2019 has been a volatile year for the apparel industry as a whole. We have seen countless brands file for bankruptcy due to their inability to adapt their supply chain practices. This year, “sustainability,” has become the top buzzword, and fast-fashion turned upside down. The top story, however, has been the escalating trade war tensions between the US and China, with another round of tariffs expected to hit in December. On top of this, the United Kingdom is now being impacted by a 40% tariff on cashmere fabrics. As geopolitical uncertainty continues to dictate the future of the apparel industry, brands and retailers need to establish where their supply chain will be located in 2020.
As companies search for solutions to protect their supply chain, many legacy brands have looked to do a complete geographical overhaul while this might seem like the most logical decision, having your supply chain heavily concentrated in one part of the world leaves brands vulnerable to the effects of continually evolving geopolitical issues. “The smartest brands and retailers should be building a portfolio and a supply chain much like any financial portfolio,” Suuchi Ramesh, CEO, and Founder of Suuchi, Inc., told NASDAQ Trade Talks. “If you have your entire supply chain sitting in one country or continent, you are exposing yourself to so many risks.” Suuchi is saying that brands should be geographically diversifying their supply chains for the upcoming year as trade tensions continue to escalate.
For brands who are uncertain where their supply chains should be, here are three questions that brands should ask themselves:
1. Where are our consumers?
Thanks to the likes of Amazon Prime, which allows shoppers to receive their package in as little as 24 hours in some cases, consumers now expect nearly nonexistent lead times for desired items. Spurred on by the rise of fast-fashion in the ’90s and ’00s, brands can no longer be forecasting for a year due to extended shipping times. Brands need to understand where their top consumer bases are in order to have supply chains that are closer to the end-consumer. A local-for-local model allows for brands to beat out their competition in getting the product to the customer first. Meaning, there is also less time for consumers to go out and find alternatives that have the ability to beat you to the punch.
A tighter supply chain also allows brands to start incorporating a more in-depth sustainability initiative in their mission. By having a supply chain closer to their consumers, they are cutting back their carbon footprint. There will be fewer emissions during the shipping process, the ability to produce nearly on-demand, and less wasted inventory in landfills. All of this can go into a brand’s story and mission, which can also allow for products to be sold at a higher price point.
2. How are we hedging our risks?
As mentioned earlier, the smartest brands will have diversified their supply chain portfolio just as they would with any other financial portfolio. Companies whom have multiple established partnerships and, the right supply chain technology, catch any issues early to come up with solutions. If all of your eggs are in one basket, you are unable to quickly react to issues and have to spend time and money finding new options. If a company has not built a supply chain to stand the constant evolution of trends, geopolitical tensions, and is untraceable, then the supply chain has not been properly constructed. Retailers and brands will need a network that they can rely on to be able to evolve across all potential changes.
This portfolio also allows companies to have the ability to easily test and scale across multiple product categories. The ability to keep up with influencer culture where trends can change overnight is key to survival in today’s fashion industry. Brands need to have the ability to change their course of action to execute on new product ranges in a moment’s notice. Whether this is through custom development or white-label options, they need to have partnerships that help them be two steps ahead of the rest of the industry.
3. What partners will allow for the highest ROI?
Every aspect of the supply chain adds up to how much money a company will make. If all of the partners in your supply chain are not carefully curated and vetted, you’re still at risk of extreme supply chain uncertainty. Taking the time to cultivate long-term relationships with your factories and vendors has been proven to double revenue and increase speed-to-market. When developing these relationships companies should look for a network of partners that allows for flexibility across categories, batch size, and the solutions offered.
Ultimately, making the right supply chain decisions from geographical location to the strongest partners across all of your brand’s needs requires the insight into your supply chain data. Through innovative technologies, brands can use the information that they already possess to make the most informed decisions. As we move closer to 2020, the top fashion companies need to make the move now to be in the right locations for continued success.