QUALITY. LOGISTICS. PRODUCTION.

WHY IT’S CRUCIAL TO OPTIMIZE NOW

 THE FUTURE OF FASHION LIES
IN OPTIMIZATION
Finding a balance in fashion is no longer an
option; it’s a strict requirement to remain in
the game. The world marketplace has adopted
a new paradigm, and the entire consumer
ecosystem has shifted. Where brands, status,
or price used to drive the market, new factors
include traceability, personalization, and a
notion of responsibility rooted in social and
environmental awareness.
An overcrowded marketplace and consumers’
desire to buy online and from anywhere in
the world forces companies to compete on
a new level: speed. Be it speed-to-design or
meeting consumers’ heightened expectations
for faster delivery, speed-to-market is key to
maintaining margins. Companies are also being
pressured as the evolving geo-political context
places pressure on sourcing and production.
The world has become more volatile, and
despite new and evolving regulations intended
to quell this uncertainty, the interdependent
global market means far-off situations have
bigger impacts than ever before.
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With digitalization transforming the way
consumers shop, fashion companies are
struggling to stay ahead, as they compete for
the attention of a generation of connected
consumers, be it fickle-minded millennials
who want it all—personalization, sustainability,
quality and speed—or baby boomers, a
surprisingly dominant group in the online
consumer demographic that seeks brand
experience, value for money, and convenience.
Mass-market apparel brands and retailers
cannot win in the next decade without
moving to a demand-focused model. As a
result, apparel companies are rethinking
their processes and inbound logistics. One
strategy is to optimize the apparel production
model by including elements such as
nearshoring, automating new delivery models
around customization, and shifting toward
sustainable, circular value chains.
Fashion companies will fail if they don’t adopt
new demand-focused strategies to maintain
delivery speed, production quality, and
customer expectations.
LOGISTICS

On-trend agility is the key

to being competitive
More collections; digital-savvy consumers who
base their purchase decisions on time-to-delivery;
demand for personalized items; blazing price wars
across geographic boundaries. Sound familiar?
Without speed and flexibility, it’s impossible for
fashion brands to respond to trends, adapt to
market volatility, or scale at will, all necessary
to respond to increasing consumer demands for
personalization and pressure from an increasingly
competitive market. According to a 2018 McKinsey
report, nearly two-thirds of apparel executives say
that speed-to-market and in-season reactivity are
top priorities for improving existing processes.

Traditional offshoring
has reached its limits
But what does being agile really mean? Quick,
adaptable, and scalable. And this is the problem
with the traditional sourcing model: manufacturing is
carried out far from the end-consumer and physical
points of sale. Mostly in China, India or Bangladesh,
these manufacturing hubs are sought out for the
competitive price they can offer for finished or near-
finished garments, thanks to lower labor costs and
expertise in the production chain. But as McKinsey’s
report points out, Asia is set to become a competitor
for this very manufacturing expertise: apparel sales
in Asia are expected to increase by 6 percent each
year, accounting for about 40 percent of global
sales by 2025. Some Chinese manufacturers have
already begun shifting their focus to local demand in
anticipation of this growth.

Despite the current advantage of lower prices

per garment, underscored by favorable currency
exchange rates, the new retail landscape is putting
the viability of this transnational price advantage into
question. Although Asia used to be attractive for
low labor costs—one-tenth of US costs in 2005—this
is less and less the case as wages in Asia rise, now
equal to roughly a third of US wages. In Vietnam, for
example, the minimum wage rose by 5.3% this year to
reach an all-time high, and is slated to rise again by
5.5% in 2020. In some cases the wage gap has totally
disappeared, but without accompanying increases in
capacity or quality.

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 LOGISTICS

Consumers’ increasingly short delivery expectations

are also incompatible with the offshore sourcing model.
The average lead-time to ship inventory from Asia
to the US or Europe is thirty days. That’s an eternity
in today’s social-media-driven retail landscape. To
put it bluntly: faster wins. With many fast-fashion
apparel companies updating store stock with new on-
trend items and mini-collections every few weeks, the
transportation time inherent in a traditional offshore
model is eating into margins.

Not only does this time waste resources and reduce

brands’ ability to stay on-trend, it also generates
significant transportation costs that must be absorbed.
High and highly volatile fuel prices make it hard to
forecast this expense, creating an erratic addition to
total production cost. The uncertainty associated with
long-distance shipping is also causing many to rethink
this model. Not only is it expensive, but it adds an
additional step to the workflow, which could end up
becoming a bottleneck or worse because of customs,
import taxes, weather conditions, or a number of other
uncontrollable factors.

Traceability provides
the big picture
Today’s retail landscape is all about connection. With
an infinite amount of information at their fingertips,
consumers have a growing awareness of what they’re
purchasing—what it’s made of and where and how it
was manufactured. Traceability is a key purchase factor
for these conscious consumers. Recent scandals around
poor working conditions and environmental degradation
coupled with growing environmental awareness have
led to a more generalized demand for traceability
and accountability in manufacturing. Companies that
resist new strategies for more agile and traceable
manufacturing risk seeing their bottom line suffer
from opaque quality control systems that make it
harder to monitor product quality on-site. Consumers
are increasingly supportive of brands that move
employment back to their home countries or that make
an effort to support fair and safe working conditions.

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PRODUCTION
Embrace automation to achieve
efficiency in manufacturing
Apparel manufacturing’s transition from handcraft
to machine-assisted work has a long history, but
a slow one. According to McKinsey, fashion is one
of the slowest industries to adopt automation: for
example, the automotive industry has about seven
times more industrial robots than in apparel. So
far low labor costs have preoccupied apparel
retails. But now that demand is driving supply,
companies must look for new ways to adjust
their offer quickly and cheaply.
Of course, the optimal balance between manual
workers and technology depends on multiple
factors, but the turnover rate of machines can
be increased almost indefinitely, whereas human
workers have natural limits; and robots, once
correctly programmed, don’t make mistakes.
When it comes down to it, automation supports
faster and more accurate production. According
to McKinsey, 50% of production managers predict
that by 2025 the production of complex pieces will
be semi-automated and those of simple articles
will be entirely automated. A cost-analysis of jean
production also suggests that automation may
reduce manual labor by 40 to 70 percent, resulting
in cost savings of $0.20 to $14.80 per pair of jeans,
depending on supply chain factors. Forgoing
automation would seem to be a costly choice
then, in terms of material use, production errors,
and human resource allocation.
Connect the dots with
centralization and data
Centralization in manufacturing permits efficient
and agile use of data as a resource. Centrally
controlled procedures make a business flexible
by allowing decisions and changes to be made
easily and real productivity to emerge. At a
basic level inconsistent and even erroneous
data leads to costly mistakes and incorrect
predictions. Beyond the obvious disadvantages,
companies that don’t harness data centralization
for manufacturing quite simply cannot offer any
level of personalization at scale. In a retail market
that is all about connectedness, this automatically
separates the losers from those willing to engage.
Collecting feedback from customers allows
designers to come up with products that suit the
market, and thus allow for the responsiveness
needed to engage today’s ultra-connected
consumer. When the offer responds more
accurately to the demand, the end-client is
provided with a more personalized product
created using an increasingly streamlined
process.
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 QUALITY

Environmental awareness is a key

concern for connected consumers
Low-cost fast-fashion comes at a high price.
While environmentally friendly slogans have
become a common feature of marketing materials,
discarded garments make up an increasing
amount of global pollution. According to Eco-
watch, fast fashion is the second dirtiest global
industry after oil. “Fast-fashion outlets are
exacerbating the problem because very few
secondhand stores or websites selling used
clothes [...] will accept items purchased from
Forever 21 and other stores like it due to its poor
quality. The chemicals are likely to seep into
groundwater if placed in a landfill or permeate
the air if sent to an incinerator. According to
the U.S. Environmental Protection Agency, 84%
of discarded clothes winds up in an incinerator
or landfill explains a recent report by 3dinsider.
With today’s level of information transparency
accessible to connected consumers, this dirty
business can’t go unnoticed, forcing companies to
rethink the lucrative fast-fashion business model.

Fast and efficient is no longer enough. “Unused,

unsold garments are not only polluting our
environment, they represent huge financial
losses for every cog in the supply chain—from
manufacturers to distributors to retailers.”
Companies are now focusing on a precise
balancing act, where supply responds to demand,
on-demand. Smaller runs add more variety and
respond to consumers ever growing need for
newness and create a further layer of complexity
in the manufacturing mix. Capitalizing on AI and
predictive technology is now crucial to remain
responsive to a fashion and apparel marketplace
defined by awareness.

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QUALITY
Experience and
personalization lead the way
Fashion is no longer about garments; the
companies leading the pack understand this and
offer a whole new range of products within a
multi-channel, multi-faceted approach. Agility
takes on a whole new meaning in this model,
where being flexible enough to adapt quickly to
new needs as they arise, no matter how complex,
is key to engaging consumers.
American outdoor recreational clothing, footwear,
and outdoor equipment brand North Face uses
IBM Watson’s cognitive computing technology to
ask consumers questions about where they’ll wear
a coat and what they’ll be doing in it. “Using that
information, North Face can make personalized
recommendations to help customers find the
perfect coat for their activities,” reports Forbes, in
their 2019 “20 Best Examples Of Using Artificial
Intelligence For Retail Experiences.” Japanese
casualwear designer, manufacturer, and retailer
Uniqlo is pioneering the use of science and AI to
create futuristic in-store experiences.
“Select stores have AI-powered UMood kiosks
that show customers a variety of products and
measure their reaction to the color and style
through neurotransmitters. Based on each
person’s reactions, the kiosk then recommends
products. Customers don’t even have to push
a button; their brain signals are enough for
the system to know how they feel about each
item.” Both examples clearly demonstrate the
efforts that leading brands are making to deliver
customers the redesigned retail experience and
targeted, personalized offers they expect in
exchange for engagement.
Leading fashion companies develop collections to
leverage all channels, including online and social.
The announcement in August 2019 that luxury
retailer and New York fashion institution Barneys
had filed for bankruptcy and announced it will
close most of its stores in the US is a pertinent
example of just how cut-throat our industry has
become. Brick-and-mortar stores remain a crucial
touch point for the overall shopping experience
still expected by many consumers, but getting
the quality-logistics-production equation right
has become even more essential in light of the
increasing complexity needed to deal with the
experience-based marketplace.
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 CONCLUSION
Accelerating speed-to-market is critical in our industry, yet speed is now just one aspect of
retail landscape that has grown beyond the garment. Logistics, production, and quality must
interconnect to support a new ecosystem based on agility and responsiveness. External
economic pressures, changing consumer demands and expectations, as well as the increasingly
dominant role technology plays require companies to rethink business models, strategies and
what they are really bringing to the consumer. If they don’t, they will fall behind. While the leaders
are shining a light on how artificial intelligence and machine learning go beyond automation to
restructure the way we do retail, companies that have not been able to switch from a “push” to a
“pull” model will see the effect on their bottom line.

Go further and get our following report:

Demand-based production: strategies for survival in a changing fashion world

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