From Traditional to Fast Fashion Retail: The Supply Chain Transition

As more and more apparel retailers shift to meet the “fashion on demand” shopping preferences of consumers, the fast fashion business model is king.

In fact, enterprises that ignore fast fashion or underestimate the amount of change needed to compete are losing serious business to brands like Zara, Uniqlo, H&M, and Mango.

For larger entities, it seems the only way to compete successfully is to abandon the traditional two-season cycle of sales, speed up, and focus more on what’s going on in the street than on the runway.

Development of a Fast Fashion Supply Chain

Vertical Integration Wins in the Fast Fashion Race

It’s not called fast fashion for nothing. The companies that have been most successful with this business model are those, like Inditex (owners of Zara) and H&M, that have shortened their supply chains and secured direct control over design, production, and logistics, if not raw material supply.

This would seem to indicate that any apparel company with a vertically integrated structure has a good foundation on which to base a transition to fast fashion.

Advantages of vertical integration in apparel supply chains include:

• Shorter turnaround times
• Improved flexibility
• Tighter process control
• Reduced risk in the supply chain
• Improved oversight of quality
• Visibility of provenance for customers

Of course, ownership of retail stores also goes a long way to enabling fast fashion, as long as certain other performance factors are implemented and executed effectively.

Supply Chain Agility is Critical

Vertical integration and local or regional sourcing/manufacture are two of the most important elements in maintaining the supply chain agility needed to compete with fast fashion trailblazers like Zara. However, agility can be said to begin at the last stage in the supply chain — the point at which consumers make their purchase in-store or place their orders online.

Above all else, in supply chain terms, agility means responsiveness to demand, not just with regard to volume, but also to what consumers want to buy or order.

It’s this quick-response mentality that enables Zara (and similar companies) to break free from the traditional cycle of spring/summer–autumn/winter fashion collections and create their own “mini-seasons” through the year.

They’re able to gather feedback from consumers (via direct communication with their store and regional management teams), turn it into demand data, analyse it, and respond by continuously launching new clothing ranges — which they introduce to market in around a month.

IT and Automation in the Agile Fashion Supply Chain

Companies planning to compete with fast fashion leaders must be prepared to invest in people and technology, since the goal is to get as close to real-time responsiveness as possible. Information systems should be capable of supporting non-linear information exchanges, enabling store managers to pass feedback and requests directly to those in the organisation best equipped to respond.

If there’s anything more important to fast fashion agility than communication, it’s visibility. That’s why successful players use advanced technology to gain transparency throughout the supply chain.

Perhaps the most valuable IT solutions for competitive fashion retailing are enterprise resource planning (ERP) and product lifecycle management (PLM), along with the use of radio frequency identification (RFID) to feed real-time inventory data to these systems.

Manufacturing Considerations for Speed and Agility

Manufacturing strategies to consider include:

• Simplification of clothing designs to speed up manufacture
• Deploying automation as much as possible in the production process
• Maintaining reserve manufacturing capacity in readiness for the need to tweak or overhaul the design of a garment (or range of garments)
• Manufacturing in small batches, using short production cycles for each garment design — this creates scarcity, promotes impulse buying by consumers, and reduces the need for price markdowns

Secrets to Success with Fashion eCommerce

After a decade or so of speculation — first that online, then brick-and-mortar fashion retail was doomed to go the way of the dodo — it’s now readily apparent that, actually, either model will become increasingly hard to sustain without the presence of the other.

The challenge is even greater for companies trying to meet consumer demands for the omnichannel experience, where, for example, a shopper can browse for clothes on a mobile device whilst sitting on a bus or train, head home to place an order online via their laptop, then pick up the item in a brick-and-mortar store the same day.

Skip the Stages and Move Straight to Omnichannel

It seems there’s little benefit to simply adding eCommerce as a new channel to complement a real-world fashion retail presence. The companies enjoying most success are the ones that manage to integrate physical and eCommerce retail channels and enable consumers to switch seamlessly from one to another.

Obviously, this requires intelligent use of information technology, process management, and resources. Companies making the transition to omnichannel will probably wish to add customer relationship management (CRM) to the list of IT platforms, as this is vital to keep track of customer activity across channels, as well as to ensure efficient communication.

A good CRM system will also help to fulfil the communication and internal networking needs mentioned earlier, enabling store teams to capture data about customer preferences for consumption by decision-makers in the design and production functions.

Fast Fashion Demand Forecasting

Regardless of market scope, sales channels, scale, or expansion plans, fashion enterprises must plan as accurately as possible to meet demand, if they’re to avoid the losses associated with stock-outs or obsolescence.

The latter has always been a troublesome problem in the fashion sector, as consumer tastes are fickle. A garment or collection might sell like hotcakes for a few weeks then suddenly die a death, leaving the retailer with large quantities of unfashionable clothing which must be sold at marked-down prices.

Zara Doesn’t Have to Look Far

Some of the leading fast fashion companies have been innovative in countering the difficulties of forecasting apparel demand. Zara, for example, has all but eliminated the need for far-horizon forecasting by turning its model into one that creates rather than predicts demand.

This seemingly miraculous state of affairs is achieved through a number of initiatives which include:

• Close monitoring of consumer purchasing and in-store activity on a day-to-day basis
• Systematic examination of early sales data to help predict future demand for new collections and styles
• Development of a quick-response business methodology, enabling Zara to adapt quickly to changing consumer tastes
• A short, fast, and agile supply chain, which enables inventory to be moved quickly from production facilities to retail stores (anywhere in the world within 48 hours)
• Creation of scarcity (or the impression of scarcity) by producing collections and garments in small quantities which, once sold out, are replaced with new designs

Because Zara is able to exercise this high degree of speed and agility, the company only tends to practise conventional demand forecasting for certain raw materials and components.

The Unique Approach of Uniqlo

Another leader in fast fashion (although it doesn’t view itself as a fast fashion retailer), Uniqlo, takes a very different approach to matching demand with supply. Uniqlo combines the use of sophisticated forecasting technology to predict demand trends with a just-in-time supply chain strategy straight from the Toyota playbook.

The result is not hyper-accurate forecasting, but a supply chain that can react so fast to changing circumstances that forecasting inaccuracies are rarely damaging.

In fact, not only can Uniqlo’s production facilities create and manufacture new clothing ranges in record time, but they’re even able to receive back and repurpose garments from designs which underperform. If a collection or range fails to sell well, the garments are returned from the company’s retail outlets to be transformed into something different.

Transition from Traditional to Fast Fashion: Some Conclusions

With some exceptions (such as H&M, which extensively outsources production), it would seem that to compete successfully with a fast fashion business model, a company must already be — or should prepare to be — vertically integrated.

Control over every stage of the design, production, and distribution process, if not essential, is certainly very desirable.

Other key factors for success in the transition include a short, agile supply chain, proximity of production to the target market, a data-driven approach to capturing consumer preferences, and the development of a “quick-response” methodology to adapt to market trends in real time (or as near to real time as possible).

If your business is navigating this transition, working with experienced inventory management consultants can help you identify gaps and build the agility your supply chain needs.

What’s on the Fast Fashion Horizon?

Finally, it’s important to note that, at the time of writing this article, questions are arising as to which way the fast fashion train is going to head next. As any fast fashion aficionado knows, success as an apparel supplier depends upon connections with consumers, more and more of whom are counting ethical and environmental concerns amongst their criteria for selecting where to shop.

If the “fast fashion is killing the planet” lobby continues to gain momentum, it might pay to consider innovating in a different direction. On the other hand, some retailers are looking to beat the Zaras, Mangos, and H&Ms at their own game, claiming to be on the verge of leading a new revolution in “ultra fast fashion.”

Whichever way the pendulum swings, fast fashion leaders can teach traditional retailers a thing or two about agility — which is wisdom that should never go amiss in an age of customer-centric commerce.