage the trend, and the benefits achieved by leveraging PLM. You’ll

learn why industry leaders recognize that the recession won’t last forever, and are using this

opportunity to build their brand and entrench customer loyalty.

WHAT IS CYCLE TIME REDUCTION? Cycle Time Reduction focuses on minimizing the amount of time spent on the entire product development cycle – from product conceptualization to retail store delivery.

WHY IS THIS TREND IMPORTANT?Until recently, Cycle Time Reduction was a term that was lim-ited to the fashion world, and most commonly associated with leading fast-fashion apparel companies. Some trailblazers like Zara® and H&M® became so adept at cutting cycle time that they were able to go from concept to retail store in as little as two weeks.

Increasingly, though, Cycle Time Reduction is being applied to all types of products, not just fashion apparel. Today, there is a ‘fashion’ aspect to almost every type of product that consum-ers can purchase. Think about the fashion aspect of consumer electronics – iPods, Blackberrys, laptops and � at-panel high-de� nition TVs –where fast-changing fashion trends are driving change in elements such as color and shape. Home items, too, are increasingly being presented as ‘coordinated ensembles’, re� ecting the latest color and print trends. No doubt, the fashion trend is showing no signs of cooling off, with global media and TV inspiring young consumers to catch the wave toward a seem-ingly endless array of toys, dolls, backpacks and video games.

‘Fashion’ can also be thought about as predicting the latest mar-ket trends, whether the trends address shape, size, color, logo or cartoon character. Once trends are recognized, the ultimate goal for manufacturers is to translate them into a product idea that will entice customers to buy. In today’s fast-paced environ-ment, the challenge is to complete the analysis of a trend and then deliver a product before the trend has passed.

To capture the latest trend, it is important that design decisions be made very late in the product development process, so that the most up-to-date thinking can be incorporated into the prod-uct concept. Making timely, informed decisions –as late as pos-sible in the process, gives a company a higher chance of design-ing products that customers want to purchase. This strategy also leads to a higher percentage of products being sold at full retail selling price, thus avoiding future markdowns and excessive inventory levels.

Another factor that’s forcing manufacturers to deliver the right products to the store at the right time is that, because of today’s volatile economic environment, consumers have less discretion-ary income to spend. To avoid excess inventory, management must make design decisions later in the process, which gives a company the opportunity to analyze the recent sales data, so quantities of products can be accurately forecasted.

WHAT BUSINESS PROCESSES ARE IMPACTED MOST BY CYCLE TIME REDUCTION –AND HOW CAN PLM ENABLE THESE PROCESSES?To make a signi� cant impact on your overall cycle time, manag-ers must take a close look at every process in the product devel-opment system. Companies that have signi� cantly reduced their cycle time realize that all departments – from up-front planning to back-end delivery –must work together in a choreographed way.

Here are the areas impacted most by Cycle Time Reduction:

Merchandising and Design ProcessesMerchandising kicks off the product development process by providing clear direction of the plan for the seasons to come, including the � nancial goals, with information such as:

• Target retail, target cost, and margins

• Assortment goals for the type of product mix

• Creative goals based on the current season trends

These merchandise plans, created either in a Merchandise Planning System or directly in a PLM system, are translated into line plans with placeholders that include directional product information for the design team.

To move at the speed of fashion, leading companies are embracing enterprise PLM.

Reducing cycle T ime impRoving SouRcingpRoceSSeS

going gReen voice oF cuSTomeR

Topic Sheet 1 of 4

In a PLM system, designers can design multiple product candi-dates for each placeholder and easily share the product con-cepts with the merchandising team. The tight collaboration between Merchandising and Design, early in the product devel-opment process, allows the design team to focus their design efforts on the type of products that merchandising will be adopt-ing into the line, thus ensuring valuable time and effort are not wasted either on products that will never make it to line adop-tion, or on late adds.

Creative DesignIntegration of Adobe® Illustrator® into the Design ProcessAs the design process continues, PLM provides multiple ease-of-use features to accelerate the translation of a designer’s idea into a product concept that can be shared with the rest of the team.

Advanced PLM solutions, such as FlexPLM™, offer a direct inte-gration with Adobe Illustrator (AI), which allows a designer to quickly create a product speci� cation from within AI. From within the familiar Adobe user interface, the designer can access color and material libraries from FlexPLM and assign these to a product –along with descriptive product attributes – to generate a product ‘design card’. The fast generation of the product spec is important early in the design process, so a product can either be accelerated or failed quickly.

Calendar ManagementOne of the most important –and most challenging–disciplines for achieving Cycle Time Reduction is adhering to a calendar. The dif� culty here is that each product has its own cycle time, but all products must be delivered to the retail store at the same time.

PLM solves this issue because it allows you to manage seasonal calendars, yet maintain different calendars with different mile-stones by product type. For example, a ‘fashion’ item may have a six-week calendar, but a core or basic item may follow a tradi-tional 32-week calendar. Easily managing multiple calendars is a key requirement for reducing non-value added activities during the product development process.

Specification Development ProcessThe Speci� cation Development Process can be accelerated using a PLM solution because data from the design concept has already pre-populated the product speci� cation. PLM allows you to de� ne product templates for different product types, so you can then quickly create the product speci� cation. In addi-tion, PLM offers multiple ease-of-use features – such as de� ning copy rules by product type, linking speci� cations of similar prod-ucts, and clipboard copying– that enable the quick generation of the spec. This ease-of-use feature is key to delivering the spec to the manufacturer faster, as well as reducing time spent resolving quality issues once the product has been produced.

“Reducing cycle time has clear financial benefits for retailers and wholesalers. Our research

shows that for every four weeks taken out of a cycle, margins increase by one (1) point at retail.”

– Jeremy Rubman, KSA

Early SourcingAs all job functions in the product development process are accessing a common, web-based PLM system, the Sourcing team has visibility into the line from conceptualization. This insight allows Sourcing to begin thinking about those manufac-turers best suited to producing the product. A search of suppli-ers against the product requirements can be executed quickly, so potential suppliers can be identi� ed to place a request for quote. PLM is capable of housing vital supplier information, such as the supplier’s current capacity and past performance, in a vendor scorecard, so that decisions can be made quickly. As quotes are received from the supply chain, PLM provides an ef� cient way to analyze multiple quotes, so that Sourcing can make informed placement decisions fast.

Supply Chain Collaboration Once a product has been placed with a supplier, PLM enables supply chain collaboration by giving the supplier direct access to the related product information residing in the PLM system. With proper authorization managed by the PLM system, the sup-plier has access to view information, as well as to make updates to parts of the product speci� cation or calendar that they own. This direct integration to the supply chain saves valuable time otherwise spent communicating through email or updating data in multiple systems.

Constantly changing consumer trends require retailers and brands to stay in touch with consumers’ needs and interests.

By leveraging web-based, collaborative PLM tools, companies have greater visibility into the right data, which allows them to make smarter decisions faster –as late as possible in the devel-opment cycle – without impacting costs and schedules.

A more dif� cult bene� t to measure in PLM is the increased ef� -ciency of the product development team. PTC’s experience shows that by having all internal and external team members working from a ‘single source of the truth,’ team members are not wasting precious time chasing down data or working on inaccurate information. As a result, designers, in particular, ben-e� t from being able to focus on innovation.

Lastly, PLM can directly bene� t sell-through and inventory man-agement, as companies can make smarter design decisions later in the process regarding what types of products should be offered for a particular retail delivery.

With PLM, companies in Retail, Footwear & Apparel, and Consumer Products can achieve the ultimate goals of Cycle Time Reduction: cutting overall man hours and eliminating wasted inventory.

Customer PinPoint: CYCLE TIME REDUCTION AT JCPENNEY®

Every Day Matters®

jcp.com

To keep up with consumer demand and fast fashion trends in the Retail and Apparel

industry, Jcpenney realized that it had to decrease the amount of time it takes to

develop a new product line from several months down to a few weeks. To accomplish

this objective, Jcpenney launched its cycle Time Reduction initiative, an enterprise-

wide program focused on shortening the amount of time from conceptualization to

merchandise delivery.

“The ability to respond to customer needs quickly, and deliver merchandise effi ciently,

is critical to delivering on JCPenney’s vision to be the preferred shopping choice for

middle America.

“As an important enabler to our Cycle Time Reduction initiative, FlexPLM is a robust

infrastructure that spans our global supply chain, enabling our Associates to collabo-

rate more effectively and deliver merchandise that inspires our customers.”

– Peter McGrath, EVP Production Development and Sourcing for JCPenney

“Product development used with product lifecycle management (PLM) tools and best practices

is often justifi ed by hard cost savings alone via material savings, reduced administrative labor,

and the elimination of redundant system maintenance. When complemented with dramatic

increases in speed to market, it provides a compelling and strategically important value prop-

osition. The benefi ts are real: initial implementations have generated 20% lead-time reductions

via improved visibility and accountability. With advanced postponement techniques, lead

times have been reduced by as much as 50%.”

– The Retail Handbook for Becoming Demand Driven, May 31, 2006, AMR Research

WHAT ARE THE BENEFITS OF ADDRESSING CYCLE TIME REDUCTION IN PLM?

Topic Sheet 2 of 4

Reducing cycle T ime impRoving SouRcingpRoceSSeS

going gReen voice oF cuSTomeRimpRoving SouRcingpRoceSSeS

WHAT IS SOURCING? Sourcing is the purchasing of products – or components that go into a product – from the supply chain. The Sourcing process involves a host of essential tasks, such as managing supplier relationships, identifying suppliers for a request for quote (RFQ), managing cost negotiations, and evaluating supplier perfor-mance after product shipment.

Why is Aligning PLM with Sourcing So Important?Because industry trends are constantly changing, success-ful retailers and brands must be nimble to adapt quickly. With Sourcing, that’s easier said than done, because products are now sourced from a growing global network of suppliers and vendors.

The traditional Sourcing process has been turned upside down not only by globalization, but also by policy shifts on quotas and by fast-changing consumer tastes.

And while the end of quotas in the US and the European Union is providing greater access to a broader network of suppliers, you still have to � nd the right source for your product. To be success-ful, you need greater visibility into your supply chain, especially the ability to understand their capabilities and track their perfor-mance over time.

This is where PLM comes in. By aligning PLM with your Sourcing process, you get the insight into the costs, capabilities and per-formance of your entire global supply chain, to make smarter, more cost-effective decisions– faster.

KEY TRENDS AFFECTING PLM AND SOURCINGRelated to the globalization trend is a host of other issues now impacting Sourcing, including rising costs of labor and energy, a decline in consumer spending, and the global going green movement.

Labor CostsFor starters, the rising cost of labor in China is forcing compa-nies to rethink their Sourcing approach. In the 1990s, China was the dominant, de-facto Sourcing magnet for low-cost labor. However, rising costs have forced companies to diversify their sourcing strategies and evaluate lower-cost options, such as Vietnam, Cambodia, Bangladesh and India.

Fast FashionIn addition, the downturn in the global economy has modi� ed Sourcing strategies for companies that deliver products on a global basis. An acute case-in-point is the ‘Fast Fashion’ phenom-enon, where winning is all about making decisions as close to in-store delivery as possible, so as to deliver ‘trend right’ products.

In cases like this, where consumers are spending less, you need to make decisions as late as possible in the product development process, and focus on ‘what’s selling and what isn’t’, to avoid excess inventory. If you have to decide on Sourcing as late as six weeks before in-store delivery, then you must have instant visibility into your supply chain’s current capacity, so you know if a sup-plier can produce and deliver the PO when you ‘pull the trigger’.

Energy CostsAlso, today’s increasing fuel costs are not only impacting con-sumers’ spending habits, but are also in� uencing retailers’ and brands’ supplier-placement decisions. For products that are deliv-ered on multiple continents, retailers and brands are increasingly splitting production orders across suppliers and choosing suppli-ers that are closest to the end-retail store delivery to reduce trans-portation costs. Although this is a cost-saving measure, managing multi-sourced products increases the complexity of overseeing a product through both the development and production processes.

Green Momentum‘Green’ products are also gaining momentum, as consumers are becoming increasingly more aware of the environmental impact of the products they purchase, whether it be raw materials, or the manufacturing process itself, or the transportation footprint. For eco-friendly retailers and brands, green priorities are inten-sifying the scrutiny of the Sourcing process, such that suppliers must provide authentic green materials, while manufacturers must minimize the environmental impact of production.

PLM can help connect all Sourcing tasks earlier in the product development process, so new styles can be designed and delivered to market faster.

WHAT BUSINESS PROCESSES ARE IMPACTED BY SOURCING, AND HOW CAN PLM ENABLE THESE PROCESSES? Successful collaboration between product development and Sourcing departments, early in the process, is helping to reduce the overall cycle time, as well as improve the overall ef� ciency of organizations. Sourcing impacts the product development pro-cess from line planning all the way through to � nal delivery of the product. Here’s how PLM improves the most critical processes:

Supplier Management ProcessThe supplier management process is a constant and evolving process for identifying a supplier’s capabilities, as well as docu-menting their compliance to your social, technical and environ-mental standards. Product Lifecycle Management (PLM) enables this process by capturing the supplier pro� le and facilitating a supplier audit process. Based on the outcome of the audit, the supplier’s status is updated within the PLM system to re� ect whether or not new products can be sourced from that supplier.

Line Planning ProcessJust as line plans are created for product lines within PLM, Sourcing plans can also be created from line plans to identify Sourcing strategies early in the product development process. Sourcing plans can include information such as what percentage of product will be sourced by region, country or even supplier.

“To help companies achieve their business objectives, product development and sourcing teams must

be closely aligned throughout the entire product development process. PLM solutions bridge the gap

between the otherwise disconnected departments.”

– AMR Research

As the line plan evolves and products are placed with suppliers, an analysis can be completed on how your product placement execution compares to the initial Sourcing plan. Additionally, PLM tools allow you to identify a supplier’s capacity, and deter-mine if the number of products placed with the supplier can be produced or if you need to � nd an alternative.

Beginning with the up-front line planning process, Sourcing is involved by helping identify which suppliers are capable of mak-ing the product. In the case of private label retailers, Sourcing assists in identifying which suppliers may have readily available or “packaged” products. PLM facilitates searching for suppliers that can meet the capability demands of the product spec.

RFQ ProcessWith PLM as an enabling technology, the RFQ process can be ef� cient and fast. Using the robust search capabilities in PLM, a user can search for suppliers that are capable of making a product based on the product spec requirements. With this information at hand, an RFQ can be placed to multiple suppli-ers. Important information, such as colorway, size, region and destination, can be pulled from the product’s bill-of-materials in order to populate the RFQ, showing the value of integrating Sourcing and product development. Once quotes have been received from one or more suppliers, PLM makes it easy to com-pare quotes and facilitate the negotiation process.

Convergence of Merchandising & Design, Product Development and Sourcing. As the industry continues to strive to reduce cycle times, it is even more imperative for mer-chandising, design, Product Development and Sourcing to be closely aligned early in the product development process.

Product Commitment ManagementAs the Sourcing process continues past the RFQ stage, PLM pro-vides a comprehensive digital platform for negotiation of prod-uct commitments, as well as unit volume, delivery dates and transportation methods. Automated archiving and capturing of discussion threads provides seamless visibility between retailer and brand, and the supply chain. Once a commitment decision has been made, PLM tracks which products have been awarded to which supplier. The ‘commitment’ created within the PLM sys-tem can automatically be sent to an ERP system to generate a purchase order.

Robust work� ow and calendar management tools within the PLM solution enable work-in-progress (WIP) tracking and production tracking. WIP tracking is a combination of statuses from ERP and PLM, with PLM providing a single, central repository to integrate the two work� ows. Reports are easily generated for viewing the status of not only an individual product, but also all purchase orders for that product. Flexibility is key during the product devel-opment process, as purchase orders can be generated in a vari-ety of ways.

Performance AnalysisSupplier management is not only important for the current sea-son, but also for future deliveries, as placement decisions are made based on a supplier’s past performance. PLM provides tools to capture key performance information, such as the num-ber of samples/prototypes required before acceptance, cost comparison to other suppliers, testing results, and integration to ERP systems for other critical information, such as on-time deliv-ery and return rates. This information is used to generate a sup-plier/vendor scorecard, which can be captured and used for future sourcing decisions.

WHERE DO YOU DRAW THE LINE BETWEEN PLM AND ERP?At PTC, we believe there’s a simple answer. Once a � nancial transaction takes place, ERP is clearly the solution that should be used to manage the process. Best-of-breed ERP systems offer robust solutions for managing � nancial transactions. Because of this, PTC has built robust integration tools to share data between PLM and ERP.

“A business case should drive the decision between PLM, Sourcing, and ERP systems. It is important

to look at not only effi ciencies, but how the system can support strategic changes in your business.”

– Jeremy Rubman, KSA

• Maturity of your ERP implementation. Many ERP implementations focus primarily on managing production purchase orders, which leaves a gap for managing draft purchase orders or commitments. PLM can fill this gap for a short-term approach.

• Roles in your organization. For retailers just starting out in the private label market, one role can wear many hats. Users of the PLM solution do not want to have to access multiple systems, so one robust solution is a better fit.

• Software development roadmap. From your ERP provider.

• Software development roadmap. From your PLM provider.

• Size of your organization. An organization with revenues of less than $500 million has different requirements than a $2 billion+ organization.

• Maturity of your Sourcing processes. If data is managed in Excel spreadsheets today, PLM may fit your short-term needs.

DIFFERENCE BETWEEN PLM, SOURCING AND ERP

There is a lot of confusion in the market over the difference between PLM, Sourcing and ERP applications, and which solution is best suited to supporting different business processes. Unfortu-nately, there is no easy answer. When making a decision about which PLM software application or combination of applications is right for your organization, there are several factors to consider:

WHAT ARE THE BENEFITS OF INTEGRATING PLM AND SOURCING?As you can see, PLM is a robust enterprise tool for enabling both the Product Development process and the Sourcing pro-cess. As development moves quickly today, it is dif� cult to separate Sourcing processes from core Product Development functions. Many successful companies have integrated Product Development and Sourcing processes in order to gain bene� ts of increased ef� ciency, lower overall product costs, and ultimately higher margins.

Reducing cycle T ime impRoving SouRcingpRoceSSeS

going gReen voice oF cuSTomeR

WHAT IS MEANT BY “GOING GREEN”? “Going green” is about being aware of the environmental impact of your product line. It is a broad topic that spans the entire product lifecycle. It starts with how the line is planned: What percentage of the line will be ‘green’ or eco-friendly? And it concludes with how a � nished product is made: Does the prod-uct contain components that are recyclable? In the middle, there is a broad range of other key issues to consider, including sus-tainability of product components, environmental compliance of the factory itself, and the ‘green’ impact of product packaging. Going green is a complex topic, but PLM is poised to play a key role in making its sustainability sustainable.

Why Is This Trend Important?The green trend is gathering momentum mainly because global societies want to ensure a safe, healthy environment for their citi-zens, as well as future generations. But for retailers and brands, this isn’t just a � eeting consumer “trend”; going green is fast becoming a mandate with sharp legal teeth, as evidenced by the EU’s REACH directive, which regulates the use of chemicals in � nished products sold at retail in the EU.

Large retailers are responding to the green mandate by making sustainability part of doing business. For instance, Walmart®’s green initiatives center on creating a more environmentally and socially aware global supply chain, as well as a more energy-ef� -cient store design. In fact, by 2012, Walmart will require suppliers to source 95% of their production directly from factories receiving the highest ratings for environmental and social practices.

In short, going green is no longer a marketing ploy, but a compet-itive initiative that retailers and brands alike are taking seriously in response to two powerful forces: consumers and regulators.

WHAT PROCESSES ARE IMPACTED MOST BY GOING GREEN AND HOW CAN PLM ENABLE THESE PROCESSES? Merchandise PlanningGoing green begins with the merchandise planning process by identifying what percentage of the line will be ‘green’. PLM allows you to create a merchandise plan that captures the tar-get environmental impact of the product. As the line is being

Retailers and brands can leverage their PLM system to effectively develop products in accordance with their environmental objectives.

designed, the merchandiser and designer can look at what per-centage of the line is meeting the ‘green’ targets that have been set.

Creative DesignDuring the design process, the designer has visibility into the target green impact of the product, as established by Merchandising. This insight allows the designer to work with green in mind, which might entail either selecting eco-friendly materials such as recycled or organic components, or designing products that can be produced in an eco-friendly manner.

“It’s not just downstream manufacturing industries that stand to be affected either. REACH will ultimately

extend into the retail and apparel domains. End consumers will further exercise their right to know what

chemicals are in the substances they choose to buy and command more complete descriptions of what

is in their chosen products. Independent retailers and private organizations with powerful supply chain

positions are placed in the position to take action on chemicals of concern, seeking to screen them

from their supply-chains as part of their broader sustainability initiatives.”

– REACH, Part 2: Risks To Everyone Applying Chemicals, January 22, 2008, AMR Research

Topic Sheet 3 of 4

Material Development and TestingOne of the most important aspects of green design lies in the materials used in the product. PLM makes it easy to use green materials because it captures key attributes on the materials that de� ne how eco-friendly they really are. PLM enables designers to identify all the materials used in the product by capturing attri-butes in a Bill-of-Materials (BOM). Information from the BOM is one of the primary components for calculating the “green index” of the product. Although there are no formal standards for the green index, many companies have created their own formula which takes information– such as the materials from the BOM, the impact of the manufacturing process, and the trans-portation method of the product– to provide consumers with the overall environmental impact of the product. Timberland and Patagonia– both customers of PTC– are on the leading edge of these green initiatives.

Packaging and LabelingIn the Consumer Products industry, the environmental impact of product packaging is under closer scrutiny by consumers and regulators alike because non-recyclable boxes, plastic bags and � ller materials all contribute to unnecessary waste. In response, many companies are examining ways to either reduce the amount of product packaging or use recyclable materials. PLM allows you to identify the speci� cations for product packaging and to determine which packaging has the lowest impact on the environment.

Supplier ManagementSupply chain management is one of the most important pro-cesses in managing the green impact of the product. While ‘social compliance’ within the supply chain is well established–for instance, protecting against child labor practices, environ-mental compliance is fast becoming a priority across the supply

chain in areas such as tracking both the disposal of production waste and the energy ef� ciency of the factory.

Product TestingFor companies that deliver � nished products for retail sale to the European Union, the EU’s REACH Directive cannot be ignored. While PLM is still evolving to support this regulation, the good news is that, for years, PLM technology has been managing regulations in numerous other industries, such as electronics, high-tech and medical devices. The technology infrastructure required to manage collaboration between multiple levels of the supply chain (vendor, factory, material suppliers and chemi-cal suppliers) is already proven. Management of materials– that is, de� ning the materials and identifying which products use the materials– is also a proven PLM functionality. At PTC, we are con-tinuing to collaborate with our customers on how PLM needs to evolve to support REACH legislation.

WHAT ARE THE BENEFITS OF GOING GREEN USING PLM? No doubt, any business initiative toward going green will impact the entire product development process, from planning the line to determining the product’s end of life. Product Lifecycle Management solutions are designed to support and manage the entire lifecycle of the product for any industry, including Retail, Footwear, Apparel and Consumer Products. The key components that need to be managed for going green–product lines, prod-ucts, materials, packaging and the supply chain–are already being successfully managed in PLM. In addition, PLM is already being used successfully to manage compliance to other stan-dards. At PTC, we will continue to work with our customer base to deliver PLM technology that meets the emerging industry stan-dards for going green.

Customer PinPoint: PATAGONIA®

Patagonia’s goal is to move from an “opportunistic” to a “strategic” approach to sus-

tainability when it comes to measuring the eco-elements of its business. Patagonia

is striving to provide hard data relative to such areas as its carbon footprint, the

amount of eco-friendly fabric in its products, how much product the company recy-

cles, and much more.

As part of this process, Patagonia is working with PTC, its PLM software provider, to

build � elds and modules into its system that will support this goal. “We are realizing

that we need to be as organized on the environmental side of things as we have

been on the product side all of these years,” says Jill Dumain, Patagonia’s environ-

mental analysis director. “This project will provide the ability to better track our prog-

ress toward making all of our products more environmentally friendly,” she says.

The PLM system will accommodate information related to development, such as fabric

speci� cations, organic components and production location, while its ERP system will

track information related to logistics. As the new system develops, the company will

be able to easily answer questions regarding how many products contain organic

cotton, or how many products comprise your Common Threads (recycling) program.

Reducing cycle T ime impRoving SouRcingpRoceSSeS

going gReen voice oF cuSTomeR

WHAT IS INCORPORATING THE “VOICE OF THE CUSTOMER”? Incorporating the Voice of the Customer involves collecting consumer feedback and incorporating it into product concepts before � nal design decisions are made. Typical examples of consumer feedback include product styling, color, performance, quality and price point.

Why Is This Trend Important?Given the current economic environment, companies can’t afford to have a ‘miss’ in their product offering. A miss can come in the form of a styling issue, or overbuying of a prod-uct, or simply missing a trend. By gaining better insight into con-sumer wants and needs before � nal design decisions are made, retailers and brands have a golden opportunity to ensure their design direction is on target. Retailers have recognized that the balance of buying power has shifted to the consumer, so gather-ing feedback early in the design process is more critical then ever for retailers and brands looking to save money and reduce design time.

In addition, today’s consumers are very sophisticated and demanding – they expect their voices to be heard. In this age of social networking, consumers are blogging and sharing product information on sites such as Facebook®, MySpace® and Twitter®, giving retailers tremendous potential to collect valuable feed-back from customers. Real-time digital feedback helps design-ers to assess the latest fashion trends, so they can lower their risk when creating new product concepts. Successful retailers and brands, such as Nordstrom® and Victoria’s Secret®, have recognized that giving consumers an online outlet to voice their thoughts can lead to higher brand loyalty and lower risk in miss-ing trends.

HOW DO COMPANIES GATHER CUSTOMER FEEDBACK? The manner in which retailers and brands collect customer feed-back ranges from traditional one-on-one interactions with the consumer, to more high-tech options, such as using the Internet. Below are some ways to record the Voice of the Customer:

Forward-Looking OptionsAllowing the consumer to provide feedback on product con-cepts before the line is � nalized.

Focus GroupsGathering a group of targeted consumers for an in-person dis-cussion to ask their feedback about products being considered for the line.

Beta Programs (Wear Trials)Releasing a product early to a group of consumers who will use the product for a period of time and then provide performance feedback. Often, this group will simultaneously try out a com-petitor’s similar product for comparison.

‘Previews’Preview of an upcoming line or product offering that is released to a select group of loyal consumers. Previews can be conducted and managed through websites as well as email campaigns.

Social Networking SitesHighly popular with young consumers (teens and twenty-some-things), social networking sites are proving to be very effective at enabling a group of like-minded consumers to discuss a com-pany’s product offering and provide direct feedback. Many retail websites are building a social networking component into their sites to drive a closer connection with the consumer, while fostering brand loyalty in the process.

Past-Looking OptionsAnalyzing the success of last season’s products is a proven way to develop an overall perspective on customer product prefer-ences, potential performance, or quality issues.

Product ReviewsMany popular websites allow customers to post product reviews and rate the product’s performance.

ReturnsAnalyzing return rates – by product – provides visibility into what the consumer is thinking. Most companies use a sophisticated return analysis process to capture why the product was returned.

Sell-Through RatesAnalyzing trends of what sold well – and what didn’t, is one of the most effective methods of determining customer preferences.

Incorporating the Voice of the Customer during the design phase increases the chances of designing trend-right products.

Topic Sheet 4 of 4

“Inspired by the Internet and its potential to bring people together, brands and retailers from St. John

to Sears are diving into social media in a big way, from adding social features to their online stores to

actually creating their own online communities.”

– Cate T. Corcoran, Women’s Wear Daily, Issue 09/25/08

PLM is a proven tool for sharing product concepts in the early stages of product development, so consumer feedback can be incorporated before � nal decisions are made.

WHAT BUSINESS PROCESSES ARE IMPROVED MOST BY INCORPORATING THE VOICE OF THE CUSTOMER, AND HOW CAN PLM ENABLE THESE PROCESSES?While the Voice of the Customer should ideally be incorporated throughout the entire product development process– from initial line planning to � nal tracking of customer satisfaction– incorpo-rating customer feedback at every stage of development is not readily available today. Many companies do not have a system-atic way–other than through anecdotal stories and feedback– to gather and deliver the consumer feedback to the merchandising and design teams. However, with its data collection, global col-laboration and visualization-sharing capabilities, a PLM solu-tion can help Retail, Footwear, Apparel and Consumer Product companies to accurately gather, archive and access valuable customer input.

Here are some of the processes that will bene� t from incorporat-ing the Voice of the Customer into product development via PLM:

Concept DevelopmentDuring the early stages of planning a product line, concepts for key themes can be shared with potential consumers to gauge their interest level in different concepts. PLM provides an easy way to do this by allowing for the creation of ‘storyboards’ or

‘mood’ boards. The boards can be shared electronically or printed out to assist with focus groups or conceptual planning meetings. PLM can capture the feedback about the concept, while providing visibility for merchandising and design teams who may be geographically dispersed.

Line PlanningThe line planning process could be far more effective if the mer-chandising team had easy, real-time visibility into last season’s product performance, including sell-through rates and returns. During the line planning process, PLM provides this team with this key information. This knowledge can be used to direct the types and volume of products that will be planned for the upcom-ing season. While this feedback is not directly from the end cus-tomer, just the same, the consumers’ past spending habits provide visibility into the types of products likely to inspire consumer purchase.

Creative DesignBefore designing products for the upcoming season, designers can have access to last year’s similar product information, such as customer product reviews from the website or product trial information. PLM provides easy access to this information from the product ‘slot’ or ‘placeholder.’

As the designer designs multiple product options for each place-holder, PLM allows information, such as conceptual product sketches, pricing information, features and styling details, to be easily extracted and shared with customers for email campaigns or previews. Information can be pulled from PLM and shared with loyal customers. In addition, PLM can store information such as internal ‘voting’ or in-house feedback on the product options.

WHAT ARE THE BENEFITS OF USING PLM TO INCORPORATE VOICE OF THE CUSTOMER?The ultimate goal for all brands and retailers is to increase sell-through rates and boost the bottom line. By listening to the cus-tomer before design decisions are made, you can increase the probability of designing the right products, at the right time, at the right cost.

A less direct but equally key bene� t is the relationship that is formed with the consumer through this process. Incorporating the Voice of the Customer is empowering to the consumer, and for the retailer, it’s a savvy approach to enhance brand loyalty, translating to increased future sales.

Incorporating the Voice of the Customer in the design and prod-uct development process is relatively new to the Retail, Footwear, Apparel and Consumer Products industries. Most implementa-tions have not reached the maturity level where all departments are fully leveraging PLM, but many leaders are making great strides in collecting customer feedback and making appropriate adjustments to the process.

At PTC, we are working closely with our broad portfolio of cus-tomers worldwide to evolve our proven PLM solution, so the cus-tomer’s voice is always top of mind during product development.

The designer can review this feedback with the merchandising team and then make product modi� cations before � nal line adoption.

PLM also provides an ef� cient way to share an entire line or grouping with the end customer. Product storyboards, line sheets and catalogs can easily be created to give the customer visibility into the entire pro-duct offering and coordinating products. The consumer can provide feedback on individual products, as well as the entire grouping.

CONCLUSION

In this series, we have identifi ed four key trends that

are becoming increasingly important for success-

fully managing product development in a challeng-

ing global economy. Top retail and brand execu-

tives realize that, even in the current sink-or-swim

environment, they need to support key strategic

business initiatives by deploying Product Lifecycle

Management (PLM) as a key component to achiev-

ing and sustaining competitive advantage.

Achieving tangible results from your technology

investments has always been important, but with

margins getting smaller and smaller, making smart

IT investments counts more than ever. Leaders in

the Retail, Footwear & Apparel, and Consumer

Product industries have realized real value from their

investments in PLM. Examples of valuable benefi ts

achieved include: • Increased operational effi ciency. Product development teams

are now globally dispersed, extending beyond a company’s employee base to include supply chain partners. PLM enables you to streamline collaboration across a global environment, ensuring that trend-right products get to market faster, without sacrifi cing margin or quality.

• Reduced costs. PLM is helping reduce costs in several ways:

• Right-shoring by restructuring a company’s workforce to fi nd the optimum blend of roles performed locally with those moved offshore.

• Aggregating materials to limit the amount of excess mate-rial, ensuring that trend-right products are designed to increase sell-through rates.

• Stronger brand loyalty and increased quality. Getting to market fast to hit a market trend must be matched with product quality, so consumers remain loyal to brands. PLM has enabled com-panies to focus on improving the accuracy of product specs, so key quality elements, such as fi t, are consistently refl ected in the latest designs on the shop fl oor.

If you haven’t already invested in PLM, now is the

time to consider a proven technology investment

that directly affects your bottom line by enhancing

overall operational effi ciency, both for enterprises

and their supply chain partners. Fortunately, eco-

nomic downturns do not last forever, and those lead-

ers who have already invested in PLM are poised to

outpace their competition in these diffi cult times. To

ensure your long-term success in the industry, turn

to a proven PLM system to achieve your immediate

and long-term company objectives.

For more information about how PLM can address your business needs, please visit:

PTC.com/industry/footwear-apparel

About the Author:Kathleen Mitford, VP Product & Market Strategy, spearheads PTC’s worldwide

PLM practice in Retail, Footwear & Apparel, and Consumer Products. She is a

frequent speaker at leading industry forums and events on PLM.

copyright 2010, parametric Technology corporation (pTc). All rights reserved. information described herein is fur-

nished for informational use only, is subject to change without notice, and should not be construed as a guarantee,

commitment, condition or offer by pTc. pTc, Flexplm, and all pTc product names and logos are trademarks or reg-

istered trademarks of pTc and/or its subsidiaries in the united States and in other countries. All other product or

company names are property of their respective owners. visit pTc at www.ptc.com.