Product complexity, long supply chains, and constantly evolving consumer needs are the key factors that make balancing supply and demand such a high-wire act. Fashion supply chains are complicated… First, SKUs in the fashion industry are extremely complex. Products vary by style, category, color, pattern, and size—all of which need to be considered in store-level merchandising, accentuating complexities in inventory management. Secondly, the fashion industry has long supply chains spanning across planning, design, sourcing, production, logistics, and retail, making end-to-end supply chain management challenging. Additionally, we see companies struggle with high inventory levels, because the design-to-shelf lead time often takes at least six months, by which time consumer tastes may have moved on.
The biggest challenges are associated with organizing and analyzing all the information associated with every step. Companies rely heavily on supply chain management software to create plans, select suppliers, place orders, track progress, manage warehouses, plan logistics, and deliver goods to buyers.
“There is an increasing need to foster strong relationships with suppliers and manufacturers, including local and regional partners. Fashion companies must work together to streamline production processes, reduce lead times, and ensure quality standards. Technology will be the mainstay in achieving desired results. They should invest in advanced planning and scheduling software to optimize production and logistics management, asserts Rachit Rungta, Head – Supply Chain Strategy & Network Planning, Reliance Retail…
How has the fashion & lifestyle supply chain shaped over the recent years with fast shaping up trends?
Rachit Rungta
Emergence of assisted commerce: B2B and B2B2C models, COFO stores are leveraging physical retail network of local merchants or stores to improve penetration awareness & exposure to aspirational products in tier II, III, IV & rural towns, especially where internet usage or adoption is low and logistical challenges for delivery high.
Leveraging customer Data and Analytics: Fashion & lifestyle companies are leveraging customer data and analytics to make informed decisions about product assortment, inventory, pricing, merchandizing and promotional strategies.
Localization: there has been an increasing preference for localization to tailor the product offerings as per local preferences and tastes.
Local and Hyperlocal Sourcing: There is an increasing preference for local and hyperlocal sourcing to reduce lead times, lower inventories and lower transportation costs.
Expansion into multiple sales channels, including brick-and-mortar stores, e-commerce websites, mobile apps, and social commerce has led to the reconfiguration of supply chains to enable integrated inventory management, fulfillment, order management, and supply chain processes in ensuring a consistent customer experience agnostic to channel. This trend highlights the importance of supply chain innovation in adapting to the evolving retail landscape.
Inventory Management: We are witnessed increasing use of advanced technologies like RFID, planning engines, and data analytics in reducing overstocking & working capital deployment, reduce stock outs and improve fill-rates.
D2C Brands: Proliferation of D2C brands has led to increasing requirement for courier/express delivery/hyperlocal delivery.
Private Label: Introduction of private label brands by retailers; managing the supply chain for these private labels has become a significant part of retail operations.
Warehouse expansion & Automation: Retailers & Ecommerce companies are investing in smart warehousing solutions, such as automation, robotics, and IoT technology, to improve efficiency in order picking and packing processes.
Last-Mile Delivery: New challenges & complexity in last mile deliveries include increasing customer expectations such as hyperlocal delivery, same-day delivery services, COD operationalization, high returns & reverse logistics.
Just in time/Direct to store or customer/Drop ship operations: Companies are reducing inventory stocking by operationalization of JIT/ DTS/DS operations.
Serialization: Counterfeiting, in particular, is a big issue for branded fashion industry where authenticity of the product is a critical component. To
counter this, companies are going in for serialization in a big way.
What are the key issues in fashion supply chain management?
There are several issues that companies are facing in managing supply chains. These include:
Short lifecycle of articles: New product introductions every season, long tail and difficult to forecast in a reasonably accurate manner due to lack of historical precedence.
SKU complexity: Size & colour complexity, ratio packs & large number of SKUs across different categories
Omnichannel complexity: Different SKUs, suppliers, product/article preferences, price & fulfilment requirements across different channels
Fast changing customer preferences and choices: Irregular buying patterns, regional preferences and variations
High seasonal variability: Less harsh winters will impact sale of winter clothing, relatively cooler climate impacts sale of summer clothing.
High supply lead time from design to display: This leads to low forecast accuracy and higher inventories to be maintained.
Premium, luxury or mass premiums discretionary spends: Macroeconomic & other factors lead to demand volatility.
Last mile delivery especially in e-commerce and B2B channels: High cost of delivery, small shipment size, volumetric weight product
FTL movements: Low vehicle utilization, loadability by gross weight is low due to light weight of material.
High returns % specially in e-commerce channel: Reverse logistic supply chain design and related costs
Counterfeiting & Theft: Copy of design, counterfeiting of branded products, pilferages from warehouse
Besides, there are other challenges such as maintaining quality and hygiene of returned goods; high dependence on imports, exposure to risk of raw material shortages; product quality variations, timely delivery of shipments especially for non-branded clothing; branded vs non-branded vs private label clothing, that have a greater impact on fashion supply chains.
What does a sustainable fashion supply chain look like? What are the initiatives taken by your company on this front?
Circular fashion concepts, including clothing rental, upcycling, and recycling programs, are becoming more popular in the fashion & lifestyle space. Retailers are encouraging customers to return old clothing for recycling or upcycling into new products. Retailers are focusing on sustainable packaging, such as using recycled and recyclable materials. Some brands are opting for minimal packaging or innovative reusable packaging solutions. There has been an increased focus on reducing miles travelled & carbon footprint by optimizing the supply chain network by sourcing/ manufacturing products closer to the point of sale, regional sourcing, optimal no. of warehouses & stock keeping points. Retailers are also looking for more sustainable transportation options, such as electric and hybrid delivery vehicles, and optimizing delivery routes to reduce emissions. In warehouses, they are utilizing eco-friendly building materials and adopting energy-efficient facilities, transportation and last-mile delivery practices to enhance green expanse. These efforts reflect the growing importance of logistics and supply chain management in the fashion industry, where companies are embracing supply chain innovation to address supply chain challenges and drive supply chain processes towards a more sustainable future. How can technology aid in streamlining supply chain efficiency?
RFID (Radio-Frequency Identification): RFID technology helps track inventory in real-time, reducing the chances of overstocking or understocking.
Inventory Planning Software: Advanced analytics and AI-powered software can provide better way to plan, classify and store inventory.
Big Data and Analytics: Data analytics tools can analyze customer behavior, market trends, and historical sales data to provide accurate demand forecasts.
Blockchain: Blockchain technology enhances transparency and traceability in the supply chain, allowing stakeholders to track products' origins and movements.
IoT (Internet of Things): IoT sensors can monitor temperature, humidity, and other environmental factors in transportation, ensuring the quality of products in transit.
Order Management Systems (OMS): OMS software centralizes order processing, reducing errors, and streamlining order fulfillment.
Automated Order Routing: Algorithms can automatically route orders to the nearest fulfillment center, optimizing delivery times.
Automation and Robotics: Robots and automation systems can handle tasks like sorting, picking, packing, and even loading, improving efficiency and reducing labor costs.
WMS (Warehouse Management Systems): WMS software optimizes inventory placement and movement within warehouses.
Route Optimization: Route planning software uses real-time data to optimize delivery routes, reducing transportation costs and improving delivery speed.
Fleet Management Software: These tools help manage and maintain delivery vehicles efficiently.
Sustainable Sourcing Tools: Technology can assist in identifying eco-friendly materials and suppliers, supporting sustainable fashion initiatives.
Eco-friendly Packaging Solutions: Packaging software helps design and source sustainable and recyclable packaging materials.
Returns Management Software: These systems streamline the returns process, optimizing restocking and refurbishing, and minimizing waste.
Unified Commerce Platforms: Unified commerce software enables seamless integration of online and offline sales channels, ensuring consistency in inventory and order management.
How should Fashion and Lifestyle companies structure their supply chain to create the required responsiveness and speed?
Companies should utilize advanced analytics and data-driven tools to accurately forecast demand. They must collaborate closely with sales and marketing teams to understand customer preferences and trends. They should establish multiple distribution centers in key regions to reduce lead times and shipping costs and implement a just-in-time (JIT) inventory strategy to optimize stock levels. Fashion companies should collaborate with manufacturers that can produce small batches quickly and adjust production schedules on short notice. They should utilize fast fashion production techniques, such as modular design and quick replenishment.
There is an increasing need to foster strong relationships with suppliers and manufacturers, including local and regional partners. Fashion companies must work together to streamline production processes, reduce lead times, and ensure quality standards. Technology will be the mainstay in achieving desired results. In order to harness its true potential, companies should implement digital tools for real-time visibility into the supply chain, including RFID, IoT, and blockchain for tracking and traceability.
They should invest in advanced planning and scheduling software to optimize production and logistics. Retail companies must seamlessly integrate all sales channels, including physical stores, e-commerce, mobile apps, and social commerce and utilize a unified commerce platform to manage inventory across channels. There are innovative last-mile delivery modes available, and retailers should explore innovative lastmile solutions, such as crowdsourced delivery, autonomous vehicles, and hyperlocal fulfillment centers. To meet customer expectations for speed, they should look at experimenting with the same-day and express delivery options. To enhance reverse logistics efficiency, companies should streamline the returns process to reduce turnaround time for returned products and develop a refurbishing and recycling program to minimize waste.
Companies should strive for an agile inventory management by implementing a technology solution that allows for dynamic allocation and allocation of inventory based on real-time data. They should also utilize demand-driven replenishment strategies to ensure products are available when and where they are needed.
Besides all these, continuous improvement and innovation will only take us ahead. We must encourage a culture of continuous improvement, where employees are empowered to propose and implement process enhancements. We need to stay updated on emerging technologies and supply chain best practices to drive innovation. Fashion companies also need to work closely with vendors, retailers, and logistics partners to align objectives and share information, reducing lead times and improving supply chain visibility. Lastly, strategic market expansion will aid in reducing shipping distances and in better serving local and regional customers
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