Craig Ryder, Director of Go Supply Chain Consulting Limited, considers the recent growth of the UK fashion industry, and the challenges this presents to supply chain and logistics operations
The fashion industry is fast-paced and highly globalized, with clothing designed in one country, raw materials sourced from another, manufactured in yet another, and despatched to customers in any number of other countries. This is the “logistics of fast fashion”.
The direct value of the UK fashion industry to the UK economy is around £26 billion and growing fast. Fashion’s total contribution to the economy is much more including support for related industries across its supply chain. It is estimated that the sector supports 797,000 jobs.
Efficient logistics and transport services have been essential to the success of the industry leaders such as H&M, Zara, Nordstrom and Jacques Vert. Such companies are facing a common challenge of how to manage distribution within a complex and rapidly evolving multi-sales channel environment. There is much debate about the best strategy for fulfilment and distribution. Is it a single distribution centre or should it be a decentralised multi-channel distribution platform?
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WHAT THE CUSTOMER WANTS
Today, a typical fashionista has high expectations. She wants services such as click-and-collect; mail order; a wider range of online offerings; free delivery; free returns through any channel; and a mobile-friendly website. Apparel manufacturers are experiencing difficulties having to distribute seasonal merchandise with short cycles to fussy consumers in many ways.
THE CHANGING ENVIRONMENT
The formula for success in this industry was always to give the customers what they wanted: trendy garments at the right price, of acceptable quality, in an attractive store setting with helpful salespeople. The only challenge was to get the goods to the shops on time.
The sales environment today is very different and much more complex. New alternatives to high street shops are on-line e-commerce websites that are easily accessible via social media and mobile technology. Companies need the flexibility to fill orders and manage inventory while satisfying customer needs across the many sales channels.
CHALLENGES FOR THE FASHION INDUSTRY
Gartner, a leading research and advisory firm, has found that executing on multi-channel inventory strategies can be a challenge for apparel retailers that do not possess the necessary resources or technology.
“In many cases, the infrastructure to support cross-channel inventory isn’t there”, says Jessica O’Brien of Gartner. She says that retailers may not have the necessary inventory visibility or multi-channel order management systems to support it.
Their studies show that sometimes companies have multiple warehouse management systems that aren’t operating together to allow inventory to flow through their network. “Companies that have flexibility to move inventory around can gain a large advantage,” explains O’Brien.
Some organizations are getting it right. Nordstrom, the US-based up-market fashion retailer is a leading light in responsiveness to customers. In Europe, the Jacques Vert Group has developed a technology platform that can flex and grow with the company, allowing it to add new channels and new markets whenever opportunities arise. The apparel marketplace is evolving and re-inventing itself regularly. New sales channels are popping up which require companies to continually evaluate and remodel their logistics and transportation networks.
Returns are a headache for apparel retailers in the new multi-channel world. Reverse logistics is complicated, customers who bought a garment via one channel may want to return it through a different channel. Cross-channel returns present interesting problems for both inventory and transport. Keeping the customer happy in this scenario is critical.
SOME SUCCESS STORIES
YOOX, an Amazon-type operation based in Italy, powers the e-commerce backend of 37 leading luxury goods brands, from Armani through to Zegna. It handles the logistics, picking, packing, shipping, customs, returns and customer service. One of the reasons for its success is its database of up-to-the-minute information on customer preferences, whims and fancies.
Inditex,the Spanish-based group whose leading brand is ZARA, is a world leader in the distribution of fashion. It centralises the distribution of its products using a hub in Zaragoza. Without efficient logistics and sufficiently fast transport, the company could not enjoy short lead times and be present in economically and geographically disparate markets, continuously renewing the offerings available in its shops in 88 countries.
Research recently completed for SDI by the Peerless Research Group shows that many leading fashion retailers embrace the concept of performing multi-channel distribution within a single facility with a single information system. This has the objective of dramatically reducing labour costs in the e-commerce distribution channel.
ASOS.com, the UK online fashion and beauty retailer, has decentralised its supply chain. It opened a 200,000 sq ft European hub in Berlin last year and is doubling its size shortly. They decided to bring forward the expansion of their global logistics network due to reaching their £1bn sales target a year early.
TIPS FROM THE LOGISTICS INDUSTRY
DHL says that lead times, accuracy, availability and reliability are all of critical importance as well as keeping up with the whims of consumers. They reckon the biggest business issues and challenges among the fashion retail industry include the dramatic growth in sourcing from emerging markets. This shift, combined with the need for “speed to market” is requiring adaptation of supply chain processes.
FEDEX offers some guidance on exporting challenges. They say that there is no such thing as a “one size fits all” strategy when looking to enter multiple overseas markets. Make global decisions one at a time. They also advise companies to do in-depth research on new markets and particularly take notice of customs challenges that can derail any shipment.
There is no doubt that today’s apparel retailers need to optimize their supply chains to keep up with the rapidly evolving world of the multi-channel retail marketplace. Commercial success or failure is largely determined by the organization’s flexibility and responsiveness. This may entail any or all of these: changing inventory strategies, tweaking transportation management, implementing new technologies or revamping logistics.
Craig Ryder is a Director of Go Supply Chain Consulting, a specialist in optimising logistics in fashion supply chains.