Vendor Interview – Comply or Die Series
Over the past few weeks, Rob Smith of WhichPLM has provided a deep insight to the ‘green’ Trident of governance looking at the issues of Corporate Governance, Environmental Regulation and Ethical Compliance for current generation multinational business. WhichPLM has reached out to a number of the key PLM vendors to obtain their view on the topic and ascertain how their solutions can leverage some of the issues faced by their customers…
Lectra – Philippe Ribera, Software Marketing Director
WhichPLM: With the recent downturn in global economies, are you finding that your customers [international apparel organizations] have recovered quicker than some other industries with less resilient products portfolios and what do you believe are your customer’s key business drivers now moving forward?
Philippe: Undoubtedly, apparel firms have been affected as all industries have. However, our customers are already starting to bounce back, as evidenced by our results in 2010. Lectra registered nearly a 50% increase in orders in the fashion industry compared to 2009 for the three first quarters of 2010.
Many of those sales are actually the result of customers looking to streamline their processes as they recover from the crisis. Lectra’s experts guide fashion professionals towards maximum efficiency and quality through all our solutions, but our PLM has proven to be the greatest asset of all through this crisis/post-crisis climate. In fact, our Lectra Fashion PLM clients have found the downturn easier to cope with, benefiting from superior collaboration and organization, and being able respond more quickly and more effectively than clients who don’t use PLM.
As they move forward, efficiency of process will be our clients’ primary business driver, leading them towards higher margins, lower costs, and reduced redundancy across all layers of the business–not just the supply chain. And I believe this will not just be a transitory post-crisis mechanism, but rather a permanent change as we enter a new era redefining the importance of value for money. Pre-crisis processes and business drivers are now part of a past to which the fashion industry will never return. More than ever before, its businesses will harvest the endless benefits of a fashion-specific PLM designed precisely for these new efficiency-based business drivers.
WhichPLM: Do you see green-socio-economic compliance as being high on their list of concerns facing the business? Furthermore, are these issues something that Lectra themselves as a business are re-evaluating?
Philippe: Yes, we see our customers’ putting green-socio-economic compliance on their top list of concerns for three main reasons: coping with the competition, saving money, and polishing their brand image.
This topic is becoming more and more a key competitive differentiator among firms. Indeed, we daily receive news from NRF (National Retail Federation) stating how AFA firms turn more and more of their products “green” and explaining how decreasing firms’ impact on the environment is a multi-dimensional effort to balance what is best for the planet and what is best for the business.
We see that this trend impacts all aspects of the product: raw material (such as organic cotton [no chemical treatment used], factories (less energy consumption hence reducing cost of production), transportation/shipping, and packaging.
At Macy’s, for instance, being “green” not only allows Macy’s to reduce their overall carbon footprint as a garment retailer which is a source of cost reduction (less energy consumption in stores by replacing 117,000 traditional incandescent light bulbs in 86 Macy’s stores with new LED bulbs – The new bulbs use about 73 percent less energy than the old bulbs), but also leverages their brand image. Macy’s packaging is also getting greener and can be disposed as compost, or simply bio-degraded in the landfill; a powerful sales argument for consumers sensitive to green behavior.
As a PLM for Fashion vendor, we already take into account in our PLM portfolio the need to support such a trend that is becoming more and more linked to the enterprise governance processes of our customers. For instance, reducing the carbon footprint of the sampling process is a key issue: this has a huge impact since the industry is used to making a lot of back and forth exchanges of physical samples with suppliers, usually located in the Asian region. Using the combination of our 3D prototyping applications in combination with the Lectra Fashion PLM platform dramatically reduces the number of physical samples and allows virtual-instant communication between the OEM and the suppliers, thus reducing the cost of misunderstanding and the back and forth travels of the physical sample.
WhichPLM: The majority of brands are operating on an international basis with the lifecycle crossing many jurisdictional boundaries. Is there a strong enough vision or clear enough structure of regulation being formed and communicated by governments and industry regulators?
Philippe: There are a lot of regulatory standards that are not common and/or shared by governments and it is a big issue for our customers to deal with such unstructured local compliance policies. For instance, for garments such as kid’s nightwear, regulatory standards are different between France, UK and US:
• Large ‘flares’ are forbidden in UK (to prevent them from catching fire by being too close to a fireplace) and there is as yet no corresponding restriction in France.
• The draw-string length allowed is not the same between those 3 countries.
• Fire regulations (flammability tests on the raw material used) are completely different by country.
A lot of work remains to be done by industry regulators and governments on AFA regulatory compliance in term of harmonization and communication.
WhichPLM: REACH, WEEE, RoHS are relatively new regulations that currently impact apparel industries (albeit mildly), how long before you expect to see stronger regulation for your industry sector?
Philippe: Regarding WEEE and RoHS, those regulations are specific to Europe and the hard goods industries such as Automotive or Electronics industries and have little impact within the soft goods industry such as fashion. However, REACH is mainly related to chemical products used during the process of manufacturing goods and so, this regulation concerns every industry.
Focusing on the AFA industry, the likely restrictions imposed by REACH are a major concern since a lot of chemical products are used to dye, treat, and print or produce fibre. This regulation imposes a tracking of the chemicals used during the product lifecycle as well as a restricted substances list (forbidden to use). Like WEEE and RoHS, REACH is a European regulation that is different from its US-government form called CPSIA (Consumer Product Safety Improvement Act). As you see, the AFA industry has already started to be compliant with stringent regulations. We expect that US-based regulations will be extended and new countries will set up their own regulations such as China.
Therefore, the main challenge will be, for our customers, to comply – for a worldwide scale product – with different country-based regulations. Indeed, the regulatory compliance topic is often used as an economic weapon to protect domestic markets. We do not expect to see common international regulations on the subject in the years to come.
WhichPLM: As an apparel specific PLM vendor, do you believe that green-socio-economic compliance has a significant role in the future development of PLM systems?
Philippe: Yes, because the compliance has to be built into the design and development of the product. In addition to the regulations, government taxes are another means to force our customers to manufacture greener and more -socio-economic compliant products and thereby, to directly impact their income statement. PLM systems will be central in strengthening production cost control while meeting more stringent regulations and forecasting the financial impact in case of non-compliance.
Looking at the Yarns, Fabrics, Trims, and Packaging they all need to be compliant to successfully complete the design of a green-socio-economic compliant product. This is where PLM Systems control and regulate the components and Bill of Materials of a product.
Of course, the compliant design must be carried over into manufacture with no lapses. This is where PLM’s collaborative design and manufacturing features are essential.
Finally, PLM provides a platform for the validation and control of Vendors, recording and disseminating information on each supplier’s credentials, not only on ecological issues, but also on important social policies across the value chain, all along the product lifecycle.
So, in summary, we see that PLM has a vital and irreplaceable role in green-socio-economic compliance management.
WhichPLM: Do you take a view that compliance should be exclusively dealt with in PLM or does it extend beyond PLM such as ERP and the much wider business strategy?
Philippe: Compliance does extend into other areas such as ERP, where the vendor compliance noted within PLM may also be mirrored. However, as the “P” of PLM stands for “Product”, any regulatory issues related to the product and, by extension, its lifecycle, must be dealt with in a PLM system.
Whilst PLM is a vital tool for ensuring compliance, it is, after all, merely a tool. A wider business strategy is the starting point for a compliant company, from which the wider use of enabling tools emanates.
WhichPLM: At what stage in the development roadmap are you with green-socio-economic compliance? Do you consider yourself as a pioneer for this sector, or are you taking the prudent approach to see how the industry initially responds?
Philippe: At Lectra we consider ourselves as industry leaders and innovators. Consequently we are pioneering an approach to green-socio-economic compliance. This involves building foundations into our Lectra Fashion PLM systems to be able to progress the compliance functionality as the requirements and regulations coalesce.
Examples of these foundations are the pre-loaded internal libraries of –
• Colors and Dye specifications
• Material Testing
• Care Requirements
When these are coupled, via our platform, with our core applications for design or garment engineering, this paves the way for significant and enhanced compliance functionalities accessible from our PLM solutions portfolio. However, some areas where industry requirements have not yet coalesced are the widely differing regulations between countries, discussed earlier.
WhichPLM: As of today, does your current solution have any features that could be classed as green-socio-economic functionality available and enabled for consumers to utilise and what benefits do you envisage those providing?
Philippe: Within Lectra Fashion PLM, we have already recorded the restricted substance list from AAFA (American Apparel and Footwear Association) or the substances of very-high concern from REACH. In addition, native access to the care symbols library or the test templates will ease the process of being certified by a given regulator such as Veritas or SGS.
This latest feature dramatically reduces the number of recalls which have a major and direct impact on both operating margin and brand image. In addition it confers an enhanced go-to-market process, being sure to be right with the product, the first time. Additional costs due to redundant work or tasks when failing compliance procedures are also avoided.
WhichPLM: Would full traceability of the supply chain through PLM simply give apparel brands the ability to distance themselves from accountability or is there still a wider need for the brands to educate and work with suppliers to ensure the ‘best practices’ are maintained?
Philippe: It is difficult to see how AFA companies can be in full possession of the information regarding compliance and then distance themselves from accountability. In fact there are several notable examples where brands and retailers have been taken to task:
• In the case of an Irish retailer, customers reacted immediately to disclosures about some social issues in their suppliers.
• In the case of German retailers, much Indian-sourced fabric and garments were banned by the regulatory body due to carcinogens in some Azo dyes.
Coupled with this, the legislation in most countries clearly tasks the brand/retailer with a duty of care, irrespective of the garment source. For instance, we have already noted that some corporate policies clearly indicate corporate guidance that suppliers must sign off and comply with (ie: forbidden child labour). Such corporate policies clearly show the increasing accountability of our customers throughout the entire value chain.
The conclusion here is, yes, there is a need to educate not only the retailers/brands, but the whole supply chain to ensure that ‘best practices’ are instituted and maintained.
WhichPLM: Finally is green-socio-economic compliance simply a new tick box for apparel brands/system vendors to promote in the market or do you see it a true investment in the supply chain delivering a lot of added value?
Philippe: It would, of course, be disingenuous to say that a tick box would not be an advantage in promoting our PLM solution. But, more pragmatically for our customers and their shareholders, not being compliant will strongly damage both the top and bottom lines of any company income statement. As we stated before, on the top line, this can prevent a company from entering into a local market therefore squeezing any revenue from the targeted country, or being late on the market which will free competitors which follow the rules to capture market share. In addition, the bottom line will likely be further affected by additional costs incurred due to taxes, recalls, or simply task redundancy, required to finally deliver the product onto the market.
So, yes, we do see regulatory compliance management as an enterprise governance process and so a true and essential investment in the supply chain. This will enable our customers to fully support their own sustainable corporate policy and achieve green and socio business development on both short and long term, paving the way for a true sustainable growth.
Read more about Lectra here… (http://www.lectra.com/plm/)