The apparel business has similar knowledge management needs to those of ...... The following Table VI shows the number of Internet visitors for apparel as they ... 7 Target. Target.com. 1,800. 301. 17%. 8 LandsEnd. LandsEnd.com. 1,200.
KNOWLEDGE MANAGEMENT (KM) FOR MASS CUSTOMIZATION IN THE APPAREL BUSINESS
By SU-JEONG HWANG, B.S., M.S.
A research paper (A-2) submitted to the Graduate Faculty of North Carolina State University in partial fulfillment of the requirement for the Degree of Doctor of Philosophy
TEXTILE TECHNOLOGY AND MANAGMENET
Raleigh 2002
KNOWLEDGE MANAGEMENT (KM) FOR MASS CUSTOMIZATION IN THE APPAREL BUSINESS
By SU-JEONG HWANG, B.S., M.S.
A research paper (A-2) submitted to the Graduate Faculty of North Carolina State University in partial fulfillment of the requirement for the Degree of Doctor of Philosophy
TEXTILE TECHNOLOGY AND MANAGMENET
Raleigh 2002
APPROVED BY:
ABSTRACT KNOWLEDGE MANAGEMENT (KM) FOR MASS CUSTOMIZATION IN THE APPAREL BUSINESS
Su-Jeong Hwang,
February, 2002
Knowledge Management (KM) is a hot topic in the business world. Knowledge Management (KM) is a formal directed process of determining what information a company has that could benefit others in the company, then devising ways of making it easily available. A majority of business leaders in consulting firms, professional organizations, and private corporations indicate that KM practices have created value by improving organizational effectiveness, delivering customer value, and improving product innovation and delivery. The apparel business has similar knowledge management needs to those of most other industries. In fact, in the apparel industry, with information technology and digital technology, it is a natural progression for manufactured apparel to move from mass production to mass customization. With the trend towards mass customization, in addition to the process of data and information accessed, collected, and stored on a firm’s networked computer system, apparel firms need to manage knowledge that is leveraged from information. The purpose of this paper was to provide information on KM in order for the apparel business to more successfully manage the vast amount of information necessary to meet the needs of their changing consumers and to evaluate the current use of KM by certain companies within the apparel industry. The companies chosen all had a focus on mass customization, an issue area for dealing with high volume of data and information. The following companies were investigated: Benetton, IC3D, and Lands’ End. In
addition, information about initial KM users were found from 40 companies and practitioners world wide, which revealed how companies create value from their knowledge as intangible assets. Knowledge appeared at a higher level than information with the following criteria that enables the enterprise to anticipate events: Connectivity, Leveraging, and Applicability. Knowledge was always relevant to environmental conditions, and was applicable in planned environments. However, information did not precipitate action of some kind. All knowledge was classified according to its complexity on a continuum from explicit to tacit. In the apparel business, tacit knowledge appeared as two sides of the technical and business dimensions. The technical dimension to tacit knowledge seen in the apparel industry was related to the production of garments and was informal knowhow. The business dimension to tacit knowledge was an abstract view that explained how to drive and succeed in business. Usually, knowledge in an explicit form appeared to be understood clearly, but tacit knowledge gained through long experience was ambiguous. For example, in the process of creation or alteration of garments, there is difficulty articulating the technical principles. Even though a master designer attempts to train people in how to manipulate apparel CAD for garment creation, and how to alter garments for each individual customized garment, it is still difficult to deliver the skills. KM was a considerable success with the initial KM users such as GE, Buckman Labs, and Benetton Group. They have embraced KM in an effort to better leverage knowledge and information, including the process of how data and information is accessed, collected, and stored on a firm’s networked computer system. On the other hand, apparel companies with an interest in customization were found to realize the need
of managing knowledge, but did not know yet about KM and how to manage the knowledge. These findings indicated that all apparel business trends were more closely associated with technology than knowledge management. Even though technology was well developed, KM is significantly important for people because people in the company, not machines, do the actual work such as data entry and information handling. KM has the great advantages of efficient organizational structures, better communications, and quick response in real time. It will also assist apparel production innovation and mass customization.
TABLE OF CONTENTS
List of Tables
iii
List of Figures
iv
Introduction
1
Objectives and Method
3
Knowledge and Knowledge Management (KM)
4
Knowledge and Knowledge Levers
4
Knowledge
4
Metaphors of Tacit Knowledge
7
Knowledge Levers
8
Knowledge Management (KM)
11
KM
11
Business View of KM
14
Knowledge and KM tools in the Apparel Business
17
Knowledge in the Apparel Business
17
Source of Knowledge
17
Explicit Knowledge for Apparel
19
Tacit Knowledge for Apparel
20
Knowledge of Customers in the Apparel Business
21
The Role of Customers in the Apparel Business
21
Customers via the Internet
22
Knowledge of Customers for Customization
24
KM Tools in the Apparel Business
25
Information Technology
25
Apparel Management Systems
29
KM Initiatives for Apparel Customization
33
Case 1: Benetton Group
33
Case 2: The Interactive Custom Clothes Company (IC3D)
36
Case 3: Land’s End, inc.
39
Advancing KM in the Apparel Business
43
Conclusion and Suggestions
46
References
49
iii
List of Tables Table I.
Apparel Company Information
3
Table II.
Knowledge Bases and Examples
4
Table III.
Knowledge Management Initiatives
14
Table IV.
Infrastructure and Structure Information for Apparel
18
Table V.
Business Dimension to Tacit Knowledge
21
Table VI.
Internet Visitors for Apparel
23
Table VII.
IT in Support KM
26
iv
List of Figures Figure 1.
The value chain of data, information, and knowledge
4
Figure 2.
GE operating system model
16
Figure 3
Explicit knowledge for apparel
19
Figure 4.
Knowledge Management and E business
28
Figure 5.
Use of CAD in the supply chain
31
Figure 6.
Management Information System interlocking of departments
31
Figure 7.
Apparel CAD systems and product development
33
Figure 8.
IC3D interface web design for customer knowledge
38
Figure 9.
The tendency of towards mass customization
43
Figure 10.
The progression of the enterprise
44
Figure 11.
Knowledge levers
45
1
Introduction Knowledge Management (KM) is a recent phenomenon in the business world. Knowledge management (KM) is a formal, directed process of determining what information a company has that could benefit others in the company, then devising ways of making it easily available. A majority of business leaders within a fortune 100 company indicate that Knowledge Management (KM) practices have created value by improving organizational effectiveness, delivering customer value, and improving product innovation and delivery (Brooks, 1998). Knowledge Management (KM) was developed in the mid-1990s for businesses. Consulting firms such as Price Warehouse, Andersen Consulting, and Coopers & Lybrand are involved in Knowledge Management (KM). Professional organizations such as the Association for Information and Image Management offer seminars, conferences and facilities in the area of KM. Private corporations such as Ford, GM, Monsanto, Amoco and Texas Instruments have all experimented with KM (Srikantaiah, & Koenig, 2000). Almost every company pursued KM to increase profits and efficiency and reported benefiting from the implementation. According to a study conducted by Ipsos-Reid and Microsoft Canada Co., regarding the implementation of KM practices in Canadian companies (Doucet, 2001), 65% of Canadian companies practicing KM believed it had given their organization a competitive advantage. Ninety one percent agreed KM practices had succeeded in creating value in improving organizational effectiveness, 88% agreed KM practices have succeeded in delivering customer value, and 89% agreed that their organization had a culture that encourages and provides opportunities for communicating ideas, knowledge
2
and experience internally. One-third of the organizations without KM practices in place had plans to implement one in a year. The study results indicate that KM has been highly successful. Today’s largest firms have embraced KM in an effort to better leverage knowledge and information, including the process of how data and information is accessed, collected, and stored on a firm’s networked computer system. The apparel industry is the fourth largest and most fragmented industry in the United States economy (Rio, 2001). It has similar knowledge management needs to those of most other industries. The apparel retailing business is dealing with a huge amount of information, such as thousands of style variations. In fact, the apparel business is more complicated than other businesses because apparel is consumer goods, the industrial goods. The greatest challenge for retailing apparel over the Internet, via mail order or in department stores is to offer apparel in the desired fit, and in the desired style, fabric and color. With information technology and digital technology, it is a natural progression for manufactured apparel to move from mass production to mass customization. In the trend of mass customization, KM is necessary for the apparel business. However, very little is known about Knowledge Management (KM) in the apparel business. The purpose of this study was to provide information on Knowledge Management (KM) in order for the apparel business to more successfully manage the vast amount of information necessary to meet the needs of their changing consumers and marketplace.
3
Objectives and Method The objective of this study was to 1. determine the significance and importance of KM strategies to other industries, 2. evaluate the current use of KM strategies by certain companies within the apparel industry, and 3. demonstrate how KM is an important process for companies with a customization goal. Related articles, books, lab sources from class, and Internet sources were used to conduct this study. The following companies were researched. They were all focused on mass customization since this is an issue area for dealing with high volume of data, information and knowledge. Table I. Apparel Company Information Company Benetton Group Location Italy URL www.Benetton Group.com Products Knit wear and casual clothing Knowledge Management External Structure of KM
IC3D USA www.Ic3d.com
Lands’ End, inc. USA www.landsend.com
Jeans
Jeans and casual clothing N/A
N/A
4
Knowledge and Knowledge Management (KM) Knowledge and Knowledge Levers Knowledge Knowledge is presented by information which is known and verified and which is institutionalized in any business process (Kelly, 1997). Knowledge is a very difficult concept to define, and it is neither information nor data (see Figure 1). Data is represented by isolated facts concerning a subject or groups of subjects. Information is represented by facts that have a meaningful context and which may be analyzed to support decision making.
Knowledge Information Data
To anticipate events To respond to events To record events
Figure 1. The value chain of data, information, and knowledge (Kelly, 1997)
As shown in the Figure 1, data appears at the bottom of the level in the value chain of data, information, and knowledge. The data enables the enterprise to record events. Information enables the enterprise to respond to events. Knowledge appears at a higher level than information. The knowledge base comprises the facts, rules, models and concepts; it is for daily decisions made at every level in the organization (Taylor, 2000). Table II. Knowledge Bases and Examples Knowledge Bases Examples Facts Felix is a cat, a cat is a mammal; Felix is a mammal. Rules If x = y and y =z, then x = z. Models Class hierarchies, classification of animals Concepts Cat, mammal, class, class membership
5
According to the study of KM (Koulopoulos & Dover, 1999), the following criteria must be met before information can be considered knowledge that enables the enterprise to anticipate events: •
Connectivity: Knowledge is connected. It exists in a collection of multiple experiences and perspectives.
•
Leveraging: KM is an action of leveraging. Knowledge is always relevant to environmental conditions, and stimulates action in response to these conditions. Information that does not precipitate action of some kind is not knowledge.
•
Applicability: Knowledge is applicable in planned and expected environments. Information becomes knowledge when it is used to address novel situations for which no direct precedent exists. Information, which is merely plugged into a previously unplanned model, is not knowledge (Koulopoulos & Dover, 1999). Knowledge may be used as an example in dealing with subsequent similar instances. Knowledge is formulated in the minds of individuals through experience. People learn, naturally, all the time. Knowledge is shared between groups and communities through shared experience, and through the transfer of knowledge, both tacitly and explicitly. All knowledge is classified according to its complexity on a continuum from
explicit to tacit. Michael Polanyi identified the distinction between these two types of knowledge in 1966. The complexity of the knowledge refers to the degree to which the knowledge can be easily understood and communicated to others (Koulopoulos, & Dover, 1999). Explicit knowledge is articulated in formal language and is easily transmitted among individuals. Explicit knowledge can easily be processed by a
6
computer, transmitted electronically, or stored in databases. Explicit knowledge, because of its nature, is typically captured and exchanged throughout the organization. On the other hand, tacit knowledge can be described as personal knowledge embedded in individual experience and contains an important cognitive dimension. It consists of perceptions, values, and mental models so ingrained in us that we take them for granted. The concept of ideas isn’t explicitly identified and sometimes it is very difficult to make tacit knowledge explicit, which you need to be able to do to understand, explain, test or teach it. For tacit knowledge to be communicated and shared within the organization, it has to be converted into words or numbers that anyone can understand. During this time, conversion takes place from tacit to explicit. Sharing tacit knowledge can only occur through networking and synchronous communication models among those people in possession of tacit knowledge that can not be encoded (Koulopoulos & Dover, 1999; Srikantaiah & Koenig, 2000; Taylor, 2000). However, the subjective and intuitive nature of tacit knowledge makes it difficult to process or transmit the acquired knowledge in any systematic or logical manner. For example, Buckman Labs is well known in the field of KM. In 1997, management at Buckman Labs teamed with outside resources to specifically develop an enterprise-wide human resource knowledge-sharing system focused on simplifying the identification of competencies within Buckman Labs' personnel, and preserving and sharing the decision-making processes smart managers execute within Buckman. Much of the explicit knowledge stored in the heads of key personnel was formalized in a series of on-line profiles. The knowledge base constructed from these profiles provides the
7
company with the ability to match its competencies, experiences and skills to changing market demands and customer needs. Explicit knowledge can be transferred quite adequately with the help of electronic tools. The smart manager recognizes the challenge of explicit knowledge as one of handling the sheer volume of information that is available. As a result, knowledge communities are built in real-time based on explicit linking of skill and experience. Buckman’s personnel report an increased level of confidence in approaching new business and more aggressive attitude towards facing new situations. The real proof is in the company's long-term return on its KM investment. Bob Buckman reported that revenues from new product sales had more than doubled from 15% to 35% (Barclay, 2001). On the other hand, another process in the Buckman lab, such as an Account Manager's activities, was more tacit. Knowledge of customers, their interests and concerns, differences, and the skills required to fulfill their needs, is based largely on experience developed over time, inherent abilities, and an empathy with the customer. The approaches to handle them and communicate them were vastly different (Koulopoulos & Dover, 1999). Metaphors of Tacit Knowledge The philosophical basis for tacit knowledge is identified and explained as a metaphor. A Metaphor is when we say X is Y such that Y is used to enhance the 'meaning' associated with X. The word 'Metaphor' comes from the Greek word metapherein - to transfer (Lofting, 1992). Many of activities such as arguing and solving problems are metaphorical in nature. The metaphorical concepts that characterize those activities structure present reality (Lakoff & Johnson, 1995). Metaphors provide a means
8
for individuals and, ultimately, organizations to create and share understanding. Metaphors help define the whole concept of things. The metaphors establish images, names and an understanding of how things fit together (Hill & Levenhagen, 1995). Language use in general, and metaphors in particular, have the opportunity to influence competitive positioning, behavior and strategy by an organization and its members. A shared language can have an important role in a management context. The better cooperation the better the results (March & Simon, 1993). It seems fairly obvious that such a conversion with cooperation can be greatly assisted when the people speak a common language and share access to somewhat similar views of the world they inhabit. In business terms, metaphors help people understand or develop a consensus of the meaning in the working process or working environment. In the apparel industry, it is a critical factor for having an efficient working process. The metaphor might be an easy way to explain ambiguous terminology and allow substitute terms. It increases the efficiency of production and process in any organization or company. Knowledge Levers The knowledge levers describe the ways in that a firm can leverage its knowledge resources. They consist of an action mode and intents. The action modes describe what can be done with knowledge or knowledge artifacts and the intents yield four varieties of knowledge management approaches: Harvesting, Hunting, Harnessing, and Hypothesizing (Short, 2000). Harvesting. The Harvesting approach is the most recognizable approaches to Knowledge Management. Harvesting is an approach many firms take as a first step on the Knowledge Management path. It assumes that useful information about expertise can
9
be codified and an end user is willing to use it. The codified information has to be organized, stored and retrieved in a way that makes it easy for an end user to locate and retrieve (Short, 2000). Hunting. The Hunting approach is collections of data or information without a specific issue or problem in mind. It is not always clear that analysis will produce the most meaningful result like searching onto the World Wide Web. The approaches assume that significant business value may be derived from the discovery of meaningful trends or other information contained in a large data set (Short, 2000). Hypothesizing. The Hypothesizing approach is more common in firms. Brainstorming is often used in meetings to generate a large quantity of ideas. It can produce new insights and breakthrough visions of value to the firm. Firms seeking to leverage knowledge resources by connecting people with the intention to explore issues or future possibilities can maximize the benefit derived from these approaches (Short, 2000). Harnessing. The Harnessing approach is relied on connecting knowledge to each other and to a problem, with an aim to exploit what the people know. Quality circles and other attempts to increase shop-floor employee involvement in problem solving and production improvement are examples of harnessing, connecting to exploit, what people know (Short, 2000). Effective harnessing approaches assume that significant knowledge exists among employees. This knowledge and expertise is highly tacit. The knowledge is not readily codifiable for capture and storage in a database. Issues and challenges arise that if addressed in a significantly better way, could drive meaningful business value, and
10
there exists a means of mapping “who knows what” and wide access to such a map is possible. Above, all approaches have four key functions that are based on a model, which regards Knowledge Management’s primary role as the sharing of knowledge throughout the organization. The key functions are known as Intermediation, Externalization, Internalization, and Cognition (Koulopoulos & Dover, 1999). The each key function has the following characters: •
Intermediation is the connection between knowledge and people. It is focused on brokering tacit knowledge. By tracking the experience and interests of individuals, it can link those that need to know with those who have the knowledge.
•
Externalization is the connection of knowledge to knowledge. It refers to the process of capturing knowledge in an external repository, and organizing the knowledge to provide for the sharing of knowledge.
•
Internalization is the connection of knowledge to query. It is the extraction of knowledge an external repository, and its filtering to provide greater relevance to the knowledge seeker. It is focused on the transfer of explicit knowledge.
•
Cognition is the linking of knowledge to process. It is the application of knowledge that has been exchanged through the preceding three functions.
Knowledge Management solutions can be reduced to combinations of four functions.
11
Knowledge Management (KM) KM The origin of KM is based on Polanyi’s theory that describes how human beings acquire and use knowledge to identify the difference between tacit and explicit knowledge. It is action-oriented and about the process of knowing (Koulopoulos & Dover, 1999). General opinion of KM is the re-amalgamation of earlier experiments, such as management information systems, business process reengineering, and information resources management (Koulopoulos & Dover, 1999; Srikantaiah & Koenig, 2000; Taylor, 2000). KM embodies organizational processes that seek a synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings (Malhotra, 2001). KM has become a new way of capturing an institution’s full expertise addressing factors such as: •
Managing Data base, Web site interfaces and documents;
•
Accessing knowledge infrastructure for just-in-time knowledge;
•
Enhancing the visibility of knowledge in an institution;
•
Sharing knowledge not only within an institution but also with external clients;
•
Capturing tacit knowledge and experience of individual staff;
Perceptions of KM are different by the person and his/her specialty. Information professionals, such as librarians’ record managers and archivists emphasize document management. Information technologists such as software developers, programmers, and similar technologists, stress hardware, software, network, and telecommunications.
12
Scientists, federal/state/local governments, business and finance analysts, and the general public have their own viewpoints reflecting their interests. The following three main themes dominate the field of KM: •
Organizational Learning (OL)
•
Technology
•
Document management
Organization Learning (OL) specialists analyze tacit and explicit knowledge systems in corporations and make recommendations to enhance their performance levels. The OL emphasizes that the efficiency and effectiveness of knowledge workers depends on how workers communicate and collaborate in their efforts and expose themselves to communities of practice within the organization or company as well as outside the organization (Srikantaiah, 2000). Technology experts focus on KM with systems analysis, design, and implementation in mind. They look at knowledge storage and access, networks, customer satisfaction, telecommunications, and application software packages (Srikantaiah, 2000). Without knowledge of how to operate, design, and implement ideas, only having an advanced technology or system does not mean that the company will be successful in the competitive market environment. Document management specialists find their information systems such as libraries, information centers, record centers, and archives, and emphasize collections and policies. KM has been used for document management that is the management of information in papers and electronic forms. Document management with information technology in the field of KM gives organizations stronger, more thorough control over
13
not just information but the way it is handled over increasingly complex networks (Brooks, 1998). The effectiveness of those information systems relies on factors like response time, quality of information, accuracy of information, completeness of information, relevancy of information, and operating costs (Srikantaiah, 2000). The explicit knowledge component is used in this document management process and Information purveyors provide information services to clients through explicit knowledge. Open Text Corporation, based in Waterloo, Ontario, is a good example of how the traditional concept of document management has evolved. Open Text provided collaborative commerce solutions for e-business that enabled users to extend applications and allowed them to work together within and across organizations. Open Text was a pioneer of the development of innovative Intranet, Extranet and e-business applications. It has experienced some dramatic market success with Livelink Intranet, a knowledge management tool, which incorporates document management but also offers workflow, search, project management and collaborative work capabilities (Brooks, 1998). For example, International Organization for Standardization (ISO) has installed Livelink servers on the Sun® Solaris™ and Windows NT® operating environments using Oracle® databases (OpenText Corp, 2001). The organization used the nugget for achieving consensus, exchanging ideas and concepts, facilitating the standardization with project collaboration, and connecting the participants to knowledge. Open Text has been successful in the market, providing optimized commerce chains, industry processes and relationships with partners and suppliers. It improved product delivery and reduced cost
14
with enhanced internal and external communications. Therefore it increased returns on investment, and greater productivity and profitability. Business View of KM Knowledge is a very meaningful resource for businesses. If businesses manage knowledge effectively by drawing on the abilities, insight, and skills of professionals, they can increase organizational competitiveness and enhance the productivity of all employees. Several companies were already successful in their business by managing knowledge. And now many people would wonder what KM programs were used in their businesses and how they were successful. According to Dr. Sveiby (2001), KM can be defined by looking at what people in the field of KM are doing and how people use knowledge. He defines researchers and consultants as KM vendors and companies and practitioners as KM users. Information about the initial KM users was collected from 40 companies and practitioners world wide, which revealed how companies create value from their knowledge as intangible assets. Table III shows the summary of initiative under the three categories: the External Structure Initiatives, Internal Structure Initiatives and Competence Initiatives. Table III. Knowledge Management Initiatives Knowledge Management Initiatives External Structure Initiatives Internal Structure Initiatives Competence Initiatives Gain knowledge from Build knowledge sharing culture Create careers based on customers Knowledge Management Offer customers additional Capture individuals’ tacit Create micro environments for knowledge knowledge, store it, spread it and tacit knowledge transfer re-use it Create new revenues from Measure knowledge creating Learn from simulations and pilot existing knowledge processes and intangible assets installations Companies Companies Companies Benetton Group, General 3M, Analog Devices, Boeing, Buckman Labs, IBM, Pfizer, Electric, National Bicycle, Buckman Labs, Chaparral Steel, WM-data, Affaersvaerlden, Netscape, Ritz Carlton, Agro Ford Motor Co, HewlettHewlett-Packard, Honda, PLSCorp, Frito-Lay, Dow Packard, Oticon, WN-data, Consult, Xerox, National Chemical, Outokumppu, McKinsey, Bain&Co, Chevron, Technological University, Skandia, Switzerland, Steelcase British Petroleum, PLS-Consult Matsushita
15
External Structure initiatives gain information and knowledge from customers, offer customers additional knowledge, and create new revenues from existing knowledge. For example, since 1982 GE has collected all customer complaints in a database that supports telephone operators in answering customer calls. GE has programmed 15million potential problems and their solutions into its system (Sveiby, 2001). For another example, in the apparel industry, Benetton Group in Italy produces “mass customized” apparel to fit the latest trends in colors and designs. Daily sales data from their own boutiques are integrated with CAD and CIM (Sveiby, 2001). Internal Structure initiatives build knowledge sharing culture, capture, store, and spread individuals’ Tacit knowledge, and measure the knowledge creating processes and intangible assets. The competence initiatives create careers based on KM, create microenvironments for tacit knowledge transfer, and learn from simulations and pilot installations. Buckman Labs is a good example of both Internal Structure initiatives and Competence initiatives. Buckman Labs, a biotech firm, has reorganized itself to optimize knowledge sharing and created a Knowledge Transfer Department to co-ordinate efforts. Employees best at Knowledge sharing gain both financial rewards and management positions. As a competence initiative, Buckman Labs create careers based on knowledge management. The Buckman Labs employees best at Knowledge sharing gain both financial rewards and management positions (Sveiby, 2001). Some of the companies from the table were developing in internal, external and competence aspects. For example, the Work-Out program in GE is considered an aspect of internal structure. The Work-Out program began in 1989. The Work-Out exemplifies an attempt on the part of large companies to create the opportunity for hidden knowledge
16
to be made public (Takeuchi, June 1998). It was important for GE employees to be able to search across multiple computer platforms that may be on systems throughout a distributed enterprise network. Training and improving the speed at which engineers get access to knowledge were key issues for the company (Riggs, 1999). The GE Operating System that includes the Work-Out program is the result of more than 100 years of corporate evolution. It is the way to operate, think, and get things done. The GE culture generated a constant stream of new ideas, changes and nnovations. The Operating System is the means by which they focus and drive those ideas towards company wide initiatives that shape and mold everything that they do. The system serves as the proving ground and incubator of these new ideas and practices (GE, 2001). Figure 2 shows the GE management process through the Operating System.
Jan.-Feb. Annual GE Executive Leadership Meeting
Mar.-Jun. Sept. Dec. Corporate Executive Council Meeting
Apr.-May. CEO Reviews and Employee Survey
Oct. Corporate Officers Meeting
Oct.-Nov. Business Plan Development
Jan. Annual GE Executive Leadership Meeting
Social Architecture Work-Out
Boundarylessness
Growth Initiatives Six-Sigma
E-Business
Services
Globalization
Figure 2. GE operating system model (Recreated from GE,2001)
The Work-Out program with Boundarylessness program supports social architecture within the company. For growth initiatives, GE developed Six-sigma, Ebusiness, and services and focuses on globalization. The whole system shows continuous
17
working process flow with connectivity in each activity. It seems to allow for sharing and transforming knowledge. Knowledge and KM Tools in the Apparel Business Knowledge in the Apparel Business In the apparel industry, the most important key for the success in the marketplace is to know the right target market and the right time to provide fashion goods for customers. This means knowledge is the power to increase profit margins and returns on investment. Within the company, people deal with information through the Internet from customers, contractors, retailers, sourcing suppliers, and manufacturers. Some of the information that can be leveraged to knowledge is applicable for merchandising, garment customization, and business processes. Source of Knowledge In the apparel business, the source of knowledge appears as a set of data or information. Information is useful because it has a context, which allows the analyst to draw some conclusions in order for a company to develop apparel merchandise or build a business plan. In the apparel business, the information is in two categories: infrastructure information and structure information. The following Table IV shows examples of the infrastructure information and structure information for the apparel business and apparel business consulting organizations that provide the source of knowledge.
18
Table IV. Infrastructure and Structure Information for Apparel Categories of Information
Information for Apparel
Infrastructure Information
• • • •
Structure Information
• • • • • • • • • • • • • • • • •
Business consulting Corporate finance services Government services Technology media & communications Information technology E business Legal services Professional and business services R&D (Research and Development) Business Process ID numbers and Bar Codes Standards management Process ID and Bar codes, EDI information Technology and Industry news Industry supplier guide Trade data Import quotas Trade agreements Export information Global apparel sourcing Apparel manufacturing resources
Organization Providing Source of Knowledge Anderson Consulting, TC2, Uniform Code Council, 1EDI source, Driving global e-business, National Retail Federation (NRF), Techexchange.com., Apparel Management Associates (AMA), American Apparel and Footwear Association (AAFA).
The Office of Textiles and Apparel (OTA), Passport Apparel, Apparel Management Associates (AMA), American Apparel and Footwear Association (AAFA).
In the category of infrastructure information, Anderson, TC2, and National Retail Federation (NRF) provide information such as government services, manufacturing and distribution, legal services, standards management process, EDI information, and production information. The information assists the business process. In the category of structure information, the Office of Textiles and Apparel (OTA) and Passport Apparel provide information such as trade data, import quotas, and global sourcing information. Structure information is directly related to manufacturing and product development plans. The information is based on raw data. Some organizations offer both structure and infrastructure information as sources of knowledge for the apparel business. For example, Apparel Management Associates (AMA) and the American Apparel and Footwear Association (AAFA) provide structure
19
information that is based on the data and infrastructure information that is necessary for the business process. Apparel firms can access the organization through the Internet and mine data as sources of knowledge that will be represented by information which is known and verified and which is institutionalized in any business process that can benefit from that knowledge. Successful plans for the data warehouse and data mining is essential because of increases in information and data all around the world. However, only a few organizations have developed their data warehouse infrastructure to such an extent that they are heading for the second transition from information to knowledge. Explicit Knowledge for Apparel Like other most businesses, in the apparel business, the knowledge is a set of leveraged information. The knowledge has connectivity, leveraging, and applicability that are always necessary for transformation from the information. Most knowledge used in the apparel industry for developing products is considered as explicit knowledge. Explicit knowledge usually is leveraged from information in external criteria and internal criteria for merchandising (see Figure 3).
Explicit Knowledge External criteria • Brand and labels • Color • Price • Country of origin/ Location of store • Availability if it shows stock status • Store carrying products • Assortment • Merchandising display areas
Internal criteria • Fiber content • Fabric construction • Size range • Number of colors • Construction quality • Construction functionality • Construction features: style or Silhouette • Fabric weight • Construction detail: stitching, seam type
Figure 3. Explicit knowledge for apparel
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The explicit knowledge is delivered among suppliers, manufacturers, and customers. The explicit knowledge is significantly important for communication between suppliers and customers. Although the knowledge is readily understood, it is sometimes necessary for people training in order to obtain the knowledge from customers who do not understand apparel terminology. For example, IC3D shows very specific information that can be applied as explicit knowledge on the web. The company provides the method of measurement in order to make its customers understand. Explicit knowledge from customers is conveyed to the company and is clear to understand. Tacit Knowledge for Apparel To be precise, there are two dimensions to tacit knowledge. The first is the "technical" dimension, which encompasses the kind of informal and hard-to-pin-down skills or crafts often captured in the term "know-how" (Takeuchi, 1998). For example, after years of experience, master craftsmen develop a wealth of expertise at their fingertips. But they often have difficulty articulating the technical or scientific principles behind what they know. In the apparel industry, tacit knowledge can be explained as two sides of the technical and business dimensions. The technical dimension seen in the apparel industry is related to production of garments. The tacit knowledge is informal know-how. For example, in the process of creation or alteration of garments, there is difficulty articulating the technical principles. Even though a master designer attempts to train people how to manipulate apparel CAD for garment creation and how to alter garments for each individual customized garment, it is still difficult to deliver the skills that were
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obtained through long experience. Practices such as apprenticeships, mentoring and communities of practice proved effective. The business dimension to tacit knowledge often appears as company’s mission, vision, guiding principles, and their strategy in the company. It is an abstract view that explains how to drive and succeed in business. It is related to business know-how. Sometimes it is difficult to make people within a company understand top managers’ tacit knowledge. The following Table V shows the mission and strategy seen in three apparel companies who are developing products for customization. The importance of tacit knowledge is increasing in the field of customization because companies have to respond to specific needs by each customer. Table V. Business Dimension to Tacit Knowledge Benetton Group Mission Benetton Group is a multinational company working for its worldwide Vision
Be united with free and equal.
Business level Strategy Functional level Strategy (marketing strategy, operation strategy)
Reliability, customization Marketing strategy- retail strategy Operation strategyKnowledge strategy (Net working communication)
IC3D IC3D is a company providing customization and made-to-measure designs on Internet. Be a leader in mass customization for the apparel industry. Flexibility of production, customization Marketing strategy“win-win” strategy for the customer. Operation strategyArtificial intelligence with knowledge base
Lands’ End, inc. Lands’ End, inc. is “a direct merchant” of traditionally styled clothing for the family. Please customers with the highest level of quality and service Customization Catalogue retail strategy
Knowledge of Customers in the Apparel Business The Role of Customers in the Apparel Business Retailers everywhere are talking about using “data mining” to learn more about consumers’ habits, tastes and buying behavior. Traditional retail business models rely on weak, uninformed consumers who do not know the actual cost, performance or repair
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record of products (Loewe & Bonchek, 1999). The role of the consumer in the apparel business, as a fashion business, is an important one (Jarnow & Dickerson, 1995). The part that consumers play seems to be a passive one and people do not actually demand new products and designs of which they have little or no knowledge. However, their individual and collective power is exercised in the selections they make and in their refusals to buy. The role of the consumer is related to their acceptance or rejection of the final products. They influence the goods that will be presented for their favor and even the methods of presentation. Consumer’s collective acceptance or rejection results in annual figures on the industry. The controlling role of the consumer is not unique to the fashion industry in that they also have to guide its operation in light of consumer demand based on the “pull system”. Unlike most other businesses, however, the apparel industry as fashion business has to respond quickly to consumers’ demands. Clearly of the first importance is a knowledge of the fundamental facts of what consumers want. Apparel firm’s target consumers are the center of all the firm’s activities. Customers via the Internet As part of the use of the Internet and information technology increases, companies have developed “Dot Com” divisions into parent companies. The division has an important role of linkage between customers and companies. It provides an opportunity to continue to grow the business as a leader in the e-commerce arena. This trend is not only for the computer business any more but also for all businesses, including the apparel business. With extensive consumer research combined with a sense of emerging new markets and trends, the logical way to offer consumers desires such as off-
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price designer apparel and home accessories is just a click away. Especially the presence of Internet enables the integration of the web sites with retail stores (WWD, 2001). The following Table VI shows the number of Internet visitors for apparel as they appeared in Women’s Wear Daily (WWD) news. The total number of visitors in 28 companies’ web sites was over 30 million, 24 % of who were under the age of 25. Table VI. Internet Visitors for Apparel Company
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Web Site
Delias corp. Delias.iturf.com Sears Sears.com Kmart BlueLight.com Walmart Walmart.com JCPenney JCPenney.com Victoria Secrete Victoriasecreat.com Target Target.com LandsEnd LandsEnd.com Gap Gap.com EddieBauer EddieBauer.com Alloy Alloy.com Spiegel Spiegel.com OldNavy OldNavy.com LLBean LLBean.com Nordstrom Nordstrom.com Jcrew Jcrew.com Coldwater Creek Coldwatercreek.com Chadwicks Chadwicks.com Macys Macys.com Nike Nike.com LaneBryant LaneBryant.com Fogdog sports Fogdog.com American Eagle AE.com Jeans 24 Abercrombie Abercrombie.com 25 BananaRepublic BananaRepublic.com 26 Polo Polo.com 27 Bluefly Bluefly.com 28 Eluxury Eluxury.com Total Note: A monthly report from WWD, April 16, 2001
Total Visitors % Users Visitors Under 25 Under 25 (in thousands) (in thousands) 3,500 2,700 2,600 2,300 2,300 1,900 1,800 1,200 1,200 1,100 1,100 1,000 893 807 719 709 685 593 577 487 414 355 328
1,900 216 520 390 305 462 301 129 461 169 647 48 293 91 88 344 26 28 48 178 40 79 203
54% 8% 20% 17% 13% 25% 17% 10% 38% 16% 62% 5% 33% 11% 12% 48% 4% 5% 8% 37% 10% 22% 62%
291 263 262 260 230 30,573
177 130 99 93 48 7,513
61% 49% 38% 36% 21% 24%
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This indicated that the Internet customers as their potential customers are not limited to the younger generation. The searched company’s key focus was on the customer information, offering the broadest range of products available on the Internet. Knowledge of Customers for Customization The knowledge gained from customers is used for customers’ additional knowledge. It creates new revenues with existing knowledge in the company or organization. Feed back, point of sale (POS) records, and Internet orders might be good example of how a firm gets customer knowledge. Customer knowledge is significantly important for customization with the following reasons: •
Better and more timely design of new products and services
•
Early warning and competitive intelligence
•
Customer commitment and loyalty
•
The synergy of collaboration (Srikantaiah & Koenig, 2000)
The exchange of knowledge, ideas, and opinions is not just the transaction data currently exchanged with just-in-time inventory or supply chain management systems. Many apparel companies are shifting from mass production to mass customization. IC3D Company believes that Mass customization is the true Business-to-Consumer (B2C) model. The next generation B2C model are businesses creating products specifically for each customer. The Internet enables the essential one-to-one B2C communication so businesses are able to deliver unique products to customers. Mass customization enables businesses to offer customers unique products while operating with minimum inventory. For example, essentially by delivering “truly customized products” with higher customer
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satisfaction, the IC3D company is setting the standard for all next generation B2C companies (IC3D, 2001). The analysis of what customers are actually buying is an important part of the fashion marketer’s job. In retail stores, a record is kept as to the styles, colors, and fabrics. Every garment bought by a consumer becomes a ballot cast by the customer for the desired size, color, fabric, silhouette, and style. Computerized registers provide this important point-of-sale data (POS) from every purchase. The POS data is important for apparel business as to understand consumers’ purchase behavior. The data and information can be leveraged to gain customer knowledge. Conversely, it is not easy to apply the knowledge directly from customers. When the customer purchases the garments that does not guarantee real customers’ wants. However, it is obvious that knowledge gained from customers used for customers’ additional knowledge creates new revenue with existing knowledge in the company or organization. KM Tools in the Apparel Business Information Technology KM systems can reside on a variety of computer platforms. It is possible to access a KM system via a workstation terminal and mainframe computer, from a personal computer workstation connected to a network server, or from a personal computer workstation connected to the Internet or a corporate Intranet. With increasing information technology, KM became a very important topic in the business world. Knowledge providers and receivers could be internal or external to an organization. The providers could be individuals or other sources of knowledge such as stored knowledge (Sahasrabudhe, 2000). Information technology provides tools to
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support management of explicit knowledge and also to support communities of practice. Only an integrated set of information technology tools can provide effective and efficient support to knowledge management (Sahasrabudhe, 2000). Although information technology alone is not sufficient for effective knowledge management, it supports KM. The following Table VII shows that information technology supports the management of knowledge as it appeared in most industries. For explicit knowledge, Relational Database Management System (RDBMS) and document management systems are useful for codification and organization. Internet, search engines, and workflow tools assist the access of explicit knowledge. Obtained and codified knowledge is applied for specific use through the performance support system. Collaborative work is important for tacit knowledge and the connectivity of the work is done by email, videoconferencing, and electronic workplace. Table VII. IT in Support KM IT support for Management of explicit knowledge
Codification and organization of explicit knowledge
RDBMS Document management systems
Accessing explicit knowledge
Internet search engines Workflow tools Performance support system
Applying knowledge
Decision support systems data mining data warehousing IT support for Management of tacit knowledge
Collaborative work
Email Video-conferencing Electronic workplace
A huge amount of knowledge exists and continues to increase rapidly in the apparel business. Information providers had to face the challenge of making the knowledge available to others and apparel firms constantly looked for tools to use to
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search for and access useful knowledge. Information technology provides tools for accessing, codifying, and applying knowledge. Information technology is a knowledge management tool to support management of explicit knowledge applied and also to support communities of practice (Sahasrabudhe, 2000). In the apparel industry most practical situations involve a combination of explicit and tacit knowledge. Information technology is used in support of managing explicit knowledge and tacit knowledge. In the apparel business, Internet, search engines, Intranets, and workflow tools are used for accessing the explicit knowledge that can be codified, can be stored and shared with receivers. Internet became a very important knowledge nugget for business to business (B2B) and consumers to business (C2B). The use of Internet not only changed consumers’ life styles, but also business practices. It has an important point of connection between consumers and firms in the world. For example, catalog retailer Lands’ End, inc. developed web sites called Landsend.com, and customers input a series of measurements on the company Web site (D’Innocenzio, 2001). Through the Internet, customers can access explicit knowledge that the company provides for customers and inputs their measurement data as well. The process through the Internet enables customers to find their own customized garments. Internet technology is used to link an organization together, using the Internet and its conventions for data display and access. As an e-business dramatically increases the amount of information within and across businesses, effective knowledge and content management leverage the information to fuel innovation, responsiveness and efficiency (see Figure 4) (Malhotra, 2000).
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Information Technology Knowledge Management
E business strategy
Creativity and Innovation Figure 4. Knowledge Management and E business (Malhotra, 2000)
Email, video conferencing, and electronic workplace for collaborative work supports the management of tacit knowledge in the apparel. Information technology tools provide electronic workspace to enable such collaboration (Sahasrabudhe, 2000). Information technology used for apparel merchandising, calendering and scheduling allows two ore more individuals to have brainstorming sessions electronically. It increases speed of process in the apparel business. A computer network is used to integrate the various types of information emanating from different departments of the company. In the apparel industry, Benetton Group in Italy is an example of using computer network and the company focuses on commercial network that integrated with apparel systems such as CAD and CIM (Sveiby, 2001). Usually, each separate department will have its own internal network, and software that is specialized for its own functions. The data on the departmental networks are mostly not relevant to, and not available in other departments. However, depending on the size and technical capability of the company, it may be possible for some of the sales and production data to be combined. An advance on this is the partially integrated system, in which some functions in cross-departmental boundaries can be linked (Eberle, et al.,1996). Ideally, a fully integrated system would be possible, in which all of the separate departmental networks are combined under the control of a central computer.
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Information technology that supports KM concentrates on efficiency and creating a consensus-oriented view. Information technology can distribute human expertise. This assumes that companies predict the right information to distribute and the right distribution of people (Hildebrand, 1999). It is very clear that information technology is a powerful enabler for effective KM, but it is not sufficient for managing the entire apparel business including top executive support, appropriate business strategy, and decision making on merchandising. An integrated set of information technology tools is necessary. Apparel Management Systems Apparel CAD/CAM system can store human knowledge and experience. Bits and pixels of data that are necessary for apparel production are stored in CAD/CAM system. But the data put into the system represents people’s explicit and tacit knowledge. While people change, tacit knowledge from their experience and explicit knowledge can be stored in computer systems. In the view of KM, apparel CAD/CAM systems enable the conversion of tacit knowledge to explicit knowledge and convey the knowledge through apparel production processes. Major CAD/CAM systems developed by Gerber Accumark System, Lectra, Assyst and Investronica can grade pattern pieces with various degrees of sophistication and speed. All systems can make markers. For the grading and marker making system, the Assyst PDS package was sold to users of existing systems, and passed over block patterns to Assyst’s workstation for style creation and grading. Once this was done the graded pieces by a master designer went back to the existing system, and the markers were made. Assyst’s Automarker.com provide automatic markers over the Internet.
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For pattern design, when CAD is used for alterations such as trouser lengths or skirt lengths, technical dimensions of expert tacit knowledge are necessary. The system has a size table, an alteration table and style listing. The system can then create a full set of patterns in all the sizes you have chosen, for the outer fabric, linings and interlinings and the entire pattern pieces are graded. This is then transferred to the CAD system from a PC and stored with a style name, piece name and sizes already graded ready for marker making (Aldrich, 1994). Users who do not have knowledge of grading and alteration are allowed to share the explicit knowledge that was transferred from expert tacit knowledge in the existing system. The apparel CAD/CAM systems have the ability to reapply the information with accuracy as users can watch a human and store in its expert knowledge with a particular movement on the same type of piece. The CAD/CAM systems are important tools for leveraging information to knowledge and applying the knowledge to the specific uses and processes. Apparel manufacturers respond directly to the behavior of their final customer and use this as information to help drive apparel business forward. Manufacturers use the system in the processes and in links to the other process in the supply chain (see Figure 5).
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Fabric trim
Design
Selection
Pattern Design
Production
Prototype
Production cost Providing information for all processes
Store
Point of sale
Lead Time Present lead time = 3-9 months Future lead time = 2 weeks –3 months Figure 5. Use of CAD in the supply chain (Aldrich,1994)
As shown in Figure 5, the shaded area indicates where CAD could be used in the supply chain. The use of CAD systems reduces the time in supply chain for the quick response. The knowledge-based system stores how a human ‘expert’ executes a function (Aldrich, 1994) and the system is an important tool for capturing knowledge from individual experienced operators or users. Other management information systems ensure timely provision of the necessary materials, services, equipment, and information, as well as the proper execution of the various functions and operations (see Figure 6). Standard forms are used to convey the technical information required for each production operation (Eberle, et al.,1996).
Design Department
Order
Operations Department
Marketing Department
Manufacturing Department
Figure 6. Management Information System interlocking of departments (Recreated from Eberle, et al.,1996)
Customer
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Electronic data processing (EDP), using computers, is very important for information flow and it can be an effective way of organizing information and managing knowledge in an organization or apparel manufacturing company. The rapid availability of knowledge both inside and outside the manufacture can reduce unnecessary delays. It ensures that the right goods are in the right place at the right time. As shown in Figure 6, management information system interlock of all departments in the apparel firms. From orders to customers, all systems show their connectivity in the process flow. With connectivity, leveraged information in each department can be useful sources of knowledge for the planning of production. For example, the operation department in the production department plans, monitors, and controls production. Its main functions are to reconcile the orders received from the Marketing department with the technical capability of the factory and to achieve the corresponding production at the optimum quality and minimum cost. The operation contains a large amount of documentation, such as production plans, cutting plans, sewing plans, and work allocation plans. EDP is a very critical tool for making all of these plans: production, operation, and balance (Eberle, et al.,1996). Planning can be greatly assisted by EDP because all of the required data are available at the various locations in the manufacture. Apparel CAD/CAM systems with MIS (management information system) are important support tools for KM. Apparel CAD systems and product development diagram shows flexibility in process order, extensive availability of CAD tools and the importance of communication and connectivity (see Figure 7) (Aldrich, 1994).
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Retail design and planning Communication
Sales information
Market research
CAD tools
Fabric & trim development Garment and print design
Virtual Reality: Video Camera: Compact disk imagery: graphic design and image manipulation: Color separation: Fabric printing: pattern making: pattern cutting: Sample cutting: Product development
World wide manufacturing Product control Product Development
Communication connectivity
Product cost
Prototype
Selection Buying
Figure 7. Apparel CAD systems and product development (Aldrich, 1994)
The system with connectivity, people can share the knowledge through the process. Integrated CAD/CAM systems hold much of the information that is required as input for explicit knowledge within a manufacturing environment. In addition, sharing tacit knowledge can occur through the systems with networking among those people in possession of tacit knowledge that is usually stored in someone’s head and cannot be codified. KM Initiatives for Apparel Customization Case 1: Benetton Group Investment in production capacity as companies that can meet increases in demand has a considerable advantage over their rivals. However, there is risk as large investments in implementing a generic strategy are required before the environmental change occurs. Benetton Group has avoided this risk through innovation in production, information processing, and product design (Smyth, et al, 2001). In the field of KM,
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Benetton’s process appeared as an external structure initiative that gains knowledge from customers for the mass customization (Sveiby, K. 2001). Benetton Group is traditionally known for knitwear and casual clothing in a wide array of colors, featuring fashionable Italian design and projecting a youthful image. The Group also licenses its trademarks for products manufactured and sold by others, including fragrances and cosmetics, watches, sunglasses and other fashion accessories, which complement its product lines. Benetton Group is a multinational company, operating in the clothing sector with the well established United Colors of Benetton Group and Sisley brands, and in the sportswear and equipment sector through the leading brands, Playlife, Nordica, Prince, Rollerblade and Killer Loop. The Benetton Group has 7000 Employees and another 30,000 people working for its worldwide. The Benetton Group is engaged in the design, manufacture and marketing of distinctive casual apparel for men, women and children, which it markets principally under the brand name United Colors of Benetton. The Group's commercial network of 5,000 retail outlets around the world is increasingly focused on large floor space stores offering high quality customer services (Benetton Group, Sept. 2001). The Group has a program called “Fabrica” for communication and commercial networking. Benetton’s communication. In the art or design process, it is hard to express what designers have in their mind and how to transfer what they think. For Benetton Group that operates in a multinational environment and targets international markets, it is of paramount important in order for designers to convey knowledge. Fabrica is Benetton Group's communication research and development center, created in 1994 from Benetton Group's cultural heritage. Fabrica's young designers
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works on innovative projects regarding products, fashion, interiors and industrial design. The Fabrica is a new phase of activity as an international multicultural center. Overseen by an international scientific committee, shaping its communications, strategic and cultural direction. Fabrica offers hospitality to young artists-experimenters from all over the world. After a rigorous selection process they are invited to develop concrete communication projects in sectors ranging from cinema to graphic art, from industrial design to music, from publishing - the Colors magazine and other editorial initiatives - to new media. Fabrica's challenge is both an innovative and international one. It is a way of merging culture and industry, using communications which no longer rely only on the usual forms of advertising, but transmit "industrial culture" and the company' s "intelligence" through other means: design, music, cinema, photography, editorial, internet. Fabrica's projects have involved diverse partners (Benetton Group, 2001). Benetton Group develops concrete communication projects. In its creativity laboratory, Fabrica experiments with new forms of communication, following two parallel guidelines. •
Training: learning by practice.
•
Interactivity: developed through teamwork. These two guidelines show how to share knowledge and allow people involved in
different roles and disciplines to work on a central idea and cultural identity from countries with different languages, cultures and attitudes. Benetton’s commercial network. In the field of KM, Benetton Group, the commercial network was a good example of external structure initiatives that gain
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information and knowledge from customers, offer the knowledge, and create new revenues from existing knowledge. Benetton Group “mass customized” apparel to fit latest trends in colors and designs. The development of Benetton Group's commercial organization has been supported by a major program of investment in stores, some of which are directly managed by the Group (Benetton Group,2001). The stores are characterized by their large dimensions, their prestigious locations in historic and commercial centers and by the high level of customer services they offer. The commercial network provides connectivity between customers and Benetton Group stores. Case 2: The Interactive Custom Clothes Company (IC3D) The Interactive Custom Clothes Company (IC3D) the leading retailer of mass customized apparel on the Internet. The IC3D focuses on mass customization as its business strategy. The company is compared with Levis, Gap, and Lands’ End, inc. and it is relatively new competitor in the custom apparel business. The IC3D provides much more customized jeans than the competitors’ (Zipkin, 2001). The company was launched in 1996, as a proof of concept, to sell mass customized, made-to-measure apparel over the Internet while maintaining a better than 90% customer satisfaction rate (Rio, 2001). In March 2001, Macworld Web awards pools IC3D.com as one of its lists of web favorites for home, work, play, and technical use and focus on the benefit of the “madeto-order” which is customized jeans for each individual customer (Macworld, 2001; Rio, 2001). The IC3D provides a simple and robust business-to-business interface (IC3D, 2001). The interface supports customized business apparel by offering customization at all levels for businesses. It is enabling everyone to choose how his or her clothes fit,
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offering customization down to what color thread to use. Automated real-time flexible manufacturing enables customization at low costs. Artificial intelligence with knowledge base. A proprietary artificial intelligence system was created to make the digital made-to-measure apparel patterns and since then IC3D has offered the public, custom made-to-measure jeans (Rio, 2001). The artificial intelligence is a series of software procedures, which allow a computer to think in similar ways that of a human, and an expert knowledge base (Aldrich, 1994). The IC3D developed an artificial intelligence system to manage the knowledge that is applicable in the customized apparel business. People obtain knowledge naturally with the help of simple and robust interface. The Internet communication with well-designed interface provides connectivity between the customers and the company. Customers are able to select jeans by themselves by following few steps and explanation provided on the web (see Figure 8). As shown in Figure 8, IC3D’s web site guides customers through the 14 continuous process steps and has continuous process. In each step, customers can select preference detail design and find out their right sizes. To make customers who do not have any knowledge about what is fitness and how to measure, the IC3D delivers the knowledge of the fit and measurements through the on line. After taking eleven measurements, customers type the numbers into the computer by themselves and order via email. The continuous process with connectivity enables the IC3D to apply the knowledge that is relevant to each customer condition and collection of multiple perspectives on satisfaction.
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Create Jeans by Customers
Step1: Select Gender (F / M)
Step2: Select Fabric (24 Fabric categories) Step3: Select Color (Each fabric contain 4-7 color ) Step 4: Select Fit (Company definitions of the fit: The FIT is how tight the jeans are around your hips)
Response via Email (Satisfaction or not)
Step 8: Select Hardware for Type of Metals
Step 9: Select Fly (Zippers /Buttons)
Step 10: Select Front pockets Step 11: Select Back pockets Step 12: Select Number of Belt loops
Step 5: Select Legs
Step 13: Select Thread Colors
Step 6: Select Ankles Step 7: Select Label
Step 14: Select Measurements (Waist, Widest, Thigh, Knee Length, Bent knee, Inseam, Front Rise, Back rise, Full crotch, Mid crotch, Waist to Widest)
Figure 8. IC3D interface web design for customer knowledge
IC3D Company
Order via Email
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IC3D business dimension to tacit knowledge. The IC3D has grown from a noble concept to an Internet business. The company believes that mass customization is a fundamental business model that involves customizing products with numerous options in quantities as small as one while maintaining mass production's economies of scale and speed (IC3D, 2001). Mass customization is possible because the Internet enables producers to know exactly what each customer wants instantly and inexpensively. As a business dimension to tacit knowledge in the company, mass customization is a "winwin" strategy for the customer and producer. The customer benefits because they receive goods and services that embody their own tastes. Producers benefit because they operate with no inventory and deliver a product on demand (IC3D, 2001). The tacit knowledge on mass customization potentially represents great value to the organization. Case 3: Lands’ End, inc. Lands’ End, inc. is a catalog retailer that has had years of experience in selling without the benefit of stores and the second largest direct clothing retailer in the world (Lands’ End, inc., 2001). Lands’ End, inc. is “a direct merchant” (Lands’ End, inc., 2001) to customers by mail or fax, or shop via the Internet. Landsend.com evolve quickly from an experimental site launched in 1995 (Sweat, 2001). The Lands’ End, inc. has B to B business strategy (Garner, 2000). For small and mid size business, there’s the Lands’ End, inc. corporate sales site, with its prominent link from the consumer site, landsend.com. The B to B strategy built with customer service, support and quality. Lands’ End, inc. has loyal customers who buy without trying on clothes first. Land’s End also knows how to fulfill orders and deliver products with its long experience.
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In the move to mass customization from the mass production, the Lands’ End, inc. also offers “custom made chinos”(D’Innocenzio, 2001) and has direct marketing with a loyal customer base. Lands’ End, inc. has web interaction tools without overloading on technology, Customer Relationship Management (CRM) system, and efficient communication tools for vendor-supplier relationships. Lands’ End’s customer relationship management. Lands’ End, inc. managed information to provide almost legendary customer service without benefit of the technology that many companies take for granted in the past. For example, the company’s catalogs weren’t in electronic form for sales representatives. A representative had to go through a catalog to find the answer for a customer’ calls with a question. Land’s End pulls together customer information from disparate systems. In the past, Land’s End had Business to Business connect center that handled interactions via phone and internet, each served by a variety of custom front ends that link into back end systems such as “Axciom” for direct marketing and “WebLine” for web customer service. But E-commerce and customer-relationship management tools (CRM) are finally bringing automation to the aid of its customer-service personnel. The CRM includes “Trilogy” software program that integrates with old CRM products, such as “Axciom”, for marketing and customer profiles. In addition, other software programs such as “MCC catalog”, “Pricer”, and “Config” in the CRM system help contact center employees suggest appropriate products in light of customers’ past purchases (Sweat, 2001). “Lands’ End Live”, powered by software from “WebLine” software, enables shoppers to speak to customer service reps live over the Web via chat or voice over Internet Protocol (IP). If a customer can’t find an item, a customer representative can
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assist the shopper to find the right catalog URL. The customer service tools already had much of the distribution and order taking technology for customization. Lands’ End, inc. recognized that its online customers were asking the same questions about fit, color, and other product details as its catalog shoppers and launched (Cotlier, 2001). And its catalog’s customers are willing to spend another 40 percent more to have a better fit (D’Innocensio, 2001). To offer better fit to each customer and customers’ preferences on the product detail, Lands’ End, inc. launched its customer care technology such as “My Virtual Model” and “ My Personal Shopper”. The technology allowed customers to input a series of measurements on the web site and can expect a pair of personalized pants delivered to their homes within two or three weeks (Cotlier, 2001; D’Innocensio, 2001). The company created a virtual model to try on clothes and provide a picture of exactly how the garments would drape and fit. “My Virtual Model” and “My Personal Shopper” are tools to more accurately reflect customers’ measurements as determined by a body scanner. The “My Virtual Model” lets customers enter their measurements to see how clothes would look on them and helps consumers overcome hesitancy about buying clothes sight. “My Personal Shopper” was developed internally for the online customer service option. The feature asks each customer questions about style preferences, analyzes customer style preferences, and then builds an online profile for the individual based on the answers from the customers (Cotlier, 2001; Sweat, 2001). The customer service and the customer care technology built into its Web site are examples of extensive customer service automation through gaining knowledge from individual customers.
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Lands’ End’s customer service innovation distinguishes the company from its competitors. Lands’ End, inc. has a challenge to integrate its catalog call center with its evolving online customer care technologies such as “My Virtual Model” and “My Personal Shopper”. Because of a lack of training, only 10-20% of Lands’ End, inc. service representatives can respond to online and offline customer inquires (Cotlier, 2001). Even though Land’s End launched all support technology systems, the company had to be aware of that it would be an inefficient way of working process without managing the knowledge for people who operate systems and represent to customers. According to Sterlicchi and Gengler (2001), Lands’ End, inc. has an advantage over its etail competitors because the company already knows how to move items through the supply chain to the customer. Employees receive 70 to 80 hours of product and computer training when they start, and 24 hours of training a year after that. On average, employees have eight to nine year’s experience in sales with the company. Vendor supplier relationship. Lands’ End, inc. has an efficient communications with suppliers for effective inventory control. Lands’End, inc. communicates with suppliers through an extranet in order to share inventory data. Lands’ End, inc. offers extranets to corporate clients, enabling them to log on to their own password protected Internet site where they can order merchandise and check on inventory status ( Franco, 2001). This allows sharing knowledge with corporate clients. All internet, export, and liquidations sales are included in the respective business segments figures such as international, core, and specialty operation (Lands’ End, inc., 2001). Lands’ End, inc.
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has an adequate number of servers and connections for vendor supplier relationship. It enables efficient communication on real-time. Because of the external focus of Customer Relationship Management (CRM) and Vendor Relationship Management (VRM), the company was able to provide seamless ebusiness with quick response and delivery to its customer. The continued challenge of integration remains in terms of ensuring the adaptability and flexibility of information interfaces and information flows both internally and externally required for dynamically changing business and competitive environments. Advancing KM in the Apparel Business The progression from mass market through niche markets to segmented markets and finally to the customer marketplace is illustrated in Figure 9. The tendency of towards mass customization shows that data volumes and the level of detailed analysis of markets are increasing.
Level of detailed analysis of markets
Data volumes
Market
Niche
Segment
Individual
Marketing focus Figure 9. The tendency of towards mass customization (Kelly,1997)
The traditional market segmentation has been based on demographic factors such as age, sex and income (Kelly, 1997). But companies in the move of mass customization need more data and specific data analysis than required for the mass market because data warehouse begins to deliver customer oriented data to the enterprise, the first thing that is
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discovered is that all customers are different. Benetton Group, IC3D Company, and Land’s End, inc. are in the direction of mass customization and needs high level of detailed analysis of markets. According to Kelly (1997), the progression of the enterprise shows transition from the primitive data-oriented organization to the more progressive information-oriented organization to the fully adaptive knowledge-based organization appeared (see Figure 10). All investment justification for the information technology will be based on the added business value. Data
Information
Added business value
Knowledge
Market Leadership Customer-facing Revenue Growth DSS systems Cost Reduction Operations systems
Automation
Innovation
Adaptation
Information management maturity Figure 10. The progression of the enterprise (Kelly, 1997)
Benetton Group, IC3D, and Lands’ End, inc. were in the phase of information and innovation that Information Technology such as Decision Support System (DSS) with innovation made their revenue grow. Today, these companies have customer user interface systems that provides interactivity through the Internet as their operational strategy. Fully adaptive knowledge based management is necessary to be a leader of the mass customization market.
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According to Short’s analysis of KM approaches (2000), the cited three apparel companies, Benetton Group, IC3D, and Lands’ End, inc., were analyzed whether the companies practice KM. Hypothesizing is a common approach in almost all businesses, and it appeared merchandising, prediction and planning of apparel product lines in fashion trends (see Figure 11).
Collect Connect
Harvest
Hunt
Harness
Hypothesize Portion of area that used by the apparel
Figure 11. Knowledge levers (Recreated from Short, 2000)
As shown in Figure 11, all three apparel companies uses Hunting and Hypothesizing approaches. Hunting approaches with Harvesting approaches rely on collecting data, information, and knowledge artifacts, with an aim to storing them in an organized fashion that will yield future business value. Practically, IC3D shows Harvesting approaches. Compared to other apparel companies, IC3D provides the best practices and useful codified information that is already stored and retrieves the information in order for customers to select garments in a well-organized process through the IC3D’s interface. However, any of apparel businesses did not show an evidence of practicing effective Harnessing approaches that need a map of “who knows what” for managing significant knowledge existing among employees. For the efficient KM with the approaches, it is necessary to focus on strategy that is created by reviewing the firm’s articulated business strategy and objectives, identifying
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business issues that arise from the business strategy. The strategy for KM assesses the knowledge resources available to the firm, defining the way in which those resources should be leveraged against the business issues to support the business strategy (Short, 2000). Apparel businesses need a map that can be used to identify and prioritize KM levers and approaches in a way that supports achievement of long term strategic business objectives. Conclusion and Suggestions In all businesses, knowledge appeared at a higher level than information with following criteria: connectivity, leveraging, and applicability. Knowledge was always relevant to environmental conditions, and was applicable in planned environments. The apparel businesses had tacit knowledge that appeared as both technical and business dimensions, and was related to informal know-how. Like most businesses, apparel businesses, knowledge in an explicit form appeared to be understood clearly; however, tacit knowledge gained through long experience was uncorroborated. The results of the present study of KM may be summarized by pointing out the following: •
KM was extremely important for efficient organizational structures, better communications, and quick response in real time.
•
Businesses that had three main themes such as Organizational Learning (OL), Document Management, and Technology mostly embraced KM in an effort to better leverage knowledge and information. This includes the process of how data and information is accessed, collected, and stored on a firm’s networked computer system.
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•
KM increased the efficiency of production and process in most companies while apparel companies with interest in customization are beginning to realize the need of managing information and knowledge.
In the apparel industry, major goals of the marketing effort associated with customization appeared to be customer retention and customer satisfaction. This indicates that apparel businesses were already focused on external structure of KM. For example, Benetton Group’s customization with communication networking, IC3D’s artificial intelligence with expert knowledge, and Land’s End’s Customer Relationship Management (CRM) were explained as efforts for managing knowledge from their customers. However, in the apparel industry, firms did not show evidence of practicing KM. The business trends in the past decade were more closely associated with technology than KM. Even though it was very clear that information technology was a powerful tool for effective KM, it was not sufficient for managing the entire apparel business including top executive support, appropriate business strategy, and decision making on merchandising. This finding is of considerable importance since it suggests that KM is an integrated set of information technology tools. The KM is necessary in the apparel business because people perform the actual work such as data entry and information handling. These findings suggest that a strategy for KM be comprised of the following discrete components: an articulated business strategy and objectives for tacit knowledge, an inventory of available knowledge resources, and an analysis of technology as knowledge levers. Once this fundamental strategy is defined, technology options may be explored. Then, KM may be defined as the set of practices, tools, interventions, and
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infrastructure, aimed at improving a firm’s ability to leverage its knowledge resources to achieve business objectives. Clearly, this KM has promise for efficient management in apparel production innovation and mass customization. This suggests an inevitable evolution of KM in the apparel industry.
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