THE INFORMATION-INTEGRATED CHANNEL - A STUDY OF THE US APPAREL INDUSTRY IN TRANSITION

Many U.S. manufacturers face intense competition from foreign competit ors. Frequently, foreign competitors have much lower labor costs than U.S. manufacturers. To compete, U.S. manufacturers often try to keep a head technologically through investments in capital. The U.S. apparel industry is used as an example of a U.S. manufacturing industry hurt b y cheap foreign labor and price competition. The authors argue that te chnological and organizational changes in the apparel industry are rap idly transforming firms and the nature of competition. To understand h ow industry competition is likely to evolve, one must understand these changes. The authors base their study on an extensive field study, ga thering sales, technology, inventory method, and supplier and retailer data from eighty-four apparel manufacturing companies. The data revea l that U.S. apparel firms have responded to foreign competition by inc reased integration to better manage costs. Central to this strategy ha s been the introduction of information systems that collect, process, and manage information on consumer demands and firm inventories. These systems permit apparel firms to reduce inventory costs and risks asso ciated with shifts in consumer tastes. When domestic apparel firms can keep this information and their information systems proprietary, they gain a comparative advantage over foreign competitors. The paper begi ns by describing the history of competition and the structures of-appa rel firms, suppliers, and retailers. The authors note that the industr y has recently shifted from an arms-length vertical structure to an in creasingly integrated manufacturing-retailing channel. The survey data suggest that changes in information acquisition and information techn ologies have facilitated many of these changes. They also find that fi rms that have the greatest incentive to manage inventory costs are als o the most likely to make investments in information technologies and inventory control systems. Perhaps the most intriguing finding is that firms that make these investments tend to perform better than firms t hat do not. Although it is unclear whether this result appears because better performing firms have more funds to invest or the opposite is true, this association suggests that information technologies are impo rtant sources of competitive advantage in the apparel industry.