The 6 Supply Chain Trends the COVID-19 Crisis will Accelerate
Date: Wednesday, May 6, 2020
Source: Sourcing Journal
The COVID-19 pandemic has been an eye opener in identifying where major weaknesses in fashion and apparel supply chains ultimately reside. Many retailers simply aren’t agile enough to adapt to consistently changing customer trends, are stretched too thin with operations spreading across the world and have been mired in outdated processes that prevent them from getting the right products to the right consumers at the right time. But that doesn’t mean they can’t make changes starting now, even as most apparel stores remain closed.
Here are six trends that are occurring within supply chains that fashion companies can capitalize on as they navigate through the COVID-19 pandemic and beyond, as well as accompanying articles and resources from Sourcing Journal highlighting the recent advancements within the supply chain:
1. Seasonless Collections
Getting seasonality timed right has been a problem for fashion and apparel retailers far before the COVID-19 outbreak, with product lifecycles and launches often predating their anticipated peak wear time. Think: coats in July. This unsold merchandise results in inventory pileups and markdowns by the time consumers are ready for it.
COVID-19 only exacerbates this issue as stores remain closed and retailers put a halt to their late summer/early fall orders―they now have a whole season’s worth of goods to liquidate. With such uncertainties arising regarding future demand, retailers must take this as a time to be more flexible in their product cadence going forward. This may mean manufacturing and designing more garments that are wearable for all seasons. The seasonless concept is not a simple process, which explains why many brands haven’t taken advantage of it yet.
Menswear label Western Rise has shift fittings and pre-production sampling to video calls with models but it’s the company’s commitment to year-round dressing that’s really helping them through this period. The brand focuses primarily on seasonless items, specifically on the core product instead of chasing fleeting trends, with the only remaining aspects of seasonality coming from colors and fits. The apparel label only discounts twice per year, instead opting for strategies to keep shoppers engaged over a multi-month period.
If there’s a lesson from today’s crisis, it’s that seasonless goods are less perishable but they require material developers to be more creative in the types of fabrics they use so that the same product can work in different countries in different climates across a longer period of time.
2. On-Demand Production
The move to overseas production has meant many retailers and brands operate under long lead production times of anywhere between 12 and 18 months, making the guesswork around what consumers will want in future seasons highly unreliable. The result? Misfires that led to markdowns.
The pandemic’s spread has compounded the issue of long lead times, creating more demand uncertainty than ever before. One way retailers can attempt to get out from under this problem is by implementing a just-in-time model to lean out the supply chain. Since retailers aren’t driving cash flow due to store closures, the reliance on a just-in-time model would enable them to instead order smaller quantities more frequently. Smaller runs mean consistent, relevant production, and less risk of a markdown as well.
Just-in-time isn’t without risks. Retailers that typically wait to produce until there is definite demand might have to deal with the opposite problem—out-of-stocks—if the supply chain is disrupted. But it is still a risk worth taking, especially as cash is in short supply.
Going forward, retailers would benefit by being more agile in their ordering capabilities to give the end consumer the product they want at the right time. While pivoting to an on-demand model can be a major challenge for retailers to get the product right every time, the opportunities are there for the taking to develop long-term loyalty from the consumer.
3. Factory & Fulfillment Automation
Retailers and manufacturers have long debated the role of factory and warehouse automation, questioning how it’s applied and the impact it could have on the workforce.
Already, factories included robotics, IoT sensors and autonomous processes designed to reduce overhead costs and alleviate human factors such as employee turnover and training. The virus outbreak raised more questions around human capital as some factories faced lack of workers since many who had traveled for Chinese New Year were unable to return amid lockdowns.
Beyond worker availability, employee safety has become the top concern across warehouses and factories, opening the door for greater automation. Even as demand has driven U.S. companies such as Amazon and Walmart to staff up their fulfillment centers, they’ve had to do so while respecting social distancing guidelines. Here, automated processes could reduce risk while driving efficiency and costs savings. In one case, Danish robotics company UVD Robots deployed robots to disinfect facilities with UV light.
Throughout the pandemic and beyond, businesses must think long and hard about the benefits automation would bring to the workplace, as far as minimizing the reliance on human capital, or at the very least enabling them to do other jobs safely.
In recent years, retailers have been looking for ways to create a more agile supply chain to shorten lead times and ultimately quicken turnaround times. For some, nearshoring has been the avoid the distance and communications issues common with production in Asia.
With the coronavirus forcing factories to intermittently shutter operations throughout China and neighboring countries, as well as putting pressure on retailers to reorder new batches of products or halt orders altogether, retailers need supply chain agility more than ever. If retailers weren’t considering nearshoring before COVID-19, they better be all about it now.
It would require the industry to embrace a new math, one that includes higher labor costs, factors in lower shipping expenses and results in higher margins due to the flexibility proximity provides. Nearshoring allows companies to delay commitments until demand is evident, promising higher full-price sell-throughs.
Looking forward, an agile supply chain would benefit retailers even further in a post-pandemic world, where more shoppers are expected to buy online and continue their “buy now, wear now” shopping mentalities.
5. Vertical Operations
While the trade war with China prompted companies to move more of their production out of China, often they failed to fortify the remainder of their supply chain elsewhere.
COVID-19 has brought forward a lesson: diversification must include raw materials. As the early days of the outbreak illustrated, factories can’t operate without the necessary inputs. Under this reality, retailers may have to vertically integrate their supply chain to ensure raw material availability.
One manufacturer, Textimax Peru, is a prime example. The company offers everything including spinning, knitting, dyeing and finishing in house, so textiles are never held up, there’s no wait time between steps and no time is lost during handoffs.
This trend has the opportunity to accelerate as more retailers realize the dangers of what can happen when an area of the supply chain is interrupted, be it from natural disasters or other anomalies. They’ll also benefit from the ability to make changes to product lines closer to need.
6. Data Analytics
Retailers often used to be able to dictate fashion trends to the consumer, but the tables have turned. With consumers now in the driver’s seat, the supply chain is now a demand chain. This change means retailers need to be more reliant on data analytics instead of sheer intuition to understand shopper preferences. Yet the excess inventory problems and markdowns season after season shows store executives still have a long way to go.
COVID-19 disruption means that the industry has lost a season, which makes planning for the next seasons that much more challenging. Retailers must leverage data, derived from social media, search engines and other third-party sources, to not only to determine what to make but also where to ship and move product based on regional popularity or even weather patterns.
Already retailers are testing goods via e-commerce, allowing them to garner consumers’ real-world reactions to different colorways or style variations. Provided a brand has the agility, that type of data can then be used to determine if it should ramp up production.
In the future, data analytics is going to be pivotal no matter the situation. Technology promises to make inaccurate demand forecasts and assortment plans a thing of the past.