With some people arguing that the fashion industry’s supply chain current status is unknown, there is definitely a new normal in effect. It is one that is rewriting the rules of business and taking away the luxury of short term thinking. With more pressure on the fashion industry to change how it operates as a whole, some experts believe that COVID-19 has accelerated a more diversified supply chain. Which leads me to ask, would you agree that with every crisis comes an opportunity to make a difference?
Currently, behind the scenes of global supply chains, fashion companies are retooling their production as they scramble to survive the crisis without going bust. Rethinking their supply chains and dependence on China, they are already enduring delays and unforeseen implications. “No Company will Survive CoronaVirus Alone“, read a Business of Fashion headline last week and in truth, this is probably so. In response, we are seeing many more fashion companies adopting a “work together” attitude, to help their business recover more quickly.
Which brings us to the question of, how can one navigate and mitigate the impact of their end-to-end supply chain? Well, the latest McKinsey report has put a more positive spin on how companies can start to build the kind of resilience that could support their supply chain not only short term but long term too. Breaking it down for you, here are five plays that you can put into action today:
[1] Try to Keep Production Running
Fashion companies are nervous because most of them are wondering whether they will be able to meet the demand for their product. Experts believe that there is a solution to this problem. Businesses should first estimate the amount of inventory they have along the value chain. In doing so, you will be able to bridge inventory, including garments that could be repurposed for new-product production to keep business running. “Most businesses would be surprised by how much inventory sits in their value chains,” states the McKinsey report.
[2] Embrace Supply Chain Transparency
Although information-sharing is quite an unorthodox process in the fashion industry, committing to a transparent supply chain allows businesses to identify components that could be high risk. Transparency could mean better ways to deal with interruptions and identify alternative suppliers. When putting in place a recovery plan, one of the most effective strategy approaches is a collaborative one. This is because it could help you understand specific exposure across the multi-tier supply chain so you can restart your business faster following a crisis.
[3] Make Products in Several Countries
Adopting the ‘don’t put all your eggs in one basket’ approach, some businesses are rethinking their supply chain by making their products in several countries, rather than just one. This method takes away the pressure and means that you might not have to pull out of China altogether. “Look to alternative sources if suppliers are in severely affected areas”, states the McKinsey report on how we can plan for now and the future.
[4] Determine Realistic Demand
Currently, there is uncertainty when it comes to predicting consumer demand. Some experts think that the crisis could either increase or decrease need, especially when it comes to particular products. Turn to your data because it could help you develop a demand-forecast strategy that will play a key role when it comes to reacting quickly to inaccuracies. “Prioritizing customers by strategic importance, margin, and revenue will also help in safeguarding the continuity of commercial relationships”, advises the McKinsey report.
[5] Stress Test Your Capital
It should come as no surprise that a constrained supply chain adds pressure on earnings and liquidity, which is why supply-chain leaders need to focus on freeing up cash locked in other parts of the value chain. The authors of the McKinsey report on the impact of Coronavirus on the supply chain suggest “running stress tests to understand where supply-chain issues will start to cause a financial impact”.
Lastly, if you haven’t already dived into it, think about digitizing your supply chain. Doing so will strengthen your company’s capabilities when it comes to predicting risk and coordinating across your supply chain. So, is every crisis an opportunity to make a difference? Well, I would say yes. This is mainly because some fashion businesses, like Primark, have admitted to now knowing their supply-chain vulnerabilities. Although it was a lesson that came out of the left-field, there is no doubt that next time the fashion industry will be better prepared to handle it.
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