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Fashion industry: The supply chain in times of pandemic

How can we be prepared for surprises?

Logistics has evolved from a supporting process in the value chain to a core process. Only those survive in the market who convince the customer with their reliability, speed and service orientation in the supply chain. The customer no longer just buys a product, but also the service in logistics.

In recent months, the textile industry in particular has had to cope with earthquake-like fluctuations in demand. During the Corona Lockdown, the branches and clothing stores were or are closed from one day to the next. The entire seasonal business was tilted. Parts of the demand volume were shifted to the online channel, albeit with a different focus: The business suits were left behind and the comfortable home sweaters and jogging suits were the order of the day. Likewise, sales of wedding dresses fell by more than 60 percent, while ladies' dresses in general and outdoor clothing for men were hardly sold at all. Sports labels, on the other hand, continued to have top sales opportunities, especially online of course. The interest in lounge wear and sports outfits was almost unbroken.

Looking at all business models, 4 categories crystallized that separate the market: The losers, the winners, the changers and the keepers.

The losers

The deadly mix in the crisis consists of the following ingredients: Focus exclusively on stationary trade, no online business or online business not expandable. The supply chain is rigidly organised, in the worst case there are pre-arranged minimum purchases in terms of transport volumes and warehouse handling. Furthermore, the "loser" relies on a stale assortment without the "hip factor". These factors lead the dealer into direct insolvency. Unfortunately, there have been a lot of examples of this lately and they are quite prominent.

The winners

The bright spots in the crisis were those who enjoy a lively and scalable online business. Behind this is a dynamic supply chain organization that can cope with both fluctuations in demand and short-term changes in supply channels. The online presence is designed to support current payment methods such as googlepay, applepay, or paypal, as well as state-of-the-art logistics services - delivery window selection, real-time tracking, one day delivery. The complete supply chain is IT and process integrated. Fast and efficient processes are realized by avoiding paper-based communication and implementing collaborative platforms, for example for efficient freight cost accounting without manual invoice verification. The product range picks up on current trends and is popular with young and old alike.

The changers

The Changers are certainly the most interesting category. These are the traders who have taken advantage of the crisis to adapt their business model. For example, we were able to accompany traders who have made their expertise in logistics processing available to other traders and have thus adopted a "marketplace" approach. In this way even competitors can become customers - always purely in terms of supply chain services. This allows old competitors and new customers to reduce their investments in their own supply chain and at the same time to rely on experienced competencies including SLA agreements of the "changer". The Changer keeps his own business and brand, but opens up his business model in logistics. This is staggerable over the pure transport handling, warehousing, production order and more.

The keepers

The keeper manages to maintain his business with his existing market presence and thanks to a strong brand power and does not record significant gains or the loss of buyer groups. Typically, these are manufacturers and retailers of "everyday consumer goods" in the textile sector, which are neither subject to fashion trends nor high-priced.

What does this mean for the supply chain?

The disruptive changes of recent months are new territory for us. In the past decades we have been able to plan our supply chain in a nicely optimised way and assume a predictable deviation of 5% - 10%. That has now completely changed. Changes in demand of 80 - 90% of the volume have to be handled and the strengthening of the online business results in completely different processes in the warehouse locations and the transport chain. No hanging garments and size sets are picked - but individual packages. There is no longer a "bus timetable" of pre-ordered trucks, but parcel dispatch via CEP service providers.

This means fundamental changes in the organisation's procedures, which are the mirror of the processes in the IT systems.

What needs to be done?

A complete toolbox is necessary to examine the supply chain end-to-end and to check for the relevant issues, such as

  • Flexibility
  • Dynamization
  • Cost efficiency
  • Sustainability

A health check of the company's supply chain management helps to get a first rough analysis in the shortest possible time and thus an idea of which tools from the toolbox should be used in a sensible way. Here we determine the current strengths and weaknesses of the supply chain by comparing best practice databases and develop appropriate proposals for action - such as:

Verification of the SCM strategy with regard to the current change

Using various methods, a medium to long-term strategy must be developed with regard to foreseeable market movements. Knowledge of current market events and the analysis of trends and forecasts in the corresponding market environment are indispensable. We have to examine which measures make strategic sense, including aspects such as

  • Make or buy in transport and warehouse processes - which services do I assign to my service providers, what do I see as my USP and do I operate myself? How big do I design my own fleet versus tendering for capacity?
  • Site locations Review of warehouse locations - usually the warehouse structures have grown historically. How do I get away from my patchwork rug, what opportunities do we see for consolidating locations based on current and future supply flows?
  • Opportunities for additional business areas in the supply chain - to what extent can I offer my logistics skills to external parties and act as a service provider? What revenues can I expect?

Rapid analysis of all operational processes and KPIs using process mining

We need to look at all operational data from the IT system and identify the critical bottlenecks in the supply chain in terms of performance, costs and customer satisfaction. How can we do this in the shortest possible time? With the help of "Process Mining" technology together with Celonis. The process mining tool allows a dynamic analysis of exceptions and process bottlenecks by docking to data lakes and applications and using a dynamic framework for efficient analysis. Best Practice KPIs are used to create a comparison to the market average.

Sustainability of the IT architecture 

Once the core alignment of the supply chain is established, we take a look at the IT architecture and examine it in terms of the degree of coverage of the capabilities required by the strategy. We also do not neglect the sustainability of the technological basis and the system landscape. We know topics such as cloud approaches versus on-premise installations inside out.

The result is an easy-to-understand evaluation and a roadmap based on the largest benefit levers. Read more about this in the next article on logistics!

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