Designing a Soft Goods Supply Chain
Forecasting demand for soft goods can be difficult because demand changes due to fashion trends, weather patterns, and other factors. But artificial intelligence (AI) and machine learning (ML) technologies are changing the way soft goods manufacturers and retailers manage their supply chains.
To understand why, let’s look at the technologies in detail.
AI solutions help parse massive volumes of data from a wide range of sources that companies can then use to understand customer behaviors, supply chain fluctuations, and other business insights.
ML goes hand in hand with AI. It uses self-optimizing algorithms to imitate the way human beings learn. When used in combination with AI, ML empowers businesses of all sizes and across all industries to transform data into insights.
AI and ML enable demand forecasting models that track and analyze historical data to predict upcoming consumer demand cycles. Soft goods companies can use this insight to find ways to keep pace with customer requests year-round.
AI- and ML-based modeling enables soft goods businesses to identify and resolve supply chain roadblocks as well. Since these companies continuously capture data and insights, they can assess the state of their supply chain at any time and constantly explore ways to improve operations. This helps avoid supply chain disruption, maximize productivity, and minimize operating costs.
In addition to using AI and ML-based modeling, soft goods companies can launch and maintain a successful supply chain by taking these steps:
1. Establish a "one-number" plan. One-number forecasting involves creating a plan based on a single operating number. The plan is demand-driven and gives a business the opportunity to make modifications if market conditions change. A one-number forecast can be beneficial for soft goods companies, since many factors can suddenly alter demand.
Use historical data to establish a one-number plan across your supply chain. Create plan goals and maintain flexibility. Assess the plan regularly and make changes as needed.
2. Monitor in-season performance. Soft goods companies commonly use complex spreadsheets for supply chain planning, but these lead to inaccuracies.
Track in-season performance of your supply chain to ensure you maintain a steady stock of in-season items that hit the mark with consumers. This also allows you to cut down on items that fail to meet consumers’ expectations before stock-outs and markdowns are required.
3. Use customer segmentation to your advantage. The best soft goods supply chain plans are built with customer segments top of mind. Companies that segment customers and localize assortments are well-equipped to deliver the right products to the right consumers at the right time. They can accommodate customer requests as well.
Set up your customer segments based on preferred apparel and accessories and fine-tune your supply chain based on these segments. Over time, this will optimize your supply chain planning, sourcing, and replenishment strategies.
4. Streamline S&OP. Sales and operations planning (S&OP) helps soft goods companies determine how much merchandise is required to achieve their goals. Effective S&OP requires a business to account for its people, processes, and technologies.
It is crucial to use S&OP technologies that support integrated business planning and help develop processes that simplify supply chain operations. They also provide supply chain transparency to the point where different departments can work together to analyze data, generate insights, and find ways to help your business achieve its goals.