Optimizing the Fashion Supply Chain

The debate in fashion over inventory as an asset or a liability may never see an end. Only a few years ago, the CEO of one the largest fashion retailers in the United States said, “I’d rather lose sales than carry (risky) inventory.”

What an incredible statement. The head of a major retailer willing to lose sales before taking a risk on inventory – which frankly seems to be pretty fundamental to the traditional retail model.

It’s often said, “You can’t sell what you don’t have” – but you also can’t sell what consumers don’t want.

The answer to the inventory challenge is not whether or not it’s an asset or liability. The reality is that you can’t be in retail if you have no inventory. The secret is to move from the current western fashion model of design, source, sell, to an emerging model of design, sell, source. A model that shares the inventory commitment throughout the value chain – and the key to success lies in the ability to deliver from the closest point in the value chain to the purchaser.

In today’s omni-channel sales and distribution environment, those organizations that have most fully embraced this model only commit to inventory as it’s sold to the end consumer. The biggest inventory commitment they hold is shipping bags, boxes, and literature – all stored at various producer locations or intermediate shipping consolidation points.

The fashion industry is fueled by change, and in today’s market where trends are short-lived and consumers are fickle, apparel organizations have two choices: keep up with consumer demands or throw in the towel. Inexpensive prices, combined with the omni-channel assault, add in social networking and you have now put the power to dictate the market into the hands of the consumer.

The entire value chain focus has to be shifted, from cutting production costs to meeting the consumer requirements. No matter how full a store’s shelves may be, profits are only achieved once an item is in the consumer’s hands – or better yet – in their closet. One way to ensure that the items consumers want to buy are available when they want them is to develop methods for intelligent segmentation of products that allow manufacturers to fast-track trendy items that need to hit the shelves quickly, and develop strong replenishment logic, processes, and systems that cut costs by using more efficient processes for basic products that their stores always carry, and only refresh on a periodic basis.

Once products have been segmented, companies can determine the quantities of each item to produce at a time based on demand forecasting. All this has to be supported by linking a lean retail environment to a lean supply network – a network that can replenish required inventories as they are needed. Consumer demand is the key – let it lead the way. Design, develop, and engineer products for efficient manufacturing. Listen to the consumer and collaborate with the supply chain.

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