Top 5 Unique Business Challenges Fashion Manufacturers Face and the Innovative Ways to Solve Them
Achieving operational excellence in the fashion industry is about more than having a great design. Some of the most difficult challenges companies encounter occur during the fashion production process.
The State of Fashion 2018 report, issued by The Business of Fashion and McKinsey, revealed that one of the biggest business challenges fashion companies are likely to face in the coming years is the digitization and improvement of the supply chain.
Speed to market, optimizing production, right-sizing inventory, balancing omnichannel distribution, and more all present unique business challenges for fashion manufacturers.
Read on for the top five difficulties fashion manufacturers face today and how they can be solved.
- Achieving digital transformation of the supply chain
Industry 4.0 is shaping the factory of the future — which is of particular importance to fashion manufacturers as these technologies allow for significant opportunities in the supply chain and fashion production process, such as shortening lead times, creating more diverse or customized product lines, and becoming more agile.
However, for many fashion manufacturers the concept of digital transformation is seen as overwhelming.
According to strategy+business:
“Industry 4.0 is not a group of technological platforms that can easily be adopted as a purely operational upgrade.”
“It requires a clear strategy and top management commitment; the transformation of key operational activities; and a deep understanding of collaboration, across internal company boundaries and likely with other companies that share the same platforms and technologies.”
In reality, the real challenge with digital transformation is making the decision to move forward with progressive change and taking that first step in planning. While the technology fashion manufacturers choose for the future is essential to supply chain transformation, it is most important to have a sound strategy and understanding of the processes being transformed.
It is not enough to have software without a strategy — you need both.
How to solve this challenge:
To solve this challenge, fashion manufacturers need to understand digital transformation and how it can be applied to their business — and how that application can produce quantifiable results. Each manufacturer is different; digital transformation will not look the same for everyone. However, by embracing what makes you unique and looking for the processes that will be most effective for your organization to transform, you can make real progress in a relatively short time.
This can now be where a value-added reseller (VAR) partner comes in. They can help you think of pilot projects that keep the budget low with minimal disruption to the business so you can start seeing the effects, get the buy-in that you need, and build a plan to move forward.
- Traceability in an omnichannel environment
For today’s fashion manufacturers, traceability is paramount.
When you are scaling and working with more retailers, channels, warehouses, and distribution centres, it is often all too easy for inventory to be misplaced and unoptimized. This can be due to siloed and inefficient systems, lack of real-time tracking, manual processes that result in human error, and more.
You need to make sure that you know where your inventory is going, how much you need of it, that it is kept in stock with retailer partners (you can’t always rely on retailers to tell you this because they are facing their own challenges) and more.
Traceability is not only important for improving internal processes either. It’s also a way to stay transparent to consumers who demand proof of sustainable production.
Consumers today expect more transparency. According to Sourcing Journal’s “Transparency: Opportunities, Obstacles & Outlooks 2019” report, 85% of respondents say transparency is either extremely or very important to the apparel industry’s success.
Consumers want to know more about the products they are buying — who made them, where supplies came from, how excess product is disposed of, and beyond.
While transparency and traceability are two different goals, the outcome of both can be the same — improved production and sustainability in the supply chain.
How to solve this challenge:
To resolve this challenge, you need to create a traceability system that will work in today’s ever-changing manufacturing landscape.
Using Enterprise Resource Planning (ERP) software can automate processes, add bar codes for tracking, eliminate the potential for human errors, and find your inventory at every step of the process. It can also connect siloed warehouses and teams to give you an at-a-glance overview of your entire inventory system. This will allow you to both optimize your own processes and increase transparency with customers.
Some ERP systems are specifically designed for the fashion industry. This allows for much more traceability and path management than using a basic accounting system, or even an ERP optimized for a different industry.
- Inventory optimization and control
Two important complements to traceability are inventory optimization and control.
With traditional material requirements planning (MRP), many fashion manufacturers can find it challenging to accurately forecast how much supply they will need. This often leads to creating not enough product, or too much and having to dispose of it.
Unfortunately, the disposal methods fashion companies use have not always been environmentally or budget friendly, which can have a negative impact on both brand reputation and your bottom line.
Even if you know where your products are in the supply chain, un-optimized inventory processes can make it difficult to reduce lead times, create new product lines, and become more agile and flexible. The challenge is identifying what processes to shift from manual to automated in a budget-friendly way that produces real results.
How to solve this challenge:
By optimizing their MRP, fashion manufacturers can more accurately forecast demand. This method is called demand-driven material requirements planning (DDMRP).
Doing so also makes it easier for fashion companies to create more product — such as holiday-specific merchandise — or achieve personalization for consumers while also conserving costs.
Your ERP solution is essential here too. It helps track sales order management, including optimal allocation of received stock, and some systems can even automatically cancel or replace items when minimum quantities aren’t met during the presale phase.
- Changing customer expectations: on-demand delivery and mass customization
Speed-to-market is another top challenge for fashion manufacturers, and it’s only getting more competitive.
With the rise in on-demand expectations, many distributors (including Amazon) are feeling the pressure to hasten delivery times — and the costs that come with it.
This is particularly challenging as “fast fashion” comes under scrutiny. Manufacturers need to increase speed-to-market while maintaining sustainability and product quality. For some, this might include near-shoring or even on-shoring production.
Along with on-demand delivery, consumer expectations are also changing for personalized production. Whether it’s monograms embroidered on a towel, a limited-edition product line, or even an app that scans a customer’s foot and makes a pair of shoes to their dimensions, mass customization is a growing trend that will evolve into mainstream practice.
Some apparel companies are offering the option for consumers to use virtual reality technology to see how garments would look on purchasers, then rapidly adjusting designs.
In 2017, Google and Ivyrevel launched the Data Dress, which used an app to track a user’s activities, lifestyle, and environment to create a customized dress.
Mass customization is not going away, and fashion manufacturers need to adapt their supply chains accordingly — all while maintaining (and exceeding) speed-to-market.
How to solve this challenge:
By working with technology that increases efficiencies, manufacturers can achieve faster time to market. The right material requirements planning process is a large part of that, as is your business technology suite solution. A suite of solutions – such as Microsoft Dynamics 365 Business Central — can help enhance processes across the whole organization, from the finance department, to customer service, to the supply chain, and beyond. This can in turn create more alignment between departments and decrease informational siloes.
The processes you use in your business are key to improving both speed and manufacturing capacity. Looking for roadblocks in the supply chain workflow, such as bottlenecks, red tape, and unleveraged technology, is important to find new opportunities and achieve operational excellence.
- Rapidly changing industry and market conditions
While competition is stiff in the fashion industry, there is another type of competitor that fashion manufacturers might be facing:
According to The State of Fashion 2019, 79% of executives placed self-disruption in the top five trends affecting the fashion industry.
Fashion businesses need to be constantly looking for innovation, exceeding customer expectations, and creating a fluid experience from start to finish. While this is not necessarily manufacturing-specific, it does involve the manufacturing process.
Manufacturing is the backbone of the fashion industry. If you have an innovative product but you’re not able to distribute it quickly, that’s an issue. If you want to scale and grow but you’re limited, that’s a problem.
Fashion businesses must be able to stay agile and productive with shorter decision cycles and quicker responses to change.
How to solve this challenge:
Part of the solution comes down to how your organization approaches thinking about change. Carol Dweck, author of the book Mindset, describes this as having a growth mindset vs. a fixed mindset. Organizations with a growth mindset embrace challenges, persist in the face of setbacks, learn from criticism, and seek opportunities for development.
Is your manufacturer embracing potential for change and open to exploring new ways of thinking — or are you stuck in your old processes and patterns?
The other part of this challenge comes down to the sheer volume of choices available to today’s manufacturers. It can be difficult to keep current with the latest technologies when those technologies are always changing. Yet there is a simple way that fashion manufacturers can stay in-the-know with the latest trends without sacrificing operations: their software upgrades.
Software upgrades provide a roadmap to Industry 4.0. They pave the way for change, opportunity, and customization, even if your business isn’t necessarily there yet.
Paired with a growth mindset, manufacturers can use software upgrades as a way to identify new areas for development within their organization.
While new innovations and developments can mean challenges for the fashion manufacturing industry, all of these challenges can be solved. Additionally, not only can they be solved, but they can also be a real gamechanger for your organization.
For instance, optimizing the supply chain and inventory control makes it much easier to add a new product line. Through transforming manual processes into automated ones, manufacturers can save time and costs, and also increase productivity and reduce errors. By seeking out opportunities for growth and development, businesses can stay ahead of the competition and find a loyal customer base.
The key is marrying mindset and technology. The technology can help achieve results, but the mindset is what will help you realize the results that are possible.
SHEA Global has extensive experience in the fashion industry and has a partnership with fashion ERP solution provider K3|pebblestone. We understand the business challenges that fashion manufacturers face and have the in-depth knowledge to solve them.
Reach out today for a consultation to help your fashion company achieve business better.