Indeed, the finely orchestrated symphony of supply chain efficiency over the past 30 years or so across the production, delivery, and distribution of apparel is sputtering and may require a tune-up. At least, recent events seem to suggest that. Firstly, apparel companies have become too internationally expansive in scope which necessitates that they implement new and advanced methods of supply chain management. Secondly, the apparel industry more than any other industry must be able to react quickly to seasonal changes and tweak product characteristics. And finally, intense competition in the apparel industry means only those who can respond fast and accurate to new consumer requirements will survive and succeed. This means maximising efficiency by concentrating on building competences which ultimately works for the company and its consumers as both thrive amidst a cacophony of socio-economic changes.
The fashion industry is characterised by highly integrated global supply chains. And given the globalised nature, fashion companies face significant risks across their supply chain as suppliers and retailers need to transport their raw materials and final goods within and across continents. Additionally, global trade wars, uncertainty over Brexit, and tougher environmental regulations have all become driving factors in bringing insolvencies to the forefront of supply chain risk management, particularly in this space.
With above, in times of COVID-19, companies faced the immediate risk of increased costs and border crossing wait times, all the while customs agents were adapting to new processes and companies indulged in business contingency planning.
From a logistics point of view, textile, apparel and garments are considered time-sensitive products. Irregularities in making goods reach a particular place at a specified location on time can lead to reduced or no profits for the textile owner. Usually, the goods and raw materials are transported using a combination of land, sea, and air. Strong multimodal interlinkages are therefore the key to ensuring just-in-time (JIT) delivery to maintain the good balance between client’s orders, raw materials, and production needs.
Additionally, fashion choices or clothing collections change quickly, their lifecycle is short (as perishable products) and commercialisation is characterised by strong seasonal peaks. In this sense, textile logistics are characterised by small stocks and short delivery times. That way, when disruptions occur in the supply chain that demand an immediate response, the company and its supplier partners will need to think about their strategies well beforehand so that they won’t be caught off-guard when their overall survival and existence matters.
Factors like rapid e-commerce growth today have further accentuated time-related logistics requirements, such as next-day delivery, as well as the capacity of handling large volume of returns and offering the possibility for manufacturers and dealers to check the location of their articles at any time. All this implies getting information out on time, giving oneself and one’s supplier time to respond accordingly to any disruption, ultimately helping develop company—vendor and most importantly, market and customer relationships. If companies do it better than others in competition, they are sure to gain market share because when “it’s only in tough situations that the strongest companies thrive”.
The fashion industry is undoubtedly under pressure in these uncertain times. Depending on the role that countries play in the supply chain, building resilience could entail different needs and approaches.
In the short-term, lockdowns around the world have thrown a spotlight on risks associated with high supply chain interconnectedness and challenges associated with global sourcing. This has also had an impact on trade logistics, as the glue that holds global value chains together. Observable changes introduced in air and maritime transport services to cope with reduced demand and cargo imbalances illustrate this.
The key question however is: what will all this mean in the longer term, after surviving this unplanned humanitarian and financial crisis, particularly for the weakest links of the chain? Or, has it already induced structural changes to the industry supply chains?
For example, has it led to generalising new models such as ‘seasonless designs’ or shorter value chains through increased local or regional sourcing. Certainly, moving away from the just-in-time and made- to- order business models will have a profound yet positive impact on trading and transport patterns.
One of the concerns in this respect is that production of fashion goods could be moved away to other sourcing countries that are resuming activities faster in the Asian region or that are closer to retailers to diversify their supply chain risk.
Most developing countries considered as hubs for apparel sourcing do not have similar financial means, health systems or social safety nets to respond to the COVID-19 pandemic crisis and its economic impacts like developed nations where governments swiftly implemented unprecedented actions to ease the effect on their economies via measures put in place to limit the spread of the pandemic.
In this context, various assistance packages were also announced by IMF, the World Bank and others with a view to supporting economies, including emerging market economies.
Strategic Realignment Moves
Apparel companies benefit financially from sourcing production in low-cost developing countries, but this strategy is not without its drawbacks. Key considerations include:
Faster lead times: A McKinsey & Company report describes the “typical” process followed by most apparel companies in developed countries—“A shirt is manufactured in a faraway country based on a months-old design and then shipped for weeks across the ocean before reaching a retailer. A consumer might eventually buy it at half price in an end-of-season sale—a routine event in an industry whose long lead times and big batches give it little flexibility to adapt production to shifting consumer demand”. Given the complexity of the process, it’s not surprising that the typical retailer needs six months to bring a conceptualised product to market.
Ralph Lauren recently announced it had exceeded lead time targets with approximately two thirds of their products on lead times of 6 months or less. But, the emergence of “fast fashion” and e-commerce has threatened the validity of this achievement, with Zara able to bring a product to market in just three weeks. Zara’s drastically shortened lead time is possible because of multiple factors, including:
- In-house design and production teams
- Reliance on limited selection of fabrics and materials
- Inventory forecasting models linked directly to consumer feedback
- Reliance on just-in-time manufacturing methods in which small batches of inventory are manufactured and quickly shipped to stores
- Linear management model in which store managers can provide feedback directly to designers (This model bypasses the multiple levels of personnel in place at most traditional companies)
- Streamlined manufacturing and distribution processes confined to Spain with suppliers located in close proximity (Suppliers deliver within five days of an order being placed, with most deliveries via truck)
- Materials sourcing and finishing services (sewing, cutting) located close to production facilities
While traditional apparel companies can certainly take note of the Zara model, few are in a position to uproot their globally based supply chains and start over. Companies are looking to reduce lead times by integrating any number of innovative approaches and using technology to help weed out inefficiencies.
Product Life Cycle Management (PLM): Technology solutions can be quite effective at helping companies reduce lead times—by an average of 25 to 30 per cent. PLM has been referred to as a “cradle-to-grave” approach since every stage of a product’s life cycle is monitored and linked. According to reports, PLM technology was originally developed as a tool for the automotive and aerospace industries. But its benefits quickly became apparent to other industries, including apparel.
If a subject expert were to explain the benefits of a PLM system for an apparel company, he would put it across as “Internal teams, design development, suppliers—they know what fabrics are being used, what colours were approved, the status of production and the exact location of containers that are in shipment.”
A 2017 survey conducted by Gartner found PLM solutions are having a significant impact among apparel companies:
- 38 per cent have reduced product development time
- 19 per cent have improved overall margin
- 29 per cent have reduced total lead time
- 24 per cent have achieved faster time to market
- 29 per cent have reduced inventory
Tommy Hilfiger, for example announced a partnership with IBM and the Fashion Institute of Technology (FIT) to develop an artificial intelligence (AI) powered system to determine the kind of data to optimise production, sales and also reduce cost and waste. The students at FIT accesses IBM Research’s AI capabilities including computer vision to look into the company’s data like real-time fashion industry trends, customer sentiment around every Tommy Hilfiger sent back—for the student designers to make informed decisions for new product development.
Visibility/Supplier Collaboration: Former Ralph Lauren CEO Stefan Larsson, in citing his company’s goal of reducing lead times from 15 months to nine months, stressed the need to strengthen the collaboration with its supplier base in Asia.
“The suppliers are really advanced and have a lot of knowledge. We have to get even closer to them and leverage that knowledge,” Larsson said in a discussion with analysts.
But how can a business accomplish this with dozens of suppliers located in as many as 15 different countries? Well, the short answer is—to establish visibility across the entire organisation so that managers have insight into all parts of the design, production, and distribution processes. But for most companies, this is easier said than done. This is where technology comes in. By adopting “the right” technology solution—selected from the dozens of apparel industry-specific solutions currently on the market—a company can have a bird’s-eye view into parts of its business that may be underperforming, anticipate potential production or shipping delays, and establish critical communication links between different parts of its organisation. The more stakeholders put “in the loop”, the greater the likelihood for collaboration and efficiency. However, that collaboration will come with increased exposure to risk. Finding the right balance is the key.
Experienced logistics provider like Kuehne + Nagel, CEVA, or sector specific experts like Li & Fung, can help determined businesses identify the right solutions for adding visibility to their unique supply chains.
Pre-production Efficiency: In 2016, Kohl’s challenged its suppliers to dramatically improve production times and indicate openness to new ideas and processes. Specialists Li & Fung has been able to cut lead times in half by focussing on product pre-production. As reported by the media, Kohl’s had traditionally followed a process in which its home-based designers would wait for samples to arrive from Asia. After modifications were made and transmitted back to Asia, a final run of products would eventually be shipped by sea.
Li & Fung was able to overhaul that process by introducing three-dimensional digital designs instead of physical samples. Now designers in its home country can “see” modifications throughout the product development process and collaborate through an integrated system with the Asian production team. This has trimmed a process that routinely took six months down to a few days.
Fabric Platforming: Fortune reports that some manufacturers, including Gap Inc are taking advantage of efficiencies achieved by purchasing large amounts of particular fabrics and then creating designs for that fabric, rather than the other way around.
Additionally, this is a practice that has been instrumental to Zara’s fast-fashion modelled dynamics.
The BOLD show
In addition to location diversification, businesses must also come to terms with various notional definitions of ‘capacity’. In a business-as-usual (BAU) scenario, capacity would be defined as the (theoretical) maximum of some performance metric that can be achieved by the system. However, given the seasonal nature of products and consumer behaviour, businesses have to expand their understanding to accommodate for ‘surge capacity’.
Here, surge capacity refers to a requirement from the system to produce higher output as compared to its BAU capacity, but such stretched output levels are expected to be sustained for relatively short periods of time.
Continuing in the same vein, under a pandemic situation, companies can arrive at the notion of ‘crisis capacity’. In crisis mode, organisations must be able to leverage their broader network of suppliers/sub-contractors, etc. and sustain a significantly increased level of output (as compared to even surge capacity) as necessitated by their customers for extended periods of time.
Moreover, transitions to increased capacity levels are recommended to be done in a phased manner. Despite this, when the capacity level reaches crisis capacity mode, it is often accompanied by a commensurate loss in related performance metrics, typically product quality or customer service levels. This flexible understanding of capacity under various operating scenarios and the corresponding ability of an organisation to manage upstream and downstream supply chain operations is a key factor in ensuring the survivability of an enterprise in the COVID world.
When addressing an important yet often neglected aspect of supply chains, namely order fulfilment, it is imperative to look at advancements in robotics and automation, which have grown to become an integral part of warehouse management systems.
Warehouses, which involve repetitive and labour-intensive tasks, are at the forefront of man-machine interactions and are often a testing ground for new automation ideas. Both resources—man and machine—will need to be orchestrated through efficient workflows to maximise performance, and to further accelerate such transformations, a people-centric approach that includes strong employee engagement as well as labour efficiency is critical in these times. Warehouse managers will need to have employee performance data and related analytics at their fingertips, while making them readily accessible for agile decisions by management.
Modeling and algorithmic solutions that help conduct ‘what-if’ analysis to determine optimal staffing requirements will also be essential in a fast-paced, rapidly evolving world.
In fact, digitalisation as a big opportunity for the apparel industry not only in 2021 but also in the years to come. Fashion brands and retailers will increasingly find digitalisation ubiquitous to their businesses—like air and electricity. Fashion companies should start making more efforts to creatively use digital technologies to interact with consumers, make transactions, develop products, and improve consumers’ online shopping experiences. With the adoption of more advanced digital tools, apparel companies may also find new opportunities to improve sustainability, better understand their customers through leveraging data science, and develop a more agile and nimble supply chain.
For instance, San Francisco based Stitch Fix which delivers clothing to customers with the help of online stylists, is working with AI. They are now designing garments created by algorithms that identify trends and styles missing from the Stitch Fix inventory. These are based on combinations of consumers’ selections of favorite colorus, patterns, and textiles which are picked by AI system which then suggests a new design. These new designs are then reviewed by a human design team.
Going ahead, brands should gradually start exploring how 3D printing can help them produce goods on-demand and create new avenues for customisation. This has become an increasing need as competitiveness lies more and more in delivering products tailored to the customer’s tastes and needs in a speedy and timely manner.
As lockdown restrictions get eased worldwide, social distancing has already been mandated in retail stores and as a result, in-store checkout systems and POS terminals seem to undergo a radical change to reflect the new normal. Customers have always avoided queuing up in stores, and this behaviour is further exacerbated by social distancing norms.
Having a mobile point-of-sales mechanism that gives store associates the freedom to walk the shop floor and deliver personalised experiences and recommendations, while simultaneously educating, upselling, and cross-selling products before seamlessly accepting payments on their mobile devices significantly reduces check-out lines or use of self-service devices, and yet provide an enriching and transformative shopping experience.
While switching gears, it is ever important to recall the fact that at the far end downstream of any supply chain remains the all-important customer. As e-commerce orders begin to proliferate, customer order fulfilment directly from stores is bound to grow along with fulfilment from warehouses and distribution centers. But important considerations need to be carefully thought out through before scaling fulfilment operations.
Conversations around sustainability, another key component of supply chains, will also increase as things stabilise in the near future. Most companies begin their sustainability efforts by focusing on their transportation operations.
While organisations will need advanced transport management systems that optimise and execute logistics operations, helping to reduce the overall carbon footprint of supply chains is a much broader task. To that end, organisations will need dashboards that provide visibility into all sustainability metrics—for example, manufacturing facility operations using Internet of Things (IoT) compatible sensors that enable to understand tradeoffs, not only between logistics costs and service operations but rather from a more comprehensive greenhouse gas emissions and carbon footprints standpoint.
Lately, an increasing amount of global fashion brands have been making agreements to work with suppliers, governments and NGOs to ensure a fair living wage and better working conditions for workers.
The fragmented production model, pressures on prices and lack of critical insights have allowed a severe exploitation of workers. Some big companies like Nike, Levis, Esprit, Adidas and PVH signed an open letter to the Cambodian government asking them to improve their labour standards.
The use of new internet-based technologies can have the potential to identify and track the previously obscure information. They can also connect individuals and groups to organise and act using this information. Although there are laws in place to protect workers and their rights, but governments routinely fail to enforce these laws. Also workers rarely fully know their rights.
What’s in this episode?
In the Apparel Supply Chain: Need Speed to Shelf feature, we try to assess the impact of the COVID-19 pandemic on India’s textile, apparel and garment supply chain and logistical operations through the analysis of short and long-term responses to disruption, as we question the supply chain managers about how they are ensuring business stability and adopting holistic analytics-backed business solutions, in a way navigating through the crisis. We dive into significant trends within consumer fashion sector and explore the strategies through which supply chain leadership together with its value chain partners look to reinvent and evolve.
COVID-19 is a reminder to the fibre production, textile manufacturing, garment manufacturing industry about the fragility in ways of doing business. It will be a game changer for companies that will focus on evolving business continuity models and transformational change with new and emerging technology.
With creative, resourceful responses to the pandemic, apparel supply chain leaders are ensuring that consumers are able to buy the goods they need, while also maintaining the health and safety of both consumers and their supply chain network.
Moreover, the lessons from these challenging times are helping manufacturers and retailers to make their supply chains more resilient. The second wave might be no less surprising, but the right plans are keeping it from causing as much disruption.
Our interactions as part of this feature are a classic example of—how adopting new processes for managing customer relationships and improving product sales all in one place, along with effective prioritisation of data and utilisation of channel partners—is helping fashion companies increase market share following demand surge.
Fashion on demand is a new trend to watch and executives say they are already switching to made-to-order production cycles. The result is a reduced level of overstock and less clothing that ends in landfill. In fact, lately, executives have noticed an increase in the importance of the small-batch production cycles. New technologies, analytics are becoming a solution for companies to quickly source and develop products, shorten production timelines and streamline distribution.
As people become increasingly “impatient”, shortening lead times is the key to ensure delivery with optimum timing. Managers say their companies have taken a step further to develop the entire process “in-house” to increase speed and supply chain efficiency. Things like materials sourcing, creative and technical design, samples, production and shipping are happening under the same roof. And enabling everything to run smoothly, all the teams have real-time flow of information to ensure everyone has access to the same data and the same version of the latest products.
Our society has never had a bigger need for effective supply chains, transformative technologies, and the people that make these complex systems work seamlessly. In such critical times, continuity and resiliency of supply chains become essential towards maintaining some semblance of normalcy for people and businesses alike.
Organisations must therefore strive to strike the right balance between efficiency and resiliency to satisfy customer requirements. ‘COVIDity’, which we may define as the unease that we all feel living in the new normal, is here to stay but leading companies that demonstrate agility and embrace innovation in this ever-changing world are going to pave the way towards a new future.
The coronavirus might linger on for many years, but effective e-commerce and hybrid fulfilment methods will help propel the retail industry forward and help retailers weather such storms now and in the future.