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Fashion in Focus Podcast: The Inventory Planning Puzzle

Apparel demand has reached a new level of unpredictability. During the pandemic, the purchasing behavior pendulum has swung from weak sales amid early lockdowns to revenge spending in 2021. Historical data is therefore no longer a strong predictor of market performance.

Retailers are also contending with supply chain disruptions, including expanded lead times and shipping schedules that threaten on-time arrivals of goods. The major risk has shifted from overstocks to understocks, and retailers have adjusted their buying strategies accordingly. In AlixPartners and Sourcing Journal’s recent “2021 Fashion in Focus” survey report, industry executives said they were planning for delays by buying earlier and ordering larger volumes of goods. But buying far out essentially means “buying blind,” explained Joe Schmitt, a managing director at AlixPartners.

As the industry adapts and learns from pandemic pressures, there are still uncertainties in how to navigate planning.

“I don’t think anyone has a clear game plan moving forward around what exactly they need to do,” Schmitt told Sourcing Journal founder and president Edward Hertzman in a recent podcast conversation. “I think the theme is really, ‘How can we be as flexible as possible while still being differentiated in the market?’ And that balancing act is what everyone’s trying to figure out right now.”

Per Schmitt, one strategy for reducing risk is lengthening the selling period by making product less seasonal. Another tactic for retailers is focusing on what is key to their specific business, and buying shallower in areas that are not as crucial.

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To compensate for longer travel times and port congestion, companies can shrink timelines earlier in the process by streamlining design, reducing sampling and working with suppliers to shorten production schedules. This keeps the purchase order as late as possible, allowing retailers to get a more up-to-date read on demand before committing.

Lowering inventory risk also revolves around better interdepartmental data usage. Analytics teams have access to lots of information, but they won’t be able to gather the most relevant insights if they are not connected to the merchandising and buying activities.

“You need to not only know what data to use, but almost as important is what data not to use, and really having a methodical approach around that and how it plugs into the go-to-market cadence in your business,” Schmitt said.

Listen to the podcast episode to discover:

  • Why retailers might be developing and purchasing new product faster than the market demands
  • What retailers can do to better manage inventory in today’s omnichannel environment
  • How to prepare for an eventual easing of supply chain challenges
  • Why sales growth is an outdated metric for retail performance, and what KPIs companies should be paying attention to instead
  • How to overcome “corporate culture” obstacles and break down interdepartmental silos

This is the third episode in a three-part series. Click here to listen to part one on supply chain risk mitigation. Listen to part two on omnichannel operations here.

For a more in-depth look on these topics, download the 2021 AlixPartners + Sourcing Journal Fashion in Focus: Investing in a Future Forged by Adversity report here.