What is supply chain digitization?

As retailers and brands now know, an efficient and reliable supply chain is the building block for a successful company. For decades the fashion industry has paid less and less attention to production and pushed supply chain operations behind a curtain. Fashion can't keep doing that anymore. The events over the past eight-plus months prove the industry needs to bring the supply chain ecosystem to center stage again.

COVID-19 has brought to light issues in fashion's supply chains.

Delays, or complete cancellations, have been the biggest challenge facing brands and their suppliers this year. When COVID-19 started spreading across China in January, factories were shut down to control the spread, and retailers worldwide saw their orders delayed as a result. Even brands that don't have cut-and-sew operations in China were still affected if materials like fabric were sourced from the country. Situations like this made brands and retailers take a closer look at how globalization impacts their business. It wasn't long before suppliers started seeing the adverse effects of an international economy either. When sales on non-essential items started to decline, manufacturers saw their completed orders canceled without payment as mega-retailers like Arcadia Group — the owner of TopShop, Burton, and Miss Selfridge — tried to rebalance their inventory. COVID-19 caused fashion to realize how fragile its supply chain ecosystem is; a few closed factories or a slow down in sales could cause a ripple of damage that would hurt everyone from garment workers to consumers.

The supply chain ecosystem has to change; this means more technology and more transparency.

Pricewaterhouse Coopers (PwC), which created a report on supply chain digitization in 2017, predicted the need for an improved "supply network" long before the pandemic. As the report stated, key technologies such as "integrated planning and execution systems, logistics visibility, autonomous logistics, smart procurement and warehousing, spare parts management, and advanced analytics" are needed. When these improvements are implemented, companies will be able to better react to, and even predict, supply chain disruptions. Not only can supply chain digitization help companies avoid supply shortages and economic trouble, but it can also make it easier for consumers to learn about the inner workings of the businesses they support. A combination of forces such as increased consumer-awareness, a decreased amount of time to stop climate change, and increased globalization that may lead to another COVID-19 level pandemic, have left industries like fashion no choice except to follow the advice of service companies like PwC.

Supply chain digitization will require an investment from brands, but it will pay off as sustainability moves from trend to expectation.

Unfortunately for brands, they will be the ones to pay the price for a fashion industry that prefers tradition over innovation. Trade groups, media organizations, and luxury retail owners are finally addressing that the fashion industry needs to change. Still, the years of damage done by sticking to the status quo means the system now needs to be replaced entirely instead of just improved. This complete redo in operations will require a significant amount of money, and companies like Vogue and NYFW — which have perpetuated the idea that nothing needs to change — can't foot the bill. Brands and retailers now face the task of restructuring and improving their supply chains to make sure they align with the recommendations of a new, tech-focused industry. The one upside is that more efficient and transparent supply chains will help brands rank better against competitors on sustainability. The brands who achieve complete digitization first will receive the biggest reward for their investment, so the race is on now.

The Bottom Line:

Supply chain digitization means using technology to make every part of the supply chain ecosystem more modern. Fashion is one of the biggest consumer-facing industries negatively impacted by the events of this year. Catastrophes such as a global pandemic, climate change, and human rights violations are not going away anytime soon, so brands need to be prepared to make major changes, like digitizing their supply chains, to handle future challenges better.