There is a difference between the nature and components of supply chains of the fashion industry - between the companies. It depends on various important factors like a competitive priority, global strategies, target markets, delivery delays, lead time, supply integrations, and products, to name a few.
With the varying components of fashion supply chains across the industry, their supply chain managing strategies also differ. The effectiveness of different fashion brands has been explored through different strategies for mitigating the risks.
Why Rethinking Fashion Supply Chain Is Important?
The supply chain in the fashion industry, particularly fast fashion, has been characterized by high demand volatility, short life cycles, high impulse purchasing, and low predictability. Since the shift to global supply chains, you can consider fashion brands on the basis of their velocity, volatility, dynamism, and complexity, and the supply chain of the fashion industry is inclusive of unpredictability and uncertainty. Big fashion brands have always been attacked with key risks, like delayed deliveries, stock-out or over-stock, long lead delays between customer returns and refunds, and delivering in a single solution.
Additionally, the globalization of supply chains has exposed fashion brands to various inter-country risks, leading to high risks for local retailer chains. Also, the Covid-19 crisis has impacted countries to vary in the methods and ability to contain the effects of the virus through a lockdown and social distancing requirements. This has limited production in the key supply markets, revealing the major troubles of the fashion supply chains around the world.
The past couple of years have seen fashion companies struggling with their supply chain bottlenecks. Fashion retailers have been turning competitors into collaborators and customers to tackle this issue.
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With the huge shift to the eCommerce world, which accelerated during the recent lockdown, accounting for a third of the total fashion sales by 2028. This has caught the brick-and-mortar retailers by their necks.
Most fashion brands have decided to restructure their supply chains and open multiple small outlets acting as fulfillment centers. They have also started accounting for the fashion changes, and these outlets have all the virtual inventory that online customers and retail stores could deliver on time.
There is a paradigm shift of shifting your business model from an extensive retail store network to an online mode, where you can reach more than half of your sales. It is not operationally and financially feasible to landlock all of your inventory at a distribution center.
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Several fashion stores dealt with this issue by shifting a significant portion of their inventory to the stores, transforming them into mini-eCommerce order fulfillment stores. Such a model is effective only when there is a single item. However, when the orders contain multiple items that are usually unavailable in that area, the cost of picking and packing, and shipping adds up instantly.
These outlets are usually located in low-cost real estate regions with low labor costs. By fabricating a more common model in the fast-moving consumer goods sector, fashion brands can reduce their supply chain cost by 15%. The company's working capital, too, can be brought down by pulling huge inventory from fulfillment centers and retail stores and selling full-priced goods more on the online platform.
The interesting part is that fashion brands have started seeing the benefits of the evolving network of supply chains, realizing that the fashion industry can land on a new possible business model. Every fashion brand retailer has tackled the same issue of high supply chain costs that are plummeting faster than profit. However, with this supply chain model, many small retailers get the opportunity to achieve higher-scale benefits and also get the privilege to balance the inventory in ways that large retailers can achieve.
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So, why does it matter?
✔ Supply chains are becoming less linear as the demand for eCommerce grows and stores become fulfillment centers.
✔ A massive 65% of the retailers expanded or established their local and domestic fashion production sources to better control their supply chain during and after the Covid 19 pandemic.
✔ Many apparel companies are shifting their manufacturing units from overseas to the U.S. to operate closer to their consumer market and for better control of the supply chain management.
Hence, it is about time fashion brands rethink their supply chain model.
Improving Supply Chain Disruptions - Rethinking Strategies
With the potential of outbreaks and other disruptions to input-sourcing, fashion brands must adapt to adjust their source mix to diversify their risk in a better way. Brands deploying dual-sourcing techniques get exposed to huge uncertainty and disruptions due to close proximity of suppliers.
In the same way, a demographically diversified network of suppliers of various fashion brands is also exposed to supply chain disruptions. This is happening because relying on a single product supply from different suppliers can cause a consecutive ripple effect.
Fashion MNCs need to locate which products are confronted with single-source or single-locality disturbances and figure out appropriate supply chain strategies. Usually, this happens in two ways:
Creating a time buffer through the delay of manufacturing of those goods where the demand is uncertain.
Inventory buffering or safe inventory stocking of crucial fashion products and accessories can be created by fashion brands.
The pandemic has brought a new perspective. It is also important that the fashion MNCs work with suppliers to ensure production facilities and factories adhere to the new pandemic guidelines so that sudden disruptions can be taken care of without any hassles. Fashion brands should additionally develop protocols that enable them to act quickly in times of emergency so that the supply chain flow does not come to a halt.
Another important dimension of supply chain strategy for fashion brands to think of is data analysis. With consumers getting addicted to social media platforms, brands have swiftly switched to social media presence as an essential strategy for improving their supply chain. Nowadays, every consumer is almost influenced by social media trends and for every fashion brand tapping this resource is very crucial.
With every fashion brand working on building its social media influence in various ways, competition has increased, and only innovation and creativity can get your brand's target audience’s attention. Establishing your supply chain through these channels is easy, provided your strategy works on data-driven analysis. There are different forecasting agencies which help brands access this golden consumer data which is collated from the retailer’s IT systems and supply chains.
You must understand that it’s a melange of both qualitative analysis and quantitative data for both the short and long-term predictions of fashion choices. The supply chain on these channels is created by fashion brands, celebrities/ influencers, and consumers scrolling through their daily feeds.
With the integration of artificial intelligence (AI) and machine learning, fashion brands have a huge scope of evolving their supply chains for high conversion rates. Till now, AI algorithms are only playing a side role in the fashion industry, but with the fast-paced internet usage increasing day by day, the day is not far for AI to become a major supply chain tool.
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There are various startups and technology development being tested in the market where AI generates creative concepts by experimenting and innovating with different sets of data - preferences, spending patterns, clicks, etc. For example, AI-driven insights provided by AI-start companies to big brands like Adidas, Dior, and Louis Vuitton allow them to make prudent decisions on marketing, purchasing, and inventory of their products.
This way the brands can figure out how far their trending products might run in the market and also how to keep the trend sustaining for healthy inventory.
In practice, the start-up technology today scans millions of Instagram images every day, providing information on whether a specific trend or fashion style will sell or not.
Some technologies are designed to scan the texts used in the posts and hashtags, along with the visual content which helps in filtering the best seasonal trends and commercial posts according to the consumer choices. This way you can easily improve your supply chain through social media channels with the help of AI-powered algorithms.
The major rethinking needed by fashion brands is to deploy sustainable supply chain methods and remove the bottlenecks in the same. There is a huge issue of piling-up clothes which reached the local retailers when the consumers already forgot the trend or switched to the alternative.
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According to the Retail Localization and Agility survey conducted by Coresight and Blue Yonder, fashion retailers plan to invest in technology to enhance their supply chain operations, with 62% specifying solutions for inventory, assortment, logistics, and warehousing as the main focus of their planned tech spending.
Fashion brands should indeed rethink their supply chains to turn fixed costs and high capital challenges into technology-based growth opportunities. AI-driven data analysis is a big step to revolutionizing the supply chains of fashion brands, with a huge benefit of accessing golden consumer data from social media channels.
The changing pattern of consumers can be easily tracked and monitored through AI-driven technologies, helping the fashion industry to easily provide the right consumer demand, and also manage their inventory without any supply-demand shocks.
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FAQ | Should Fashion Brands Rethink Their Supply Chains?
Why does the supply chain hamper fashion brands' delivery ?
With the expanding network of different brands and designers, there is a strong dependence on the national and local retail networks. Therefore, the fashion brands need to strategize their clothes and accessories delivery through these channels in a symbiotic manner, which benefits both of them. Even with the online channel delivery, the warehousing and inventory stocking needs to be streamlined for easy flow of products.
What are the major problems of the supply chain of fashion brands ?
The supply chain network of fashion brands faces various challenges in the journey : - Shipping disruptions - Global crisis like Covid-19 - Demand volatility - Online selling - Raw materials
What are the additional costs associated with global supply chains ?
With the rising dependence on oil supply, there are major supply chain costs associated with the logistics : - Shipping and freight costs - Fabric and yarn costs - Labor costs - Exchange rates - Compliance and sustainability
How internal obstacles are disrupting the flexibility and speed of supply chains ?
There are various ways through which the supply chain is getting affected to maintain speed and flexibility : - Digital tools lacking which can support efficiency in product sourcing and development processes - Prioritizing product costs over flexibility and speed - Limited functioning across product development processes - The skill gap in the internal teams hampering the digital adoption - Lack of management in the critical path
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