The fashion and apparel market remains exceptionally dynamic. The economic outlook and continuing supply chain complexities are likely to amplify this dynamism. In this article we discuss some of the unique challenges and complexities faced by the sector, as well as some of the emerging strategies and innovations being deployed in the industry’s warehouses to overcome them.
The recent history of the apparel supply chain
More complex supply chains started to evolve during the second half of the 20th Century, as brands sought to reduce their costs by sourcing from countries with lower labor costs. In many cases these countries were also closer to some of the raw materials like cotton.
Towards the latter quarter of the 20th century and the first decade of the 21st, two new revolutions appeared. On one front, the advent of fast fashion, driven partly by increasing disposable incomes, redefined the patterns of fashion consumption, while on the other, e-commerce revolutionized the manner in which fashion was both consumed and distributed.
The concept of fast fashion, characterized by the swift journey from design to production to retail, emerged in the 1970s and has persisted ever since. Brands such as Zara, H&M, Uniqlo, Gap, ASOS, Boden and Boohoo serve as prominent examples of this trend, which has not only profoundly reshaped consumption habits within the clothing industry but also wrought transformative changes upon its supply chain.
With collections undergoing frequent renewal, Zara, for instance, refreshing its offerings every two weeks, these industry leaders are in need of supply and distribution models that can adeptly fulfill their unwavering pursuit of velocity.
With the enormous success of online apparel giants such as JD, Shein, Amazon, Coupang, and VIP, the e-commerce segment of the apparel industry continues to witness unparalleled revenue and growth. While in 2020, e-commerce accounted for only 30% of clothing orders, experts project that this share will surge to more than 40% by 2025.
Where does clothing stand now?
Clothing consumption has exploded over the past 20 years. Fashion consumers buy over 80 billion new items of clothing every year, an increase of over 400% on what we consumed just two decades ago.
Overall, however, after years of steady growth, attested despite the COVID pandemic from early 2020 to mid-2022, the apparel market has been experiencing a certain recession since 2022, and is unlikely to see any real upturn by the end of 2023. Even if there are some notable exceptions in terms of sectors (sports or luxury) or geographical zones (Asia and North America), the overall apparel market is less dynamic than in the past, in terms of global revenues. The main reason for this is widespread inflation, which is pushing up the price of raw materials as well as finished products. It is also causing consumers to postpone their purchases in these lean times, in favor of more essential products rather than those designed to fill their wardrobes.
No more seasons?
Today, one of the pivotal factors shaping the apparel supply chain is the evolving nature of order seasonality, which has become progressively fluid and erratic. In the past, fashion trends adhered to well-defined seasonal cycles, revolving around changes in weather and sales periods. However, the advent of fast fashion and its proliferation of inter-seasonal collections has disrupted this traditional framework. Moreover, in our contemporary digitalized landscape, new trends can swiftly emerge and fade within mere weeks, with the amplifying influence of social networks exacerbating this phenomenon.
This accelerated and unpredictable seasonality necessitates constant adaptations in inventory management and supply chain strategies for fashion and apparel operators, as they strive to synchronize with shifts in demand and their own evolving business plans. In this article, we delve deeper into the topic of seasonality within the realm of apparel logistics.
Personalization and diversity of products and channels
Today’s apparel consumers are displaying a growing appetite for personalized and even one-of-a-kind products, alongside an array of seamless delivery and return options. This dynamic consumer landscape presents the apparel supply chain with the challenge of handling a more extensive array of product variants and a significantly accelerated product turnover rate compared to the past. Consequently, manufacturing processes, inventory management, and order fulfillment have become markedly more intricate, especially within the context of the predominantly omnichannel approach.
Need for speed
Propelled by the surge of e-commerce and bolstered by industry titans that not only embrace but also establish new benchmarks within the sector, consumer expectations for swift delivery are forcing companies to operate at an ever-accelerating pace. This palpable pressure is particularly conspicuous within warehouses, where the challenges of sustaining such velocity are exacerbated by a persistently scarce and unreliable workforce.
And it’s coming back
Although clothing purchases have surged to unprecedented levels, the incidence of returns has also experienced a significant and concerning surge. While the average return rate for all e-commerce sectors stands at 20%, the figure climbs to 25% for clothing e-commerce transactions. As a result, companies, particularly those handling returns within warehouse facilities rather than physical stores, must embrace a dynamic and agile approach to reverse logistics management. This entails efficiently processing returns and swiftly replenishing inventory for future sales while mitigating the inherent value loss associated with these operations.
Sustainability and ethics
Consumers are increasingly concerned about the environmental and social impact of their purchasing behavior, particularly when it comes to fashion. Beyond the product itself, operators must therefore manage their operations in a more sustainable way, which may require changes in packaging materials, transport methods and waste management practices, as well as product traceability.
Apparel supply chain strategy: a question of style
In the face of the numerous challenges and swift transformations within the fashion and apparel industry, there exists no one-size-fits-all supply chain model. This sector comprises a diverse array of subcategories, product families, and business models, each tailored to address distinct constraints and objectives. Below, we outline a simplified classification:
- Efficiency-Focused Supply Chains:
This category primarily deals with mass-produced standard items, distributed through straightforward channels. Such supply chains prioritize efficiency and tend to exhibit a stable and relatively unchanging structure over time. They emphasize optimization in terms of productivity and cost-effectiveness. In this context, production is large-scale, inventory levels are substantial, and the supply follows a ‘push’ logic, with operators striving to anticipate consumer demands and behaviors.
- Flexibility-Centric Supply Chains:
Contrasting with the former, this category is inhabited by apparel brands that emphasize innovation and personalization. This pertains not only to product offerings but also to the purchasing experience and the multitude of return options they provide. These supply chains prioritize flexibility as their key attribute. The challenge here lies in responding to the inherent uncertainty stemming from rapid and unpredictable shifts in consumer demand and the frequent renewal of collections. In this scenario, the volume is lower, and the supply chain strategy operates on a ‘pull’ basis, where consumers shape and influence the continually evolving design of their supply chain strategy.
Balancing efficiency and flexibility
This classification, while providing a structured framework, represents a simplified view of the complex reality faced by fashion and apparel brands. In practice, these businesses must navigate a nuanced landscape that lies between the two extremes. They are tasked with harmonizing various determinants encompassing customer preferences, product diversity, and operational processes. The desired result is a blended ‘push-pull’ supply chain strategy, striking a delicate equilibrium between efficiency (push) and flexibility (pull) that aligns with their unique business model. This strategic approach empowers them to extract maximum value.
In conclusion, confronted by the challenges of economic downturns, rapid trend seasonality, heightened product personalization, and the relentless pressure for speed and sustainability, businesses find themselves in a constant juggling act between performance and adaptability. This dynamic compels them to embrace continuous innovation. Simultaneously, the burgeoning awareness of environmental and social responsibilities necessitates a pursuit of sustainable and ethical solutions. Ultimately, supply chain strategy within the fashion and apparel sector represents a nuanced dance between various market imperatives, all aimed at maximizing value while retaining a crucial measure of adaptability in an ever-evolving landscape.
Solutions tailored to the apparel industry
At Exotec, we specialize in the design, production, and maintenance of robotic goods-to-person solutions tailored to optimize warehouses worldwide. Our expertise shines particularly bright in the realm of ready-to-wear and footwear sectors, which collectively constitute nearly 50% of our customer sites. Specifically engineered to address the unique demands of apparel warehouses, our Skypod® system delivers unparalleled performance, agility, and adaptability — qualities that are indispensable for intralogistics operators operating in this sector.
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