10 Apparel Supply Chain Ideas in 2017 | FBA Inspection

10 Apparel Supply Chain Ideas in 2017

Uncertainty in 2017 brings opportunity for retailers and brands to rethink their business models and how they operate

Several recurring themes cropped up in just-style’s roundup of sourcing and supply chain issues likely to impact apparel and footwear firms in 2017. The reports, which ran across four articles and more than 11,000 words, combined the views of a panel of industry executives. Here we condense their words of wisdom.

Global political uncertainty

Political uncertainty is likely to be one of the main challenges facing the apparel industry in 2017 – with ramifications for both sourcing and consumer confidence.

The most immediate impact is likely to come from the new US government under President Donald Trump. His first day in office saw the US officially abandon the Trans-Pacific Partnership (TPP), while his campaign pledges also include rewriting NAFTA (the North American Free Trade Agreement with Canada and Mexico) trade pacts, imposing tariffs on imports from China and Mexico, and bringing back US jobs and manufacturing. A possible revamp of the US tax system also threatens US apparel importers and their suppliers.

The departure negotiations following the UK’s Brexit vote to leave the European Union (EU) will also start in earnest after Article 50 is triggered in March, although the terms under which the UK will eventually trade with both the EU and the rest of the world may not be known for several years. More immediately, the decline in the value of sterling is set to push up the price of goods imported imported into the UK – Europe’s largest importer of clothing from outside the EU.

Elsewhere, uncertainty surrounding upcoming elections in key Asian and European countries including India, South Korea, France, Germany, Hungry, Czech Republic, Slovakia, Portugal and the Netherlands is also set to make 2017 a challenging year.

As well as unease over the potential for increased tariffs, the implications of this political and economic change extend to a rise in inflation, and the potential for falling consumer confidence.

China-US tensions

Linked to this political uncertainty is increasing tension in the relationship between the US and China, and the possibility of a trade war between the two superpowers. Trump has repeatedly accused China of cheating at trade, currency manipulation, and has threatened to impose tariffs of 45% on Chinese goods including apparel. If the US follows this course of action, China will almost certainly retaliate with its own trade restrictions.

In parallel, China has been riled by the refusal of the US, EU and Japan to confer “market economy status” as it claims was promised on the 15th anniversary of joining the World Trade Organization (WTO). It has launched a legal challenge at the WTO, although it is hard to know yet how this may impact importers of Chinese apparel.

Diversified sourcing

Regardless of the outcome, what does seem to be certain is that companies with a diverse sourcing strategy that takes in multiple production bases will be best-placed to manage this potential upheaval. In 2017 “prepare to expect the unexpected,” our experts say, while a ‘China Plus Many’ sourcing strategy is not only key to helping companies continue to meet consumers’ needs, but also mitigate global supply chain risks. Also be ready to have more ‘what if’ strategy discussions: What if there are additional tariff’s placed on China? What if NAFTA crashes? What if a trade war breaks out?

In line with this, apparel firms are also advised to work even more closely with their key suppliers, and should expect sourcing consolidation to continue as the search for greater efficiencies and maximised productivity in the supply chain goes on. The good will become bigger – and better – while scale and the ability to provide more services will drive value. Middlemen will continue to be squeezed, so will need to find reasons to continue to be part of the supply chain.

On-shoring or near-shoring

As global politics become more turbulent, moving things closer to home or out of the eye of the storm may be another solution. Near-shoring supply chains closer to regional markets also taps into the ongoing trend for fast response and smaller but more frequent orders, less environmental impact and greater efficiencies to manage quality. But despite claims to the contrary ­­– and the best efforts of President Trump – executives say it is unlikely that domestic apparel manufacturing will ever return en mass to developed countries like the US. Instead, the dual-track sourcing strategy that sees fashion brands and apparel retailers use western hemisphere supply chains to supplement their Asia-based production for more fashion-oriented or time-sensitive items is likely to continue to gain momentum in 2017.

Digital obsession

Uncertainty also brings opportunity for retailers and brands to rethink their business models and how they operate ­ – with digitalisation a recurring theme for our executives. In essence, digitalisation brings supply and demand closer together by combining traditionally distinct supply chain elements into seamless digital supply networks. Tools such as social media, mobile communications, analytics and cloud computing set the stage for this convergence, uniting not just physical flows of materials, products and supplies but also talent, information and finance.

Individual elements may involve digitalising the supply chain through technologies such as RFID to improve visibility and, in turn, responsiveness, innovation and ever-faster execution. Or it may be a wider digital transformation that aligns an organisation’s strategy and IT to serve increasingly mobile and digitally savvy customers when, where and how they demand it. For manufacturers, digitalisation of their processes will help streamline administrative costs, give them greater control over day-to-day production and capacity and letting them make operational adjustments – fast.

That said, the apparel industry is still at the early stages of this adoption. The shift in 2017 will be to spot the opportunities to prepare for digital procurement while still optimising traditional non-digital sourcing.

Data analytics

Over the past few years there has also been considerable excitement over the potential of big data, along with advances in demand forecasting by extrapolating today’s sales and using this to predict what will sell tomorrow – and move stock to the right stores accordingly. The elephant in the room, however, remains the inability of fashion buyers to predict what will and won’t sell.

Embrace customer data and analytics, our executives say, to drive smart and fast decisions around specific product and service needs – such as style, colours, size and delivery options – as well as improve inventory productivity, reduce lost sales, and drive margin improvements. The data can also be used to identify problems and, crucially, to develop solutions. A lot of prediction and forecasting tools are now at a level of maturity where they will disrupt the traditional way apparel is designed, bought, and inventoried.

Demand and supply model

Aligned with this is a shift away from ‘supply and demand’ production to a ‘demand and supply’ approach where retailers reduce initial purchases and inventories and instead trigger in-season production runs based on actual sales in-store and online. Similarly, there is the ‘see now, buy now’ expectation of fashion conscious consumers to purchase the designs they see on the catwalk instantly.

While both of these tactics can be highly profitable, they place huge stress on the entire supply chain – from design to production to shipping and ultimately the shopping experience. And they require a commitment from the top down to challenge, change and commit.

In particular, they are highly dependent on collaborative and effective partnerships with suppliers, who will be under increasing pressure to develop concept designs and prototypes with shorter lead times and fine tune their manufacturing to manage smaller initial orders and respond faster to demands for redevelopment and reorders at short notice. The overall shift will be towards a more agile development model. To support this, one option will be for brands to consider making strategic investments in their supply base.

Investing in innovation

Differentiation and innovation are also highlighted as key ingredients for success in the future. To remain competitive, apparel companies need to be prepared to change and be willing to try something new: whether it’s in the way products are designed, made and sourced (3D printing, wearable technology, digital prototyping, robotics and automation); how consumers shop (the ‘see-now-buy-now’ trend); or where and how to sell (e-commerce and omni-channel retailing).

Tapping new talent

As these apparel industry changes take shape there will also be a need to build new skills for the digital future. The sector already bemoans the loss of technical training in areas like manufacturing, sourcing, product engineering and quality management – yet as products, demand chains and consumer requests become more complex, the need for a high level of process knowledge and technical understanding becomes increasingly important.

Firms are also likely to find themselves having to recruit from more diversified educational backgrounds, such as engineering, physical therapy and business analytics – and then having to teach current and future managers the right skills to deal with these new technologies. If the industry is not able to implement the technology available, it will be vulnerable to outside tech giants taking large chunks of market share quickly.

Another concern related to the next generation of industry leaders is increasingly poor verbal communication skills. In a world that is wired and connected 24/7, the lack of interpersonal communication is often the root cause of most problems. While social media tools are important, verbal communication and personal connection is an invaluable – but depleting – art.

Sustainability and social responsibility

Last but not least, sustainability and social responsibility will continue to have a strong influence on sourcing decisions. In short, building a more transparent and sustainable supply chain is an irreversible trend in the apparel industry, our panel says. With external stakeholders increasingly questioning the origins of a product and its manufacturing processes, apparel brands and retailers need to get closer to their upstream supply chain operations. Building a sustainability network is also key, through collaboration with peer brands and retailers, their suppliers, their service providers, and especially third-party organisations with expertise in these issues. Sourcing, compliance, customs, and government affairs teams can no longer remain in their own silos; everyone must work together and share information to ensure a compliant, sustainable business practice.

Source: https://zsupplychain.com/2017/01/27/outlook-2017-ten-apparel-supply-chain-takeaways/
Image: wikimedia.org

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