Introduction: Transformation Under Way at Uniqlo
Uniqlo is a main group company of FAST RETAILING CO., LTD., the biggest apparel retailer in Japan with sales of US $16 Billion, placed in the third in the global market, following ZARA and H&M.
In February 2017, Uniqlo opened a brand new 200,000-square-foot headquarters on top of its distribution warehouse in Tokyo. This project was aimed to drive the apparel giant’s new strategy to transform its business model from “Selling what we produced” to “Producing only what we can sell.” As described by Tadashi Yanai, CEO of the company, the strategy represented a shift from “Made for All” to “Made for You” through digital integration of planning, manufacturing, and sales. The new headquarters is designed to foster such integration by placing its 1,000 employees from different divisions in the same workspace—e.g. locating all of the planning, marketing, production, and logistics divisions on the same floor — and connecting them through a common digital platform as well.
Uniqlo’s Concerns and Efforts for the Supply Chain Transformation
In his press interview, Mr. Yanai said, “Digitalization makes demarcation of industries useless. In such a world, data is the most important source of competitiveness. As fashion and apparel products are the data itself, Amazon and Google will have a great power in this industry too. In order to overcome such challenge from these digital giants, we need to transform our supply-chain system by using digital technology”. Thus Uniqlo began to execute supply chain transformation since 2016.
Under the current system, it takes 6 to 12 months for Uniqlo to decide the design, procure material, manufacture products, and deliver them to retail stores, resulting in a mismatch between customers’ needs and the products, with loss of sales opportunities and excessive inventories. However, in 2017, the company has begun to instill RFID (radio frequency identifier) tags to all of their products, and connecting RFID data to its digital platform. With this new system, Uniqlo’s goal is to make accurate daily sales forecasts at each retail store, and to plan and produce its products in real-time.
I interviewed my former colleague who is working on IOT digitalization project for a Uniqlo’s manufacturing plant in China, and learned that Uniqlo has requested the plant to introduce new IOT-based automated production system and share the real-time production status with Uniqlo’s headquarters in Tokyo. Once this new system is in place, Uniqlo’s whole supply chain – from production to retail– will be connected to its digital platform.
According to several media sources, Uniqlo partners with Accenture for data analyses, and set up a joint venture with Daiwa House Group, a Japanese largest homebuilder, to build a new logistics center for efficient and fast distribution network in Tokyo. Uniqlo also announced that it will increase sales on its own e-commerce platform from the current account of 5% total sales to 30%, and will integrate its real stores with virtual online sales operation. Based on this information, Uniqlo’s new supply-chain system with digital platform can be illustrated as below.
 http://business.nikkeibp.co.jp/atcl/opinion/16/092900020/100600009/ (2016 October 7)
 Ms. Nana Kato, Textile and Apparel Business Department, Sojitz Corporation
 https://www.nikkei.com/article/DGXLZO14184210W7A310C1TI5000/ (2017 March 17)
http://www.logi-today.com/219287 (2016 March 3)
Recommendations and Discussion for the Way Forward
Uniqlo is working hard to establish its new supply-chain system based on digitalization, but its overarching strategy to improve the global distribution networks remains unclear. Now that its global sales consists 45% of its total sales, Uniqlo needs to articulate how to compete with other giant retailers such as Amazon in terms of delivery to customers. Outsourcing its logistics functions to the third parties could be one option.
In order to explore unidentified customers’ needs and innovate its products, it might be important for Uniqlo to collect more data from further downstream of its supply-chain, such as when, where and how consumers use their Uniqlo products, including frequency of washing and cleaning. With such information, Uniqlo can provide more customized service — suggesting new fashion coordination with its product lineup, or advising the timing to replace its clothes.
Open questions for Uniqlo are:
- “What are the downsides of using third party logistics functions in terms of variability and its effects on Uniqlo’s supply chains?”
- “How do they develop long-term strategy in the context of drastic changes of the future consumer lifestyles and new potential players in that landscape? For example, what does Uniqlo do if wearable gadgets expand into the clothes?”