The apparel consumer and retail landscape is evolving like never before.
Increasingly savvy and demanding consumers are significantly changing how, when and where they shop. E-commerce is continuing to soar, driven by disruptive business models from the likes of online-only retailers including Amazon and ASOS. These new entrants have also heightened consumer expectations, providing increasing levels of choice, innovation, availability and customisation while simultaneously meeting demands around quality, price competitiveness and ethical sourcing.
In a fiercely competitive sector, these changes have had a profound effect on brands and their supply chain partners, who have started to respond in different ways and with varying degrees of complexity and urgency to address the new challenges they are now confronted with.
In a rapidly changing environment, brands and manufacturers need to address a range of complex and interconnected challenges relating to:
- Speed
- Cost
- Order complexity
- Innovation
- Transparency
Some businesses have continued in their ‘pursuit of the cheap needle’ in developing markets. However this comes with its own set of resource, capacity, compliance and infrastructure challenges. Other businesses have moved towards increased vertical integration or joint venture activities. And others still have responded by progressing initiatives around vendor-managed inventory, sourcing proximity and on-shoring.
While all of these responses will undoubtedly help mitigate these changes, what is needed is a paradigm shift in how brands and manufacturers operate, particularly in their approach to sourcing and product development. A key catalyst for the transformation of apparel brands and their supply chain partners lies in the adoption of digital technology.
A recent report by McKinsey compellingly summarises the potential of digitisation for the industry:
Digitisation could enable apparel companies to achieve a step change in performance, transform to a customer-centric operating model, and create transparency throughout their global supply chains. Digitisation will be the next sourcing country.
McKinsey Apparel CPO Survey 2017, ‘The apparel sourcing caravan’s next stop: Digitisation’, McKinsey Apparel, Fashion & Luxury Group, September 2017
The potential of digitisation is still far from being realised
There have been some positive signs that the industry is realising the urgency and associated benefits of going digital. The adoption of established and proven sourcing, planning and product development solutions is increasing, as is the activity with emerging technologies such as 3D Design and Printing, Automation & Robotics, RFID, Big Data, and AI.
The reality however is that the apparel industry is at a very early stage of its digitisation journey. Despite an increase in complexity and manufacturing costs, coupled with a dramatic reduction in lead times, a majority of brands and manufacturers are still relying on manual processes and disconnected systems to run their businesses. In the same report by McKinsey, two-thirds of the apparel Chief Purchasing Officers surveyed, who together are responsible for a total sourcing value of USD 137 billion, rated their digitisation maturity – and that of their suppliers – as low or very low. Given the current consumer and retail landscape, this approach is simply not sustainable.
The good news is that this mission-critical need for change is increasingly recognised. Eighty percent of Chief Purchasing Officers surveyed expected digitised end-to-end process management to have the greatest impact on sourcing in the next five years, underpinning the ability to break down existing silos between product development, sourcing and manufacturing, and ultimately deliver a more agile, efficient business and truly collaborative supply chain. Critically, nearly ninety percent of them foresaw significantly higher investments in technology between now and 2030 to achieve this.
Overcoming the barriers to digitisation requires a change in mindset and capabilities
Given the size of the prize, why is digitisation not more prevalent in the apparel supply chain? The widespread use of email and Excel is a key barrier, resulting in less than ideal system architectures, interfaces with suppliers and data quality. Even in businesses with more advanced tools, the fact that these are seldom integrated across the business limits their full potential.
If businesses are to succeed in the digitisation of sourcing, they will need to extend their focus well beyond sourcing departments and core sourcing processes. To transform their operating models and become truly consumer-centric, they will need to drive end-to-end process efficiency, cross-functional and cross-company collaboration and deeper immersion in the manufacturing process.
‘Going digital’ should not be goal in itself but an enabler of faster, more efficient and more flexible processes. Businesses need to closely examine their own operations and specific buyer expectations in order to identify an approach to digital adoption that will deliver the greatest returns.