Optimizing Fashion Supply Chains between Turkey and the Netherlands Kees Verweij Senior Logistics Consultant, TNO Logistics Clustering Conference Istanbul, October 25-26, 2007

Logistics strategies for EU fashion sector Around 1000 European DCs located in the Netherlands Many fashion EDCs: e.g. Liz Claiborne/Mexx, Donna Karan, C&A, We International Trend: product life cycle of fashion articles is decreasing: from 6-9 months to 3 weeks-2 months EU fashion retailers need reliable fashion manfacturers

European Distribution Centers in Netherland

Logistics strategies for each article

1.Design/manufacturing based on demand from shopping outlets 2.Quick design decisions in the head office 3.Short throughput time of production 4.Cross-dock function of Dutch Distribution Centre 5.Quick sale of fashion articles in shopping outlets Logistics for fast fashion

Focus on lower logistics costs Critical success factor in fashion: focus on lower integral logistics cost instead of sub optimizing parts of the chain Method: Keep stock of low value upstream in the supply chain at manufacturers

The supply chain

Lay-out Zara European DC Zaragoza, 135,000 m 2 Sorting of boxes 33% Sorting of hanging garment 67% Lay-out not to scale Storage/picking of small/special articles Unloading of boxes (33%) Storage pallets/boxes Female Storage pallets/boxes Male/Kids Sorting of boxes Selection/merge area box sorter Mini load area (23 m high, 5 cranes) Sorting center complete/ break down boxes Manual unpacking of articles article sorter Sorting ovals of articles Sorting of loose articles in box to shops Sorter for boxes to loading area Unloading of hanging garments (66%) Aorta sorter hanging garment Storage of hanging garment (1- 2 days of storage) Stock of hanging garment (at first floor above 1-2 days buffer) Sorting of hanging garments Loading of trucks with boxes/hanging garment

INDEX 10.Sorting ovals of articles 11.Sorting of loose articles in box to shops 12.Sorter for boxes to loading area 13.Unloading of hanging garments (66%) 14.Aorta sorter hanging garment 15.Storage of hanging garment (1-2 days of storage) 16.Stock of hanging garment (at first floor above 1-2 days buffer) 17.Sorting of hanging garments 18.Loading of trucks with boxes/hanging garment 1.Storage/picking of small/special articles 2.Unloading of boxes (33%) 3.Storage pallets/boxes Female 4.Storage pallets/boxes Male/Kids 5.Sorting of boxes 6.Selection/merge area box sorter 7.Mini load area (23 m high, 5 cranes) 8.Sorting center complete/ break down boxes 9.Manual unpacking of articles article sorter

Late design & ordering implies less sales Business case Zara: every 2 weeks 50% of shop fashion collection is new this leads to less sales and more profit

Commitment

Logistics costs % in different European sectors (2003) Fashion retail supply chain is very cost sensitive Stock Administration

Three different transport modes NL TK

Use of rail/shortsea Total cost door-to-door Distance

Economic Trade-Off analysis Lower transport costs by rail and short sea should off-set against higher handling and pipe line costs

Pipe line

Times of transport: Road

Times of transport: Short sea

Evaluation of the multimodal system Main benefits 1. Savings on logistics cost Transport cost of rail/short sea are lower 2. Potential for bundling flows Bundling LTL flows through cooperation 3. Extra flexibility Potential use of 3 transport modes Main disadvantages 1. Longer pipeline times Extra activities can lead to longer pipe lines 2. Changing customer demands How can bundling be achieved with changing customer demands 3. Change in logistics processes Does the use of multimodal transport result in logistics changes?

Comparison of transport modes Price index Average transit-time (days) Freq.Q (000 t) Load Unit Flexib. Road100,007Daily13Trailer 85 m 3 High Rail87, /w-Container 45 ft low Short sea 52, Many/w611Container 20/40 ft low

Hybrid network for changing fashion demand patterns Demand Pattern Fashion Peaks and urgent shipments Guaranteed demand

Managing the Fashion Chain 1 supply chain orchestrator (4pl) FCC: Fashion Consolidation Center FDC: Fashion Distribution Center

FCC Terminals Manufacturer fashion Manufacturer basics Manufacturer trendys Supplier mixed goods Warehouse retailer Retailer Optimal supply chain