Sourcing Journal: Is Supply Chain Agility a Company’s Secret Weapon? –
SHEIN Webinar with GoodOps & BCG

If there’s one takeaway from the pandemic, it’s that an agile supply chain can make or break a company.

The pandemic exposed supply chain vulnerabilities that caught many fashion brands and retailers by surprise. Companies that didn’t have the agilities to pivot around isolated problems, solid supplier relationships to gain access to limited resources, or supply chain visibility beyond Tier 1 to appease an increasingly demanding consumer, were left out in the cold. Shifting consumer priorities also put pressure on fashion brands to produce faster, more broadly, more sustainably and without added cost—a four-way challenge if there ever was one.

The webinar “Agile Supply Chains: The Future of the Fashion Industry,” outlined how nimble supply chains offer a major competitive advantage, including improved customer responsiveness, faster time-to-market, reduced inventory holding costs and enhanced collaboration with suppliers. The discussion tapped into the knowledge of Donald Tang, executive vice chairman of global fashion and lifestyle e-retailer SHEIN; Veronique Yang, managing director and senior partner, Boston Consulting Group (a recent study outlined SHEIN’s supply chain advantages); and Divya Demato, CEO and co-founder of sustainable supply chain consultancy GoodOps.

Achieving supply chain agility is not easy, but digitization that empowers suppliers along the value chain to be more efficient, self-sufficient and make smarter choices is a sure path. It also requires a cultural shift and revolutionary rethink on the scale of Henry Ford’s auto assembly line, Walmart’s everyday low prices or Amazon’s overnight shipping.

And with consumers wanting more, more, more—from endless trend options to more inclusive sizing—brands must strike the delicate balance of creating more while keeping production waste to a minimum. This can only be achieved by really knowing what the customer wants, then using shared information and services, material economies of scale, and sharp manufacturing technology to do it efficiently.

“We reimagined the supply chain, which is a daunting task, and we have done it by digitizing the small- and medium-sized factories to give them visibility to see their own capacity, continued order flow and seamless efficiency. [We also] give them better liquidity because we pay them very fast and give them volume discounts on the raw materials,” said Shein’s Donald Tang. “All these benefits help them make better choices in terms of investments and how they run their factories.”

It comes down to collaboration and shared goals, so all stakeholders are on the same page. “The pandemic also drove the different parties of the ecosystem—suppliers, manufacturers, brands and retailers—to work together to solve frictions and problems,” said BCG’s Yang. “And digitalization is a very important foundation to enable that.”

Digitization links the chain

To get the best commercial performance out of the supply chain, companies must balance cost, speed to market and quality, said Yang, who noted SHEIN’s accurate demand forecasting, digital sampling to reduce inefficiencies, and new DTC approaches.

As fabrics account for approximately 65 percent of a garment’s costs, SHEIN takes steps to help all its suppliers, no matter their size, optimize their textile buys. Based on market forecasts, SHEIN consolidates the fabric early on, then digitizes fabrics so its suppliers can instantly and easily place orders. Digital analysis then looks at which factory is optimized for an order, reducing redundancy and wait time.

On speed to market, digitalization streamlines production and orders, removing admin and coordination time, while preset criteria creates alignment with all players. On quality, a digital feedback system helps “identify and contain” quality issues.

“People think it’s very hard to control quality when you’re trying to control a call center, but with the digital system, you can feed all the quality issues back into the system. And then this can lock into the average crux of the supply chain,” Yang said. “So starting from the design, you are already pre-answering the potential quality issues.”

Sustainability must drive end of life

As most of fashion’s impact happens upstream, it’s up to the brands to cut production waste and harmful emissions—without passing along the costs to consumers who say they are willing to pay more for sustainable goods but don’t always demonstrate that with their wallets. SHEIN’s on-demand agile supply chain facilitates sustainability by effectively addressing over-production through the alignment of production with customer demand, responsive order fulfillment, reduction of excess inventory and waste, and enhancement of overall supply chain efficiency.

But there’s also an urgency to explore what is happening downstream, especially since fashion demand isn’t going away. And more fashion merchandise coming into the world means more must be dealt with on the other end.

“Sustainability is very challenging. Yes, there can be less waste upstream, but how many articles of clothing downstream are going into the world?” said GoodOps’ Demato, noting that only a miniscule percentage of fashion is recycled, and even garments made from recycled bottles don’t remove fashion waste from landfill. “What can we do upstream with more sustainable materials to help what happens downstream? From a circularity perspective, we have to think about the entire system. That’s a very critical piece in this entire conversation.”

As a major fashion retailer, SHEIN is taking this seriously, but concedes it must be a global effort.

“It’s all going to come down to whether we work together or not, because if we tried to do these things separately, then everybody will fail,” said Tang.

One sustainability action SHEIN recently took was to partner with Queen of Raw, a company that sources existing materials from brands and retailers looking to responsibly clear out their excess fabric inventory rather than have it go to waste in landfills. The company says that diverting 1 million yards of fabrics from excess inventory would set SHEIN on the trajectory to become one of the global leaders in repurposing deadstock materials, helping conserve water and preventing the creation of carbon dioxide equivalents that would have been generated through conventional production methods.

“We have to take bigger steps to really address that through a point of view,” Tang added. “If you can find a way to do well while doing good, and do good while doing well, that’s a great resource.”

Sourcing Journal