25 March 2022
Fashion supply chains are always looking for higher performance, in pursuit of increasingly ambitious and complex goals that are pushed forward from time to time – yet they are never able to reach them with full satisfaction. This phenomenon still occurs today, in extremely complex and unpredictable times, and it reminds me of the famous paradox of "Achilles and the Tortoise" by the philosopher Zeno from Elea (fifth century B.C.), who described "movement as if it were an illusion".
In simpler words, these supply chains – although they strive to reach these goals – look like they are moving steadily but at a way too slow pace... And thus they are always late.
Today, it is not an easy task to find a company, be it big or small, that is not doing meetings (often quite animated) among its business units – Sales, Merchandising, Operations and Supply Chain – to discuss delivery delays, stock breakdowns, high levels of stock in the wrong places, lack of productive ability (internal and/or external), long lead time of supplying, to make a few examples.
It seems incredible (after two years in which there has been much talk of resilience, agility, reactivity, etc.) but unfortunately the situation is still unchanged.
The pandemic has undermined many of the assumptions made by global supply chains in the past decades. Still, there are some factors that have been overlooked by companies for a longer time:
The lack of planning related to the management of owned resources and a company’s supply chain: many companies are desperate to ensure high levels of productivity, and must face increasing demand on international markets and a realignment of stock levels at the level of central warehouses and distribution after the great slowdown of the recent years. This means that they did not work thoroughly and in advance on these processes.
The culture of "Make to Order" and the possibility of working on a very long Time to Market (in fact, a whole season, from sales campaigns to pre-season or in-season deliveries) have substantially favoured an approach that is more oriented to efficiency (related to saturation, minimum batch, volumes, repeatability, etc.) than effectiveness. Productive lead times have never been really questioned and "passed to the X-ray" with the tools offered by the Lean Manufacturing method (other sectors have done so and today these methodologies and skills are given for acquired and continuously improved).
The processes are not sufficiently integrated and agile: it is evident that the recovery of the demand of the markets and especially of the Retail channels (both physical and digital) is generating a shock wave (the so-called "Bullwhip Effect") which gradually goes back up the value chain of companies, also causing strong fluctuations, and therefore influences the three main industrial processes: Product Development & Industrialization; Production; Supply. These processes and functions are still too articulated and slow; it is fundamental, instead, that they are reframed to work in a more integrated way and depend more on the market’s demands rather than their managerial and technical constraints.
The lack of investments and management tools: the scarcity, in the sector, of innovative tools of Supply Chain Intelligence and Supply Chain Collaboration (solutions that other sectors have often adopted with excellent results) makes more problematic the collaboration between the various actors of the supply chain – which is relevant, being a field that is greatly based on outsourcing and networking. This is an obstacle to improving the company’s agility, reducing and compensating for the effects of the market’s fluctuations, and orchestrating their supply chains more effectively.
We hope, therefore, that companies of the fashion sector will be able to speedily respond to these critical issues, and overcome them to return to the levels of competitiveness, investment and profitability that have been achieved in the years before the Covid-19 pandemic. In this view, the largest corporations need to play an active role, by guiding and fostering innovation among SMEs, which are disseminated along all supply chains.
Commentary by Flavio Sciuccati, Senior Partner of The European House - Ambrosetti and Director of the Global Fashion Unit