just-style management briefing: Fast fashion shifts supply chain focus
Global manufacturing and supply chains are shifting and changing in response to fast fashion's demand for up-to-the-minute styles and trends at relatively low prices.
Manufacturers and suppliers in the fashion production chain used to have a fairly cut and dry job: procure a certain amount of fabrics and materials at the beginning of the season to be manufactured into a predetermined number of apparel items in specific styles, colours and sizes.
The fast fashion supply chain, however, requires much more flexibility: with a business strategy of providing up-to-the-minute styles and trends to consumers at relatively low prices, it is no longer viable for companies to make decisions years - or even months - ahead of time.
As companies increasingly transition from a traditional, production-driven supply chain to a more market-driven one, much re-thinking and re-working has happened on the manufacturing side of things, in order to meet new, speed to market demands.
Warren Hausman, professor of management science and engineering at California's Stanford University, says that in general, fast fashion supply chains are more complex than traditional apparel retail chains - and their overall operations can be explained through 'postponement strategy', namely transforming a product into its final form at the latest time possible.
Delaying the final product, of course, allows companies to tailor garments as closely as possible to rapidly shifting demands in the fashion marketplace. Postponement strategies have the capacity to dramatically reduce manufacturing and delivery lead times from months to days.
Dual supply chains
For most retailers and brands, for instance, development calendars from concept to consumer average 52 weeks or more, but today's competitive supply chain must have options for 26-week deployment and "fast track" capabilities of 13 weeks, according to John Thorbeck, chairman of American firm Chainge Capital, which builds speed-to-market analytics for the retail supply chain.
Felipe Caro, an assistant professor at the UCLA Anderson School of Management in the US, adds that each category of fast fashion product almost needs to have its own supply chain, too. 'Basics' for example - the generally lower-cost, staple offerings of a retailer - have more stability in terms of demand.
"You know people are always going to want jeans, for example, so you can postpone [decisions] in this area," he explains. So manufacturers can have the denim all set to go - or even the basic prototype of the jeans already made - and then at the last minute they can choose to add details, make a slimmer leg, or make other style adjustments to match the taste of the moment.
On the other end, for more 'fashionable' items, Caro says, the only way to have flexibility is by having shorter lead times - otherwise, the garment will no longer be trendy by the time it arrives in stores.
Zara, for instance, has sort of a dual supply chain - one for the more 'fashionable items' (where the company tries to leverage local production to shorten lead times) and one for the basics (where cost is the most important factor, and thus, they might produce most of these items in Asia, for instance, with longer shipping times.
Lectra's fashion marketing director Anastasia Charbin agrees that dual sourcing strategies often focus on "China plus one" and are "definitely turned toward risk management" for apparel companies.
"With the high volatility of raw material prices and exchange rates, higher labour costs in Asia and the rise in transportation costs, apparel companies are more likely to have a second supplier for some of their products.
"This is certainly truer for their high fashion product - for which having the right product at the right time on your shelves is key - than for the basics. Long term relationships are still very important though. Spreading them out over a diverse geography can provide some protection from unpredictable world events and allow flexibility when assigning or changing production ratios."
Vertica Bharwaj, from the University of Texas at Austin's department of textiles and apparel, says that most fast fashion retailers fall under one of two models in terms of their supply chains.
There is the 'fully vertically integrated' model (where the retailer controls all parts of design, manufacturing, and distribution procedures) or the 'house branded' model (where the retailer supervises the design and/or manufacturing processes through the use of subcontractors).
Depending on the size of the fast fashion retailer, says Bharwaj, either of the two can be considered feasible. However, as retailers increase their market presence by adding numbers of stores, they tend to move from a fully vertically integrated model to more of a house branded model.
"In that case, retailers source fabrics and accessories in small batches from closer distances, and have in-house capital intensive operations - like computer aided fabric spreaders and cutters - while the labour intensive operations, such as sewing and finishing operations, are assigned to local subcontractors and seamstress cooperatives," she says.
Talking of technology, Lectra's Charbin agrees that while investments in this area support speed and flexibility, it's also important that the technology is accompanied by a process improvement, whether that is better communication or information sharing or accelerated decision making.
"For example, a professional textile design tool that produces extremely realistic simulations can help the decision making process by eliminating the need for a strike off or blanket. Another great example is all-size fit checking made possible by 3D prototyping technology, which cuts down on back and forth modifications with suppliers while increasing the amount of information available for decision making."
On a broader scale, a centralized workflow can help reduce waiting time during the development process. All of these and many more technology investments are worth the effort when part of comprehensive change.
While outsourcing manufacturing and supply from lower-cost countries has been a staple of the apparel industry for a long time, the idea behind fast fashion - trendy, frequently replenished clothing at low costs - often poses a dilemma for fast fashion companies: do you outsource manufacturing abroad for lower production costs (but face long transport times and less direct control over production) or keep manufacturing nearby, to facilitate speed-to-market, but pay more for labour.
"Do you just care about cost? Or do you care about time to market? This goes back to what a company's strategy is," says Caro.
Other considerations such as currency fluctuation and geopolitical instabilities, for example, mean a more volatile economic context and, as Lectra's Charbin points out: "It's not necessarily wise to put all your eggs in one basket anymore."
Achim Berg, a consultant at McKinsey & Company in Germany, adds that in order to strengthen the supply chain, sourcing and manufacturing should not always be a question of proximity, but rather, where is the best place to produce a particular item?
"Companies tend to go back to their comfort zones [for sourcing and manufacturing]...instead, apparel brands need to be looking at a more category-by-category perspective," Berg notes. "If a company wants to make cotton dresses, they need to look at sourcing from places that are big cotton producers, have efficient fabric mills and offer low cost sewing capabilities - like Egypt or Vietnam."
Bart MacCarthy, professor of operations management at Nottingham University Business School in the UK agrees. "You don't go to a producing region just because it's cheap - they've got to have the capabilities you're after."
Furthermore, he says, because of pressures on labour costs everywhere, the era of "very cheap clothing" is - for the most part - over. Pressures on raw material costs, rising transport costs and higher energy costs are also affecting the low price aspect of fast fashion.
With this, as fast fashion companies continue expanding internationally, they are increasingly facing the challenge of dealing with global sourcing - if they want to maintain short lead times.
"When H&M was largely based in Europe, they were able to source most of their goods in eastern Europe and Turkey; when Zara was largely European based, they were able to source goods primarily in southern Europe and northern Africa; and when Uniqlo was only based in Japan, they were able to source from China," says Thorbeck.
"All of these retailers are now globalising, and have similar lead time problems."
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