Modern Fashion Supply Chain Pt.5

First of all, we would like to appreciate you if you have read up to chapter 5!

With the previous article discussing Fashion Demand Forecasting within a Modern Fashion Supply Chain. Now move on to the next chapter!

CHAPTER 5: Managing the Modern Fashion Supply Chain

Operating a cost-effective, efficient and reliable clothing supply chain is perhaps the toughest part of managing a successful fashion brand. While each fashion brand does this differently depending on how it sells, to whom it sells to, how large its staff is, etc. Most default to the standard that is expected. We will explore how that has evolved over time, and how adopting a modern fashion supply chain can help apparel suppliers and brands operate better in the future.

The Old Fashion Supply Chain Model

Hermès began in 1837 – the same year that the Oxford dictionary was created, Queen Victoria ascended the throne, and Charles Goodyear received his first rubber patent. While Hermès provides an outstanding example, most of the world’s top luxury fashion houses have been in operation for at least a few decades. A lot had happened by then, both in the fashion industry and the global trading landscape that governed it. Today, fashion is experiencing a shift in global supply chain structure and management rooted in policy changes that began 50 years ago.

In 1974, the US, Canada and the European Union signed the Multifiber Agreement (MFA) which set quotas for the amount of textile fibers, fabrics and garments that developing countries could export to developed MFA countries. This has an immediate impact on the cost of manufacturing apparel for US and UK based designers. As well as for the end consumer of fashion. “By restricting imports, the US and the EU are increasing the prices of their domestic clothing. Domestic production goes up, and domestic consumption goes down” (MacDonald, 2006).

What will happened?

As a result, many of the largest apparel retailers and brands operating over the years have decided that owning their garment factory is more supply chain, internal governance, and profit-making than having a factory partnership. Trade agreements including and similar with MFA encouraged them to take up the development and supply of fabrics as well. This creates a very lean fashion supply chain with factories that are fully connected to brand objectives. And where garment suppliers have a significant say in production timelines and seasonal calendars.

Smaller brands that lack the resources to fully own their fashion supply chains are left to collaborate with garment suppliers in a mix of fashion networks that favor developed country partners over developing country partners. In this scenario, fashion companies have less control over the logistics schedules of their fashion partners. As these relationships lack the competition found in the current model, and operate largely on a supplier-driven demand basis.

Changes in Demand Drive Changes to Fashion Supply Management

The drivers of fashion demand began to change in the mid-1980s. Previously, fashion brands built clothing lines with a heavy focus on standard pieces like khakis. Whose needs remained reliable from season to season, with little need for agile fashion forecasts. Clothing companies typically produce these collections on a regular, bi-seasonal basis, coordinating smooth and predictable delivery calendars between product developers and manufacturers. It lived up to customer expectations at the time, and products usually rolled off shelves at a steady and expected pace.

However, over time, consumers began to demand more fashion forward products with faster timelines. Major retailers are trying to meet this demand by producing more garments, with newer styles, more consistently available. This requires fashion brands to distance themselves from the traditional two-season model. And instead adopt shorter three-, four-, and five-season product cycles to maintain store traffic and consumer purchases. This shift had three major impacts on the fashion industry:

• Retailers are demanding faster, less guaranteed fashion forecasts.
• Retailers are looking for faster product development.
• Garment brands are starting to diversify their garment suppliers beyond their own or usual network of partners to be able to meet the increasing demands of fashion consumers.

Competition within fashion retail soared, and supply chains began to shift from a supplier-driven sourcing calendar to a consumer-driven calendar. This condition paved the way for fast fashion. What happened next caused the explosion.