Digitalisation offers a solution to some of the challenges facing the global apparel industry – but as Spencer Fung, group CEO of Li & Fung explains, the goalposts are constantly evolving.

The fashion industry largely relies on globally dispersed multi-tiered labour-intensive supply chains that struggle to keep up with the need for speed, responsiveness and sustainability demanded by today’s consumers.

But while digitalisation offers a solution to some of the challenges, the apparel industry “is more looking towards digitalisation, they are being disrupted, but for the most part we are not ready yet,” Spencer told delegates at the recent Copenhagen Fashion Summit.

“We all realise this now, but it is a massive change for any organisation and it will take time. But like any transformation and change you start small, you move fast and you try to reach your tipping point. I believe definitely we will reach the tipping point, hopefully sooner rather than later, but it’ll take some time. It’s all about changing mindset and that’s human behaviour, so it’s not easy.”

Changing landscape

Tapping into a network that includes 15,000 suppliers in around 60 countries around the world, and with 8,000 customers in 100 countries, Hong Kong based Li & Fung has had a key role in shaping the global supply chain.

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“As production started moving all over the world, we were one of the beneficiaries and orchestrators of that movement,” Fung explains. “When I took over as CEO a couple of years back, the world was really changing faster than ever. As a result, we believe any company, including ourselves, must innovate or die.”

Li & Fung embarked on its latest journey last year, setting out to create ‘the supply chain of the future,’ “because we believe that what we were doing at the time was probably not the future.

“The future we know is going to be ten-times faster, it’s going to be fully digitalised and has to be innovative. You cannot stay constant and do the same thing over and over again. So that’s why we set out on a journey to really disrupt ourselves and at the same time disrupt the whole global supply chain.”

“We took a shot at the moon-type of approach and said, ‘if the world is going to be out there in five years time, why don’t we shoot for that and try to get there as soon as possible?'”

But “when we set out on this journey we had no idea,” Fung now admits. “Basically we took a shot at the moon-type of approach and said, ‘if the world is going to be out there in five years time, why don’t we shoot for that and try to get there as soon as possible?'”

Fifteen months down the line, and the company has a much better of idea of what it needs to do. “We’ve seen the different shades of grey within the digitised world because it used to be black and white. We were the old world and we wanted to be the new world.”

Tracking the entire supply chain end-to-end from idea generation to the cotton fields, to manufacturers, to quality inspection, compliance, logistics, all the way to the consumer, Li & Fung is now picking “different spots” to digitalise that will have the most impact on the company its customers and suppliers.

A faster future

A current focus is on tools such as 3D virtual design, which Fung says can improve the speed at which product reaches the consumer by several months. “For a retailer and a brand, being able to postpone your decision on fashion by 3-6 months is a huge win.”

At a factory level, the big vendors are putting [wireless] “sensors throughout the entire production process,” to transfer data to other devices – thus moving towards the Internet of Things (IoT).

But for smaller factories and vendors, the search is on for solutions that are “low cost and easy to deploy,” giving them IoT-like capabilities so they can trace everything within production, increase efficiency, reduce waste and improve transparency and traceability.

Partnerships can also help some factories automate, such as the new agreement with US robotics firm Softwear Automation to create a fully-digital T-shirt supply chain.

Fundamental change

When companies can delay decisions on what they buy, “they’ll buy the right things and that reduces their mark-down, it reduces inventory.

One of the benefits of faster apparel supply chains is the ability to delay buying decisions, and when companies can delay decisions on what they buy, “they’ll buy the right things and that reduces their mark-down, it reduces inventory.

“There is no way I can predict what a consumer will want 40 weeks from now because trends are changing so fast.” But even Li & Fung’s initial goal of reducing this down to 20 or 16 weeks, is “not fast enough because consumers are changing their tastes almost every day.”

Another benefit of reducing inventory, is the impact on sustainability. “The world is producing a lot of stuff, and a lot of that is not needed and has to be marked down.”

Technology, along with store, website and smartphone interfaces with the consumer, are is also moving the transparency agenda. Consumers are now able to access much more information about their garments, such as how much they cost, where they come from, “and soon they will likely be able to trace back to source by using technology and digitising different parts of the supply chain.”

The flip side to this is the social impact, particularly job losses in manufacturing as companies become more efficient, more digitised and more automated.

But Fung is optimistic. “Looking at the past industrial revolutions and technological advances, there will be a creation of new types of jobs. But there may be a lag. It could be a five-year lag or it could be a 30-year lag.”

The sourcing giant has developed a mobile app to help workers in its supply chain utilise technology. “If, for example, 5m workers download that app we can start training them for things that are relevant today, on the job, or for things that are relevant for the future when they’re out of a job by re-skilling them.”

He returns, however, to what he deems the most fundamental change the industry needs to be prepared for: mindset.

“Right now what we’re trying to do as a company is to change our mindset to be prepared for the future world. Most of us are not ready. A lot of us want to do it, but we’re not ready. We set goalposts for ourselves a year ago, but those goalposts keep changing because of new information, new technology, new forces in the world in industry,” he explains.

“A constantly changing mindset for the entire industry is the biggest thing we have to work on. Once we change the mindset then we can skate towards the future possibility as soon as possible. At the moment we are still thinking in a very linear way; we have to be exponential.”