Reducing lead time enables a company to react more quickly to demand information and, hence, to better match supply with uncertain demand. But it is only one lever for improving response capability. Managers are familiar with others (e.g., excess capacity, supplier choice, and so forth) but lack techniques to quantify the impact of adjusting these levers. Here, we enumerate a number of these levers and present a model whereby they might be combined into effective response capability. The impact of adjusting these levers is illustrated by data obtained from a skiwear manufacturer that did so. Some of the insights that resulted run counter to intuition.

This paper discusses the relationship between business process reengineering and channel performance for firms implementing electronic data interchange (EDI) linkages within the U.S. grocery industry. Both quantitative and qualitative data sources are combined to test the hypothesis that channel transformation involving adoption of EDI and redesign of replenishment processes enables performance improvements more than an order of magnitude greater than implementation of EDI alone. This new process, enabled by EDI, provides retailers with 50‐ 100% higher inventory turns for products on continuous replenishment processes (CRP) relative to retailer performance using traditional ordering processes. Firms adopting EDI without using CRP to reengineer the ordering processes have failed to realize any statistically significant improvements in either inventory levels or warehouse stockouts. This research provides evidence to support the claims of process reengineering that are common in the popular business press, but for which statistically significant empirical evidence is minimal. The findings of the research also demonstrate the potential improvements that firms can realize through extending the business process reengineering concept to include the firms' entire supply chain.

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A Study of the U.S. Apparel Industry in Transition THE POPULAR PROGNOSIS for the U.S. apparel industry is bleak. Citing increased import penetration in many product segments and the concurrent erosion of domestic employment, many analysts regard apparel manufacturing in the United States as a dying industry. I The Department of Labor concurs, projecting a significant reduction in employment in the domestic apparel industry during the next decade. Under its most optimistic scenario, the department predicts employment will drop from a 1990 level of 839,000 to 649,000 in 2005; under its most Funding for this paper was provided by the Alfred P. Sloan Foundation. We are grateful to Tim Bresnahan, Richard Caves, Peter Doeringer, Oliver Hart, Peter Pashigian, and Peter Reiss for their comments on earlier drafts of this paper. We thank Katy George and Igor Choodnovskiy for their superb research assistance. 1. For example, Alan Blinder writes: "to remain a rich, high-wage nation, we must keep changing our industrial structure. We must let the routine industries that can thrive with unskilled labor migrate to poorer countries in Asia, Latin America, and even Eastern Europe, and we must concentrate instead on the complex, progressive tasks that require highly skilled workers.. .. This approach. .. will surely be bad news for both labor and capital in certain industries-as it already has been for, say, textiles and steel." Blinder (1992, pp. 13-14). 175 176 Brookings Papers: Microeconomics 1995 pessimistic scenario, employment is projected to fall to 479,000 in 2005.2 The arguments underlying this prognosis generally proceed in the following manner: apparel is an industry driven by price-based competition among generally small manufacturing establishments.' U.S. wage levels greatly exceed those of competitors in countries such as the People's Republic of China and Mexico. Because domestic wages are too high relative to the labor productivity of U.S. apparel workers, U.S. manufacturers operate at a significant cost and therefore competitive disadvantage. As a result, U.S.-based apparel manufacturers face a bleak future. This view oversimplifies the nature of competition in the apparel industry. Competitive dynamics in many segments of the industry are being transformed by technological innovations that allow the low-cost collection, processing, and dissemination of consumer sales data. These innovations lay the foundation for a new set of retailing strategies directed at reducing a retailer's exposure to market demand risk by using daily, point-of-sale information to adjust the supply of products offered to consumers at retail outlets to match actual levels of market demand. The new retailing strategies, in turn, lead to apparel supplier investments in the information technologies required to respond to realtime order requests. In the short term these developments may merely shift inventory costs backward to apparel manufacturers. In the long run, however, adoption of information-based and related practices by retail supplier...