Disruption has had a profound impact on the fashion industry and its supply chains, accelerating and fragmenting the flow of goods and upending logistics provider relationships. All this could be dwarfed by new moves from arch-disruptor Amazon, which has filed a patent for a groundbreaking new model of fashion production.
Worth an estimated US$2.4 trillion, with huge volumes traversing the globe, the fashion industry is a juicy sector for logistics providers, but it has also proven to be a highly challenging one with changes coming almost as fast as changes in collections. Above all, the migration of fashion purchases to online channels has severely impacted the way in which fashion items flow, and in what quantities.
Online shoppers’ expectations of delivery within days means that merchants need a solid grip on their supply chain to ensure goods are always available, and they lean heavily on their logistics providers to ensure there are no delays. Under the terms of its contract with German fashion firm s.Oliver, Hellmann Fashion Logistics is committed to an on-time delivery performance of at least 98%, based on consignments per month. Likewise, s.Oliver monitors its suppliers’ compliance with cut-off times for booking and deliveries.
Good visibility is crucial. Hellmann tags all goods with RFID chips for monitoring along the supply chain.
Shippers’ desire to receive goods ordered online quickly means that the share of shipments that move by air – often as second- or third-day deferred consignments – has gone up. Parallel to this, the size of shipments has shrunk, which has led to a marked increase in LTL shipments, while full truckload traffic has waned.
The migration of the purchase from retail outlets to online channels is a major driver of the shrinkage of shipments, but not the only one. Another major change that has played out in the fashion world is the rise of mass customization. Rather than produce large quantities of items in bulk, smaller batches are manufactured based on customers’ choices for fabric, style and colour as well as personal measurements. Vancouver-based online merchant Indochino, which produces chiefly custom-tailored men’s suits and shirts, guides consumers by video instruction on how to get the right measurements to ensure good fit. Once the order process is completed, the right fabric is allocated from Indochino’s inventory and one of five contract manufacturers in China produces the garment, which is then shipped by air to customers around the world.
Consumers may have embraced online shopping of fashion items with a vengeance, but merchants find that it still pays to have a physical presence where their wares can be sampled and examined. This has led to the creation of small stores in shopping centres that give consumers the chance to touch the fabric and try on clothes. These outlets are pure showrooms devoid of any inventory other than the display samples. If consumers decide to purchase the item they have tried, they order it online through their mobile device for subsequent delivery to their home or a specified collection point. Again, this means that forwarders move only small quantities from warehouses to those showrooms.
For merchants these showrooms promise a significant reduction in returns, which tend to be disproportionately high in the fashion sector. Consumers often order an item in different sizes and return those that do not fit. For merchants this has been expensive, especially since competitive pressures have more or less forced them to offer free returns.
All of this has shifted fashion logistics more towards smaller shipments moved at greater velocity, supported by real-time visibility of the products in question. Increasingly, fashion merchants feel a need to split up their logistics contracts, focusing on the particular strengths of logistics providers in specific arenas. Jeff Cullen, CEO of Rodair International, noted that his clientele seems less and less inclined to farm out the entire logistics to one provider. Increasingly they look to individual logistics firms to take care of one particular aspect of their supply chain, be it factory replenishment or final-mile delivery. The one-stop shop is falling out of favour, said Cullen.
An even bigger disruption is now looming over the industry, courtesy of Amazon. In mid-April, the online sales giant obtained a patent that aggregates orders from various locations and then coordinates apparel manufacture. Utilizing a computerized system comprised of textile printers, cutters and an assembly line, this aims to produce garments in batches. Almost fully automated, it feeds the output directly into the e-tail giant’s distribution system. This would move production to areas closer to the consumers, radically whittling down logistics needs. Instead of producing garments in low-cost environments and shipping them around the world, this could shift the manufacture to locations nearer to the consumer, eliminating a large chunk of the supply chain.
Cullen, for one, is perturbed by this. “This is huge,” he said. “I have always said to anyone who will listen, our industry remains relevant until someone figures out how to teleport things. This is the teleporting technology.”
By Ian Putzger
Correspondent | Toronto
