Yahoo Finance Stitching the future of apparel manufacturing with digital supply chain
Here's how fashion retailers can improve efficiencies, reduce their environmental impact, and transform their bottom line.
Styles are updated every season in the realm of fashion, yet behind-the-scenes the apparel manufacturing process has remained largely unchanged over the decades. The industry, often associated with manual production techniques and analogue supply chains, is now facing a growing call to move into the digital age.
However, updating the manufacturing process is easier said than done. The garment manufacturing industry is a complex web of raw materials suppliers, fabric mills, embellishment processing facilities, and finished product manufacturers, supported by a strong and robust domestic and global logistics ecosystem to move materials and products across factories and warehouses, and to transport products to customers. Any brand looking to minimise wastage of materials and time while providing consumers with quality and affordable products needs to have the ability to track and maintain oversight of their entire supply chain and in real-time.
It is no wonder that McKinsey and Company found that more than 70% of fashion brands’ chief purchasing officers (CPOs) expect supply chain digitisation to be the most important capability for suppliers to acquire.
Dawn of digitalisation
Digitalisation is an inevitable transformation, and companies that can successfully unlock its potential have leveraged it to pull ahead of their peers. For example, in the retail sector, traditional brick-and-mortar stores may struggle to compete with the growth of e-commerce and changing consumer shopping preferences. Going digital enables the brand to establish an online presence, implement relevant e-commerce strategies, and embrace omnichannel retailing to reach a broader customer base. Inventory management has also benefited from digitalization by receiving real-time insights, avoiding stockouts or overstock situations.
However, it was only after the COVID-19 pandemic which exposed gaps in demand management and supply chains, that apparel manufacturers felt compelled to invest more heavily in digitalising their operations. In the past, factories often utilised basic tools such as Excel for record-keeping and inventory management.
While they performed basic functions, such tools were limited in their ability to help manufacturers optimise resources and inventory levels, or make better manufacturing decisions. Furthermore, such tools did not facilitate information exchanges across different parts of the supply chain, nor were they able to seamlessly connect manufacturers with buyers, brands and customers on the demand side.
Under one roof – an advanced supply chain
The fragmentation within the supply chain and opacity between actors on the demand and supply sides have resulted in higher-than-necessary costs and other inefficiencies in production and logistics delivery. They also contribute to sustainability-related problems such as excess inventory and deadstock waste.
A fully integrated supply chain addresses these concerns by enabling the apparel manufacturer to minimise any mismatch between customer demand and merchandise supply. With its integrated supply chain, SHEIN produces an ultra-small batch of each style (100-200 pieces) and gauges market response in real-time, only responding with larger-scale production to meet demand if warranted.
Should there be surges in demand, SHEIN is able to distribute production across its network of third-party suppliers via an in-house developed supplier management system. By producing the amount of clothing to accurately match sales, SHEIN is able to significantly reduce production waste and excess inventory, and also price its products affordably, without markups to account for unsold pieces.
An integrated supply chain that can consolidate information across the supply chain and effectively track the production process also allows SHEIN to have a better grasp of existing inventory levels at each tier of production. This in turn informs the centralised purchase of materials from upstream suppliers such as embellishments and fabric at a whole-of-supply-chain level, thereby lowering costs for the brand and its customers due to economies of scale.
Following the production of apparel lies the last mile delivery, the final leg of an optimised supply chain. Digitalisation here too plays a crucial role in generating customer satisfaction through transparency.
Customers place great emphasis on ensuring that goods arrive on time and in good condition, with clear and simple procedures to facilitate returns if required. Getting this right requires meticulous execution by a consolidated supply chain network which brings together SHEIN’s supplier factories, warehouses, as well as international and local delivery partners. Information is shared with customers through SHEIN’s app, which allows for tracking of the delivery stages in real-time, and to also register returns, which can be efficiently routed to logistics providers. Naturally, an integrated supply chain system would also be able to take stock of returns at warehouses, and once these are sorted and inspected for quality, can even be directed to fulfil new orders from customers in a nearby location.
It's now or lose out
Digitalisation of a supply chain evidently requires much effort, especially for brands that have many suppliers across the value chain. But it is undoubtedly an investment worth making – BCG concluded that by building an agile supply chain—a customer-oriented, end-to-end mechanism for responding to fluctuating demand—fashion retailers can gain a powerful competitive edge.
Today, whether by developing their own in-house systems or by tapping on new solutions in the market to optimise all processes within an advanced supply chain – from manufacturing to delivery and even returns – companies can improve efficiencies, reduce their environmental impact, and transform their bottom line.
Annabella Ng is the senior director of Global Government Relations at SHEIN.
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