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Repercussions from the pandemic, the ongoing war in Ukraine and soaring inflation are still being felt within the global fashion and beauty supply chains. Almost a third of retail planning executives globally say they feel unprepared for another large-scale supply chain shock, according to new research by software firm Board International, which works with brands including Burberry. Experts say more investment in nearshoring and multi-shoring, plus new technology such as generative AI, is needed to build resilience.
“Are we better prepared [than we were before the pandemic]? Yes,” says Simon Finch, supply chain director at UK-based luxury department store Harrods. “Do we still need to do more? Yes, absolutely. Have we fully harnessed technology to support that journey? Not yet.”
Some brands are still being impacted by the “ripple effect” of the pandemic, says Akash Mehta, CEO and co-founder of haircare brand Fable and Mane. “[The question] is not if we’re ready for the next shock, but if we’re ready to accept the lasting impact of the last one,” he says. “Many have felt global supply chains will bounce back and have absorbed the incurred costs over the last few years. However, three years later, costs are still increasing rather than normalising, making many face the harsh reality that the global supply chain is forever changed.”
Inventory levels are still a challenge for many brands, too, says Christos Chamberlain, UK general manager at global freight platform Flexport. “You’ve come out of a period with a lot of disruption, a lot of capacity crunch, and demand is uncertain. There s definitely an increased interest in technology solutions that can help brands see more clearly what’s happening in their supply chains, giving them the ability to respond more quickly.”
Finch agrees: “The problems are not going away, so we need to be better prepared for the next challenge.”
Harnessing new tech
Latest advancements in technology, including generative AI tools, could help transform global supply chains, says Suren Fernando, CEO of south Asia’s largest apparel manufacturer MAS Holdings, which supplies brands including Victoria’s Secret, Calvin Klein and Tommy Hilfiger. Board International’s research found many retail planners still work on traditional spreadsheet platforms, such as Excel, which prevents them from having real-time visibility.
AI algorithms can analyse vast amounts of historical and real-time data to identify patterns and predict potential disruptions, says Fernando. This data can then be combined with scenario planning, with AI-powered simulation and optimisation models generating multiple scenarios to evaluate potential outcomes. This includes different variables such as demand fluctuations, transportation disruptions, or supplier failures.
Generative AI is helping improve demand forecasting accuracy by identifying complex patterns to capture subtle consumer behaviour changes, Fernando says. Accurate demand forecasts are also helping brands optimise inventory levels and minimise excess inventory during uncertain times.
“Where that becomes critically important is in promotional activity, or in marketing activity,” says Harrods’s Finch. “If we know our beauty advent calendars are going to be delayed because packaging is delayed, or because one of the 25 components is delayed, then we can make decisions about when and how we ramp up that promotional activity,” he explains.
Mehta says automating processes, using historical workflow tools such as SAP, or procurement and fulfilment software from tech start-ups like Precoro and Shipbob, will help supply chains adopt a more agile and tech-focused framework — imperative to prepare businesses for future disruption. However, he warns that as well as investing in the technology, it’s also crucial to build a team of experts that can not only manage these processes, but also advance them as new tools come into the market.
Understanding how to read the data then apply the learnings to the business is crucial, says Board International’s head of global retail solutions marketing, Matt Hopkins. “What we are seeing as one of the biggest adoption barriers to AI is buyers, merchants and planners not really being data scientists. There are great insights coming from machine learning running every single day and every minute of the day but bringing that into meaningful ways that buyers can consume is key.”
Building agility
Harrods’s Finch says retailers are gaining a better understanding of the movement of product, both in terms of supply chain disruptions that may delay it, and where there are opportunities to bring deliveries forward. Harrods has been focusing on how to build agility into its supply chains by driving structural change, balancing cost and availability, and doing more nearshoring and multi-shoring. The latter includes moving some sourcing from China to the UK and Europe, based on what Finch calls the “magic square” model, which has four elements: sourcing locally to lower risk, improved cost, speed to customers and better service.
The move away from China is an important one. In early May, leaders from the G7 nations met in Japan to discuss how to strengthen global supply chains. Top of the agenda: reducing the world’s reliance on Chinese manufacturing so supply chains are more diverse, and therefore less vulnerable to issues in one market (such as China’s stringent Covid lockdowns last year). Nearshoring is also better for the environment, as well as improving lead times.
“We are making decisions now to nearshore, which positions us where we need to be in the future in terms of sustainability. It protects us, it gives us that resilience that we didn t have going into the pandemic,” Finch says. But it’s not easy, he notes: moving its sourcing base has come with challenges such as higher labour costs, availability of materials and technical capability.
Technology and data are helping, though he cautions against relying too heavily on them. “I hate the expression ‘data-driven’, because the data isn’t telling us what to do. It is ‘data-led’ in that the insight from the data allows us to make decisions. Ultimately, we re still making those decisions. But, those decisions are augmented by the technology that we now have.”
Attila Kiss, CEO of manufacturing hub Gruppo Florence, which acquires and invests in Italian luxury fashion manufacturers and works with the large French luxury groups, as well as luxury brands in the UK, America and Italy, says digitisation of the supply chain is crucial to build agility going forward. Gruppo Florence is looking to the automotive industry for inspiration on how to do this: for example, reducing waiting times between single phases of production through better organisation of factory layouts. He says this will reduce lead times by less than half in certain categories, such as leather goods.
“This kind of organisation originally came from Toyota,” he explains. “The brand was one of the first to drastically reduce the waste time between one phase and another. And, from that kind of approach, now it’s possible to learn and be adapted to the leather goods sector.”
The company is also developing a new generative AI tool — currently in test phase — that will enable it to estimate the cost to create a product immediately, rather than the current lead time of a few weeks. Kiss says this will allow Gruppo Florence to give brands a more accurate indication of the cost to design a new product before creating any prototypes.
With a plethora of new technology and key learnings from the last three years under their belts, brands and retailers are already transforming many areas of the supply chain with great success. However, businesses need to be continuously evolving if they’re to stay abreast of the challenges and disruptions in the years ahead.
“The pace of change has never been as fast as it is now,” Finch says. “And, I think the onus on all supply chain professionals is that we have to be prepared to unlearn and relearn. What was true for 20 years or 50 years is just not going to be true in six months, 12 months, 18 months’ time. The biggest lesson we’ve learned is that we do need to operate differently.”
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