Shein, BCG and GoodOps discuss issues and opportunities

As the fashion industry continues to grapple with the far-reaching impact of the pandemic and new global challenges, it has become clear that the ability to respond quickly to changes in the supply chain is a critical factor in a company’s success. Industry representatives from the ultra-fast fashion company Shein, the consulting firm for sustainability strategies and processes GoodOps and the management consultancy Boston Consulting Group (BCG) recently discussed the challenges and opportunities of an agile supply chain in the webinar “Agile Supply Chain and the Future of the Fashion industry”.

When are supply chains agile?

In fashion, supply chains are considered agile when they can get products from design to retailer shelves in two to eight months (or faster), in-season inventory replenishment based on demand, and end-of-season inventory leftovers can be reduced to a minimum. Some of the key challenges are cost management, end-to-end collaboration, and quality control.

“Companies with flexible supply chains are able to respond quickly to short-term changes in demand by building a customer-centric, end-to-end product delivery mechanism. This requires close collaboration and rapid coordination of merchandising, design, production and distribution channels,” states the BCG report “Agility Is Fashion’s New Source of Competitive Advantage”.

1. Challenge: Changed customer behavior

Veronique Yang, Managing Director and Senior Partner at Boston Consulting Group, begins the discussion by explaining how customer behavior has changed: “They expect more variety and a greater range of products, which they can benefit from with faster deliveries and free returns and exchanges receive. At the same time, they expect quality and a competitive price, which increases the pressure on brands.” At least in a customer-centric business model, and according to Yang, the ultra fast fashion phenomenon stems from this consumer need.

“It’s a tall order, and we’re trying to accomplish it,” agrees Donald Tang, Shein’s executive vice president. “No one has an answer as to what the new normal is, but consumers have become very demanding and the fight has intensified and moved online,” he adds. This is the battle for their attention, their money and the best price: While inflation and economic uncertainties have driven up prices, consumers are looking for increasingly cheaper offers. Tang reports that a survey of 25 percent of Shein customers found that 13 percent want to make more responsible choices even in the current situation, while 87 percent have switched to more affordable brands.

“These changes were happening before the pandemic, but the pandemic has accelerated them,” said Divya Demato, CEO and co-founder of GoodOps. “While the climate crisis and the role of different industries in it is undeniable, companies are often at odds with this reality and consumers understand this at different levels; accordingly, they target brands.”

2nd challenge: linear business models

A linear business model no longer works for Demato, especially in the fashion industry. “The pandemic has caught many unprepared; those that made it had close relationships with their suppliers, but there were still a lot of uncertainties,” she says. “Brands face the challenge of managing their inventory. They need to identify an ecosystem for their supply chain and build resilience,” she advises.

“Everyone would like to fulfill the responsible choices of consumers,” Tang explains. One shift that has worked well for Shein has been the digitization of small and medium-sized factories. “A few years ago, small factories in China disappeared. We’ve all digitized and connected small factories so that together they can form one big company and compete,” says Tang better liquidity.”

1st chance: Digitization and transparency

For Tang, sustainability is a matter of technology and platform. “We must use technology for the planet and to improve working conditions,” he said. In that regard, he sees Shein as an “enablement company.”

For Yang, it’s not just the technology that has made a difference: “Companies have realized that a supply chain can be really valuable and they have started to look at how it can become more stable while maintaining quality and competitive prices. “

For them, there have been three key changes: the emergence of redesigned supply chain networks and even models worldwide, more openness and transparency throughout the supply chain, which also includes new technologies and digitization, and finally a high awareness of sustainability. All of this leads to resilience, responsiveness and responsibility, all of which are very important, as Demato emphasized: “There is always more to come, as the pandemic has shown”.

As for the tools to achieve all of this, Yang, who manages different product categories, admits that the fashion industry’s supply chain is the longest and most complex. “It has many internal and external stakeholders and is quite fragmented,” she says. It requires the coordination of a large group of parties of different complexity, different sophistication and different degree of digitization, and managing all this is a challenge. “Everyone should learn from the best, but choose carefully what fits their own business model,” she advises.

2nd Chance: On Demand

“Agility is the new source of competitive advantage and it was before the pandemic,” Tang emphasizes. Through the on-demand model — which Tang calls a “game changer” — Shein also ensures nothing is wasted, managing its Stocks well and focuses on consumer needs, which he sees as critical to growth. “We want to become more inclusive; Skin color, location, orientation, etc. doesn’t matter, but you have to redesign the supply chain. At the end of the day, consumers win, and you have to find a way to do good while doing good and have a good time while doing good,” he summarizes.

Demato agrees, comparing Shein’s on-demand retail model to how Walmart revolutionized pricing with its wholesale model and how Amazon revolutionized e-commerce. “Upstream, there might be less waste, but what about downstream? What can technology do? Consumers will continue to buy.” For her, it’s about more sustainable materials and innovations in textile recycling, since today only one percent of all clothing is recycled due to a lack of technology.

Opportunity and challenge: sustainability

“The infrastructure is there, many elements are there, but from a circular economy perspective we have to look at the whole life cycle. Consumers will ask themselves, ‘Is this worth buying? Or will it end up in landfill?’” Demato says this is an opportunity for brands to get ahead of the curve.

“That moment has probably already come,” says Tang, adding “we need to figure out what the preferred materials are.” He also pointed out that “so far we’ve only seen the half-life and not the entire life cycle”. For him, it is all about cooperation: “No one is big enough to come up with an end-of-life concept all by themselves develop.”

Yang agrees that industry players need to come together and share their power, scale and expertise. “Fashion is a consumer good that has social and environmental impacts. The supply chain must help create a future for fashion and consumers. Technology helps us to reduce product quantities, maximize resources and make more environmentally friendly decisions when it comes to dyeing, washing and other processes,” she sums up on behalf of all participants.

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