Digitizing the Supply Chain: Key to Improving the ‘State of Fashion’

Confronted by pandemic-related operational challenges and shifting consumer demands, companies in the fashion industry are looking for ways to adapt. The Business of Fashion (BoF) and McKinsey & Company’s annual report, “The State of Fashion,” released in December 2021, examines the vulnerabilities in the industry that were revealed and exacerbated by the pandemic.

BoF and McKinsey’s report sends a clear message: digitization is essential to the fashion industry’s comeback.

Supply chain, environmental and social concerns have become priorities for both companies and consumers of fashion. According to a BoF and McKinsey survey, 30 percent of respondents pointed to supply chain, logistics and inventory management as the biggest challenges ahead, followed by 14 percent citing sustainability and 10 percent citing COVID-19 recovery.

Pre-pandemic, some companies were already investing in digitization. Today, however, these efforts have become essential to contend with ongoing supply chain disruption and evolving consumer demands. According to the same BoF and McKinsey survey, 32 percent of respondents pointed to “digital” as fashion’s biggest opportunity ahead. Steve Rendle, VF Corporation chairman, president and chief executive, agrees. He told BoF and McKinsey that he sees “significant opportunities in creating a hyper-digital supply chain.”
 

Behind the Times

But because the fashion industry has been behind the times, the pressures brought on by the pandemic have been especially arduous and many companies were ill-prepared. When the world was forced to shift to remote work, for example, many design shops, manufacturers and other players didn’t have the technology and digital systems necessary to keep production running.
 
“The pandemic, the great accelerator for the retail industry, enabled teams to rethink their processes and to work digitally—from design to development to production,” Liza Amlani, principal and founder of Retail Strategy Group, told Sourcing Journal and CGS. “Retail in the apparel, footwear and even home world has been slow to the process of digitizing—and these industries need to do this to be more efficient, to eliminate redundancies and manual tasks.”
 
Yet, even as the world returns to in-person work, the benefits of digital communication remain. Digital tools help increase transparency at every point of the supply chain—from the factory floor to the retail floor—at a time when that is of paramount interest to consumers. Designers use software to share ideas virtually, making collaboration easier and faster. Manufacturers use data to make flexible and informed decisions about inventory based on up-to-date information, reducing bottlenecks, cutting down on wasted materials and saving time. Retailers face fewer returns and can provide faster, more accurate delivery times to customers. Finding these kinds of inefficiencies is essential to improving systems and increasing productivity.
 

Waste Not

Waste is a concern not only for companies wanting to cut costs but also for organizations and consumers who want the fashion industry to reduce its environmental impact. For example, using better inventory management and considering consumer demands, companies can meet their goals while throwing away fewer products—saving money and reducing the amount that ends up in landfills.

Such improvements are crucial at a time when environmental and social impacts are increasingly influencing consumer choices. According to a Capgemini study published in 2020, 79 percent of consumers are changing their purchase preferences based on social responsibility, inclusiveness or environmental impact. The study suggests that COVID-19 has only increased this awareness and commitment.

Transparency about processes within the supply chain is also important to companies that want to improve efficiency and the customers who want to know that their clothes are being made in a way that is safe for both workers and the environment.

“It’s going to be game-changing,” Joseph Phi, Group Chief Executive of Li & Fung, tells BoF and McKinsey, “because inventory [waste] is the biggest cost to the brand owners and retailers as well as [one of the] biggest negative impacts on the environment.”
 
Investment in digitization is an investment in a more resilient supply chain, the environment and consumer demands. Technology will enable the fashion industry to catch up.

Looking to achieve that transparency and digitization across your supply chain? Get more actionable insights and tips from our Visibility Report, prepared in partnership with Sourcing Journal.