How Delta Galil Industries Ltd. Is Using Technology To Manage Growth and Supply Chain Complexity

Synchronizing a far-flung supply chain while running manufacturing operations on four continents is a monumental task. With help from Intentia's Movex, this Israeli company is managing superbly.

Headquartered in Tel Aviv, Israel, Delta Galil Industries Ltd. (Nasdaq: DELT) is a leading global manufacturer of boutique-quality apparel for the mass market. Delta designs, develops, manufactures and distributes ladies' intimate apparel, men's underwear, socks, babywear, leisure wear and fabrics which are sold to brands and retailers throughout the world.

Among Delta's best known brands are Polo Ralph Lauren, Donna Karan, Calvin Klein, Victoria's Secret, Hugo Boss, Nike, and Playtex. Among its major retailers are Marks & Spencer (U.K.) JCPenney, Gap, Banana Republic, J-Crew, Structure and Abercrombie & Fitch. Israel is the only country where Delta Galil sells its products under the Delta brand name and maintains a chain of 40 stores named "Delta Plus."

Going for Growth
Delta's management believes in locating plants in close proximity to air and ground transportation hubs to optimize operations and leverage local advantages. The company has established manufacturing facilities in Israel, Egypt, Jordan, Turkey, Greece, Romania and Scotland.

To spur increased growth and profits, Delta focuses on burgeoning markets in Europe and North America and supports marketing centers in Israel, France, Spain, the U.K. and U.S. Major sales breakthroughs in these regions, especially the U.S. and U.K., led to soaring growth. Between 1995 and 2000, the company doubled its number of employees to 10,000 and grew annual revenues from $257 to $355 million.

Delta's plans for global expansion have been aided by recent acquisitions. In the past year, the company acquired Dominion Hosiery Mills Inc., a Canadian sock manufacturer, as well as U.S.-based Wundies Industries Inc., a leading producer of private label apparel ladies' and girls' apparel sold at JCPenney, Mervyn's and Kohl's, and Inner Secrets, a New Jersey manufacturer of ladies' intimate apparel sold at Wal-Mart, Kmart and Target.

Challenged by Complexity
In the global arena especially, rapid sales growth is often a mixed blessing. Increased profits can be lost due to complexity caused by multiple languages and currencies, administrative and operational inefficiencies, supply chain bottlenecks, and lack of visibility across the enterprise. Such was the challenge facing Delta Galil.

Delta's make-to-order production environment is inherently complex. The company produces approximately 12 million pieces of apparel each month, a task involving 100-120 million components, such as trims, threads and packaging, which often have to be transported among various manufacturing sites. To meet production schedules, Delta must coordinate more than 1,500 raw material and services suppliers around the world and, at the same time, synchronize the activities of multiple factories and distribution centers to ensure customer orders are fulfilled in a timely manner.

The business information software Delta previously used was a home-grown, RPG-based creation, with patches and enhancements added over the years. As a result, there was no integration between sites, no consolidation of information across the enterprise, and no integration between marketing, logistics and finance systems. In addition, the system demanded a high degree of maintenance by a staff of 55 IT professionals.

According to Arnon Tiberg, Delta Galil CEO, "The logistics involved in a supply chain such as ours are extremely complicated and must be carefully managed to maintain profitability. It became apparent that, to streamline operations and handle the growth we were experiencing, we needed a broadly functional, enterprise-wide information and control system. After evaluating various alternatives, we decided that an Enterprise Resource Planning system would best meet our needs."

Before selecting an ERP solution, Delta solicited input from personnel involved in all of the company's key processes, including customer order entry, bills of material, inventory, purchasing, manufacturing (i.e. cutting, sewing and packaging), import and export operations, transportation and delivery, and subcontractor coordination and payment. Using this data, a requirement survey was conducted and selection criteria established.

According to Avi Pinhas, Delta's CIO, the objectives were clear. "We wanted a fully integrated system to cover all aspects of business management," he explains. "The new system had to offer more functionality than we needed at the moment. It also had to be able to evolve over time to support new business trends, activities and various modes of operation. In addition, we looked for strong support of specific fashion operation processes. And, of course, the system had to have language and currency capabilities to support our global operations."

After a variety of solutions were evaluated and tested, 100 key professionals within the company were asked to rank a "short list" of three ERP software vendors. Ultimately, both the survey team and user groups selected Movex Fashion from Intentia International.

Movex is a multilingual, multicurrency system that has evolved from a traditional ERP system and now offers supply chain, customer management, e-business and e-collaboration functionality. Movex Fashion, which was developed specifically for manufacturers and distributors in the fashion, apparel, textile and footwear industries, also adds fashion-specific features, such as a product configurator, four-dimensional product matrix and flexible pricing.

Implementing Movex Fashion
For its first site, the company decided to take a phased implementation approach rather than adopting Intentia's Implex, a structured implementation framework. In a phased implementation, integrators map a specific process, then implement that piece before going on to the next. CEO Tiberg notes that this approach proved to be less than satisfactory. "The disadvantage of piecemeal implementation is that the organization does not gain a comprehensive view of its processes, from beginning to end. As a result, you could actually automate procedures that decrease, rather than increase, efficiency," he explains. What Delta management learned from the experience was put into action with subsequent implementations.

Delta's London site, a large logistics center supplying retailer Marks & Spencer, had been implementing another ERP system before the company chose Movex. Despite the investment of much time and money, the system fell far short of expectations and Delta scrapped the project. To install Movex, the company used Implex, in which all relevant processes are first mapped in order to standardize processes and align them with best practices built into the software. Led by IT and the implementation team, all user groups were heavily involved in the mapping process, which took about nine months.

The time and care paid off. After mapping system requirements, it took only three months for all modules to "go live" -- with no major problems and few adjustments. "It was amazing to me," says Tiberg. "From past experience in implementing technology systems, I have learned that one cannot simply 'push a button' and have the system work, despite the assurances of the software vendor. However, when we pushed the button in London, I have to say Movex worked like a Swiss clock."

In subsequent installations, Implex became the standard. Since the first London installation, Movex has been rolled out in several additional sites, including all sewing facilities in Israel, Jordan, Egypt, England and Scotland, and currently has 400 users. According to CIO Pinhas, Movex is installed on several IBM AS/400 Servers to facilitate working on the same technology platform, yet maintain site independence. The various sites are linked within a Wide Area Network (WAN).

Delta's product catalogues and bills of material are generated centrally and distributed to remote locations. All production operations are performed on local systems. Information is consolidated on a daily basis to the central data warehouse system to provide global visibility. The consolidated information is displayed on a corporate intranet, to enable all users to access the information they need when they need it. In addition, there is extensive use of Web-enabled EDI, both with customers and business partners.

Results: Better Logistics Control, Increased Profits
Tighter logistical control and streamlined synchronization of the supply chain are expected to have a long-term effect on Delta's cost reduction strategies, delivering both higher productivity and higher profit margins. Even while Movex rollouts were in progress, Delta Galil began to realize the benefits of integrated business information. According to Pinhas, "The London distribution center significantly improved customer service by doubling order accuracy rates, while reducing order processing time by 80 percent. Inventory accuracy at Delta's main fabric warehouse also increased at least eightfold. In addition, because of the simplicity of maintaining Movex, we have been able to reduce the IT staff from 55 people to 40." Based on these savings alone, Delta estimated that the initial technology investment would pay for itself within a year.

But, perhaps the greatest benefit of integration is Delta's ability to share information globally. Standardization of all processes throughout the enterprise -- from order entry, through manufacturing, delivery, invoicing and financial analysis -- means that all sites now follow the same procedures and work under the same business rules, which serves to minimize miscommunication, miscalculations and human error.

Now that Movex is well on its way to being implemented across Delta's vast and growing enterprise, the company is already looking toward the next step. Delta recently licensed Movex WebShop, one of Intentia's e-business applications, for future implementation. "Implementing Movex Fashion was a highly strategic decision," Tiberg concludes. "Ready access to enterprise information has improved our executive and managerial decision-making. As a result, Delta has become more flexible within its dynamic business environment, and has gained the ability to respond quickly to changing customer needs and new business opportunities. We are now well positioned for future growth."

Intentia