Ask any supply chain executive about the No. 1 concern today, and the answer is unanimous: COVID-19, the coronavirus. The swift economic fallout stemming from the coronavirus outbreak has been devastating, and nowhere is this truer than in the fashion industry.
Forget the retail apocalypse and the Great Recession; this is the biggest crisis the fashion industry has faced in the past 20 years. With Chinese factories closed or at limited capacity, employees in quarantine, and production halted or slowed down, retailers are reeling from the impact of supply chain disruptions.
“Even if the world turns the corner on containing the virus in the next week or two, economic effects will roll through most of retail, from luxury to discount and everywhere in between,” according to Forbes. Those effects may linger a long time, too. The National Retail Federation reports that is has been “in frequent conversation with its members on supply chain disruptions, the impact on the workforce in China and the cascading effects on logistics and transportation in the supply networks.”
While previous crises such as the SARS epidemic spurred retailers to adopt new policies designed to minimize supply chain disruptions, those policies may be out of date, according to Angela Chan, managing director and president of Chargeurs PCC Fashion Technologies.
“Companies’ supply chains are vastly different, and more complex, than they were at the height of the SARS outbreak in 2002-2003,” she argued in a Sourcing Journal article.
That’s exactly why digital supply chains are more important than ever for helping companies mitigate the impact of supply chain disruptions.
Digital supply chains are essential for managing supply chain disruptions
The digital supply chain has been one of the leading topics among fashion supply chain executives for several years now, and it’s red-hot today in the wake of the coronavirus health emergency. A digital supply chain brings together all the systems, applications, processes and information in the supply chain, uniting all stakeholders on a single digital platform—which makes it an essential platform for managing a supply chain crisis such as COVID-19.
There are many ways that a digital supply chain can help mitigate the damage of a sudden shock to a fashion supply chain, including the following:
Supply chain visibility and transparency. One of the first principles of crisis management is a fast, thorough assessment of the problem—something that can only happen when planning, design, sourcing, production and logistics are part of a single, connected enterprise. By connecting all systems, processes and users in real-time, a digital supply chain enables the visibility retailers need to understand the full impact of a crisis such as coronavirus.
Global collaboration. Companies can access a “single version of the truth” in the supply chain through a digital supply chain platform where all communications about product, material, POs or shipment are linked by style. Workflow calendars and exception management are critical as companies scramble to update production schedules when factories shut down or slowly come back online.
Postponement. As manufacturing capacity returns, retailers can use postponement techniques to delay critical production decisions until the last possible minute. A six-week delay in production may mean that companies miss critical seasonal selling windows, so they can redirect manufacturing capacity to replenish perennial bestsellers, and shift materials to different styles as needed.
Raw materials management. A digital supply chain platform allows retailers to closely manage raw materials, positioning them so they can quickly be deployed to the factories that have actual manufacturing capacity. Materials sitting in idle factories can’t help retailers replenish their inventory.
Vendor management and sourcing. Retailers that have been affected the least by coronavirus are those with diversified sourcing strategies. A digital supply chain platform helps enable this through features such as vendor onboarding and management. Companies can more easily spread their bets across multiple sourcing locations, rather than rely too heavily on Chinese production.
Omnichannel inventory visibility and fulfillment. Inventory shortages due to the coronavirus will continue throughout 2020. A digital supply chain can provide unified visibility to the available inventory in each channel, allowing retailers to quickly move their limited inventory to the channels and stores that have the greatest demand. Direct-to-store shipments will be more important than ever.
These are just a few ways that a digital supply chain provides the right technology platform to manage extreme supply chain disruptions. Fashion retailers with these systems in place are well positioned to weather the storm of the coronavirus, and other retailers can start preparing now for future supply chain disruptions.
The only certainty of a global crisis such as the coronavirus is that it will happen again, in ways that companies don’t expect. With a digital supply chain platform, retailers can be prepared.
Mark Burstein is president of NGC Software.