With leading sales numbers and strong revenue streams despite the lack of advertising and mass marketing investment, Lululemon’s aggressive expansion strategy as announced by Day, seems promising. However, the internal battle to ensure information systems are current and able to track and accommodate physical expansion prove challenging. Up until 2005 Lululemon’s product lifecycle management system consisted of using Excel and Adobe Illustrator (Kusterbeck, 2006). The system which had once functioned adequately, rapidly became ridden with inefficiencies as the company grew to a force of over 1100 employees and 42 retail stores worldwide (Kusterbeck, 2006). To accommodate expansion plans of over 250 new stores in the next 5 years, in addition to the product and design expansion of the garments themselves, it was paramount that a new system be implemented that would integrate Lululemon’s product development, sourcing, manufacturing and wholesale distribution processes. While avoidance of advertising and promotions had worked in the company’s favour by maintaining low costs and operating margins while not adversely effecting customer traffic or revenues to date, investment in the upheaval of information technology and internal systems was unavoidable in the face of successful expansion.
Product Lifecycle Management (PLM) System
In an attempt to align and accommodate expansion efforts, Chief Supply Chain Officer and Director of Corporate Operations at the time, Christopher Ng, implemented a new product lifecycle management (PLM) system. Generally speaking PLM is the process of managing the entire life cycle of a product from conception of the idea through to design, to manufacturing and then to service and disposal (Johnson, Alan. 2009. "PLM comes of age for manufacturers."). Following from this, a technology based PLM system has the capacity to accommodate customizable and innovative products more efficiently due to the ability to streamline the lifecycle of the product from concept to store (Johnson, 2009). The decreased time to market implicit in the PLM system further lends itself to the maintenance of a competitive and first mover advantage. Also of critical importance to a community and lifestyle oriented corporation such as Lululemon, a new PLM system would provide a more effective avenue for listening to the customer’s feedback and incorporating it in their products in a timely manner (Kusterbeck, 2006). Additionally an effectively implemented PLM system would enable Lululemon to strategically increase the amount of new product they carry in their stores by introducing new apparel more often and pulling it off shelves more quickly to make room for the next novelty apparel item ultimately translating into more frequent visits by customers (Johnson, 2009).
The implementation of the PLM system was smooth with little interruptions to operations. The design team was at first resistant to the new process. Ng attributed this resistance to designers’ attitude towards standardized practices. Creative designers are often resistant to regimented processes however it soon became obvious to them that investing time upfront to learn the new systems would allow them to be more efficient the next time around (Kusterbeck, 2006). The PLM solution allowed the designers to create products with more unique colors and styles in smaller quantities and with a shorter demand cycle. As cost sheets, fabric and trim flowed automatically into the PLM system, designers could easily find, for example, an image of a zipper used in spring 2004, instead of digging through paper files. A “visual organizer” component made an electronic library of images immediately accessible to the designers. With this new PLM solution, Ng reported that product development time had been cut by an estimated 25 percent, from an average of eight to six weeks (Kusterbeck, 2006).
ERP System
Despite the smooth implementation of the PLM system, Lululemon continued to experience affiance difficulties with regards to their supply chain. While Ng’s implementation of a PLM system represented a vast improvement it was proving incompatible with Lululemon’s Enterprise Resource Planning (ERP) system. By definition, an ERP is the actual computer based system that consolidates all corporate information (external and internal) and creates an effective flow of information within that corporation (Bidgoli, Hossein. 2004. The Internet Encyclopedia, Volume 1). As it stood at the time, once a designer had finished and received approval for a product, they would send an e-mail or print a report from the product lifecycle management system and hand it to another person, who would manually update the data in the enterprise resource planning system generating a time lag of three to five days from the time a product was approved until the information was entered into the system (Kusterbeck, 2006). It became apparent to Ng that to optimize Lululemon’s prior investment in the PLM system and accommodate the company’s strategy of quicker inventory turnover and product development in order to meet sufficiently supply customer demand, integration of the PLM and ERP systems was critical.
Acting quickly, by June 2008 together Ng and Day had approved and implemented a system called New Generation Computing's (NGC) which included the Redhorse Enterprise ERP system (Kusterbeck, 2006), an e-PLM product lifecycle management integration tool and an e-SPS (a global sourcing and production system). The new ERP system and integration of the recent PLM system represented significant financial investment: the better part of $11,212,848 in fiscal year 2008 and $6,052,786 in fiscal year 2007 can be attributed to the ERP and associated PLM implementation (see Appendix A for financial statements, Sedar). The new systems enabled Lululemon to integrate all its product development, sourcing, manufacturing and wholesale distribution processes. NGC had a proven track record in the sewn products industry and Ng had been confident that the NGC system would provide Lululemon with the comprehensive infrastructure that they would need to compete and expand in today's marketplace (Kusterbeck, 2006).