Transforming Fashion Supply Chains in A High Inflation Environment

April 2023

The global pandemic and the war in Ukraine have placed intense stress on global supply chains. Purely cost-based models have shown their limits, and fashion companies are now trying to pivot, as uncertainty is the “new normal”. They also need to anticipate regulatory shifts in terms of sustainability to plan for the future. From using AI to investing in bioengineered fibres or nearshoring some operations, this briefing looks at the steps companies can take today to build their future resilience.

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This report comes in PPT.

Key Findings

A shadow lies over recovery

While global sales of apparel and footwear bounced back more quickly than previously expected, the war in Ukraine, all time high inflation and China’s strict COVID-19 policies have further disrupted the global economy, forcing market players to reassess their supply chain architecture.

Multisourcing and nearshoring

Geopolitical considerations have led fashion players to reassess their supply chain locations, moving away solely from cost considerations to take into account the need to secure timely deliveries; however, for nearshoring or reshoring to scale up, legislation and public investment will be essential to create production clusters.

New partnerships and verticalisation

The pandemic highlighted the need for better collaboration with supply chain partners, while some market players have sought vertical integration, to help cut costs and secure their access to craftmanship and materials, or reduce reliance on wholesale in order to control their image and prices.

Embracing AI and digital tools

Automation and smart technologies can help reduce inefficiencies within supply chains, for example by working around the clock and ensuring resilience in the event of another major health crisis. Technology, especially AI, could also empower brands to better manage inventory and forecast demand.

Next generation of man-made fibres

Innovation in materials is being pursued in anticipation of new environmental regulations in fashion, and because conventional commodities are seeing their prices soar. In the future, these new materials could facilitate nearshoring, which remains difficult at present owing to the challenges of sourcing raw materials.

Traceability as a strategic imperative

Traceability is becoming critical to identify risks, in terms of sourcing as well as green claims or forced labour, and to help prove compliance with relevant laws, in due time. Consumers increasingly demand that companies are more purpose-driven, and regulation in that regard is toughening.

Executive summary
The global economy has not fully recovered from the contraction caused by COVID-19
European crisis leads to mass inflation and further disrupts the global economy
Businesses expect consumers to focus on essential purchases
Fashion supply chains are over-reliant on China
Textile industry among those most vulnerable to global shocks
Today’s key pressures force the fashion industry to transform its supply chain
Redesigning a “crisis-proof” supply chain today
Embracing digital solutions and automation tools
Ecco rolls out 3D printing footwear production lines for shorter iteration cycles
Levi’s and Google have an AI tool to assist with pricing and demand forecasting
Nike has deployed 1,000 “ cobots ” throughout its factories and a repair robot, BILL
Multi-sourcing and nearshoring as risk mitigation measures
Geopolitical considerations are pushing a realignment of global investments
International brands are likely to maintain a footprint in China
C&A opens jeans factory in Germany and New Balance opens fifth facility in the US
US brand Steve Madden has shifted 50% of production from Asia to Latin America
Mango has deployed a mix of long distance and proximity supply tracks
New collaborations with supply chain partners and vertical integration
Nike banks on DTC to gain control of its distribution and pricing strategies
Golden Goose secures 40% of production in-house with the acquisition of IFT
American Eagle Outfitters has acquired Quiet Logistics
Reviewing the role of products and services through a “less is more” lens
Mosaert’s seasonless and unisex collections remain for sale until they are sold out
Inditex repositions Zara Home and launches eco-friendly laundry care with BASF
Farfetch dresses influencers digitally, to gauge demand on its pre-order offering
Turning to material innovation to alleviate supply-chain bottlenecks
The H&M Foundation and HKRITA unveil cotton garment that captures CO2
Inditex signs EUR 100 million deal to secure supply of Infinna recycled fibre
Lycra will use Qira’s BDO made from renewable corn feedstock, from 2024
Increasing transparency and traceability
VF Corp has released Tier 1 through Tier 4 supplier information via SourceMap
Mango uses QR codes on its labels and discloses the list of its Tier 1-3 factories
All Asket garments come with a detailed “impact receipt”
Hogan uses “digital twins” to give visibility on its supply chain (and create hype)
Tomorrow’s supply chains look less global and more regional
Changes happening today will shape tomorrow’s supply chains

Apparel and Footwear

Apparel is the aggregation of clothing and footwear. This dataset covers retail sales of apparel through both store-based retailers and non-store retailers. Excludes black market sales (i.e. untaxed, generated within informal retailing)and duty free sales (travel retail). Items must be new when sold to the consumer; second-hand/used items are excluded. Antique and/or vintage clothing and footwear is also excluded.

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