Including weather forecasts to improve fashion product profitability

An article in the Wall Street Journal (November 27,2016) titled “The Next Fashion Trend:Weather Forecasting” describes the impact of weather on fashion sales and thus the need for the fashion industry to learn about weather forecasting. It claims that the average temperature last winter was 4.6 degrees above average and thus decreased demand for heavy coats and impacted J.C.Penney’s apparel sales. In response, designer Michael Kors includes a range of fabric weights to cover the possible clothing types that may be demanded in response to weather. Others choose layered options that can adjust to the weather. Which of these options i.e., offer a broader range of weights or offer a layered solution is likely to be the best for the retailer ? Should domestic, quick response yet higher cost sourcing be included as a way to compete ? How might forecasting be linked to product uptake over smaller intervals to ensure profitability ?

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26 Responses to Including weather forecasts to improve fashion product profitability

  1. Christine Rasquinha says:

    In offering a wider selection, the company may be able to capture a wider market. However, this may also increase costs because there is not an ability to standardize product creation. If a layered solution is provided, this may need coordination amongst multiple suppliers for the materials which could also potentially drive up costs. In order to determine which solution is better, the company needs to compare the profit associated with layers versus heavier coats/lighter coats. If it would cost more to do a layered solution than to not sell a heavy or light coat then a layered solution should be further investigated. However, if the company sees the opposite is true, it may be better to have a wider product array. Though, if the company can forecast the weather and has designed ready for both paths, it can create designs more quickly; this would essentially require a lot of coordination to have materials in place for creation.

  2. Sarinah says:

    Generally, the creation of clothes has a long lead time from sourcing to manufacturing and then shipping. A reduction in forecasting errors would definitely impact the profitability of the company by having lesser occurrences in shortage or overage. Also, in a review by the International Journal of Business and Management, 80% of the manufacturing cost of the product is determined by the design or the process. One suggestion to improve on forecasting would be through “postponement”, similar to the case of Benetton in their manufacturing of a sweater. By delaying the final manufacturing, companies can modify their “basic” design to address the change in weather.

  3. Shashank Chinnolla says:

    The inculcation of changes in weather change to fashion trends is a pretty old fashioned technique. This was mostly due to the various seasons experienced by the country. But as each season itself changes over a certain number of years in terms of duration and range of temperature, the demands of the customer as well change. By offering a layered solution the retailer is giving a long term option to the customer in terms of higher return/use for the same investment. But on the other hand in areas of fast fashion offering a broad range of weights might work better for the customer as one would not want to stick to the same pair of clothes for a longer period of time. This also has another advantage of higher returns and repeated customers for the same brand. By anticipating the trend in weather the fashion brands can come up with innovative solutions by offering one stop shop for a range of weather patterns and leave the final decision to the customer as per their requirements. At the end of the day, customer loyalty would play a key factor as the cost of acquisition of a customer is rather small compared to a lost customer.

  4. Amer Nasrawi says:

    It’s hard to put all categories of fashion in two categories, heavy and layered. Some trendy fashion producers will not risk changing their brand image to adapt to new ways of forecasting or changes in the weather. However, other fashion producers have already been doing it, let alone some producers who use the layered approach as one of their core designs, but those are the more trendy practical fashion brands.
    High end fashion producers will most likely use a closer and more expensive suppliers to respond faster, but that is a horizontal competition between fashion producers on the same level.

  5. Yi-Hang Yang says:

    I would say it depends on the position of the clothes retailer in the market to decide whether a range of weights or layered design is better. For high end clothes retailers, it’s better for them to develop clothes based on different weights because only these branded retailers will be able to spend money on this particular detail. For mid priced clothes retailers, their clothes are much more affordable than those from high end retailers for customers and thus, acceptable to buy multiple clothes. Layered option suits for mid priced apparel retailers. Sourcing domestically should only be applicable for high end clothes retailers because of the higher production cost it leads to.

  6. Bishal M Ojah says:

    Layered option is a good solution and will go a long way to go towards demand consolidation and hence more accurate forecasting. But unlike normal commodity products, apparel industry (winter clothes) is mostly dominated by designs, and customers will certainly buy a good design product even if it serves a weather few degrees above or below the requirement. The use of layered design have to carefully coordinated across multiple sources which may tend to increase costs. And even then customers might not approve the layered design and sales will plummet.
    There might be many other reason because of which sales may have dipped that winter:
    1. Excess stock in customer’s house due to high sales promotions last year.
    2. No new design in the market.

  7. Emily Zhang says:

    I always think the fashion industry is not related with weather, especially high-end fashion. Those fashion people do only consider the design. What’s the weather outside does not matter to them. Low-end clothe industry would be more reactive to the weather, while price is another important factor to them. Thus, high cost-quick response supplier would not be the best choice for them.

  8. Kody Kleine says:

    There are too many variables to justify using quick response sourcing to respond to the weather. With the relatively long lead times in the industry, the company would have to start relying on external weather forecasting. This would be another forecasting area that is prone to inaccuracies. This multiplied with the companies own forecasting inaccuracies could exacerbate problems. Offering layered options would be a more viable solution and reduce overall forecasting inaccuracies. The company could effectively reduce the variations in their product offerings, which would allow them to forecast more accurately.

  9. HUNG-CHENG, CHENG says:

    If the retailer choose layered option, it can be benefited by satisfying a broader range of customer need. By choosing different combination of layered, customer can assemble the best combination of layers to best fit their need. However, the weight option might not being able to satisfy that broad of customer need. In the clothing market, majority of the sales occur before the season actually begin, thus even though the quick response can manufacture the one that customer need, it won’t be able to catch up the sales. While the forecasting will not be that accurate, it should help the company to have a preliminary picture of the market demand and plan for it which could reduced the left overs.

  10. Xiaoye Li says:

    Clothes that are not sold during the season will be salvage after the season end, so retailer are looking for the option that could satisfy customer the most and left the lowest inventory. If retailer choose the weight option, the temperature fluctuation will lead to large sale of certain type of cloth, but others may remain huge inventory left. On the contrary, the layered option provide customer different kind of choices to satisfy their need, and different types of layer can be combine together and have the same warming effect to accommodate large quantity of customer with the same need.
    If the estimation of the total left over cost is greater than the high sourcing cost for the quick response option, then the quick response option should be considered. Since it can satisfy the need for the customer while lower the inventory cost for the retailer.
    With the forecasting, clothing industry can produce the right type of clothes that customer needs and reduce the cost of left over.

  11. Eric Zheng says:

    It is definitely for fashion supplier’s benefit to incorporate weather indicators into their predictive models if the current weather forecast technology is able to capture the overall temperature trend over the next season within an acceptable tolerance. However, the cost of forecasting error can be rather high, since it will be affecting the product characteristic of the entire season, especially given the perishable nature of fashion products. A reasonable alternative should be introducing local, responsive suppliers in preparation for unexpected change in macro conditions instead of manufacturing a vast number inventory in advance.

  12. mfoust35 says:

    Looking at how the weather affects demand of winter clothing, having less SKUs (less inventory) would be an ideal situation. In this case, the layered options for winter clothing would be the better option than carrying a broader range of weights which make the retailer have to hold significantly more inventory of winter clothing. It seems that it would be wise for domestic, quick response sourcing to be used as an ideal way to compete if the designer is choosing a range of weights for their clothing so that the designer could allow the retailer to keep less SKU and less inventory but still be responsive to demand. Furthermore, accurate weather forecasting would allow the retailers to hold less inventory if the designers utilized different weight options and correlated their weight options with the weather forecasts, colder forecasts=heavier weight options. Of course, this scenario would require quick response sourcing so that the correct SKUs could be quickly transported to the retailer as the temperatures trended colder. Now the layered options for clothing could avoid the need to accurately forecast the weather and potentially not utilize the higher priced quick response sourcing since there would be 1 SKU that can adjust to the weather. But, the real question is will the customer like these layered options instead of traditional coats? That question remains to be answered.

  13. Jutong Cui says:

    The weather forecasting will have higher uncertainty and error if the lead time is great. Hence, if there is a relatively long lead time about 12 months in apparel supply chain, forecasting can’t work as a guidance of manufacturing and sourcing. Additionally, the taste of customers changes dramatically these years that they care more about fashion but functionality. Building up quick responsive system will benefit the retailer of having a more accurate forecast of fashion trend but not the weather. High-end retailers who try to lead the trend but not to follow would focus on innovative designs. While for retailers who try to follow the newest trend, due to the intense competition in this segment, the benefit they get from quick response supply chain may outweigh the higher sourcing cost.

    • Man Lu says:

      I agree with you. Longer lead time, larger forecast error, especially in apparel supply chain. The trends of fashion are changing quickly. The quick responsive system can reduce forecast error and reduce the lead time.

  14. Kyle Fithian says:

    Offering a layered solution is likely to be best for the retailer. Having a broader range of weights will require a much higher inventory and more risk of forecasting error. The layered solution will allow for much less inventory and can help reduce their costs. Quick response sourcing can be considered, however, designs and planning will need to be incorporated prior to the season. The retailer will still need to plan for the production of heavier garments, but give it a go/no-go decision based on early weather forecasts.

  15. Xiaodan Liu says:

    The fashion market can change almost everyday, thus the less forecasting error will definitely brought higher profit. The choose of having a brand range of weighted options sounds like would provide better options when facing the weather changing, however, this will incur a huge material and inventory cost to keep those material on hand. The best choice for quick fashion would be having the quick response system. With the quick response to dealing with the customer’s taste, quick response will better deal with a serious of changes to better meet the demand even there is a demand fluctuation occur. Instead of having too much material inventory on hand, quick response will lower the inventory cost plus give better demand satisfaction.

  16. Adam Davis says:

    Using a layered solution seems preferable for the retailer because it can utilize standardization to mitigate what would be complex guesswork to produce the different weights needed to suit every customer’s taste, thereby also decreasing the per-unit cost of the winter wear.

  17. Murilo Siqueira says:

    As others mentioned, adding weather forecasting would include another very unpredictable variable for the forecasting process, probably leading to a worse result.
    If one has the opportunity to use the layered solution, it is not only better for the retailer and producer, because they would be covering a wider range of specifications with a single product, reducing the number of needed SKUs and thus, inventory level, but also better for customers, for acquiring a more versatile product, with a longer life and that can be used in more situations.

  18. Xin Wen says:

    I agree with Emily’s point that weather has no influence on high-end fashion. But most people in real life care about the weather. So the weather does a lot of influence on clothing demand. Quick response means higher cost. So for the small retailers, I would recommend having a broader range of clothing to satisfy the demand with variation.

  19. Milind Patel says:

    I agree with Adam’s point in that a layered solution allows standardization. The final product can be postponed essentially at the retail store which will help with a more accurate forecast. I don’t think a higher costing quick sourcing strategy would be useful for most retailers. Most clothes bought at retail stores like H&M, JC Penney, Macy’s, etc. are made at low cost overseas, so having a safety stock for a higher service level would not be as costly as relying on quick domestic sourcing to cover stockout.

  20. Amitesh Mishra says:

    No company is good at forecasting and adding another variable might just complicate things even further. But then companies have been performing by managing risks associated with forecasting inaccuracies till now.
    From a company perspective the question that needs to be asked is what are their core competencies.
    Is it an optimized supply chain? Is it variety of SKUs? Or is it a fashion trend setter? Based on that it would depend for the company to choose between a layered option or having a range of fabric weights. From a supply chain perspective having less SKUs looks to be the solution but the industry that we are talking about is fashion and having a variety is an important factor.
    The other question that needs to be asked is does domestic sourcing, which would reduce lead time by multiples, help in increasing the market share to such an extent that the extra cost associated with it is balanced or not. Being quick and responsive is something that helps apparel companies’ top line.
    Forecasting weather is another variable but if it can incorporated into optimizing the supply chain function for apparel companies then it could improve profitability.

  21. subhash katragadda says:

    Current day business is becoming data driven in every possible way, new technological advancements are enabling that drive in effective manner. Weather Forecasting is not a new thing and today’s technologies have enabled firms to get reliable forecasts for longer time period of time but despite all these accurate forecasts, fashion firms can only be successful when customer is given an option to choose form and i believe layered clothing with a fashionable design really gives customer a choice not only when buying but also when he is using it if companies are able educate the consumer of the same it would be a real seller.
    Layered products also gives the fashion industries a degree of advantage in postponed production and multi-season sale, retailers can themselves restructure the layers based on season if the products are designed with right material that could be across seasons.

  22. Koustuv Pal says:

    The layered option will be a better option obviously because the retailer has to keep less inventory which means lesser inventory holding costs not particularly because of lesser SKU’s but because the product can be more saleable because it eliminates the dependency on weather fluctuations.
    Fashion apparels involve innovative and high margin products which requires a responsive supply chain. A responsive supply chain may incur higher costs but the higher margin should more than offset the costs involved.
    Accurate weather forecasting can help retailers to stock up only on apparel which will be on demand just because the apparel is the right fit for a particular Fahrenheit range.(We are assuming that the apparel has variety in terms of sizes and colors).Because we are stocking up keeping the weather in mind we will have less holding costs, lesser cost of lost sales and hence greater profitability.

  23. Saravana says:

    One of the major challenges that the fashion industry is facing is forecasting. Fashion industry is characterized by higher forecasting errors which is a result of higher number of new SKU’s that contribute to 85% of the sales while other regular SKU’s contribute to balance 15% of sales. New SKU’s replace the older stocks on shelves much faster. Fashion apparel companies such as Lululemon Athletica, Under Armour, Zella etc focus on low volume, high price sector. Most of these companies procure products from outsourced manufacturing facilities in Asia (due to low cost) and sell them in USA, Europe, Australia, Hong Kong etc. Any company that has a responsive supply chain would maximize its profits. Responsive supply chains can be designed by using information from the retailers about customer’s feedback during early days of the season (or from sales figures of similar products in previous season) and thus revise production quantities accordingly.
    Offering clothing options closer to weather conditions would definitely enhance sales volume, but matching weather forecasts is more difficult especially in cases where lead times are higher. Hence, domestic production with a lesser lead time even at a higher cost would be the best way to maximize sales volumes. I suggest that these companies should maintain contracts with at least two manufacturers (one with lesser lead time but with higher cost, other with higher lead time but with lower cost). If during the season, weather conditions are not matched with clothing options then domestic manufacturer with lesser lead time can be utilized to respond faster. Production quantities of manufacturer with longer lead time can be altered accordingly. Weather forecasts are more accurate for shorter time horizon. Hence, responsive supply chain is a certain need for fashion industry.

  24. Vinay Gundam says:

    If apparel stores choose a range of clothes with different weights, they have to maintain inventory for each of them. Given a season, based on the weather only few cloth types will have good sales and considering how quickly clothes go out of fashion these days, keeping a lot of inventory may not be profitable. Cycle time from design to retail stores for most apparel will range from three to eight months and predicting weather much before the actual season will not be accurate and any decisions based on weather predictions may not work. I think a layered solution is more appropriate to adapt to the uncertain weather changes. Retail stores should find suppliers who can respond quickly to the dynamic requirements of customers through buyback agreements and moving inventory to more favorable weather destinations.

  25. Senthil says:

    For retailers, offering the layered option is best choice because the layered coats can be adjusted to any weather conditions and will have less forecasting errors. It is easy to procure from suppliers and reduces the number of different product types. However, customer preferences about the layered options should be considered while making the demand forecasting. Most of the people prefer to have two or three different weight of coats to adapt to different winter temperatures. So, these customer category would not buy layered coat. They will be looking for a particular fabric weight coats.
    The apparel industry has to consider the weather forecasting while deciding fashion clothes for the season. Because, customer preferences change according to the weather conditions experienced. So, apparel companies should include weather forecast insights in their decision making process and manufacture a range of fabric weights coats to include possible product types that are expected for the upcoming season. To do so, consider outsourcing to domestic suppliers. They will have low lead time and more information can be obtained about next season if we order near to the season to a domestic supplier. This will reduce salvage products and stock outs, thereby improves the competitiveness of an apparel manufacturer.

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