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Certainly, 2017 is proving to be a fantastic year for apparel companies, which makes now the ideal time to measure just how well your company is doing by benchmarking key performance areas. Preparing your organization for long-term success now will help you establish goals for 2018 and ensure you either maintain your industry-leading status or figure out where you need to improve. This will maximize profitability and guard against disastrous results when (or if) the apparel market experiences a downturn.


How to Choose the Right Benchmarks

Too often, companies limit their benchmarks to competitors they recently beat out (or lost to) in sales situations. Certainly, those can be worthwhile, but you need to broaden your benchmarking to continuously improve in line with broader industry trends. After all, companies of the same size, model, and outlook could ALL become obsolete if completely different competitors enter and operate better in their market. So, your benchmarks should be based more on companies that are doing things well, including:

  • Industry leaders, regardless of their scale and size
  • Innovative companies that do one or more things astonishingly well, such as Amazon’s email operations
  • Your B2B customers’ competitors that may do something very well, which you can then offer to help make your customer better

Since there are so many metrics you could measure, you need to focus on those that matter most to your apparel business – the key performance indicators (KPIs) that account for value to your customers and profit to your business. We find that easiest to do by following the typical apparel product lifecycle stages and tracking KPIs for each: Sales & Marketing, Supply Chain, Production, Delivery, Financial Analysis.


Marketing and Sales KPIs

Marketing and sales performance indicators help an apparel company judge the success of pricing strategy and marketing campaigns. With the popularity of e-commerce and online retailers, it's easier than ever to get quantifiable data. Apparel companies looking to expand into a new customer base can evaluate the percentage of unique visitors versus returning visitors on their website. Retailers can set goals and measure the conversion rate of visitors at electronic stores compared with brick-and-mortar stores. Companies looking to refine pricing strategy can measure the average order size and the average margin on products sold.


Supply Chain KPIs

Since trends change quickly, apparel companies need to be able to quickly respond to changing product demands. Apparel companies seek to achieve high inventory turnover indicators. The quicker apparel retailers can turn over inventory, the more capacity they have for new products and the less likely it is they have unfashionable, obsolete inventory on hand. Companies will also evaluate time to market to see how quickly they can translate an apparel design into a sellable product.


Production KPIs

Apparel companies that manufacture products should routinely evaluate production indicators. Standard costing indicators help apparel manufacturers understand variances in production costs, quantity and quality. Companies can measure the amount and cost of the machine hours they used to create their products. They can measure the average defect rate per product to identify areas of weakness. Purchase price variances can help managers identify where cheaper raw materials may result in lower-quality apparel products.


Financial KPIs

Employees, managers and investors want to make sure their apparel company is financially viable. Apparel companies often set target financial indicators to increase their stock price or lure in new investors. Companies can measure their return on assets and return on revenue to see how well they're leveraging the resources available to them. Apparel businesses that are seeking long- and short-term financing focus on maintaining low debt ratios and a high current ratio.


Delivery KPIs

Apparel wholesalers need to protect their reputation for meeting contract delivery dates to earn repeat business. Buyers use the on-time delivery KPI -- shipments made without any extensions or delays divided by the total number of shipments -- to evaluate the factories they use. A variation called “on time in full," or OTIF, considers quality and quantity of items in a shipped order as part of a wholesaler's ability to deliver.



By establishing your performance benchmarks now for 2018, you will position your apparel business to continuously improve and optimize long-term customer value. This is the only way to ensure you maintain a competitive advantage in 2018 and beyond.

Contact Sapphire today to speak with an expert about your apparel business.

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