American Apparel and Business Process Reengineering

American Apparel and Business Process Reengineering

J.C. Canedo

Argosy University

American Apparel

American Apparel is an American clothing company that prides itself on manufacturing all of their products in the United States. The company started its operations 1989 as t-shirt wholesalers. American Apparel opened their first retail stores in 2003 which has grown to 285 stores in 20 nations (Covert, 2010). During 2008 through 2008, American Apparel culminated what was to be the fastest retail expansion in American history, by opening 200 stores worldwide. American Apparel also has an online arm of its retail operations, called AmericanApparel.net, which grew to 43.1 million in 2011 (Covert, 2010). Even though the organization has built a cult like following amongst consumers for “Made in the U.S.A.” value point American Apparel does face price challenges from competitors (Perry, 2004). The value to consumer in regards to the American Apparel clothing lines is not the design, but the quality of the material and the construction.  

With the exception of their international retail stores, American Apparel completes all of its operations in the U.S. American Apparel focuses on controlling all levels of manufacturing; including dye houses and knitting factories that distribute their product to their own retail stores domestically and internationally (Perry, 2004). This allows American Apparel to control its quality and supply leverage. American Apparel has a fully vertically integrated manufacturing channel. A substantial challenge for American Apparel is that it has to position themselves in an above average price point due to its above average labor costs.

As a fully integrated manufacturer, American Apparel bypasses some of the obstacles that other retailers have with their suppliers. Because of the basic designs and streamlined collection of apparel, it can afford to be vertically integrated. It has also been profitable, since their blended margins on their product is on the average 70%, versus their competitors averaging in the 30% range (Kay-Yut & Ozalp, 2008). American Apparel also offers their wholesale service that provides high quality T-shirts to other organizations or retailers. Its t-shirts are a mainstay throughout the t-shirt world due to their design and quality of its product.

American Apparel’s target market is mainly young adults between the ages of 20-35 of both genders. Although they focus on young adults who make less than a high income, and that might be in college, they understand that their target market is invest in fashion.  American Apparel’s demographic considers themselves unique and show off their personality through fashion (Perry, 2004). American Apparel’s customers also like the fact that their apparel is made in the United States, which has become a marketing touch point. American Apparel also has various interests in social issues such as immigration, and gay rights (Perry, 2014).

American Apparel and RFID

American Apparel recently invested heavily in inventory management by implementing RFID (Radio Frequency Identification) for its inventory. American Apparel chose Motorola as it supplier and handler of its RFID system. This required hand held RFID readers and inventory cycle reporting. The RFID tags are placed in each item of clothing and merchandise. The RFID are tags work in conjunction with the TrueVue software platform ((Kay-Yut & Ozalp, 2008).).  The platform manages store, online and mobile inventory stock. The platform also allows American Apparel to look at their inventory in a real time basis. Most of the garments that arrive at stores are tagged at the main distribution center in Los Angeles. This process is congruent with American Apparels, vertical integration model.

The RFID inventory tracking system has worked well at American Apparel and has had constant success. The RFID process at American Apparel has contributed to appropriate stocked stores, increased sales, and accurate inventory counts. It has also allowed for American Apparel to replenish its stores, and allocate online inventory appropriately. The process also allowed to the restocking of an average American Apparel store from 6.5 hours to 2.5 hours per day ((Kay-Yut & Ozalp, 2008).). An unintended positive consequence from the RFID roll out was the decline in inventory shrinkage from inventory misplacement and theft. This in turn brings about a cost savings from prior years before the RFID project was implemented.

Business Process Reengineering

Business Process Reengineering (BPR) is an approach of redesigning facets of an organizations processes or tasks. Organizations usually implement some form of BPR in order to install efficiencies and cost cutting measures. The concept of BPR has become a description of an organization rethinking and radical redesign of business processes to achieve dramatic improvements (Hindle, 2008). The use of BPR usually has a technological factor into its implementation. However, it is more than just implementing technology to certain processes. It essence BPR is identifying procedures within the organization and having them align themselves to the needs, and wants of the consumer. This an involve re-thinking values as well as processes in order to bring the highest value to the consumer, and therefore bringing about operational profits to the organization.