Sourcing giant Li & Fung plans to cut its apparel production cycle by more than half, to 20 weeks, by 2019 across private label and licensed brands as it seeks to keep pace with ever-changing fashion trends, CEO Spencer Fung said at the National Retail Federation (NRF) Expo this week.

While the time between product concept and retail shelves has typically been 40-50 weeks, the company last year launched an effort that calls for spending $150 million over three years to digitize its production chain. About 20-30% of its apparel and home goods are currently produced in around 20 weeks, Li & Fung’s Marc Compagnon told us. This allows its top customers such as Kohl’s to better keep pace with fast-fashion retailers such as Zara, H&M and others that have championed a faster manufacturing cycle. When Li & Fung re-upped with PVH Corp., the owner of Tommy Hilfiger and other brands, last year, one element of the agreement called for speeding the production cycle. It’s also a supplier to Global Brands Group, which sells licensed apparel and was spun off from the company in 2014.

“The end consumers around the world are fully digital, especially in China,” Fung said. “Some retailers and brands are digital natives, but for the most part everyone is still analog. We are not moving fast enough yet and retailers haven’t yet caught up to the speed at which the world is moving.”

Most of Li & Fung’s efforts thus far – the company is less than a year into a three-year process — have focused replacing shipments of actual samples with increased use of 3D modeling technology that allows for virtual fit, sampling and delivery. That can cut design approvals to a matter of days instead of months, and fitting can be completed within several hours, Fung said.

Li & Fung formed a design center as part of a “speed playbook” that has helped some customers’ cut lead times by 50%, Fung said. And shortening the product cycle to 15-20 weeks could double revenue, slash inventory and reduce the number markdowns needed to clear unsold product, he added. A faster supply chain could also move up the start of development for holiday to July or August instead of January, something that would help in better keeping pace with changes in fashion trends, Fung said.

“If you make a decision in June or July, or even October, you can guarantee you will have something that is more aligned with what a consumer wants,” Fung said.

Elsewhere at the NRF:

• Lego, as part of a restructuring last September that cut 1,400 jobs, centralized its decision-making for its retail group at headquarters in Denmark, Lego’s Martin Urrutia Islas told us. Its 135 retail stores were previously split among four sales regions – U.S., Europe, Asia and the Middle East.
• The restructuring last fall followed a 3% decline in net profit for the first half of 2017 as revenue tumbled 5%, leading the company to seek means for increasing sales in the face of flat sales in the U.S. Lego opened a two-story, 9,800-square-foot store in London last November and the company wants to speed the addition of new locations, says Islas. In addition to expanding retail stores, Lego also announced an agreement this week with Internet giant Tencent, which will developed licensed mobile games potentially a children’s social network aimed for the China market. Tencent will develop a Lego video zone on its video platform.

• Panera Bread, having been acquired by JAB Holdings in a $7.5 billion deal last year, is moving to increase its Panera at Home licensing business, CEO Blaine Hurst told us. In 2017, the brand generated about $250 million in retail sales of licensed grocery items including salad dressing, refrigerated soup and bread, up from $175 million at the end of 2016, says Hurst. Panera hired an outside consultant to help in setting strategy for Panera at Home, says Hurst. The move to expand licensing comes as JAB applies its imprint on the Panera, which plans to open 70-80 new stores this year. Panera had spent heavily upgrading its in-store and ordering technology. “We are more focused on adding value for the new owners and getting a little more disciplined in our spending,” says Hurst. “We went through rapid growth and we did a re-imagination of the restaurants and spent a lot money on technology. So what JAB is saying is ‘that is all great, but can’t we make a little more money along the way?’”

Contacts:

Lego, Martin Urrutia Islas, Head of Global Retail, +45 75 33 11 88

Li & Fung, Marc Compagnon, Group Pres., +852-2806-7942, mcompagnon@lifung.com

Panera, Blaine Hurst, CEO, 314-984-2444, blaine.hurst@panerabread.com