Buyers of fashion products are, almost by definition, fickle. But they exert a powerful influence on the supply chain – and the nature of their requirements is changing. Johanna Parsons reports.
Fashion logistics has been transformed by fast fashion and the internet. But the one constant is that it is the consumers, and their demand for ever more efficient fulfilment that has driven these changes. But now, immediate changes are being influenced by the changing nature of the end user.
Emerging economies such as the BRIC nations are expanding massively as consumers of fast and high fashion products alike. And even in more established markets, consumers are changing too, not only embracing technology to empower themselves as multi channel shoppers and social media influencers, but also educating themselves as to supply chains and ethics.
Social media has fuelled a seemingly insatiable appetite for fashion, and the turnover of new trends, and the value of being current is one way the new breed of consumer has made itself known. And this has challenged perceptions of the sector itself, as it could be said to veer towards becoming a FMCG category.
As long ago as 2012 DHL provided a helicopter service to transport shipments from the airport to Fashion Week catwalks.
“Fashion trends change all the time so we have to think of these products as perishable goods,” explains Marcel Beelen, DHL’s head of business development fashion and lifestyle EMEA.
The requirement to translate high street trends onto shop floors fast doesn’t just apply to clothing in the fashion industry. Accessories and cosmetics are also subject to the fickle whims of consumers, with seasonal colour palettes, and “in” products.
For the uninitiated, BB cream is a good example of a cosmetics craze. Originally popular in the Far East, “beauty balm” was promoted as an all-in-one miracle face cream, which was seized upon by seemingly every cosmetics firm from budget to premium brands. This then gave rise to subsequent fads for CC creams (colour correction) DD (daily defence) and now even EE (elemental emulsion) creams are emerging. And being quick off the mark with new trends pays dividends.
Yaw Prempeh, operations manager HCT Group Europe, gives another example -Johnson’s Holiday skin, which he says created a new category within skincare for everyday self-tanning products and enjoyed the position of market leader while competitors caught up, before the craze passed and whole sector went into decline.
He says: “This is a perfect example of setting up a supply strategy to take advantage of a new trend and exiting at the right time to avoid costs.”
Demand response
But getting the volumes and timing right is a tricky business. “This is even worse for colour cosmetics as prediction of sales potential of new colour trends can be a shot in the dark and as we’ve seen they can be for only six months periods,” says Prempeh.
The particular challenge with cosmetic products is the time it takes to develop and manufacture products, as rather than just a textile, many components go into each item, not to mention the patents and legal framework of the industry.
Companies like HCT have identified a niche for cosmetics and toiletries and built a business model for quick responses to new trends, while offering customers the ability to exit with little costs. The model identifies centres of excellence to source and develop product innovations that are set up to be able to meet small, even single orders.
“Brand manufacturers are now taking the strategy of outsourcing non-strategic products/categories ie products/categories where they don’t have any technological advantage or IP to protect.”
But that still leaves the smaller runs required for particular shades, textures or those product fads that are out of the market in a year or two.
Prempeh says the key to this for HTC is to work with manufacturers, usually small producers, that are able to run small batches of bulk; then to agree raw material prices with suppliers to keep formulations competitive; and to design filling and assembly centres to be flexible.
One of the traditional stumbling blocks to flexibility is the industry’s seasons. Not only do they limit the window of opportunity to sell items, but they also put immense pressure on supply chains to have complete collections in store ready to sell on very specific launch dates. All this while also being at the mercy of traditional retail peaks.
But Martin Palmer, business development director for Norbert Dentressangle, which won the £100m ASOS contract in September, says that fashion retailers are using the broader reach of omni-channel operations to mitigate these pressures.
In fact, he says that an industry governed by change, and events geared around the next new thing is actually particularly suited to the new paradigm of instant retail.
“Omni channel affects people in different ways,” says Palmer. “Even bricks and mortar only stores sometimes sell online abroad to help space out peaks and balance out volumes.”
One of the pioneers of e-retail in the sector is ASOS, which now has over 12 million registered users, and in the three months leading up to the end of May 2013, its sales reached £194 million – a 45 per cent increase on 2012.
Following up this robust growth, the firm invested in several new logistics contracts. Norbert Dentressangle won its £100m three year contract for the management of its worldwide distribution. And following work on an interim basis, Clipper was contracted to handle returns from the UK and Europe at its e-fulfilment centre in Selby.
Norbert will be managing orders for customers in some 241 countries from the 1.1 million sq ft global DC in Barnsley. To support its growth and expansion, ASOS has also applied to extend the facility to effectively double storage capacity at the site.
Clipper has been tasked with keeping a strong focus on getting non-faulty goods back into the retail supply chain as quickly as possible, which is of course key, to maximise the opportunities to sell within each customer interaction.
Fresh challenges
“You need to set up an operation that can do that, and can do that well, to get credit to the customer as soon as possible, so that hopefully they can spend it with you again,” says Palmer.
But as well as keeping up with the whims of consumers, DHL reckons the biggest business issues and challenges among the fashion retail industry include the dramatic growth in emerging markets, and slowing growth in developed ones. And in the traditionally cheaper places to manufacture, working conditions and wages are rising. This means a serious reassessment of far-shoring is on the agenda.
“With Chinese labour costs continuing to rise, many brands have begun to look for new sourcing hubs,” says Tim Robertson, vice president, marketing and sales, DHL Global Forwarding US.
“Retailers increasingly have two choices when it comes to sourcing: seek less expensive options such as moving sourcing to regions with lower labour costs, like Southeast Asia, Africa and Latin America.
“They are also compelled to source locally and shift production closer to the market.”
Of course near-shoring speeds the route to market. But the ethical values behind such moves, and how they resonate with consumers will also bear consideration.
The USA is a good case in point. The consensus is that there is a real demand for ethically produced fashion. And Sarah Ditty, of the Ethical Fashion Forum says the success of brands like Nanette, Lepore and Hanky Panky proves that American consumers are willing to pay a premium for products “Made in USA”.
“And there is a premium involved; The NY Times estimates that labour costs are 40 per cent more than in China,” she says.
But premiums like that don’t make for easy sales, and the business case for near shoring is often somewhat murkier. With improved working standards and wages tipping the scales and making certain regions less attractive, economies that have developed on the basis of foreign outsourcing, are being abandoned when working conditions rise.
Rebecca Taylor, of Responsible Trade Worldwide, says: “The irony of our supply chains is that as we begin to make steps towards greater transparency, identify the areas in which need improvement and put the processes in place to make positive changes, brands are actively seeking alternative locations for production in a bid to drive down cost.
“It’s as if some brands don’t want to make these crucial improvements, as they see cost as a more important factor than human rights.”
The fashion industry had a wake up call in 2013, with the tragedy at Rana Plaza in Dhaka where more than 1,000 people died when a building of textile factories collapsed.
This tragedy put the fashion supply chain in the headlines and into twitter feeds, driving home the human cost of fashion to its consumers.
In response, workers unions put together the Bangladesh Accord on Fire and Building Safety, which grants workers the right to refuse dangerous work. Its activities will be aligned to the National Action Plan on Fire Safety and work collaboratively, establishing common programmes, liaisons and advisory structures.
UNI Global Union general secretary Philip Jennings said: “We are putting in place rules that mark the end of the race to the bottom in the global supply chain.”
And with the world’s media looking on, some 100 global brands have signed up, including H&M, Inditex, C&A, Tesco, Marks & Spencer, Primark, Mango, Helly Hansen, Arcadia Group, G-Star, New Look, Mothercare, Sainsbury’s, Benetton, Esprit, Next, Abercrombie & Fitch, John Lewis and Puma.
But there were notable exceptions. “By not signing up the Walmart brand sinks to a new low. Equally Gap’s refusal to join is a mistake that shoppers will not forget,” Jennings asserts.
Walmart says that it will get results faster acting under its own steam. For example it says it will conduct in-depth safety inspections at all the factories in Bangladesh that produce goods for the retailer, whereas the Accord only commits to inspecting 65 per cent of each participating company’s production sites.
So whatever approach is taken, fashion businesses can no longer afford to turn a blind eye to suppliers’ standards. There is a real obligation to consider the people at work throughout the supply chain as well as those who stump up cash at the end of it.
In a sense, improving standards is yet another consumer driven demand, enabled by the impact of social media on brands. Consumers becoming more enlightened and more empowered is one trend that’s here to stay.
Case study: M&S tracks merchandise
Marks and Spencer have taken on ediTRACK’s business process tracking system to gain visibility and control of its directly sourced merchandise.
ediTRACK’s event based structure tracks the progress of purchase orders all the way through the supply chain; holding detailed information on the activities performed to the orders, whether they have been consolidated at origin, loaded at the factory or if they have travelled by road, sea or air.
Integration with M&S’s supply chain partners makes information on shipments available in real time in addition to a complete audit history of all orders.
One tool is used to track and record quality audits and planned and unplanned reprocessing. This gives secure access to external reprocessors enabling them to view only orders assigned to them. Reprocessors use the tool to plan their workload and record the reprocessing of garments, detailing the quantity of stock received, the type of reprocessing which has been carried out and the associated costs.
This all enables real-time supplier KPI reports and responding to changing demands; expediting quick moving stock for example.
M&S can also conduct detailed historical analysis on their supply chain performance by reporting on areas such as container utilisation and cost-per-single.
Paddy McLaughlin, head of supply chain operations, said: “ediTRACK’s independence, speed and flexibility has allowed us to drive performance, visibility and control across a number of disciplines and regions, while using multiple logistics providers.”
New developments include a critical path system for deployment to M&S sourcing teams throughout their regional offices. This system will be used to monitor product development and integrated directly into the order tracking system.
Case study: KNAPP for Celio
French fashion brand for men Celio has more than 1,000 shops in France as well as in Spain, Belgium and Italy and also an e-retail channel. With a turnover of some 570 million Euros as of 2012, it decided to merge its distribution centres in Villetaneuse, Chambly and Croissy Beaubourg at its Amblainville location. That year a large distribution centre was established with 30,000 sq m and five huge warehouse areas.
For the new Amblainville DC Celio enlisted KNAPP to design an end-to-end system to handle the firm’s three large physical streams – goods-in for new models of folded garments and the replenishment of both folded and hanging garment areas, and three sales networks: store deliveries in France; abroad; and online mail order.
KNAPP provided a system with an OSR shuttle at its heart.
With two rack lines and 20 levels, it provides space for 22,400 containers with a load capacity of up to 35 kg.
They opted for picking to light, and some 800 items per hour can be processed at eight Pick-it-Easy work stations.
The Split Tray Sorter functions as the main artery of the system automatically filling orders. Workers feed articles to the Split Tray Sorter at eight work stations. The sorter then drops the articles through a flap to the carton below in one of 680 outlets.
The sorter has a two-part tray element, so two articles can be placed in a tray if necessary and KNAPP’s KiSoft software can handle the articles individually.
A separate warehouse hall area with 6,000 sq m is available for processing hanging garments. This area is equipped with modern, modular trolley technology by Dürkopp Fördertechnik. The trolley system can handle more than 50,000 items per hour.
Celio reckons the system has raised the quality of delivery while at the same time reducing transit times. It gives greater flexibility for volume variations, reduced costs per item as well as a decidedly improved error rate of only 3 in 1,000 items. Celio is set to expand to deliver some 31 million items per year.
