The Fashion Supply Chain: Transforming Supply Chain With Intelligent Technologies

6 mins read

A supply chain consists of all parties, directly or indirectly, in fulfilling a consumer need. A supply chain includes not only the manufacturers and suppliers, but also transporters, warehouses, retailers, and even consumers themselves. Each stage in the supply chain is associated with the flow of products, information and funds. The stages of the supply chain include the supply of industrial product by the raw material supplier to the manufacturer, who makes the product sale to the distributor, the distributor makes the sale of this product to the retailer by small lot, and finally, the consumer gets the product from the retailer.[1] Therefore, a supply chain consists of raw material supplier, manufacturer, wholesaler/distributer, retailer and a consumer.

The traditional management of the supply chain raised the need for conversion to a new paradigm of supply chain management. Traditionally, the supply chain management process relied more on the experience and intuition of the managers and had long supply cycles which consisted of large batch sizes, capacity based on annual volumes, volume-driven technology, and numerous suppliers for the same part on the short-term base contracts. Here, the goal of the business activities was to achieve competitive edges based on cost reduction, thereby maximizing the efficiency of an individual functional unit. Supply chain management links all the supply interacting organizations to manage high quality inventory in the most efficient manner.[2] Therefore, it reflects those actions responsible for the continuous improvement of the design, development and management process of an organization’s supply system, with the aim of improving its profitability and survival of its customers and suppliers. With the change of management focus, companies began to realize that maximization of efficiency in one department or one functional unit is less desirable than optimal performance of the whole company.

THE FAST FASHION SUPPLY CHAIN

Fast fashion has changed the market for good, leaving luxury and affordable, budget fashion items are thriving. Companies are achieving the fast fashion requirements by compressing production cycles which enables the shoppers to expand their wardrobes in an affordable manner and to refresh them at speed. This requires the companies to have a tight grip on the supply chain. Brands like H&M, Primark, Boohoo and Forever21 have epitomized this by churning out affordable garments.

The companies in the fashion business who are taking their products from a nascent trend to a clickable online purchase with a deliverable garment at a lightning-fast pace are the ones that are winning. Therefore, such companies require superior digitalization and great analytics. Some other key elements are – firstly, quick turnaround i.e., turning out the latest trends in an ultra-quick time. For instance, Zara takes 300 designers to create 12,000 new patterns every year. Considering its fastest fashion piece, it takes six weeks to go from a sketched design to a product in a store.[3] Secondly, inventory turnover is crucial for the bottom line. Some companies in the fast fashion business have realized that there is no point in the clothes being on the rack, they are better off in someone’s wardrobe. For instance, Boohoo turns over its inventory 6.7 times a year, compared with 4.4 times for Inditex, owner of Zara, and 3.1 times for ASOS.[4] Thirdly, test and repeat are a good tactic for the brands working online as they can try out examples of styles before ramping up the production. For example, Boohoo makes just 300 examples of a single day before selecting what will sell best. Fourthly, according to Mckinsey, consumers expect the companies to be extremely transparent about their supply chain. This has raised many questions as to how the company value those who grow the cotton, stitch the products, the environment and equitable profit for those in the supply chain. Lastly, supply chain agility and fast fashion is a strength for a good number of companies. Sustainability in fashion has become an important aspect among Gen Z and Millennials consumer.

With the change in the game, smart fashion brands are investing in forecasting efforts, which means to predict the garment, shapes and colors that consumers will click on in a frenzy with the coming seasons. Thus, now it’s all about data driven analysis, whereby forecasting agencies pour over information collated from retailers’ IT systems and supply chains.

REASONS FOR THE CHANGE IN FASHION SUPPLY CHAIN

The internationalization of the fashion industry has posed many challenges to this fraternity. The acceleration of the trend cycle, the consumer demand for quality and transparency, as well as the need for reduction in losses and increase in profits are the unprecedented challenges faced by the companies when considering the acceleration of processes. In a report published by Mckinsey and Business of Fashion, the third biggest challenge the companies will face is the digitalization of the supply chain.[5] The executive surveys confirmed that Artificial Intelligence will be implemented in many companies supply chains to achieve greater flexibility.

The two main elements that are changing the blackened process in this industry are – an automated supply chain and teamwork through a cloud system. There are times when quick reaction may lead to the need of increased production, such scenarios are common in the retail sector but can only be dealt when the processes are completely automated. If at each step of the supply chain the data is monitored, then the efficiency at all levels will increase. For instance, in the 90’s the Enterprise Resource Planning[6] systems were used to control inventory. According to a report, companies who migrate their system to ERP by 2020 will have improved their response rate by 75%.[7] Companies like Kate Spade and Fenwick have taken the step and used an ERP system that allows them to control their stock and sample collection.[8]

The companies have become increasingly internationalized, as a result, the only way to save all the information managed by these teams is through a cloud system. This helps them to sync information along with the design, production, merchandising and PR departments. Further, the companies have to adopt the new consumer buying cycle. As a result, many of them are taking on the ‘See Now, Buy Now’ strategy as shoppers want new trends as soon as they come out. By using sample tracking tools brands can predict the demand for each product before they are launched in the market. Another factor that has forced a change in the supply chain is the demand for quality and transparency. In 2013, more than 1,000 workers died due to the collapse of Rana Plaza in Bangladesh.[9] The clothing factory collapsed which was responsible for the production of many big players in the fashion and was a wakeup call for the industry. This terrible news is a key moment in history as companies began to work on CSR strategies and the optimization of the supply chain.

CASE STUDY: ZARA CLOTHING COMPANY SUPPLY CHAIN

 The clothing brand Zara changes its clothing designs every two weeks on average, while its competitors change it every two to three months. Zara’s highly responsive supply chain is the reason for its success. ‘The Cube’ is the heart of the company and its supply chain where highly automated distribution is carried out.[10]

Zara buys large quantities of fabrics but only of few types, and the garment designs and related cutting dyeing are done in-house. This way fabric manufacturers can make quick deliveries of bulk quantities of fabric directly to the Zara DC – the Cube. Italy, Spain, Portugal and Greece are the suppliers of raw fabric and they deliver within five days of an order being placed.

The cube is 5 million square feet and highly automated with underground monorail links to 11 Zara owned clothing factory.[11] The raw material passes through the Cube on their way to clothing factories and all finished goods also passes through on their way out to the stores. The factory can instantly increase and decrease production rates, so there is less inventory in the supply chain and less need to finance that inventory with working capital. The factories are connected to the Cube by underground tunnels with high speed monorails to cut fabric to these factories for dyeing and assembling into clothing items. The monorail system then returns finished products to the Cube for shipment to stores. The brand can deliver garments to stores worldwide in just a few days. Zara is a clothing and fashion retailer that uses its supply chain to significantly change the way it operates in a very traditional industry.

CONCLUSION

The trend of timely fashion has resulted in the restructuring of supply chains as the companies have to adapt to the higher product variety and shorter product cycle. Fashion retailers need to adopt new strategies for inventory management and supply chain management. In order to be efficient, they need to incorporate more helpful technology into the process and address issues such as sustainability. Technology like independent tracking and monitoring services will make the global supply chain efficient. As the supply chain is characterized by volatile and unpredictable customer demands, tremendous product variety and short product cycle, they increase the complexity in the fashion supply chain. As a result, the application of artificial intelligence in the fashion supply chain will be highly beneficial.

[1] Avizit Basak, M. M. Israfil Shahin Seddiqe, et.al., “Supply Chain Management in Garment Industry”, Volume 14, Issue 11, GJMBR (2014).

[2] Ibid.

[3] Elliott Jacobs, “The Fast Supply Chain – A strategy of Speed”, It’s in the Supply Chain, available at: https://itsupplychain.com/the-fast-fashion-supply-chain-a-strategy-of-speed/ (Last Visited May 15, 2021).

[4] Ibid.

[5] See The State of Fashion 2018, available at: https://cdn.businessoffashion.com/reports/The_State_of_Fashion_2018_v2.pdf (Last Visited May 15, 2021).

[6] See What Does ERP Stand for and What Does it do for Apparel & Fashion Businesses Today?, available at: https://www.cgsinc.com/blog/what-does-erp-stand-for?utm_source=visualnext&utm_medium=redirect (Last Visited May 15, 2021).

[7] See New Report: 2017 Annual ERP and Supply Chain Trends, available at: https://risnews.com/new-report-2017-annual-erp-and-supply-chain-trends (Last Visited May 15, 2021).

[8] Gina Gulberti, “3 Reasons the supply chain in the fashion industry is changing”, Launchmetrics, available at: https://www.launchmetrics.com/resources/blog/fashion-industry-supply-chain (Last Visited May 15, 2021).

[9] Ibid.

[10] See Zara Clothing Company Supply Chain, available at: https://www.scmglobe.com/zara-clothing-company-supply-chain/ (Last Visited May 15, 2021).

[11] Ibid.

 

Author:

Muskan Mahajan, Legal Content Writer at Legal Desire Media & Insights

Fashion Law Journal

Fashion Law Journal covers the legal landscape of the fashion industry and its stakeholders, providing the latest updates, how-to guides, and exclusive content for fashion law fratenity. An initiative and publication of Dept of Fashion Laws, Legal Desire (www.legaldesire.com)

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