IN TODAY’S WORLD, HOW CAN FASHION RETAIL INDUSTRY MITIGATES ITS SUPPLY CHAIN RISK

By Sehrish Huma; MBA (SUPPLY CHAIN MANAGEMENT)

KARACHI UNIVERSITY BUSINESS SCHOOL

In recent years, consumer demands have made fashion industry’s supply chain management more challenging. As the years passes fashion retail industries are facing high seasonality, means fashion item may only have a shelf life of a few weeks before consumers move on to new colors, designs or textures. Fashion industry is likely to be very short and also facing high volatility because consumer gets easily influence by celebrity style.

Nature of fashion industry is unpredictable and has a short life span and needs to ‘refresh its products in a timely manner. With the increase fashion trends and awareness of the fashion industry, many retailers facing different risk in maintaining their supply chain in the highly competitive fashion market. One of the most important risk fashion retailers are facing is technology, today consumer can easily compare prices through social media. Even consumer wants more time browsing over internet rather than wandering in the shopping malls. Access to this information has made fashion retailers more sensitive about setting their prices. Because of the price pressure many retailers start outsourcing from low cost market.

Risk Scandal: (M&S) Marks & Spencer
In the early 2000s UK retailer Marks & Spencer struggled initially to migrate from its traditionally UK-focused sourcing strategy when pricing pressures forced it to source from low cost markets. It was not able to maintain a just-in-time delivery schedule to its stores and also quality fell.

Everything comes with a cost, when we use outsource strategy many retailers fails to manage its supply chain. They have to face delays which increase the lead time and in such an environment the risk of both obsolescence and markdown is high as well as the significant inventory carrying cost that certainly is incurred somewhere in the supply chain as a result of the lengthy pipeline.

The combined effect of these risks clearly provides fashion retailers a challenge to manage its supply chain in a timely manner, but retailers can mitigate risk by establishing supply chain strategies.

RISK MITIGATION STRATEGIES
Trend Analysis It is necessary for fashion retailers to have a strong fashion sense, also recognizes when such trends are on the decline and the ability to predict fashion trends in order to create a strategic sourcing plan.
Apparel inventory Management Having relevant historical data based on demand changes by season, year, location, promotion, and event, can help fashion retailers to accurately plan product allocation, pricing, assortment, and new product replenishment.
Agile supply chain Today, more and more companies are succeeding not because they have the lowest priced product and not because they have the highest-quality or best-performing product, but because they are able to respond quickly to market needs and get the right product to the right customer at the right time. Companies like Zara, the Spanish apparel retailer, have used speed as their primary competitive advantage to succeed in the marketplace.
Quick Response (QR) To Demand fashion retailer should follow pull model in their inventory and supply chain management. They should create designs every month based on store sales and current trends and also should monitor customer spending’s in the store to evaluate and understand what types of designs are being consumed and then accordingly iterate on their next designs. 
Small Batch Productions To have a fast turnover, fashion retailers should produce small number of quantities for every product. This gives them the opportunity to quickly understand what designs are successful. It is also a great way to explore new designs and understand its acceptance rate in the market. This also heavily reduces the risk of producing large quantities of something that the customer does not want Zara is very famous for its time based strategy. In order to launch a new product within 15 days, Zara uses a small lot production.
Postponement Apparel maker Benetton Group also practices postponement. An inventory of undyed shirts gets stockpiled in one location; coloring takes place only after specific orders have been received. This postponement of demand across geographical areas, and across colors, helps Benetton greatly reduce inventory risk while more effectively meeting customer demand.
Multiple sourcing In a competitive environment fashion retailer should not only one supplier. They should improve availability and reliability of raw material by building close relationship with multiple suppliers.
Distribution center To be responsive and efficient in fashion retail industry, retailers for fast moving product should have decentralize distribution center and for slow moving product they should have centralize distribution center.

A wide range of risk from increase in fashion trends to high seasonality, many retailers have been facing different risk in keeping their brands in the highly competitive fashion market which always made this category tough. But if they follow some supply chain strategies which is above cited so they will be able to mitigate its risk which will help them to enhance their profit with satisfied customer.