Case Focus: How Chinese Lingerie Retailers Manage Inventory

In the cut-throat fashion industry, many companies have to lift up their collection
renewal rate to catch up with the current trends in the market. However, the high
renewal and restock rate may certainly arise some inventory problems.
In fact, many Chinese apparel and lingerie companies have got entangle with this
problems for a long time. But most of them are still on the way to improve and finding
better solutions…
Many lingerie companies and retailers in China have complained that the poor
inventory management has raised the cost of their business. And an excess of
inventory overstock have made their business hard to move forward. Most of these
are usually due to 3 problems below.

Firstly, retailers find it hard to predict the market and fail to balance the demand and
supply. As a matter of fact, lingerie is a fashion business with very unpredictable
demand. If they over optimistic about the market’s enthusiasm for a certain kind of
product, they will definitely invested a lot of inventory that had to be disposed off at
heavy reduced price because of lack of demand. On the other hand, if they fail to
maintain adequate volume and a wide range of size and color for the product on
hand, once the lingerie hit the market, they will have no time to manufacture or
restock. As a result, they will either lose their customers or caught up by competitors.
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Secondly, slack inventory systems in Chinese lingerie companies make it hard to
manage. Huang Daxiao, the regional manager of ShenZhen ForYou Science &
Development Company, told us that the ERP (Enterprise Resource Planning) system
in China’s lingerie companies is far leg behind. “I found that there is not any domestic
lingerie companies can manage their inventory 100% accurately.” Huang said. “Various
size, cup, color and catalog ask for a much complicated system to manage the
inventory. However, nowadays, few software companies can provide the excellent
management solution to them, even there is, the effect is not good enough. “So, there
is still a long way to streamline the system.

Thirdly, lack of personal that is professional in inventory management lead to the

serious inventory problem. In China, many supervisors or managers in inventory
department are grown up from low level of education background. They usually do and
judge things by their own experience and lack of systematic inventory management
knowledge. As a result, their subordinate probably cannot receive adequate trainings
from them and make a poor performance.

In the past, Chinese merchants and business people all over the world alike manage
their inventory all by experience and intuition. They record purchases and remain staffs
to forecast future needs on the paper. So, they can seldom run a big business with such
a slack inventory management.
As the development of globalization and mass production, Chinese merchants became
aware that they need a better system to manage inventory. But many systems are
either too
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Inc. or cumbersome. 12 - 2
It is not until the development of affordable laser technology in 1960s revived the concept. It
allowed smaller, faster and cheaper readers or scanners. As computing power became better,
the power of Universal Product Code (UPC) was born to help track and manage inventory
improved exponentially.

During the mid to late 1990s, retailers began implementing modern inventory management
systems, from purchase tracking to inventory monitoring to re-ordering and back around again.

In recent years, another promising technology for tracking inventory, Radio frequency
identification, or RFID, has come into stores, warehouses and factories. It uses a microchip to
transmit product information -- such as type, manufacturer and serial number -- to a scanner or
other data collection device. It's superior to bar codes in several ways. For instance, a scanner
reads the information from an RFID from several yards away, making it ideal for tracking items
stacked on high shelves in warehouses. It also can encode more data than a bar code and in
some systems tell merchants if an item is out of place in the store, providing excellent anti-theft
characteristics.

Another popular means of automated inventory control is vendor-managed inventory. In this

arrangement, the vendor is responsible for keeping its products stocked on a store's shelf. The
vendor and retailer work closely together and share proprietary information.

This system also has many advantages for vendors. It allows them to ensure their products
are properly displayed and able, and it also puts them in close contact with the retailer --- sales
data. The feedback the vendor receives can play an important role in its marketing, research
and development.
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