According to a recent report published by management consultants McKinsey & Company and news website The Business of Fashion (BoF), the global fashion industry was likely to have been worth around US$2.4 trillion in 2016, making it one of the world’s most important industries.

However, the sector is also facing a range of challenges with major implications for the logistics side of its business. One was the need to provide an ever-faster response to consumer demand. Another was the development of ever more sophisticated ‘omni-channel’ sales operations. A third was the requirement to build agile supply chains as a key strategic response to worldwide political and economic volatility, according to that report, The State of Fashion 2017.

The impact of those influences was confirmed by senior executives with several providers of logistics services to the global fashion industry contacted by Asia Cargo News.

David Emerson, group sales and marketing director for SEKO Logistics, which provides supply chain services to that industry in Asia, North America, the UK and other parts of the world, confirmed that the traditional straight line supply chain which existed in the 1980s, 1990s and early 2000s had been “disrupted massively by the growing demands of omni-channel operations and the consumers behind them.”

“Consumer demand for reduced lead times and the IWIN (I want it now) effect have started to dramatically bend and shape the fashion industry’s traditional supply chain of factory-port-ship-port-warehouse,” he said.

Similar points were made by Mattias Praetorius, global head of industry vertical consumer, retail and fashion for worldwide forwarder and supply chain solutions provider Panalpina, which lists fashion as one of its key business sectors.

“The on-demand shopping trend requires optimized supply chains where goods are available with short lead times. That, of course, leads to a greater requirement for end-to-end visibility at order/item level as well as logistics capabilities including personalization of goods close to the end market,” he stated.

“Vendors at the point of origin and retailers in the destination market need to work much more closely together and with a logistics provider to fulfil the requirements of the increasingly demanding consumer. In some cases, digitalization of consumer behaviour is opening new channels for vendors to move direct to consumer and we see that as a quite likely development in the future.”

Neil McMaster, general manager, contract logistics, for GAC Dubai, whose fashion logistics activities include storing and handling inbound products manufactured in Asia for Middle East retail customers in the Jebel Ali Free Zone, said current industry trends meant logistics providers must have the capabilities to provide retailers with cross-channel inventory visibility to help them implement omni-channel strategies.

“In response to increasingly volatile global politics and economic trends, retailers want to build agile supply chains and concentrate on their core competency of selling goods. That has given rise to opportunities for 3PLs to step up and provide more value-added services to help retailers manage their supply chain,” said McMaster.

Expanding on GAC Dubai’s involvement, he explained that many retailers set up their manufacturing arm in the Far East, but with the local and regional markets served from Dubai being too small to hold vast stocks, those products were initially shipped to a European hub and then sent out from there to the Middle East and other regions.

“To help reduce the lead time needed to get the goods to market/consumer, GAC Dubai’s contract logistics team can coordinate inbound shipments directly with the manufacturer,” he said. “Our local distribution models can be easily adapted to meet the specific needs of each customer for delivery to retail outlets, including daily stock replenishment.”

Panalpina’s response to changing fashion industry requirements, said Praetorius, focused on developing multi-dimensional logistics solutions capable of servicing sometimes erratic buying behaviour by consumers.

Examples included end-to-end visibility solutions at order, item or SKU (stock-keeping unit) level to allow early and upstream reaction to exceptions. “That also offers an ability to plan early for order deliveries and cover gaps in inventory at various locations,” he explained.

Another example, he said, was a complete e-commerce solution where Panalpina basically handled the front office, including site management for retailers and the end-to-end logistics order fulfilment. “In addition, the Panalpina global network, combined with visibility solutions, allows us to plan order delivery on a ‘need by date’ basis and offer direct-to-market solutions to allow order fulfilment.”

SEKO’s response to the changing requirements of the global fashion industry, reported Emerson, included working with many of its retail sector customers to develop and operate offshore multi-channel logistics centres in Asia, the US and other key sourcing areas.

“The thinking behind that is, why ship product from a factory in China when perhaps as much as 40% of that order could end up being purchased by consumers in that country or the wider Asian market? For that reason, SEKO first started doing direct-to-store replenishment in 2006 and has since moved on to full multi-channel support operations in key markets,” he said.

An additional challenge, continued Emerson, was the fact that consumers increasingly wanted to buy their fashion products in different ways. “For example, sometimes they want to buy from the customer’s (retailer) own website but sometimes a third party platform is an even more convenient way of purchasing.”

Another key issue which had to be taken into account, said Emerson, was returns, particularly where e-commerce was concerned. “With some fashion retailers having return rates of up to 35%, you need a local, low-cost returns solution in order to ensure that the total customer experience is up to expectation.”

Looking ahead, Emerson suggested the fashion industry would see a continuing proliferation of all the trends he had outlined. “More and more retailers are trying not to ship in bulk across continents to one DC (distribution centre) only for that DC to receive the product, pick it, pack it and ship it back to a market close to where it originated.”

Other developing trends in the future, he suggested, were likely to include the rise of inner city logistics and ‘smart hubs’ as consumers demanded even greater flexibility on lead times. ‘Next day’ might not be quick enough and two-, four- and eight-hour delivery windows could become the norm.

That last point was echoed by GAC’s McMaster. “From the current state of next-day stock replenishment, we might see a move towards same-day replenishment, if customer demands continue as the current trend indicates. Logistics and supply chain service providers will have to become even faster and more flexible in their response.”

Panalpina’s Praetorius said that in recognition of the likely future needs of fashion industry manufacturers and retailers worldwide, that logistics provider was also reviewing and investing in possibilities for personalizing goods close to end market and through 3D printing production.

By Phil Hastings

Correspondent | London