Fashion moves fast, and fashion retailers need to be nimble to keep up with trends and manage profit targets. While the designers and merchandisers are focused on delivering what customers want to wear, how do you watch and grow the bottom line?

Our client knew they had opportunity to improve overall margins but decision-makers lacked access to complete information to drive timely decisions. Senior management’s objectives were to produce more of the styles consumers want, in quantities better aligned with demand, at lower cost. With 500,000 styles made by third-party suppliers around the world and designs changing by the season, a significant amount of data was being generated however systems and processes couldn’t keep up.

Analysis Team delivered a solution that assembled critical data from disparate sources such as product planning and ordering systems as well as the company’s data warehouse. Automated integrations keep data up-to-date and calculate key metrics on product mix, cost, margins and variances from total brand down to the product style level.

Through an easy-to-use reporting interface, information now at users’ fingertips includes cost of materials, labor and freight by country and by vendor for each style across the enterprise. Seasonal product and assortment plans are brought together, enabling planners to compare to historical trends and optimize mix, revenue and margins for the upcoming season, before making supplier commitments.

The solution is used by the company’s planners, merchandisers, field offices and brand presidents to make better decisions during each season’s planning cycle, not merely to compare results after-the-fact. The financial impact was clear from the first season after the new system went into use:

• Improved speed, consistency and visibility of product and supply chain performance measurement, resulting in
  • Optimized product mix decisions
  • Improved ordering and inventory management
  • Production shifted to lower cost suppliers
  • Better supplier performance management
• Total gross margin improvement of over $300 million in the first year, delivering over 100-to-1 return on investment
• Continued margin improvement that reached a total of about $1 billion after two years, by the client’s own internal assessment

Our client is a Fortune 500 company that had huge potential for improvement, but this story is also relevant for mid-market companies and in other industries too. How much financial opportunity is hiding in your product or service gross margins?