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Supply Chain Focus: Brands - Chain links

When a fashion brand decides to open its own stores, an effective distribution strategy and supply chain is vital for ensuring sales success

Fashion brands are showing a growing appetite for opening their own stores. The extra volumes that this involves has obvious implications for the supply chain, but brands also need to think about the method of getting products to their new outlets.

DHL business director of department stores and fashion James Reading says one of the main challenges is adjusting to a different flow of products. "Brands usually supply products in quite big quantities, as a whole range or season or as large top-ups to retailers' distribution centres," he explains. "They also know their forward order commitments and therefore what demand is probably going to be like. When they open their own outlets, companies find themselves dealing with smaller order sizes, rather than bulk orders, and they often have to pick individual items."

Reading says a brand's warehouse operation, or that of a third-party logistics provider, can be modified to cope with this by creating a separate area for its retail operation.

This is the approach being taken by lifestyle brand Ben Sherman, which operates from a 100,000 sq ft distribution centre run by DHL at Radlett, Hertfordshire. The company has three high street stores, six outlet centre shops and two concessions, all of which are supplied from a separate area within Ben Sherman's warehouse and account for approximately a quarter of the brand's total stock.

Ben Sherman group logistics director Alan Higgins says: "It is a different way of operating, but from within the same environment. The retail side orders its own stock, but you have the option of taking products from the wholesale side if necessary. Some of what you don't sell in the stores can also go back into wholesale. It is very efficient having all our stock together, on hand in one place."

Having all product in the same location also has benefits from a transport point of view. DHL runs three dedicated vehicles to service Ben Sherman's stores, but they can also be used to make some wholesale deliveries.

If a brand decides to expand by opening concessions, another challenge it faces is to deliver directly to department stores, rather than to their distribution centres. Philip Bracken, development director of fashion distribution company TNT Fashion Group, says: "Most of the larger retail groups prefer pre-arranged distribution. You have to be careful that your deliveries are able to get through the back of house to the sales floor efficiently," he says.

One of the options for brands opening stores is to use a multi-user network run by one of the logistics providers, which enables them to share overheads and transport costs with other firms. "There is no need for a company with just a few stores to find distribution much more expensive than larger retailers," says Bracken.

Multi-user warehouses can be used for several purposes, according to Clipper Logistics Group business development director Tim Robinson. Some brands, particularly those from overseas, might need to have a central stock-holding point if they are opening franchised outlets, while others may want to service a tight geographic area.

"Our distribution facility in Brimsdown in north London, for example, is used by many firms as a stock room for their London outlets," says Robinson. "It doesn't matter whether you have one store or 60."

Some brands already outsource heavily before opening stores and often continue with the same logistics provider. This is the case at denim brand David Bitton, which already used TNT to distribute to 60 retailers around the UK. It has now opened four stores in the south-east, with a fifth imminent.

David Bitton general manager of finance Murali Ramadoss says: "We're using a one-stop solution for our distribution, which has helped us to expand. Product is sourced from various locations, brought to a hub in Harlow, Essex, and picked, packed and distributed."

Other advantages of this approach are the ability to cope with peaks in demand, as well as access to an IT system that allows product to be easily tracked, he says.

Alan Williams, director of logistics group Davies Turner, says one of the major benefits of these multi-user distribution solutions is that they are usually priced according to volume, whether per piece or per case. This enables brands to forecast exactly what its costs are likely to be. "If you experience unforeseen highs and lows, a multi-user centre is a winning solution," he says. "If companies decide to open their own warehouse, it becomes a financial drain if it is not working to at least 75% of its capacity."

However, some brands prefer to have greater control of their operations and instead opt to set up a small warehousing operation to serve their stores, although this strategy also involves arranging transportation. Ruth Waring, managing director of logistics consultancy Labyrinth, says one solution is to use a pallet distribution network such as Pall-Ex or Palletline.

Such networks operate through local hauliers, which collect consignments from various customers in their area and take them to a central hub, where they are picked up and delivered to other areas by different hauliers. "It means you don't need dedicated transport if your volumes are fairly small to start with," says Waring.

Many of the issues faced by brands are similar to those of smaller retail chains, especially those that are part of an international company. Urban Outfitters, which has 90 stores in the US, operates just nine stores in the UK, Republic of Ireland and Scandinavia and is using Clipper Logistics Group to carry out its distribution.

Urban Outfitters planning manager Andy Frey says the company felt the need to outsource once the UK chain had grown to a certain size. Initially, products went directly into its first store in Kensington, west London. When its third store opened it decided to rent warehouse space, before realising it needed the expertise of a logistics provider to grow further.

"If we just had three or four stores in north London, we might still do our distribution in-house," says Frey. "But the model we use now has allowed us to do what we want in terms of expansion across a wider geographic area."

Whatever method they choose, both small chains and brands that branch out into retail need to compete with larger rivals in terms of costs and efficiency. If they can find the right logistics solution, there is no reason why this should not happen.

SOLVING THE DISTRIBUTION DILEMMA

World Design & Trade (WDT), which owns the Firetrap, Sonneti and Fullcircle brands, uses a dedicated warehouse at its west London headquarters to serve its retail operation, which launched three years ago.

The company has three stores and four concessions under the Firetrap name, and one store and two concessions for Fullcircle. The 9,000 sq ft warehouse facility is responsible for picking and packing the products, which are then sent out to the company's stores using UPS subsidiary Lynx Express.

WDT logistics director Nick Fox says: "Our main aim is maintaining a fast stock rotation by getting the product in and out as fast as possible."

The company runs a warehouse for independent retailers in a nearby building, with Lynx again supplying transport. This site also handles exports to 32 countries, which are transported by DHL.

"One of the problems we faced was finding extra staff to cope with peaks. We solved this by building a relationship with an employment agency, which has focused on finding people with the right abilities. Many of them are Polish or Lithuanian and have good level of PC literacy," he says.

As well as the west London operation, WDT uses logistics company Davies Turner to distribute products to major retailers such as Selfridges and USC from its warehouse in Dartford, Kent.

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