As the fashion industry sets its sights on resuming retail operations and production without a clear picture of future consumer demand, there is a greater need for near real-time adaptability. And manufacturing models that favor low-cost, high-volume runs will not be as well versed to handle sudden shifts in the retail market.
With limited capital to place orders, being able to more accurately deliver the right product and sell-through with limited discounting will become even more imperative. Sourcing Journal’s “Coronavirus Impact: Battling Back in the Midst of a Crisis” webinar discussed why companies should consider shorter lead times and small-batch production strategies to navigate out of the crisis and beyond.
After delaying payments to factories for goods in process, some companies are now putting in new bulk orders for upcoming seasons, continuing to request discounts or payment extensions. But experts caution this is not the path to take to achieve a financial turnaround.
“The bigger volume you’re going to order, the more risk you’re going to take… There’s a lot around uncertainty and crystal ball reading, and the challenge for the days, weeks and months to come is to reduce all of that ASAP,” said Frederic Gaillard, vice president, product marketing-manufacturing at technology firm Lectra. “So it’s no more about the decision makers to squeeze manufacturers and go for abroad, faraway, low wages, but to try maybe to think differently.”
Smaller runs may cost more up front, but they can actually lead to better financial outcomes for companies as they reduce the potential need for promotions. In contrast, if brands instead focus on the initial markup, but then sell an item at a discount, they lose out on the margin benefit.
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Making this shift to small batches needs to be led by retailers, but it will require cooperation and commitment from all links of the supply chain.
Part of the reason that bulk production still reigns is its attraction for factories. Stanley Szeto, executive chairman of manufacturing company Lever Style, noted that while it can be appealing to drive up efficiency with orders in the hundreds of thousands or even millions, these large volumes that everyone is “addicted” to are a habit that needs to be broken to respond to changing consumer demands for self-expression and individuality.
“At the retail level, coming up with a million units of the same thing, that’s just not going to work anymore because consumers have changing tastes,” Szeto said. “And consumers frankly don’t want to look like the person next door… And if brands and retailers are going to adjust how they cater to consumers, factories will sooner or later have to change their approach.”
Szeto noted that it has often been harder to convince traditional retailers to switch gears to small-batch models than it is to persuade digitally native brands such as Lever Style clients Everlane and Bonobos to adopt shorter lead-time structures. This is in part because direct-to-consumer brand executives often have backgrounds from outside the fashion business. However, this crisis could be the push that urges legacy companies to embrace change, if only out of financial necessity.
Along with getting factories on board, companies need to strategize their raw material sourcing to be able to deliver smaller batches, as mills often require order minimums that are larger than what would be needed for a single run. In order to get around this, Szeto said brands can use fabric platforming, in which they buy one textile and then wait to determine what specific styles and sizes will be cut from it. This will require conversations between the factory and the brand about who is paying for the fabric and taking on the risk and responsibility of textile sourcing decisions.
John Thorbeck, chairman of consulting firm Chainge Capital, believes that companies need to work with factories to develop a more mutually beneficial business relationship with “shared risks” and “shared value.” “The source of speed and flexibility is really upstream in the supply chain…The solution begins right there,” he said. “And I think we have to have a more collaborative attitude so that we can restructure what that relationship is that has more balance but also more benefit for both factories, as well as retailers.”
Moving beyond small batch, there is also an argument for introducing made-to-measure or fully personalized one-to-one goods. Making something that a customer actually requests completely eliminates the inventory risk. However, this model is more fitting for certain categories than others.
Listening to customer wants via social media and other digital channels will be key for determining what to offer and how. Adding to the mix of production models, from small batch to made-to-measure, will also necessitate digital tools that can handle diversified types of runs.
“You need to set up a production tool that would enable [you] to produce any kind of garment,” Gaillard said. “And this is about having this agility and flexibility, and definitely not something that was set up to be only bulk, or mainly bulk. These have to change.”
There is not one single approach that will work for all garment production. For instance, bulk manufacturing may still be appropriate for commodity goods, while smaller batch is better for trend-driven merchandise. But across the board, companies should focus on minimizing the amount of wasted production.
Excess inventory is holding companies back not only financially but also from a sustainability standpoint, making production methods and profitability intrinsically linked topics.
“The new chief supply chain officer is the CEO,” Thorbeck said. “And if the CEO doesn’t embrace these issues and make these strategic to a brand, and to a plan for recovery, then I think those brands are going to suffer. I just don’t think we’re going to merchandize and market our way out of a situation that is so colossally inefficient and needs a new contract between factories and retailers in order to make this industry not just relevant, but much more resilient and attractive.”
Watch the webinar, sponsored by Lectra, First Insight, Eurofins, Texworld USA and Tradewind, to learn:
- The benefits of small batch production
- How Lever Style’s franchise model has helped it navigate disruption
- Where production might move geographically to achieve shorter lead times
- The types of technology that will enable companies to achieve on-demand models
- Who will be the winners post-lockdown, based on first signs out of China
- The outlook for DTC brands
- How COVID-19 will shape sustainability investments
Click here to watch this webinar now. And watch our other coronavirus-related webinars on Agility & Planning and Cancellations & Closures.