Original Post on APICS.org
Apparel supply chains used to be known for producing high-fashion designs with slow response times. Designers and retailers forecast demand a year in advance and tailored their releases by season. As consumer trends have swung toward demanding low prices and fast response times, the apparel industry has shifted dramatically. Today, many businesses are trying to satisfy consumers who expect the products they want to be available right now. And for the most part, companies are succeeding in this endeavor.
This newest phase of the apparel supply chain life cycle is called fast fashion, which recognizes attempts to provide the latest styles quickly and at low prices. Because prices are so low, consumers are less concerned about how long the product will last. Instead, they are willing to make impulse buys and continuously purchase new items to keep up with the latest trends. Companies therefore are shortening the length of the fashion cycle and integrating sustainable innovation into the core product design and manufacturing process (Amed et al. 2016). The companies most cited as being in the forefront of fast fashion are Inditex, parent of Zara; H&M; Forever 21; and Primark. A study by Bloomberg Businessweek reports that Zara grew sales by 240 percent and H&M sales jumped 180 percent between 2004 and 2015 (Baker 2016). By comparison, Gap, which has a more traditional fashion supply chain, experienced level sales during the same period.
It’s interesting to think about early apparel supply chains and how far this industry has come. Hundreds of years ago, materials were sourced from local shepherds, designs were simple, and clothing was created for function instead of fashion and often handed down from generation to generation. Improving economic conditions helped that industry grow from a local to a regional one, encompassing consumers in neighboring communities or within the same country. Materials started being sourced from larger ranchers, and designers focused on high-fashion dresses that were modeled in exclusive fashion shows and sold as unique pieces to the rich and famous. To make the designs available to the public, regional manufacturers created imitation items. This also lured consumers into retail establishments, creating a more formalized business process. Still, most participants in this supply chain were within the same region, so response time was not a critical issue.
Designers soon found that there was a huge market in clothing and began to develop their own brands. Styles were scheduled to fit the seasons, so designers and retailers had to plan a year in advance. The apparel usually was sold through department stores, although a few designers established their own retail outlets. However, as more brands flooded the market, apparel companies learned that they needed to keep their prices low in order to stay competitive. As a result, supply chains expanded as companies outsourced to countries with lower labor costs, especially China.
In addition to competing on price, retailers found that response time became a competitive advantage. Those trying to operate on the four-season schedule had difficulty forecasting types and amounts of individual styles, sizes, colors and brands. Consequently, these businesses usually ended up with excess inventory that had to be sold at even lower prices or eventually scrapped. This gave rise to the fast-fashion model, which focuses on more-frequent releases of low-cost apparel throughout the year that deliver on consumer product interests. However, this shift stretched supply chains even further as apparel companies worked to keep up with the new requirements of quickly changing styles, continued lower costs and faster deliveries while juggling emerging environmental and working-conditions concerns. Zara, for instance, hires local and regional suppliers to fulfill time-sensitive orders and uses remote, low-cost suppliers for its evergreen products (Kowsmann 2016).
Fast fashion also has integrated the roles of design and manufacturing. Designers have to not only create the items but also consider how they can be manufactured and how these processes will affect the supply chain (Khan, Christopher and Creazza 2012). Again, Zara is the generally acknowledged leader in responding to design changes. Its designers work with the company’s production and logistics teams to review daily data feeds from retail stores. This feedback, along with comments from customers, store managers and country directors, help the design team decide what products to make (Baker 2016).
Supply chain implications
What does all of this mean for supply chain managers? First, there is increased pressure to establish and maintain supply chains that can deliver quality, low-cost goods quickly and efficiently. At the same time, they must be agile enough to change as market conditions change. Successful supply chains must be tightly integrated in order to be transparent to all participants, from the various tiers of suppliers to consumers. This level of integration demands a level of collaboration not found in many of today’s supply chains. It requires
- systems and processes linked together to enable complete and rapid flow of information
- policies and procedures that are clearly issued, understood and followed
- consistent and fair transactions
- technology that is appropriately matched to the functions being performed
- a clearly recognized leader — whether a retailer, a manufacturer, a third-party logistics professional or even a broker who coordinates all of the steps in the supply chain
- the ability to ensure the flow of goods while maintaining the smooth transitions among supply chain members.
In addition, the use of low-cost labor and the short life cycles of products have created corporate social responsibility challenges for supply chain professionals. As buyers discover the working conditions in some supplier organizations, this increases awareness about employee pay and safety. Concerned consumers expect companies to source from suppliers that support workers’ rights while offering low-cost products.
Similarly, supply chain managers must consider the end of their products’ life cycles. The flood of clothes being sold is overwhelming the reverse supply chain. About 10.5 million tons of clothes end up in American landfills each year because resale shops can only handle about 20 percent of the clothes being discarded (Bain 2015). This creates environmental waste that eventually will have to be addressed.
Fast fashion still is an emerging model in the apparel industry, but it quickly is becoming a concern for department stores and other large retailers, which are rapidly losing apparel consumers to these fast-fashion leaders. To be most effective in the future, apparel companies must consider both the market demand and the supply chain. This will enable the industry to keep up with consumer style preferences, appropriate response times and price points, and social and environmental implications created by an evolving market.