Embracing the web - Stone International - Company Profile - Statistical Data Included

Bobbin, May, 2001 by Jules Abend

Using his "supply chain web," Jack Stone has expanded the concepts of supply chain management and increased capital efficiency.

One important aspect of supply chain management is that it can reduce the need to acquire working capital from financial institutions. And in today's tight money market, this is becoming an increasingly important focus for firms that are up against lenders who don't think the apparel industry -- with its rapidly expanding offshore pipelines -- is glamorous enough for their support.

That, in particular, is one key reason why Eugene E. (Jack) Stone IV is embracing the concept that he calls a "supply chain web." He is among a number of companies in the industry that are broadening the linear concepts of supply chain management (SCM) to a "web," or hub-and-spoke process that is sometimes referred to as demand chain management.

Stone is chairman and CEO of $60-million, 68-year-old Stone Apparel, which is owned and operated by Stone International LLC. The Columbia, SC-based company is a major supplier of men's and boys' private label knit and woven underwear and T-shirts, selling to giants such as Target, Sears, Kmart and JCPenney.

Born Out of Necessity

Stone's interest in implementing strong supply chain measures was accelerated by a global capital crunch. As Stone stresses: "The availability of capital is restricted. Don't be misled by the fact that interest rates have come down. There is a severe tightening from the capital markets on how and to whom lenders will provide funds."

Although apparel companies have benefited from the low costs associated with operating offshore, producing worldwide is significantly changing balance sheets because of the additional working capital that the production pipelines require. "And this is right at the time when both capital availability and our industry as an attractive place to put capital are being scrutinized," Stone declares.

In his view, one of the reasons why SCM hasn't been more effectively driven into the process is because the capital link isn't firmly established across a broad spectrum of the industry. "It's really about capital utilization and efficiencies, and finding more efficient ways to move product from A to Z with less capital," Stone contends.

The industry incurs significant costs with its permanent, fixed investments in inventories and receivables, and when capital is scarce and returns are not generated above those costs, the capital markets will not offer any support. Such is the trend of the past 12 months. As Stone explains. "It is a challenge for us today.... How effective we are in managing inventories and receivables determines the amount of capital we need. If we have $1 of assets, do we generate $1.5 worth of sales, or $3 or $4?"

As head of a privately held company that produces between 40 million and 50 million garments annually, Stone feels so strongly that innovative SCM processes can enhance the efficiency of capital that he sponsored a series of full-page "advertorials" in trade publications. Written by well-known strategic thinkers including Peter Brown, CEO of Kurt Salmon Associates, these essays gave visibility to their views. As Stone urges: "We are not an island, we are inter-linked ... and we need our suppliers' and customers' thinking integrated with our own."

With an eye toward improving his organization's internal operations, Stone incorporated the ideas of his brain trust and took the first step this year toward creating a benchmark to measure procedures and develop new practices. "We believe that if we implement the majority of these, we're going to see significant benefits in terms of capital utilization, and more effective on-time delivery to our customers. And equally important, [we will] enhance the quality of our own environment," he reports.

Current Infrastructure

For Stone, the next step is to extend the process to the company's main suppliers and invite them into the discussion. Along those lines, and in preparation to develop more immediate and comprehensive information-sharing capabilities, two years ago Stone moved from "cumbersome" IBM AS/400 and 9300 mainframes to an open Internet-based client/server system. Previously, anyone who needed information had to go through a programmer to access the mainframe, a process which could take from three days to three months. Now, he says, data is available to all interested parties in real time, and is constantly updated with every transaction.

At the heart of the company's supply "web" vision, the new system consists of four main servers that are located at Stone's headquarters and distribution center in Columbia, SC. Two network servers handle the application, while one NT server takes care of the Net functions and another operates as a communications link.

The company is connected to more than 90 percent of its retail customers via electronic data interchange (EDI). In addition to receiving orders electronically, the client/server system can quickly take stock keeping unit (SKU) information, integrate it into a Forecast Pro forecasting package, interpret the trends and then report them to the retailers.