It’s no news that our world is in danger. The IPCC claims we have 12 years until it’s too late, others say 18 months, and some cross-tongues say doomsday is inevitable. But one thing is clear: something has to change, and while we’re already going green, we still need to do more – if only to soften the blow.
This change can only be achieved if everyone works together, with industry and politics as the main actors of change. Especially the fashion industry. Our high ranking for environmental impact is not new. We rank sixth for greenhouse gas emissions, and when you factor in other factors like water use, carbon emissions and waste production, the result paints us an even worse picture.
This negative connotation has a bitter aftertaste, but when you look at fast fashion and ultra fast fashion, it’s no surprise. But let’s not belittle ourselves, incredible improvements are already in the works. Above all, the latest solutions in the areas of textile technology, transparency, circular economy, communities or the growing second-hand market – to name just a few – challenge our mistakes.
But these are not the only developments towards a more sustainable industry. Because let’s be honest. Even when products are made from the most sustainable and durable cotton and produced in the most sustainable and ethical way, 10% too many products are still wasteful and unsustainable. There are other advances that can foster a greener industry, and most of us seem to forget them. In this case, we would like to specifically point out digital innovations that promote lasting change and support sustainable transformation. By using Smart Merchandise Management, some weaknesses of the fashion industry can be improved and transformed.
Find your hidden possibilities for sustainability
When Ben Vermin, the founder of Chainbalance, worked for an international sportswear giant, he was shocked by the number of unsold products sitting in the warehouses. Piles of unsold shoes, shirts, pants and more just sitting on the shelves. A waste of materials and a waste of money. Although sustainability wasn’t an issue then, Ben already knew something had to change. Not only to convert lost sales into profits and to clear out the never empty warehouses – but also to save our planet.
The large amount of overstock at the end of a season is the result of two major mistakes: mass production and mass allocation.
Many companies calculate their production for the next season based on financial targets, which are reflected in the quantities purchased per SKU and the inventory remaining in the central warehouse. Not only are high volumes purchased that are not based on actual sales data, but it also seems that no one is addressing the complexities of ordering the right quantities per size and consequently ignoring the size curves.
The remaining stock in other warehouses, shops or retailers is usually not taken into account in the production volume. For example, if the distribution center is empty but 20% is still available in other warehouses, 100% is often reproduced to fill the empty shelves. Not only is this a waste of investment, but it also leads to even more overstock.
In addition, we distribute products in bulk in the marketplace, resulting in even more excess inventory and lost revenue for the outlets or locations that require those products. Consumer behavior is dynamic, but products are still assigned to the market manually using static systems. Due to the large range of styles, colors and sizes, this is not possible. Allocation must be based on consumption per SKU and location.
And what options are there for clearing the excess inventory?
Selling to second-party suppliers like TK Maxx, discounting prices for end-of-season sales, shipping the products to outlet stores, or even shredding and burning may not be the solution to the problem. There are ways to prevent overstock and overproduction before you have to come up with solutions to these problems.
Smart merchandise management at the very beginning, at the POS – a way to support sustainability
We all want to know how much we need to produce in order to increase profits and of course also to avoid overstocking as much as possible. That is the goal, but not the first approach. Before reliable forecasts for production quantities can be made, the sell-out behavior of the products must be analyzed for each POS. The journey begins with consumer behavior right at the point of sale – in wholesale, retail, e-commerce and outlets alike.
To understand product behavior, data is needed. Analyzing the data requires trained solutions that can handle bad and particularly small data streams. By implementing solutions such as Chainbalance’s Smart Supply®, the SKUs per POS are analyzed daily and around 35% overstock is prevented. This increases availability in the warehouses and also provides a more accurate picture of consumption and demand for production quantities.
Replenishment is just one of many tools to avoid overstocking. Even more important is initial allocation – the root cause of overstocking, out-of-stock, store-to-store relocations and lost sales. Based on product performance, right down to the size curve, Chainbalance can forecast the optimal initial stock, resulting in fewer out-of-stock and store-to-store relocations, saving carbon emissions and ultimately leading to less overstock.
These features are used to better understand product behavior. By feeding the algorithm with more data and users configuring small adjustments, the solution can produce reliable forecasts for production quantities and prevent the unnecessary reproduction of slow movers and single sizes. Smart Supply® users receive a 12-month forecast of production volumes based on the analysis and decisions made for each POS and SKU. Of course not without the possibility to set predefined parameters such as life cycles, growth and new POS.
Have we piqued your interest? Contact us: [email protected]