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Top supply chain issues in the fashion industry and how to address them

December 16, 2021

According to Statista, the global apparel industry was worth $1.5 trillion in 2020. Perhaps even more staggeringly, this number is forecast to grow by 50% to $2.25 trillion by 2025. Growing consumer demand for leading fashion brands in the United States, China and Japan will primarily lead this growth.

As a fashion business operating in such a massive industry, supply chain management is vital to your success. Due to the nature of the fashion industry, many issues surround the global supply chains in this space, from sourcing and apparel manufacturing to transporting apparel products across continents.

What makes fashion supply chains so unique?

The fashion supply chain consists of many moving parts.

However, one unique aspect of the fashion industry is how consumers see and use it.

For example, while clothing is a functional product, people who buy fashion products exclusively when they need to, instead of buying fashion items impulsively simply because they like them, are in the minority. So fashion supply chains sit across the traditional supply chain ideas and how they work. Elements of seasonality give some predictability, for example, but the demand won't be there if the weather is unseasonal. As such, most fashion companies must balance producing a functional product with a range of external factors that ultimately drive consumer demand.

What are the consequences of poorly built fashion industry supply chains?

Apparel companies that don't give due attention to their supply chains and broader value chains leave themselves open to significantly elevated risk.

We can generally group most potential issues related to the impact on the bottom line or a brand's reputation. However, the underlying problems are where you can identify areas for improvement in your processes, gain a competitive advantage in your industry, and minimise supply chain disruption.

12 supply chain issues in the fashion industry and how you can address them

1. Demand volatility

The fashion industry is notoriously volatile, making forecasting an unenviable task at the best of times. The most significant issue coming out of volatile demand is the potential cost losses. Say you buy a substantial inventory of the latest fashion craze, but by the end of the week, an influencer has rubbished it, and the world has moved on. You're left having to pay for inventory that you'll almost inevitably have to sell at a reduced price.

As we've seen in the past 24 months with the coronavirus pandemic, government action like lockdowns can also erase demand overnight if you have to close and don't have an e-commerce platform.

Solution: Consider whether your supply chain strategy can react to demand volatility. Read our guide on comparing lean and agile supply chains to learn how brands like Zara use hybrid supply chain models and the benefits of doing so.

2. Production volatility

Production volatility is a relatively new experience for some businesses. However, even before the pandemic, many apparel companies were aware of the impact of events like natural disasters on production. Production issues lead to stock shortages, which subsequently can lead to unhappy customers. In the modern world, with online shopping giving consumers instant access to almost anything they want, a customer you lose now will probably be loyal to the brand that got them their product when they needed it.

Solution: Have multiple suppliers of the same product to minimise the impact of raw materials shortages or factory closures due to coronavirus. Nearshoring is also worth considering. For example, if you're based in France but primarily outsourcing production to Asia, could you also have a backup solution in Europe?

3. Transportation issues

The 2021 Suez canal blockage is an excellent case study into the impact of transportation problems on global supply chains.

However, even relatively trivial transportation issues may have a significant and profound impact on the fashion supply chain and how you meet consumer demand. A 24-hour backlog or bottleneck at one of your distributor's regional sorting hubs, for example, will have a knock-on effect on product availability and may even lead to your business missing the boat - no pun intended - of a particular trend.

Solution: Ensure you have partnerships with multiple distributions and logistics experts. You'll minimise disruption when one distribution partner has operational issues and have several options for picking up the slack in the short term.

4. Perishability

Product lifecycles are shorter than ever before.

Traditionally, the two primary lifecycles you would deal with were:

  • Seasonal lifecycles, lasting 20 - 24 weeks
  • Fashion lifecycles, lasting 10 - 12 weeks

As we saw when looking at demand volatility, we can now often measure fashion lifecycles in days rather than weeks and months. Furthermore, we also have to consider value and exclusivity alongside perishability. For example, if you're the first apparel brand to jump on a particular trend, your products are hugely valuable, but only until your competitors catch up. Thanks to platforms like Etsy, barriers to entry in the apparel market are also lower than ever, so you need an intelligent strategy to avoid getting lumbered with excess products.

Solution: Consider switching to a hybrid supply chain model so you can continue to source apparel at low cost while being less susceptible to fast fashion lifecycles driven by social media and other factors.

5. Supply chain sustainability and transparency

In recent years, many apparel brands, including Nike, have found themselves dealing with a public relations headache following revelations about things like working conditions at their suppliers' factories.

The environmental impact of producing apparel is also under greater focus than ever before. For example, according to the World Wide Fund for Nature (WWF), the fashion industry uses 378 billion litres of water every year.

Stories such as these have placed a greater focus than ever before on supply chain sustainability and transparency, and your business must have a strategy in place for ensuring your suppliers are meeting regulatory and ethical expectations.

Solution: Invest in solutions that will help deliver greater supply chain visibility and traceability. Ensure you have an ongoing review system in place for auditing things like your suppliers' working conditions and environmental impact.

6. Lead times

It's no secret that apparel companies outsource production to low-wage countries, often in Asia and Africa, to reduce their operating costs. However, this also presents a challenge regarding the time it takes for products to become available, particularly in stores. In turn, delays can make brands more susceptible to quickly fluctuating demand and having a shorter perishability window. Therefore, you must balance cost considerations against how vital time-to-market is for your brand.

Solution: As with our solution for mitigating production volatility, consider having multiple suppliers of the same product. Having one factory in Bangladesh and another in Vietnam means one can pick up the slack if you have any production issues. This is another area where you might consider nearshoring, too.

7. Managing cost types

It's common for businesses to focus solely on unit cost when sourcing products. While this approach is understandable, it discounts things like transportation costs, export taxes, or anything else that you will need to cover to get the final product from the factory to your warehouse. When searching for suppliers, don't be seduced by cheap unit costs. Instead, look at the bigger picture.

Solution: Work with your sourcing and procurement teams to ensure they're making buying decisions based on total cost rather than cost per unit. Export taxes and other expenses are the last things you want to be worrying about when you think you've got a fantastic deal.

8. Availability of raw materials

While a significant volume of modern apparel is produced from artificial, synthetic materials, eco-conscious consumers are increasingly driving a move towards organic and sustainable fibres due to the reduced environmental impact of such products. Whether you're a business that exclusively sells organic cotton or bamboo fibre apparel or such products are one part of your range, the potential for disruption if the raw materials you need aren't available is significant.

Solution: When working with different suppliers of the same product, ensure they aren't sourcing their raw materials from the same place, or you'll face an even bigger issue. Use software to view real-time data on the sourcing and availability of raw materials so you can quickly implement decisions and minimise disruptions.

9. Supplier performance

It's easy to think about the fashion supply chain in the context of process issues, but sometimes it might just be the case that your suppliers need to perform better. Yet, this isn't about beating suppliers with a stick but working with them to help improve how they operate and achieve better outcomes for all parties.

Solution: Treat your suppliers as partners, set clear objectives for what they need to achieve, and agree on the metrics by which you'll measure them. Read our article addressing supplier relationship management strategies to learn more.

10. The popularity of fast fashion

Some apparel brands are moving away from fast fashion, embracing a "slow fashion" model that uses timeless trends and doesn't worry about what's getting 100,000 Instagram likes. Yet, for many apparel companies, and perhaps yours, fast fashion is a reality of the business and what consumers demand. Fast fashion can place significant pressure on supply chains and make it easy for you to end up with an excess product that you'll need to sell at a reduced price or a loss.

Solution: If possible, consider migrating to a hybrid supply chain model to reduce your susceptibility to fast-moving product life cycles but also so you can capitalise on trends as and when they develop.

11. Accurately forecasting

Forecasting in fashion is tough enough as it is. Even if you sell seasonal products, knowing what to buy can be challenging. So do you look at long-term weather forecasts, consider whether it's an El Nino year, or think about upcoming sports or cultural events?

The reality is that you're probably looking at all these factors, with even more variables like demand volatility thrown into the mix. Yet, at some point, you need to make decisions, too. What those decisions look like will largely depend on your business model and the extent to which you can commit to significant product orders.

Solution: Consider migrating to a hybrid supply chain model. Alternatively, if you want to reduce the volume of markdowns and stock clearouts you do, you could deliberately underproduce or at least be conservative in your forecasting. Then, you could use this to drive demand and urgency through your marketing by talking about "limited supply" and maybe even use it to increase your prices.

12. Waste in the production process

A Reverse Resources study in 2019 found that just one factory in Bangladesh was producing 300 tonnes of pre-consumer fashion waste. While you might not think that has much to do with your business, a supply chain sustainability audit would likely make you think again. On top of the environmental impact of producing fashion, waste products that will go to landfills or be burned or dumped somewhere is a massive issue. If your suppliers and their factories are found to be wasteful, your business will bear the brunt of the reputational damage.

Solution: Work closely with your suppliers to understand where they can improve their processes. Doing so will help them reduce their environmental impact and the volume of waste they produce, reducing their costs which they can potentially pass on to you.

Build better supply chains with Serai Trade

With the fashion industry continuing to go at pace, it's vital you have all the information you need to know about your supply chains at your fingertips. Whether you exclusively sell apparel from an e-commerce platform or have a global network of bricks and mortar stores, Serai Trade's visibility and traceability solutions can help you make your apparel supply chain even more effective.

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