Fashion put to the test: what challenges lie ahead for the Supply Chain?

The future of fashion depends on the ability to address and tackle the challenges on the industrial front. The European House – Ambrosetti and the managers of leading fashion companies working together to map out the path to evolution.

Fashion put to the test: what challenges lie ahead for the Supply Chain?

New markets and return to the “made in”

Article by Cecilia Castelli – Global Fashion Unit

The fashion sector, above all when it comes the luxury segment, has, over the years, attracted the attention of investors by virtue of a growth trend with significant margins (EBIT percentage even higher than 25%). Today, however, the space for growth is shrinking, competition is increasingly more intense, and achieving results that will satisfy shareholders cannot be taken for granted.

“To succeed in the world of fashion it is necessary to translate the brand's strategy into a strategy of the Supply Chain” This is what Bernard Arnault has been saying for years, and the Head of Strategic Merchandising of one of Italy's most brilliant luxury brands has repeated this again recently. The European House - Ambrosetti’s Global Fashion Unit is convinced of this - so much so in fact that it has set up an ad hoc process it plans to share with the industrial managers (and others) of the leading names in fashion-luxury.
The challenges to be faced are many

Concerning the market, consumers are increasingly more attentive and informed. They’re not willing to waste time, money or attention on products and experiences in which they do not recognize a true differential in value that is verifiable and sustainable. The success of fast fashion, the ever-more frequent online purchases, and the recent turnaround towards fashion of global leaders in e-commerce shift the competition increasingly onto very fast responsive models.

On the industrial front this means, above all, reviewing the traditional approach for which the margins are mostly generated by seeking a spasmodic reduction in the product or purchase cost. It is necessary to switch to a logic that focuses on the capacity to generate value for the client (even, and above all, through operational processes), a capacity that must also be explained both to clients and shareholders, not by means of an adequate storytelling, but also by rethinking the KPI system on which the industrial and procurement structures are measured.

It means switching to a “transparent” business model which brings to the fore the steps that generate attractive products and experiences and justify their premium price. It also means guaranteeing respect for the environment, for the social contexts within which the brand is included and for the supply chain partners, with a view to the creation of sustainability in all three of its dimensions.

Moreover, it means to innovate, both from a technological and organizational perspective. Just talking about digital isn’t enough, simply having the enabling tools won’t do. It is necessary to intervene on the organization and on processes, so that the Supply Chain can effectively communicate with the Style and Merchandising functions, making the technical and quantitative skills available and then synchronizing all the procurement, production and distribution activities in order to become more efficient and quick.

All of this in a global context, in which the geographical configuration is constantly evolving. This entails new markets to be reached, always maintaining an excellent level of service, but also a review of the acquisition and production sources, in the direction of a return to the “made in” that are viewed as an added value.

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