Fashion industry sees massive change to supply chain sourcing

The COVID-19 pandemic saw supply chains tested like never before, with recent McKinsey research finding that 50 per cent of companies in the fashion sourcing industry now have major transformations underway.

According to the article “Revamping fashion sourcing: Speed and flexibility to the fore” by Saskia Hedrich, Julian Hügl, Patricio Ibanez, and Karl-Hendrik Magnus, the surging price of raw materials and shipping costs is the leading concern for sourcing executives for the first time in ten years.

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Withstanding and recovering from the effects of the pandemic will not be easy for sourcing executives, McKinsey highlights several primary supply-chain obstacles to be aware of:

• Shipping disruptions
• Volatility of demand
• COVID-19
• Raw materials
• Online sales

The sudden need to drastically improve speed and flexibility was one that many companies struggled with, and one that the authors believe will be here to stay.

“These are not simply short-term disruptions, and they are challenging the fashion industry profoundly. Adjustments will be substantial, and internal barriers to organisational transformation persist,” the authors say.

In attempting to achieve this higher level of flexibility and speed, a lack of digital tools to support higher efficiencies was the most common internal obstacle reported by respondents.

McKinsey recommends that in order for apparel companies to boost agility, shorten lead times and shift towards a demand-driven supply chain, they should:

• Simplify the assortment
• Focus on efficiency in design and product development
• Decide sourcing-country mix
• Forego partnerships
• Digitise
• Shift towards a new operating model

The article highlights a need for internal upskilling and holistic changes in organisational structures.

To overcome problems with sourcing problems McKinsey recommends investments in digital tools and capabilities, along with creating a virtual ecosystem. And optimising sourcing strategy for net margin. They also say it's important to align the organisation with new incentives and roles.

“Achieving a new trajectory based on speed and flexibility will require a full-blown transformation of apparel sourcing. To maximise the bottom line while meeting shoppers’ needs, organisations must focus on both internal and external factors,” the article says.

“Keys to success will be a digitisation turbocharge, as well as a full operating-model overhaul, including improved calendar discipline and an integrated, E2E mindset; these are radical changes that can help jump-start the brand and keep driving it into 2025 and beyond.”