Rapid response, or what logisticians prefer to call quick response (QR), is another approach to supply chain management.34 It appears similar to, and is often compared with, ECR, but is really quite different. QR originated in the early 1980s in the fashion industry, in which it has seen its greatest development. Many of the original developments are attributed to Benetton, the knitwear retailer. Many of the later ones are due to Giordano, a retailer that perfected QR from the late 1980s to the early 1990s. Since 1993, Giordano’s methods have diffused considerably in the industry and are now practiced by retailers such as Gap and The Limited.
In some ways, QR is like ECR. The fundamental pull system idea-let the consumer tell the entire channel what to make and what to ship, then do it quickly-is the same. And the emphasis on inter firm cooperation, data analysis, data transmission, inventory management, and waste reduction is the same. The fundamental difference is in the volatile, unpredictable nature of what is being sold. For FMCG (fast-moving consumer goods) categories, such as toothpaste, consumers know well in advance what they want and what they don’t want. ECR enables them to tell the retailer and the suppliers readily.
In fashion, consumers don’t know what they want until the moment they are ready to buy it. They don’t know what will be fashionable and whether the next fashion will appeal to them. In fashion retailing, consumers see and try an item then form an opinion. And they change their minds readily. Benchmarks are difficult to find, in part because of lack of standardization (e.g., of sizes) in the industry. Routinely, retailers put out a line of clothing, then. Discover consumer reaction. If the sizes tend to run bigger or smaller than normal, the retailer will have the wrong size assortment. If one fabric or color or variation pleases more than another, retailers will find themselves with too much of one item and not enough of another. And fashion is perishable Consumers won’t wait months for restock of a desirable item, and items that sell poorly must be marked down quickly in order to get rid of them at all.
Historically, store buyers forecasted fashion demand well in advance and committed to orders, sometimes six seasons before the items would be sold. This is a push system (make to forecast). Over time, consumer fashion tastes have become so difficult to forecast that many fashion retailers have adopted the opposite strategy: Try something in a small wav and see if it works. If it sells, stock more and quickly. But stock how? Manufacturers need lead time. By the time fashion is discovered, it’s too late to order up more.
Here is the impetus for quick response. The essence of QR is in manufacturing. QR involves keeping manufacturing flexible as to what to make and how much to make. In contrast, ECR is more focused on how much to make and when to put it into a ware house. There is no need to keep manufacturing flexible to produce variations of toothpaste, and there is little harm in stockpiling it for a while. Demand can be steadied (e.g., by restraining promotions). Heading off production surges But it is critical to keep clothing fabrication flexible to produce more of the latest hot dress or jacket, in this season’s hit colors and fabrics, in the sizes that have proven popular. Production volume needs to be scaled up or down dramatically, and setups from one item to another should be quick. The items produced should be out the factory’s door and to the customer rapidly.
Thus, whereas ECR focuses on shipments and promotions, QR focuses more on manufacturing. QR firms are heavy users of flexible manufacturing techniques. Computer-aided design and computer-aided manufacturing (CAD-CAM) occupy center stage in quick response programs. And a good deal of emphasis goes into keeping the components flexible. Benetton, for example, is famous for waiting until the last minute to dye its wools, after receiving early information from pas (point-of-sale) cash registers about what colors are selling.
Much of ECR is about pricing and promotion. This does not figure at all in QR. The objective is always the same: Catch the fashion and charge highly for it. When mistakes are made, which should be a frequent event, catch the mistake soon and mark it down quickly-but modestly. Then mark down again what is left-quickly. In this way, drastic markdowns are reduced: These become necessary to move out merchandise that has been around well after people realized they didn’t want it.
In short, QR is not about merchandising and inventory. It is about manufacturing and timing. Another difference is that ECR always seeks to minimize transportation costs. This is fitting in FMCG: Toothpaste and foodstuffs are low-margin items’ that don’t pass out of style while in transit. Fashion goods are the reverse. Hence, many channel members in the fashion industry willingly airfreight the hot sellers-as soon as they know what those are and to save time, suppliers locate near designers and final points of assembly for the most fashion sensitive categories
Net, ECR is about demand that consumers know they will have. QR is about demand that consumers don’t sense themselves until they’re at the point of purchase. Both are pull stems that respond to a consumer. But ECR focuses on being efficient (holding down physical costs), whereas QR focuses on being quick; that is, fast to produce what the market has just decided it wants.
Quick response is an objective. In general, the key is to have access to POS data, then to use the information to cue an array of shippers to pick up and deliver within a network of flexible factories. These factories can be individuals working at home. The transportation network shunts raw materials; work in process, and finished goods around through various steps design, pretreatment of fabrics, cutting, sewing, labeling, quality control, fulfillment of orders, and shipment of packages. Firms have multiple suppliers, some of which act as backup systems, and others of which check on work in process.
These intricate arrangements drive off of POS data. Those with access to the data are in position to trigger frantic waves of manufacturing once a “winner” has been noticed.
The speed required to respond to fashion puts a premium on EDI (for fast transfers), CAD-CAM (for changing what is being manufactured), excellent P_S systems, standing arrangements with members of the supply chain, and standardized identification. One of the most difficult challenges to QR has been implementing a standard system of Universal Product Code (UPC) and scanning.3.5 In contrast; the grocery industry had already made great progress on this problem in the 1970s, making ECR easier in the 1990s.
Given the intricacy of the production process, QR puts a very great strain on the myriad fashion channel members, particularly the subcontractors in manufacturing. Trusting relationships and open information transmission are difficult to keep up among so many players. The uncertainty of the demand environment also puts a strain on the system, making it hard to issue guarantees.
Hence, some vertical integration is commonly used to achieve QR in fashion. It occurs in two functions: design of the merchandise and retailing. Design is wholly owned because it is the key to manufacturing. Retailing is wholly owned in order to have stores to serve as test sites, observatories, and transmitters of fast, thorough information. Benetton, for example, is largely franchised but keeps some stores under company ownership. And with their stores, integrated providers such as Gap can quickly alter prices, raising them to stave off stock outs on surprise winners (while rushing more into production), or lower prices early, before it is obvious to consumers which items are losers. This is quick response indeed.
How quick it has to be depends on how fashionable the goods are. The less demand is influenced by fashion trends, the more the supply chain looks conventional. For moderately priced staple clothing, for example, a hyper responsive supply chain is neither necessary nor profitable. A good system of regional warehouses will suffice to fill in surprise inventory gaps, and long lead times for production and transportation are employed to cut costs without penalty.
