Apparel Logistics: Stepping Out in Style
Brand owners and retailers try refashioned supply chains on for size.
Beset in 2016 by global turmoil and economic uncertainty, the $2.4- trillion global fashion industry looks ready to recover in 2017, according to a McKinsey and Company report.
In 2016, the apparel market suffered from tremors such as the terrorist attacks in France, the vote for Brexit in the UK, and the ups and downs of the Chinese stock market, says The State of Fashion 2017. At the same time, fashion companies raced to keep up with an ever-more demanding customer base, and with technology that continuously remakes the way we shop.
Some apparel industry trends, such as "fast fashion" and the market for "athleisure wear," have been developing for several years. Other movements that are making an impact include customized apparel, e-commerce consignment, merging e-commerce with brick-and-mortar showrooms, and a push for more environmentally sustainable business models.
Each trend brings its own supply chain challenges. How are brand owners and fashion retailers responding? Let's have a look.
As You Like It
Nowadays, personalized style isn't reserved just for wealthy consumers who can take their desires to a dressmaker or tailor. Thanks to e-commerce and "mass customization," you can buy anything from a pair of shoes to a complete ensemble made to your measurements, with the fabric, color, trim, and other elements you prefer.
Among the notable players in this personalized fashion market is Indochino, a Vancouver-based firm that specializes in custom-tailored men's suits and shirts, plus accessories. Indochino sells its made-to-measure clothing through its website and one dozen showrooms in Canada and the United States.
Whether he checks out suits in person or peruses the selection online, the customer who orders from Indochino starts by providing measurements. For e-commerce customers, Indochino uses a video to show how to collect the right data and provide information about posture and body shape. These details are crucial for ensuring that the garment will fit and drape correctly, says Clay Haeber, Indochino's chief operating officer.
Next, the customer picks a fabric and color. "Then we'll walk the customer through the customizations, giving recommendations on what's trending in fashion, whether it's the style of the pockets, one button or two, wide or narrow lapel, pleats in the pants or not," Haeber explains.
Indochino allocates the right fabric from its inventory and feeds all the details to its factory in China, where a software-driven system creates the custom pattern. Then the fabric, pattern, and associated buttons and trim move from station to station on the production floor. Workers cut the fabric, assemble the garment, iron it, and send it through several stages of inspection and quality control.
Indochino ships its finished products from the factory via air to customers around the world, with most packages bound for North America.
It takes about 11 days from the time a customer places an order to the time the finished product goes out the door. That quick turnaround is crucial, as is air transportation. "A high percentage of our customers are buying clothes for an occasion—a wedding, a graduation, a new job—so they're on a deadline," Haeber says.
Indochino ships packages to the United States individually, to take advantage of a rule that allows items worth $800 or less to enter the country duty-free, as long as the shipment is addressed to the actual end consumer.
An alternate strategy applies to shipments bound for Canada, which has different regulations. "We package individually for the end user, but those packages are consolidated into a single entry," Haeber says. "That reduces our costs." After a shipment enters Canada, Indochino breaks it down for final delivery.
Like any fashion company, Indochino must carefully manage its relationships with overseas contractors. "Doing business in China is all about capacity planning and commitments," Haeber says. "Forecasting is critical."
Indochino used to spread its production across five contract manufacturers in China. "We reduced our risk by having many sources of production capacity," Haeber says. Then, a new production partner offered to make a strategic investment. Company officials decided to name that partner its exclusive suit supplier. "We will be moving a lot of our shirt production to them also," he says.
Working with one production partner makes vendor management much simpler. "We have our own production management staff that oversees what's going on in the factory," Haeber says. That presence provides visibility, a crucial element in the made-to-measure business model.
"If we have a production problem, we can't just tell the customer, 'Sorry, the suit for your wedding will arrive late,'" Haeber says. "Having a tight partnership with the factory, being able to track orders and proactively identify bottlenecks or other production issues, becomes critical."
Life of Athleisure: Spandex Meets Cashmere
Leggings, running shoes, yoga pants—you see them everywhere from family parties to the grocery store to Sunday brunch. The athleisure wear trend stems from the public's love of comfortable fabrics, and from a desire to look fit and energetic even in venues where no one breaks a sweat.
The difference between active wear and athleisure wear has a lot to do with the look and quality of clothes. "Athleisure wear is more about the design and the fabrics than it is about throwing on basic sweatpants and deciding you're dressed OK to go to lunch," says Andrew Lynch, president of Zipline Logistics, a third-party logistics (3PL) provider based in Columbus, Ohio.
For example, some designers today use cashmere blends for the kinds of items they used to make in cotton. "Or the designers are finding ways to blend cashmere with other fabrics to make it machine washable," he adds.
Those fabrics have nudged what used to be ordinary sports apparel into a higher-value fashion category, creating new concerns about security. "If that product is on a truck, we know that we need to follow routes that are similar to how we handle high-theft products," Lynch says.
So Zipline is taking greater precautions for some retailers that sell sports apparel. For example, it uses trucking companies that carry insurance sufficient for high-value loads and make sure drivers stay in communication with the dispatch team. "We also give drivers advice about how to park at truck stops—for example, under lights wherever possible," Lynch says.
Second Time Around
If you want to snag a Chanel skirt or a Saint Laurent blazer at a bargain price, you don't need to hunt down the nearest consignment boutique. Online resale is thriving.
One player in this segment, SnobSwap, says the market for online consignment is growing by 10 percent annually. Investors backed e-commerce consignment companies to the tune of more than $500 million between 2011 and 2016, according to Forbes.com.
"It's a growing trend," agrees Michael Roe, account executive at Carlstadt, N.J.-based materials handling automation solutions vendor DMW&H, which works with several clients in the online consignment fashion segment. "Online resale gives shoppers access to brand-name, gently used high-end goods—shoes, purses, jewelry—at a fraction of the price of new."
The boom in e-commerce consignment poses an interesting supply chain challenge for one DMW&H client: how to build a distribution infrastructure to keep pace with rapid growth. "We had to look at their forecasts and projections, and design a system that can flex and grow with them," Roe says.
A second challenge stems from the fact that every item in a consignment business is different. There's no point installing storage slots designed to hold 100 units of a single stockkeeping unit (SKU). "The company handles a wide range of apparel—men's fashion, women's fashion, shirts, pants, scarves, gloves, shoes," Roe says. "Everything has to have its own, unique location, and that takes up a huge amount of space."
Some items the client sells, especially accessories such as designer golf bags and men's watches, require special handling; shoes do as well. Conveyors and rails don't work for them. But standard apparel is more amenable to automation. "We installed a garment-on-hanger rail system," Roe says. "We also added some flat storage for other items that can be handled in that space."
Given the client's pace of growth, DMW&H decided it was best to go slow on automation in the company's distribution centers. "They can grow into the system that we've already designed and implemented," Roe says. "We can further automate as growth continues." DMW&H recommends that a company in this situation build out its equipment in phases, based on which products are seeing increased demand.
"If the faster-growing segments of their business justify automation—if the product will convey well, if it's an item you can get in and out by moving it around on a machine—that makes a lot more sense," Roe says.
As the e-commerce consignment market continues to grow, apparel companies must take care to avoid bottlenecks in their distribution networks.
"The people who shop at these sites are very 'right now,'" Roe explains. "If they order an item and it doesn't get to them in a reasonable time, they will not come back. So we see apparel companies increasingly focused on how to get their products in and out more efficiently."
Need it Now
The "right now" attitude applies throughout the world of e-commerce apparel sales. Retailer efforts to satisfy customers who want immediate delivery extend beyond the distribution center into the transportation network.
"Many of our customers historically shipped all their products by ground transportation, which involves a longer transit time than they require to satisfy consumers' 'need it now' expectations," says Melissa Runge, vice president of analytical solutions at Spend Management Experts (SME), an Atlanta-based transportation consultancy. SME has helped those customers negotiate transportation agreements that include the use of second- and next-day air, along with ground options, anticipating that faster service will become more important in the future.
SME also helps apparel companies adapt to another industry trend. While e-commerce has changed the way people shop for clothes, as well as for many other products, ordering jeans, a bathing suit, or shoes online is never as simple as ordering, say, a coffeemaker. What looks great on the on-screen model may not look the same on you.
Many merchants approach this challenge by offering free return shipping. Others use a strategy that puts a little brick-and-mortar back into the e-commerce channel.
"Some of our clients provide guideshops or customer experience centers that allow customers to touch, feel, and try on apparel, and then order through mobile devices," says Runge. The guideshop stocks samples of the retailer's product lines, but there's no inventory for customers to carry out the door.
For those companies, a foolproof inventory replenishment system is even more crucial than it is for merchants who rely purely on e-commerce. "We can't get a 'not available at this time' message when the customer has just spent the time to go in and touch and feel," Runge says.
One SME client ran into this problem when its 3PL provider failed to provide up-to-date inventory data. "Not only did they lose business, but they had offered guaranteed availability," Runge says. "They were giving away an incentive when an item was not available."
SME helped the retailer set up service level agreements (SLAs) with its 3PL. "The agreements included fill rates and penalty language for not meeting the requirements of fast inventory replenishment and accurate inventory availability," Runge says.
Make it Snappy
As the need for speed has altered the way apparel companies fill customer orders, it has also forced changes all along the supply chain.
Catering to shoppers who love to keep snapping up whatever is new and trendy, fast fashion retailers such as H&M, Zara, and Forever 21 have learned to propel new styles from sketchpad to store in just a few months. These companies hit the market with wave after wave of new items, priced low enough to keep customers continually refreshing their wardrobes.
Zipline Logistics increasingly encounters the logistics ramifications of fast fashion in its work for clients, Lynch says. Consumers are buying differently, and that influences apparel companies' supply chain strategies.
In the past, it made sense for large clothing retailers to buy 1 million units of one pair of pants: they would sell 90 percent of that product at full price across perhaps 2,000 stores, and then put the other 10 percent on sale.
"Today, however, everyone is on their toes from an omni-channel perspective," Lynch says. "It's harder to track what volumes will be at different stores." So companies are sourcing items in smaller quantities, joining the fast fashion market even if that wasn't the original plan.
Shifts in consumer tastes are pushing fast fashion as well. "The generation that seems to have a lot of retail buying power isn't necessarily interested in mass-produced product," Lynch says. "They're more interested in what seems like curated product." That's why retailers such as Zara and H&M have performed so well.
One result of fast fashion is greater demand for less-than-truckload (LTL) transportation services compared to full truckload. "These retailers are not stocking their stores in the same way they used to," Lynch says. Demand for package delivery is increasing as well, as more retailers rely on suppliers to drop-ship e-commerce orders directly to customers.
In a world of ever-shorter attention spans, fast fashion might not be speedy enough. That's the premise of Lesara, a German e-commerce apparel merchant that calls itself not simply fast, but agile.
"Agile retail is about understanding through data what trends are popular with consumers at this moment, and being able to act on that instantly, with a seamlessly integrated supply chain," says Roman Kirsch, founder and CEO of the Berlin-based firm, which currently sells into 24 countries in Europe.
Lesara has developed tools for analyzing information drawn from numerous sources—such as Google Trends and various fashion blogs—to continuously track what people want to buy. "Additionally, we constantly evaluate our own data to identify bestsellers in our online shop," Kirsch says.
Working with a network of international suppliers, Lesara gets new products into production, based on the latest trends, sometimes in a matter of days.
"For example, last year we came across a blogger wearing LED sneakers and knew right away that this was a product with huge potential," Kirsch says. The merchandising team chose one of the company's qualified suppliers to make LED sneakers, and Lesara's in-house photographers used product samples to take pictures for the e-commerce site. "We managed to have the sneakers online and available on our website only one week after spotting them," he says.
To stay in synch with quickly shifting customer desires, Lesara manufactures its products in small volumes at the outset, and then replenishes based on real-time demand. "Our model works well in an online world, where it's the selection that matters," Kirsch says. "Low initial inventory levels allow us to test different styles and offer a selection that is unparalleled among other offline and online fast fashion retailers."
While sparking new supply chain strategies, fast fashion has also created waves of anxiety about what happens to clothes that consumers cast aside to embrace new offerings. Fast Fashion is Creating an Environmental Crisis reads the headline of a September 2016 Newsweek article.
Some of the big fast-fashion brands have launched sustainability initiatives. H&M, for example, operates a large used-clothing recycling facility in Germany. Some other companies make clothes from recycled textiles.
The Renewal Workshop, a small startup in Hood River, Ore., takes a different approach, partnering with several apparel brands to bring new life to clothing that is otherwise unsellable. Those partners bundle up hoodies with broken zippers, shorts with ripped seams, and sweaters that got left behind in the clearance sale, and send them to Hood River instead of to the landfill. These items include product that never went out the door and product that customers have returned.
The Renewal Workshop repairs and freshens many of those items and offers them for sale on its e-commerce site.
"We had to create a unique website and architecture to be able to do that, because we don't sell 1,000 of one item," says company co-founder Nicole Bassett. The Renewal Workshop co-labels its products with its brand partners, which currently include prAna, Ibex, Toad&Co, Mountain Khakis, and Indigenous. "They get a revenue share back when we sell the product," she adds.
The Renewal Workshop currently receives about 2,500 items per month in its 7,500-square foot facility and processes about 1,000 each month.
If an item is too damaged to resell, the company might "upcycle" it into a new product. "For instance, we could turn a pair of pants into a pencil case or a tote bag," Bassett says.
In the long run, the company plans to aggregate some of the clothing it can't repair and send it to textile recyclers. Brand owners have a tough time doing that themselves because each company uses multiple materials—polyester, nylon, cotton and so on. "You need to have multiple relationships with recyclers," Bassett says. "Brand owners can't do that because they don't have enough product."
Plans also call for brand partners eventually to take back some of their repaired items and sell them as refurbished product.
Like an e-commerce consignment shop, The Renewal Workshop faces the challenge of managing an inventory of unique items. The company uses a warehouse management system that has been modified to locate items that are not grouped by product type. "Pants are next to shirts, for example," Bassett says. "We organized it that way so there's a lot of flexibility in stocking and finding products."
Each item has a unique identifier, contained in a barcode label. Those labels used to pose a problem when it came time to fill an order. Some were attached in ways that made items hard to locate quickly—affixed to the waistband of a pair of pants, for instance. "We can't just open every product, unfold it, and find the barcode," Bassett says.
Eventually, employees devised a solution: a paper wrapper that holds the barcode and doubles as a packing slip. "Now the barcode is on the outside, where it's easy to scan," Bassett says. "And the wrapper contains all the information we need for marketing and customer service."
One unchanging principle in fashion is ongoing change. That's true in commerce as well, especially commerce backed by new technology. Brand owners and retailers can't keep pace simply by refreshing their designs; they also need to restitch their supply chains.