How to Manage Cashflow in an Inventory-Intensive Fashion Industry
6 March 2015 | Source: Infor
Time and time again a familiar scenario plays out across the apparel industry: Retailers and brands push more new products to consumers across multiple channels and different geographic regions in the hope of striking a sale - yet increasingly volatile and unpredictable demand means they often have to turn to markdowns and other promotions to shift high levels of unsold stock.
This all-too-common problem of rising inventories, falling sales and aggressive discounts erodes both merchandise margins and profitability. After all, it is a basic but often overlooked fact that every markdown to make a sale is less profit. But less well documented is that bloated inventories increase costs, trap capital and hamper cash flow at every step along the supply chain.
Indeed, some estimates suggest there is US$3 trillion of inventory tied up worldwide in the fashion supply chain and at retail.