As the watch industry recovers from several rocky years leading up to 2017, many in the business are looking back and reflecting on the lessons of the past. The industry is awash in a sea of changes: volatility in the Asian market, rising production costs, and new technologies and manufacturing models that are disrupting long-held beliefs and traditional business practices.
In this 5 part series, we examine the most troubling issues facing the watch industry today, the underlying cause of each and how implementing the FINS solution solves them for watch brands.
We previously discussed how the overreliance on dubious sales forecasts and over reliance on the Chinese market created an inflated positive outlook on sales, leading to overproduction. When the Chinese and Hong Kong markets suddenly went into steep decline in late 2015 and early 2016, exports to the world’s largest market for Swiss watches dropped by a staggering 22%. What had been a boon for watchmakers quickly became a pain point, leaving makers sitting on millions of dollars’ worth of merchandise, warehouses full of non-turning completed stock and production lines that grinded to a halt.
The costs were sobering, not only had significant investment in infrastructure been made to keep up with rising overseas sales, but slow moving, outdated supply chains were filled with overstock, pending delivery of material components, and valued employees that were facing layoffs.
Deeply Discounted Overstock
The over-production of watches that created this problem has profound effects. To move product brands resorted to costly tactics – sales to wholesalers were discounted to move units which resulted in too much inventory all the way down the distribution network. To avoid overstock, distributors and then retailers were forced to heavily discount watches, cutting into profits and diminishing brand prestige. Often because of this, overstock then found its way into the hands of unauthorized third-party sellers which sell for rock-bottom prices over the internet, failing to respect exclusivity and regional pricing, which the makes consumers suspect of pricing structures.
The overproduction and oversupply to distributors that occurred over the last few years resulted in costly buybacks, fire-sale pricing on inventory and less brand exclusivity; costly blowback to an industry trying to recover sales while simultaneously reaching out to new markets and demographics.
As the industry began a modest recovery in 2017 and looks optimistically toward 2018, it’s clear that a fresh approach and new resources are necessary to prepare for an uncertain future. New tools such as FINS are available that create more flexible and responsive supply chains while using accurate business data to prevent overproduction and overstock.
FINS is the 1st Cloud ERP solution created specifically for the watch industry supporting Just-In-Time manufacturing. FINS uses lean inventory practices, micro-manufacturing and advanced merchandising with end-to-end traceability managed by an online portal customized for watch brands
FINS was designed by watchmakers, for watchmakers and addresses the biggest problems facing the industry today…
Preventing Overstock – FINS transforms traditional supply chains. It uses the latest in Lean Inventory practices to drastically reduce component stock and inventory carrying costs by up to 4x. This optimization of inventory greatly improves cash flow and the system is fully integrated with sales, marketing and distribution to constantly analyze sales and adjusts production to create only the minimum amount of watches needed.
Because FINS is connected all along the supply chain, and through the entire distribution network, it can more accurately control production, based on real-time sales and careful analysis of every SKU. Using FINS, brands can reduce completed watch inventory to as little as 30 days’ supply, completely eliminating over-production, non-turning units and dead inventory. Buy-backs and deep discounts on overstock become a thing of the past.
The FINS system is fast, flexible and constantly optimized, creating a supply chain that can handle the increasingly complex and stratified watch marketplace. It’s designed as a user friendly cloud-based ERP platform that can be customized to fit the unique needs of any brand. It is designed to grow and adapt fast to any changes in the market giving brands the tools they need to succeed now and in the future.
Register to try out our fully functional online live demo to see exactly what you get with
the FINS manufacturing software solution for the watch industry.