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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70 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.

  26. Bhartula Peeyush Sharma says:

    I would like to weigh the pros and cons of both options: range of fabric weights and layered options. Given the high volatility of the fashion industry, for the layered options solution, the customers would benefit by being able to use the product for a longer term which would give them a higher return on the purchase. It also gives the retailer the benefit of holding lesser inventory and a reduced forecasting error. However, in this case, coordination between different suppliers for materials could be complex and much more important than the other case and hence increase the overall costs. Looking at the range of fabric weights, this would work better, especially for the high-end products as customers generally do not want to keep the same clothes for a long time. This results in higher turns and repeat-customers along with higher brand loyalty. Thus, a financial analysis comparing the two options would need to be done in order to determine which gives the highest ROI. Regarding forecasting, even though adding a new variable of “weather changes” increases the complexity of forecasting, it needs to be done as the preferences of this industry is highly correlated to weather conditions. I agree that the lead time of this industry is quite long and thus forecasting errors can be very high, especially if the weather factor is introduced. However, the domestic sourcing option would make this easier as that improves the flexibility of the system while reducing lead time and improving the forecasting accuracy. Thus, benefit from the quick response could outweigh the higher cost. Customer loyalty is key in this business and if the customers’ preferences are not met, it can destroy the brand and make it very hard to recover from. The cost of customer acquisition in this case has to be compared to the cost of losing a customer which would help make the final decision.

  27. Yun (Winnie) Lo says:

    From my point of view, I think offering a broader range of weights would be a better choice. Since fashion industry is a high-paced industry and the life cycle of products are generally shorter, offering a broader range of weights would give the customers more options. It would also be a long-term strategy because it is less dependent on the weather. However, this would be a even better strategy if the company is doing weather forecasting. With weather forecasting, the company has a better understanding of what kinds of clothes the customers are less likely be interested in. As a result, the company can reduce the production of those kinds of clothes to reduce the inventory. This will save the company’s cost and increase the profitability.

    • Mark Messick says:

      Winnie,

      Would you agree that by offering different weights of products could extend the product life cycle. Now a fall jacket may be heavy enough for most of winter and maybe even spring. So if designers could use a material and design that transcends seasons. This would reduce the risk of keeping the multiple weights while keeping the unique jackets over a single multi-layered jacket. What are your thoughts? Do you think customers would be willing to wear materials like wool in fall and spring?

  28. Neelesh Prakash says:

    I feel retailers must offer different options to customers so that the customers don’t go to other retailers as switching cost for them is very low. To evaluate the better options among layered or broader range of weight must be carried out. Further response from both options from the customers must also be evaluated. Broader range of weights increases the inventory at the retailers end whereas layered helps them to save shelf space. They also should focus on local customers in case of high demand of a particular type of fabric as cost of customer acquisition is very high, The factor of weather should definitely be given some weight while making forecast for future demand as it has become very volatile in the recent years and with the increased global warming and other natural factors it will continue to be the same.

  29. Derek Curtis says:

    I believe that offering a layered solution would be best for the retailer. Although going with this solution will involve increased coordinating complexity amongst suppliers, demand forecasting inaccuracies would be minimized, and the retailer would not have to order as much and incur such a large inventory holding cost as they would with the other option. However, I do not think that quick response would be appropriate for the layered solution. One of the purposes of quick response is to decrease inventory holding cost, and quick response would be more appropriate to implement if the retailer chose to offer a broad range of weights, where holding costs would be more of an issue. Additionally, weather forecasting is more accurate in relation to shorter time horizons. Thus, in the case where a broad range of weights is chosen, having quick response will allow the retailer to have more appropriate inventory on hand and increase profits.

  30. Siddhanth Rajagopalan says:

    In my opinion, i feel that keeping layered options would best benefit the customer as he/she is more likely to mix and match various options and would even last long for certain customers in other seasons as well. However, keeping layered options would lead to a lot of coordination issues as Derek has suggested above. Restricting certain items as quick response clothing with respect to the fashion trends would best benefit the retailer in terms of cost. However, having said that it is crucial to consider weather forecasting in demand planning for the broad range of weights as the customer is more likely to go for heavier clothing during really cold seasons than layering options. In this case, the retailer benefits in terms of inventory planning but has to account for the holding costs during that period. I believe that a trade off has to be made in terms of costs and profitability when it comes to choose between layering or broad range of weights option. The former can be attributed to quick response sourcing for select products based on latest fashion trends and other materials under this category could be sourced normally based on the demand forecast. During cold, snowy or windy seasons, having a broad range of weights could go up in priority based on recent shopping trends and competitor analysis of selling similar products.

  31. Carlos Mario Pelaez says:

    A retailer will be obviously better off by having a broad range of products to offer to the customer so he/she might select what best suit for the occasion. This might hurt the retailer by the large amount of stock from a specific garment that was too “heavy” or one that was to light for this winter. Layered products might be a better idea to retailers at this moment were global warming is hitting hard and unexpected changes in temperature happen.
    Forecast should be implemented by this brands so they might have an idea of whats coming and what should they be prepared too. Cities like Miami or Chicago will know that they’ll need swimsuits or big coats respectively at some point of the year so for some cities like these ones forecast are easier to produce. Layered products might help this retailers in the sense they could be used in different range temperatures but they might also have an impact on fashion. Lets remember designing garments that are layered might look weird at some point and some big efforts should be done there. Again, forecast can help retailers by showing them what is expected but they also should be ready for this sudden temperature changes and have a responsive supply chain that could help them mitigate those extra costs incurred by the postponement of products or lead times.

  32. Adam McKinney says:

    Even though this is an interesting way to tackle the issue of forecasting clothing trends and supply requirements, manufacturers and designers would most likely be best suited with the second option of offering clothing that comes in a layered design. This allows them the flexibility if weather forecasts are wildly inaccurate. If they plan on an extremely cold winter and plan on producing their garments with heavy and warm material they could be setting themselves up for failure if it ends up being a mild winter. However, if they plan their designs around a layered, modular approach to clothing where layers can easily be added/removed then regardless if it ends up being a cold or mild season they will be set up for success.

    • Carlos Mario Pelaez says:

      Adam,

      I agree with your statement that layered designs will be better for retailers in these times of weather changes. In my personal opinion this type of layered fashion might also affect the industry due to its constraints by having to add layers. I agree that forecasting will be easier but how much will the retailer or designer will be giving up by doing all or most of its garments like that? Success in forecasting can be achieved, but popularity and fashion designs could be dropped and retailers might lose customers.

  33. Kaiyue Jin says:

    From my perspective, layered strategy is a better choice. First, changing fabric means that manufacturers need to procure new various fabrics, this process will increase all holding cost, procurement costs and operation costs, and the complexity of production can increase quite a lot in this process. On the other hand, if the manufacturer choose layered ones, they can make the different layers can be reversed based on various weather. As for respond to sudden weather change, I think forecast for a period of time is important, if the forecast shows that the weather change won’t be a temporary one, then it is important to order more stock before the demand change really happens.

    • Mark Messick says:

      Kaiyue,

      Do you think that customers would be willing to purchase one more expensive jacket (the layered option) over a cheaper single layered jacket for the current weather conditions? Because it is fashion, do you think customers would be concerned with committing to a more costly option that may be “out of style” next season?

  34. Xin Liu says:

    Weather forecasting do play an important part in improving fashion product profitability. Thus, suppliers should pay more attention to Weather forecasting and figure out the correlation between weather and sales. For retailer, it is very reasonable to choose some stable suppliers and retain some safety stock to react to uncertain weather. What’s more, quick response yet higher cost souring should be included because higher cost also brings retailers a good profit only if they can find out an optimal trade-off. There are many new technologies to help us forecast weather such as machine learning and artificial intelligence, we can take advantages of these tools and develop some model to gain more profits.

  35. Mark Messick says:

    I think the importance of weather forecasting goes beyond just the retail cloths industry. It seems that a layer approach could be beneficial for retailers, but I think there is also a benefit to avoid a jacket for all weather variants. Reading the WSJ article, it seems that the designer is trying to use materials from traditional seasons in other seasons, specifically wool in spring. This approach would increase the selling season and allow for retailers to buy lighter weight products in winter and heavier weight products in fall. By breaking down these traditional selling seasons, the designers/manufactures can blur the retailers fears of having excess inventory.

    I think that a more responsive approach to weather changes could assist with demand changes. If designers try to forecast the weather for the entire US versus a single state, aggregation should decrease the error. While this error could also be reduced by limiting the number of products through more flexible products, this option would limit the number of products a customer purchases. But, if the manufacturer or retailer can move the inventory as weather develops and changes, it could take advantage of sharp changes in demand. Of course an umbrella is worth more during a rain storm, so jackets are worth more during their designed temperature range. This means the weather forecasting and tracking doesn’t stop at design but continues through distribution.

  36. Yash Kothari says:

    I think first we need to consider that there are different customer segments in the market and that Michael Kors targets the high-end consumers. High-end consumers can afford to buy different clothing for one single season whereas consumers with lower income group would buy only one cloth fits the full season type of a product. So I think that both the options are equally attractive and that the retailers should keep the kind of possibilities considering the nature of consumers the retailer caters to. It all depends on the consumer segment which you are targetting that can decide which type of a response and sourcing option to use. If the retailer is targeting high-end consumers, quick response is a key irrespective of a higher cost, whereas if the retailer is targeting the low-end consumer, efficiency and lower cost per unit is the key. Better forecast of weather conditions help the company plan the quick responsiveness along with efficiency making it a win-win situation for all the stakeholders and thus the better the forecast accuracy, the lower the costs regarding variety, stock-outs, higher inventory, etc. Therefore, improve the forecast accuracy to enhance the revenues & profits.

  37. Sai Krishna Jayakumar says:

    The layered option definitely seems to offer a better solution but in the apparel industry, I think ‘fashion’ might be a key determinant of customer preferences and will play a critical role in influencing customers’ choices.

    Often, the competitiveness of a company is measured by the competitiveness of its supply chain and those companies which develop Hau L. Lee’s ‘Triple-A Supply Chain’ will have an edge in the market. A supply chain’s agility, adaptability and alignment provide a competitive advantage, the benefits of which outweigh the cost of maintaining such a chain.

    The short lifecycle of apparel products makes it imperative that forecasts for these products be accurate. But going a step further, we need to examine ways to improve the accuracy of the forecast. As mentioned in the article, one way is to analyze demand in the context of changing weather conditions. Another way is to see how we can leverage product adoption/uptake rate as a way to improve the forecast. There are mathematical techniques which can be used to model a product’s lifecycle and its uptake rate at specific points of time after launch. I believe if we’re able to estimate the adoption rate, it’ll go a long way towards improving forecast accuracy and thereby the profitability.

  38. Mitesh Somani says:

    Firstly we need to understand the difference in both the type of apparels. A layered option is one which could be used in various levels of weather while a single heavy option is only usable in very cold weather so consumer might have to get multiple warm clothes for various weathers. But on the other hand, a person buying Michael Kors would not be wearing a same apparel in all the weathers conditions and can afford to buy different warm apparels for various level of cold weathers. So, clearly there is difference in the segments targeted by both the options. Talking about the weather forecast, yes the apparel industry should consider doing that but the thing to consider is how long before they have to see the forecast so that they can design a new product for that weather, produce it and make it available in the market for the consumer. And the consumer should get enough time to realize that he/she is going to need that product and should buy one. Can the weather forecast of such a later date be so accurate?

  39. Nachiket Joshi says:

    A dual sourcing strategy can be used here in an attempt to minimize the impact of weather variation on the sales volumes. The initial weather forecast can be used to predict the average seasonal demand for each type of apparel. The manufacturing for this forecast volume of apparel can be outsourced to get high profit margins. At the same time arrangements can be made for sourcing domestically at higher costs to fulfill the additional apparel demand, which depends on the weather. The apparel not in demand can be sold at promotional rates to ensure that the company does not have to hold any inventory until the next season.

  40. Chiao-Ya Lin says:

    I consider that offering the layered solution is likely to be the best for the retailer. Within ten years, weather changes dramatically, and it’s dynamic every day. Moreover, the most important thing is whatever retailers forecast, the forecasting will never be accurate. The layered solution offers higher profit margin than a broader range of weights does. Retailers provide more options, meaning that they carry higher cost and risk. Besides, the layered solution is a kind of risk pooling method. The layered solution gives retailers buffer reacting the weather changing and ensure the essential profitability. Of course, retailers need to provide a proper response to weather changes. How not to be over respond is another issues retailers need to deal with.

  41. Xiaosi Zhu says:

    Weather forecasting is sure important for the fashion industry, it will secure the design of each season could meet customers’ need and sell more products, therefore gain more profit. However, due to the unique seasonality of the fashion industry, the products usually could not sell again next year after it launched to the market. So the accuracy of weather forecasting and flexibility of manufacturing play a significant role. The company could collaborate with weather forecasting company to build a system or get a continuously accurate trend of weather for the upcoming season before or during the production of next season products. And also provide an alternate design for unexpected extreme forecasting error, and make sure the manufacturer could have enough reaction time and capacity facing the emergency change.

  42. Nobuhiko Kobayashi says:

    Weather forecasting has become an important resource for forecasting demand for retailers. For example, Japanese convenience stores use daily weather forecast to determine the order quantity of foods and beverages.
    In the same way, amusement park such as Universal Studio also uses weather forecasting for estimating the number of visitors. Precise demand forecasting allows retailers to moderate the inventory level and cut huge cost. The problem with this case is that the lead-time of the apparel industry is much longer than convenience stores and amusement park. Thus, the variety of layers strategy might work because the company can adjust the product for meeting the demand.

  43. Jiangxu Chen says:

    Providing a tiered solution should be a better option for retailers. Due to the high uncertainty of the weather, even the most advanced weather forecasting system still has a large error, so the offering a wider range of weights cannot be used as a good choice. With a tiered solution, you can have a lot of flexibility, customers can choose by themselves, and retailers are more targeted. Domestic, fast-response and higher-cost purchases should be the focus of retailers’ attention, and the difference between domestic and international environment and consumer habits will have an impact on retailer decisions. The quick response tests the retailer’s mobility and is able to make timely adjustments to the market environment. If the capital conditions are sufficient, a higher-cost procurement plan will certainly have a greater advantage in the market, because it can allow suppliers to obtain more profits, so these are competitive means. If it is necessary to predict the product absorption rate in a short time interval, the corresponding laws can only be studied through historical data, especially in years with similar weather conditions, which give greater sensitivity to data analysis.

  44. Logan Aven says:

    While this is a interesting take to try and predict sales it is notoriously hard to predict the weather as well. So if this is to be taken seriously then they should start hedging there bets against every outcome. With that in mind i would just try and figure our weather layering or different SKU’s will make me the most money. This is also assuming that all customers are willing to take the fashion of layering or heavier products without that changing what they are normally going to buy. Assuming all of this i would chose the layering option. This seams like a form of delayed manufacturing and as we know this can drastically reduce costs. This also decrease the possibility of missing the market and therefore is less risky then trying to guess what the weather is going to be like a year from now.

  45. Chushi Yang says:

    In my opinion, it can’t be asserted that which choice is better for retailers, since revenues or sales volume of retailers depend on various factors, including clothes characteristics, forecast errors, etc. To be more concise, if I am a big fan of Michael Kors, I’d like to choose the coat of it no matter what the style is. Moreover, to some customers, they aren’t concerned the warmness of the coat and what they are concerned is only the style, then it’s not easy to say which choice is better for retailers. Therefore, to determine which choice is better, factors above need to be taken into consideration. In fact, I think that adjusting the designation of clothes based on the weather forecasting may not generate as much profits as expected for two reasons. First, the forecast errors which may be quite big can’t be avoided. Then, delays exist, since both the designation and manufacturing need time. Therefore, the finishing of new style coats may exceed the weather fluctuation periods.

  46. Chenglun, Fan says:

    This new forecast impact on the fashion industry will heavily depend on the forecast error to the weather. Even though it does not seem to work for the current weather forecast technology, however, as the fashion industry becomes more and more competitive and the weather change becomes massive, it may be the new way to rethink the logistics in fashion. Comfortableness is a big part of for consumers while considering a brand. In terms of design, thinking from customers’ perspective would be the core competitiveness for companies that it can provide the high-quality product that suits customers under the weather they forecast. Logistics will become highly unstable if companies are trying to catch up with the weather. Therefore, they should provide more flexibility for the products that fit the forecast. Eventually, I think, it is not only about the cost or logistics or the forecast accuracy, but more about the product itself that create higher customer satisfaction.

  47. Ying Yang says:

    I believe that Michael Kors’s choice of offering a broader range of weights is the best for the retailer. As the apparel industry is facing a long lead time and high forecasting error. Actually it is difficult to forecast accurately for the demand of the coming winter. Therefore, if the wide range of weight is offered, the retailer can make choice according to both the weather and the preference of consumers. In this way, orders can be made ahead of time and help with cost saving.

    As for the domestic, quick response sourcing, it is based on the high margin. If the margin is high enough, we of course can choose the domestic sourcing instead of the imported sourcing.

  48. Adam M Hook says:

    It will come down to analyzing the costs associated with each option. A wider product array has the ability to catch a wider market of individuals and increase the overall amount of goods sold. While a layered solution can lead to higher sales for an individual purchase because consumers will want the matching outfit. One of the main factors will come down to longevity of the outfit in terms of fashion style for the consumer. The advantage of offering a wide product array is that the consumer has the opportunity to easily mix and match and create new outfits over time, while with layered solutions may make it difficult to match and consumers could be stuck buying a complete layered outfit to complete the work. In terms of utilizing domestic, quick sourcing methods, I believe it is something the company should keep on the table. If after their initial production is delivered and consumer demand is well above the anticipated demand, then it could make sense to incur the higher cost of the faster sourced product at a higher cost. When it comes to having an efficient supply chain, it is important to always consider all the options available.

  49. NAICONG NING says:

    One thing is definitely correct is that weather would have an impact to the style of apparel. However, how much it can influence the sales is still hard to say. But as an rigid demand, it is worth to change. A range of fabric weights could definitely cover different types and may easier to design or manufacture, but it inevitable will cause surplus clothes which in final get a big discount due to the fast-changing style. For layered option, it could be more flexible and better adapt the changeable weather. Nevertheless, it may cause extra cost and stress the design and manufacture. In final, quick response means higher cost but in turn decrease the inventory which could improve the company’s competitive.

  50. chenxi wang says:

    Choosing between two options is based on what the company is trying to achieve. If company focuses more on reducing risks, inventory costs and increasing flexibility, then it should choose layered option. However, layered option is more costly and easily outdated. If the company can come up with a creative design solution, like a jacket with multiple wearing ways and looks, then it would be the optimal choice. If company focuses more on satisfying customers and reducing production costs, then it should choose a broader range of weights. Customers will have various styles of clothes to choose and get more satisfied. However, this option will incur high inventory costs. If the company have the ability to redesign the outdated clothes letting them adapt to the trend. Then it would be the optimal choice.

  51. Saisravan sravan Akasam says:

    To improve the forecasting accuracy we should look for out of the box variables like weather forecast, which always helps. The strategy one can follow in this scenario can be to have two order up to policies, one for outsourcing products and other for sourcing from domestic.

  52. Nikeeta Brijwasi says:

    The strategy suggested by Micheal Kors is synonymous to assembly postponement. But instead of people’s interest in buying the product being the sole factor, the weather is also a deciding factor which can be readily forecasted. Including a range of fabric-weights will give a sense of wide variety to the consumers is critical in the fashion industry. Having fabric that adjusts to weather can be adopted for designs where demand forecasting is widespread. Quick response at a higher cost is still better than understocking because even at the higher cost, the profit margins can be 100% in the apparel industry.

  53. Puneet Pandey says:

    In my view a wide variety would be beneficial for the over all supply chain as there will be individual demand for each variety. Further, even a customer would get bored in case of layered clothing. Firms should take this decision based on their brand positioning strategy. Having said that, predictability of weather should not be discounted. Firms should deploy predictive analytics to forecast weather and in turn forecast when to bring out the products in the markets.

  54. Apoorva Sahay says:

    Apparel sector has been plagued by Fashion for centuries. To rightly predict the Fashion is like hitting the jackpot. No one can truly know what all factors govern the forecast. Adding to the misery the climate shift and weather change has also started to play crucial role in apparel type.
    One who can better forecast can play with large inventory of less SKUs. However others have to make a trade-off between greater range of SKUs or quick response delivery from domestic at higher price.
    This is more towards a permanent shift, where apparel industry can take this as a indication to the market shift. However, adapting the 8 months lead time with weather forecast is not an easy bet and relies heavily on the forecast accuracy. The layered option may reduce the forecast error due to aggregation. But this will drastically reduce the expected profit margin.

  55. Sajal Raj says:

    It is for sure that the impact of weather is significant on Fashion/Apparel industry and this should definitely be included while making the forecast for the next season. The question here can be asked that how drastically the weather would change the on-going trend in the fashion industry.The layered options seems to be more safe since, customers would have the option to change whenever they require and it won’t assess vast range of suppliers, whereas different fabrics would increase the coordination issue. Here, it’s also important to understand the brand of the respective companies. Michael Kors is an high end brand, which definitely would like to satisfy their customer with vast range of SKUs where as the companies opting for layered clothing would suffice the generic demand of the population.

  56. Tanya Arora says:

    While the range of fabric weights have higher profit margins attached to it, the layered options would sell in larger volumes throughout the year. Comparing the overall profitability of both the options would be a good way to decide the best solution for the retailer. The retailer needs to evaluate the impact of lost sales and goodwill cost to develop its sourcing strategy. If the trends can be forecasted in advance and sales can be estimated well, lost cost sourcing would be profitable. However, if it is difficult to evaluate the trends and a quick response is needed to fulfill the demand, high-cost sourcing would be a better way to compete. The sales of a related product in the recent past can be used to understand the demand. This recent history of product uptake can then be used for better forecasting of consumer choices.

  57. Charles Nwaokobia says:

    With estimates of forecast errors ranging between 100%-300% in the fashion industry, the effect of a huge reduction in the forecast error cannot be overemphasized. One way to improve on the forecasts is to forecast using data from sales of similar products at points closer to the upcoming season before placing the order. The most effective sourcing strategy in this regard would be the domestic, quick response sourcing.

    Though sourcing domestically would imply higher costs, the retail gross margins of 200%-250% would be more than enough to cover the costs. There would also be the need for an agreement for the fashion company to commit to a 100% service level to ensure a higher expected profitability for both the supplier and the fashion company.

  58. Aatira Benn John says:

    The first question that came to my mind when I read this, is the explanatory power for this regression model. Assuming the model is robust, I would recommend a layered approach for segments that are price-sensitive and more customized heavy option for customers who have a greater willingness to pay. This is because customers who are price-sensitive when given a layered option, can customize their outfit depending on the weather every season instead of having to purchase a new outfit. Thus, a layered approach will give customers an option to build their own outfit that matches the season. However, shoppers with higher disposable income may not face concerns in purchasing new outfits to match every season. I realize that in my argument above, I have viewed this through the lens of a marketer and hence only considered demand side. Viewing this from the supply side, i.e. costs optimization standpoint, it boils down to analyzing the total costs incurred with each alternative. The point where these two factors meet would be my solution to this issue.

  59. Anesh Krishna J N says:

    Offering a wide range of weights and Offering layered solutions have their own positives and negatives respectively. Merits of the former include capturing a wider market while de-merits include increased holding cost. Merits of the latter include lesser holding cost while an inability to cover a diversified market would be one of the major drawbacks. In such a case, it becomes important to look at the influence of sales by the change in weather pattern. The fact that the average temperature last winter was 4.6 degrees above average meant a reduced demand for heavy coats. Since the demand is planned in the fashion industry at least half a year in advance, If a company following former policy wasn’t following at the weather forecast/weather forecast being inaccurate would affect their sales drastically. In such a case, retail stores offering layered solutions would do good in terms of sales.
    To counter this problem, we can adopt a quick response, 100% customer service level agreement between retailers and manufacturers which will see both retailers and manufactures ending up with profits.

  60. Geetali Pradhan says:

    The lead time in fashion industry is too long which makes future demand prediction difficult. there is high risk of trends changing for various reasons including weather. It cannot be completely avoided but the risk can be reduced by the assembly postponement strategy. The final products can be assembled much closer to the actual demand date when demands/trends can be better forecasted. Layering can also be an option. However, the customers who are accustomed to buying high-end winter jackets might not necessarily conform to layering options. To target such customers, having a wider range of options available is a better strategy.

  61. Swathi veeradhi says:

    Having a range of fabrics of different thicknesses seems innovative but it does not necessarily resolve the demand forecasting problem. Michael Kors will face issues while trying to source the fabric. They will not be able to gain the same economies of scale that they would if they chose a single fabric. However, were they to choose a layered option, they could pick a single fabric that is slightly thinner and make a whole range of apparel. The beauty of this variant is that the layered option will appeal to customer owing to its practicality. A layered option will definitely be more economical for the end customer compared to two or three coats of different thicknesses. The fashion business, especially seasonal clothing relies heavily on the ability to respond to changes in demand promptly. While Michael Kors should focus on cheap sourcing for the bulk of the their manufacturing, they should have an alternative supplier in close proximity to react to any spike in demand. Forecasting can definitely be linked to profitability over small intervals. For example, weather adversities such as snow storms are not typically known by the average customer until that week or that month. This pressurizes the customer to react to such weather conditions by stocking up on warm clothes. Companies can take advantage of this to change their stock to cater to changing weather conditions.

  62. Seerat Anjay says:

    Multiple questions need to be answered to decide on what to would trend:
    1. The unpredictability of the nature of customers’ behavior, trends can be on either side.
    2. The fluctuation in weather, which has become imminent in recent years.
    3. The cost of forecast error vs the cost of sourcing various materials, and many more.
    I would think of this as new product development because weather fluctuation has started impacting sales now, but was not a concern few years back.
    It is important to understand the customer’s reaction and costing for changes to develop strategies to check what works out: Local sourcing may help if weather forecasting is as error prone as apparel industry forecasting is, as it would hamper sales and brand image both.
    The same concern is for whether to use weighted clothing or layered clothing.

    The idea of product uptake over smaller intervals becomes important during periods of higher uncertainty. If the fashion is trending so quickly or the weather is changing so quickly or both,the ideas would be beneficial. Zara and H&M has worked on similar models to benefit in fashion industry. The different version of it, i.e. predictive analytics for short version would work to control the cost and ensure a better service level for the customers.

  63. Jananee Parthasarathy says:

    We have two strategies to choose from. Offering wide varieties or Layered solution. Adopting just one of the two strategies might or might not be profitable depending on the accuracy of the weather forecasting. So, a wise solution might be to have a mix of both the above said strategies. In case, the winter is not as harsh as it was predicted to be, layered jackets might be the most sought after by the customers. Also, to capture a wider market it is always better to have more options at the store. In case, a fashion company has not been doing at par in the recent years mainly because of poor forecasting it would make sense for them to adopt a quick response with a higher cost sourcing to compete in the market. Postponed production can be adopted and the final product can be built closer to the start of the season depending the updated forecasts. This could lead to product uptake over smaller intervals to ensure profitability.

  64. Sruthy K M says:

    The primary rule of forecasting says “Forecasts are always wrong” although, this is not to be taken literally. That being said, in a highly dynamic industry such as the apparel industry with high lead times of 90+ days, I don’t think companies investing into weather forecasting is a strategic decision. Layering is definitely a better option to adopt because this gives the customer more options to play with, making them feel more in control of their purchase decisions. This is also beneficial to the retailers, as now they need to keep a lesser inventory and have a reduced error in forecasting.

  65. Zibo Meng 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. 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. The factor of weather should definitely be given some weight while making forecast for future demand as it has become very volatile in the recent years and with the increased global warming and other natural factors it will continue to be the same. In the end, retailers need to provide a proper response to weather changes. How not to be over respond is another issues retailers need to deal with.

  66. Mayank Daga says:

    Technological advancement has always facilitated businesses by providing them more accurate information about the something that they needed to forecast before. The scenario above is a perfect example of this.Each solution here would have its own pros and cons. Offering a layered solution would make manufacturing more standardized and hence reduce production costs. However, offering broader range of options would give customer more range to choose from, thereby targeting all consumer segments. What should be the strategy for JC Penney or any player in the winter apparel industry should depend upon who are their target consumers.Forecasting in short term would allow retailers to coordinate and display the right assortment of apparels in their store to completely meet consumer demands.

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