Visibility into factory and environmental issues is a major challenge in the year ahead

Visibility into factory and environmental issues is a major challenge in the year ahead

What are the biggest challenges facing the global apparel supply chain in 2016? Perfecting omnichannel retailing continues to be a major issue, as does the need to be faster, flexible and more efficient. There's also an increasing need for full visibility into where, how and by whom products are produced.

Paul Magel, president, Applications and Technology Outsourcing, CGS:
The fast-evolving demands of omnichannel retail and supply chain operations have amplified the need to accelerate time to market, eliminate waste and errors, and reduce operational and product costs. This need has been echoed by consumer expectation for a more convenient and rewarding shopping experience, as well as greater product innovation across all sales channels.

Because of these demands and expectations, global apparel organisations are challenged to achieve more-effective planning and inventory management capabilities in an effort to meet changing business models and distribution strategies, such as business to consumer (B2C) direct-ship programmes. And, as the fashion and apparel world continues to move at a quicker pace, there will be a requirement for more-effective integrated analytics and actionable intelligence capabilities for better and timelier strategic business decisions.

In 2016, the global apparel supply chain will also be challenged with meeting growing compliance standards. This includes government regulation, social accountability, ethical sourcing, environmental practices, safety and fair pay practices, and supply chain partner requirements. To ensure compliance with delivery and customer service requirements, many companies have embraced electronic data interchange (EDI) as the standard for sharing information with customers, suppliers and other business partners.

Kurt Cavano, founder and chief strategy officer, GT Nexus:
Mastering omnichannel: Perfecting omnichannel retailing continues to haunt many retailers despite the huge efforts to make things work on the front end. There's no point in providing your customers with a click-and-collect option if you don't know where your inventory resides to fulfil the order. Most retailers continue to have siloed inventory based on channel, and until inventory fulfilment becomes as seamless and fluid as the customers' ability to shop, then omnichannel will continue to be an unsolved mystery in 2016.

Sustainability: Sustainability continues to be a hot topic and now we're observing even larger conversations around environmental impact from the apparel industry. Recently, at the COP21 climate conference in Paris, apparel was called out as one of the most hazardous industries for environmental impact. China was sanctioned for the high level of pollution it created in manufacturing, and companies were asked to reconsider the high carbon footprint associated with wasteful manufacturing practices. Moving forward into 2016, we will see more retailers joining the RE100, a pledge signed by Nike, Walmart and H&M to switch to completely renewable electricity.

Dealing with disruption – economic, political, environmental: As China's labour market dwindles, 2016 may have retailers moving manufacturing to other regions in Asia. It's inevitable and something retailers need to consider in terms of their supply chain capability and sourcing needs. With the introduction of the Trans-Pacific Partnership (TPP), 2016 promises more options for sourcing, which can be highly beneficial to companies who can prove provenance in manufacturing.

Mark Burstein, president of sales, marketing and R&D, NGC Software:
Business silos in the apparel supply chain are a big barrier to operational performance and profitability. It's an omnichannel world, yet retailers and brands have made surprisingly little progress in connecting the silos of information in their organisations. A recent study by Pricewaterhouse Coopers found that only 18% of the world's leading companies have removed operational silos in their organisations. Not surprisingly, those companies are significantly more profitable and competitive than the rest.

As the report noted: "Companies that want to successfully compete with these leaders…must not only remove the business silos that prevent seamless operations, but also rapidly increase their investments in omnichannel capabilities before they fall further behind the omnichannel leaders. These actions will define retail winners and losers going forward."

Real-time visibility across apparel supply chains is a big part of this. By removing the silos in their organisations, retailers and brands can help ensure that development and production deadlines are met and products arrive on time – ensuring they have the right products to meet customer demand in every channel. They can also ensure that products comply with all governmental and social regulations, are produced under safe working conditions, and meet or exceed quality standards. You can't do this with siloed operations.

Andrew Brown, group managing director, Fast React Systems Limited:
As we talk to buyers and suppliers alike, speed to market and cost efficiency continue to top the agenda, but the effects are more pronounced year on year. As buffers on margins and lead times reduce and compliance tightens, decisions need to be made based on much more specific 'actual' data, not assumed 'averages', such as 'x' days for sampling or sourcing materials and 'y' days for production.

For buyers, this involves being able to predict demand more accurately, with greater granularity (weekly rather than monthly in most cases) and considering different lead-time programmes. We see numerous buyers investing very heavily to improve their forecasting and demand management capabilities.

To support improved speed to market, it's then necessary to understand the impact of that demand on the supply base, working more strategically with suppliers to coordinate at all stages of the process (design and product development, production capacity, materials availability and order status tracking). With less time available, there is an increasing understanding of the importance of being able to respond to change and adapt quickly, then prioritise the huge number of supply chain activities to ensure 'on time' production start and delivery.

Where suppliers are dealing with multiple, different lead-times, their systems must be able to quickly prioritise and coordinate for them. Assumed priorities based on average lead-times and simply driven around the delivery date will not suffice. Priorities need to be driven by launch date and production start, much more accurately and must also be responsive to changes. Critical path management, which for so long has been the thread tying the supply chain together, is now more important than ever.

Speed and rapid replenishment programmes demand a different approach and the industry still has some way to go to adapt to this huge change.

Céline Choussy-Bedouet, CMO, Lectra:
Consumer behaviour is a catalyst for change in this industry. In a market where the consumer sets the pace and the instant availability of information is a way of life, fast has become even faster. Retailers and brands alike are fighting to make themselves seen and heard in the marketplace. Standing out from the crowd requires seamless and consistent omnichannel presence and the introduction of innovative new product on a frequent and regular basis. This calls for an increasingly agile supply chain, capable of co-developing product with 3D technology and lean-enabled production organisations capable of changing gears in a heartbeat to deliver consistent quality product when and where it is required at the right price.

Product costs, notably in China, continue to rise. As fashion companies scramble to find new sourcing regions, trade legislation such as the Trans-Pacific Partnership (TPP) in Southeast Asia and the African Growth and Opportunity Act (AGOA) in sub-Saharan Africa are making headlines. New sourcing models are emerging as production is shifting and fashion companies either develop strategic partnerships or multiply supplying regions to optimise costs from end to end. To best orchestrate the implementation of these new and innovative sourcing models requires integration, coordination and the ultra-rapid communication of enormous quantities of data.

Susan Olivier, vice president, Consumer Goods & Retail industry, Dassault Systèmes:
The biggest challenge in today's apparel industry is not about fine-tuning the existing supply chain processes but responding to the changing nature of the digital consumer. Consumers are still demanding product innovation in the areas of materials and performance characteristics. And the industry remains fast-moving and cost-sensitive, releasing products at record speed. Consumers also continue to shop in more channels and expect more product information and more delivery options.

But consumers also expect a different level of engagement with their favourite brands and retailers in the areas of personalisation and customisation – something increasingly enabled by technology with 3D designs, photo-realistic simulation, configurable options and additive manufacturing. This has the potential to radically change the whole meaning of 'supply chain,' supporting a more direct, satisfying and profitable relationship between creators (designers and brands) and the consumers. It is time for all apparel companies to focus on intelligent planning for digital and virtual experiences that will lead to superior services and sales.

Bill Brewster, vice president, general manager, Enterprise Software Solutions, Gerber Technology:
Challenges that the global apparel industry supply chain face are many in the coming year. They will face continued geo-political unrest in parts of Europe, Middle-East and North Africa that will require monitoring and agility in order to maintain consistent supply of goods to the global marketplace. They will also face increasing labour costs, in China for instance, that will drive supply chain and sourcing teams to look for potential new sources of manufacturing in other areas of APAC, such as Vietnam, Cambodia and Bangladesh. All of this is happening in support of a global apparel market that is continuously looking to reduce time to market and product costs to support, and benefit from increasingly changing trends and omnichannel retail, which puts more demands on the supply chain. 

Bob McKee, global fashion industry strategy director, Infor:
Omnichannel: The challenge du jour is still handling omnichannel. This covers a lot of specifics: there is increasing complexity, a need for greater speed, smaller order volumes, more frequent orders, faster delivery and better fulfilment rates, combined with an ever more influential consumer, a demand for greater variety leading to more made-to-measure goods and, of course, the ongoing burden of compliance and ethics.

Cost pressures also remain, and costs are increasing in traditional sourcing destinations.

Technology: From a technological perspective there are two main changes in the offing. Firstly, Digital Transformation – digital is no longer an ecommerce site. It's the complete way a business portrays the brand, interacts with customers and manges a global value chain network. Secondly there are the opportunities of more information – both global value chain inventory and management information can now enable faster and better decision-making and businesses need to address this opportunity.

Sander Schoneveld, managing director, K3 Software Solutions:
Challenges facing the global apparel industry include:

  • Attracting consumers into stores;
  • Full price check-out;
  • Achieving a true omnichannel environment with a single look and feel experience for the consumer.

Challenges from a supply chain perspective:

  • Cost and cost reduction;
  • Speed: faster, faster, faster;
  • Quality that meets expectations.

When looking at the challenges ahead, 2016 is no different then 2015. Yet the pressure on mid-market brands is at an all-time high, with a diminishing retail environment (city centres with a growing number of empty stores), constant sales, and pressure from low-priced retail chains. Retailers like Zara and H&M are able to pick up trends at a very late stage and create collections in weeks, where wholesale brands still need months to bring trends from catwalk to store. Pressure to be faster puts pressure on costs and quality.

Christophe Therrey, EMEA sales and marketing director, Centric Software:
China: Today, China is by far the largest producer of all goods that we consume. It also has such a huge manufacturing capacity, along with the required workforce, that makes it a formidable market from which to buy. The ever-growing Chinese domestic demand for the same type of products that we have been buying from China has prompted many manufacturers to carve off production in their factories to serve the Chinese market needs. We find ourselves competing with the Chinese domestic market for production space – a very new competitor for which we have no insight and much less control over.

Shorter collection calendar: Getting on-trend products onto shelves and into online catalogues before their lustre fades has become one of the fashion industry's primary measures of success. This isn't to suggest that fit, quality and branding are unimportant, but rather that the right product isn't necessarily the best one – it's the best that's available right now. Most of the industry's efforts to whittle down the duration of their product lifecycles have focused on achieving greater efficiency within the confines of a long-established and almost universally-used model.

Compression margins: The more recent and current environment of stagnant economic growth has manifested itself in the difficulty of raising consumer prices at retail while, at the same time, leading to increases in cost and operating expenses. The response has often been to cut margin. Needless to say, margin compression is not sustainable over longer periods of time and puts financial strain on organisations.

Compliance: Finally, in the fashion industry we face many rules and regulations; it has become increasingly challenging to understand and address compliance rules and to mitigate the risk of being non-compliant. 

Guido Brackelsberg, managing director, Setlog:
The biggest challenge facing the global apparel supply chain in 2016 is transparency.

Transparency is needed on all levels of your supply chain. It starts with the production process. Most brands know their suppliers, but the other tiers, from factories down to the raw material suppliers and mills, are black boxes. The customer, however, wants to know where the clothes he buys are coming from and under which circumstances they are produced. This information is not only needed concerning social aspects, but also related to environmental and toxicological ones.

Additionally, the entire sourcing, manufacturing and transportation process needs transparency. In times of fast fashion, it is essential to know at all times what stage of the process your product is at – and to be able to react to any problems and delays before it is too late.

Peter Needle, CEO and co-founder, Segura Systems:
Ethical concerns will present a significant challenge to apparel businesses in 2016. Increasing awareness, largely driven by the introduction of the UK's Modern Slavery Act, has meant that brands have been hitting the headlines for the wrong reasons almost every week so far this year. And as more businesses publish their modern slavery statements, the spotlight on these issues is likely to become even brighter.

In fact reports suggest that most of the statements issued so far don't actually comply with the new legislation. Clearly many businesses are unable or unsure how to meet the requirements, which could leave them liable for prosecution. Additionally, many businesses will also need to be familiar with the requirements of international legislation, such as the California Transparency in Supply Chains Act, making the situation quite complex.

Apparel brands have a limited amount of time to address both the statement itself and the wider problem of ensuring an ethical supply chain. As reported recently on just-style, modern slavery (and the lack of supply chain visibility that allows unethical practices to go unnoticed) poses one of the biggest risks to brands' reputations in 2016.

Click on the following links to read other reports in this management briefing:

Apparel software trends 2016 – Tools to tackle the issues

Apparel software trends 2016 – Where to focus future spend

Apparel software trends 2016 – What else to watch?