How is the Apparel industry adapting to the supply chain to meet increasing demands?
India is world’s largest cotton producer and the second largest synthetic fibre producer. The country is the largest textile and apparel producer accounting for $36 billion dollars in exports. In addition,India is among the fastest growing retail markets in the world. These factors have resulted in a highly complex value chain comprising of raw material,labour, working capital, import dependence, exports, and the expanding domestics market.
But India remains a complex market that presents challenges as well as opportunities. The apparel business is still largely unorganized, with formal retail accounting for just 35 percent of sales that is growing & likely to reach around 45 percent by 2025.Given these dynamics; it is little surprise that more than 300 international fashion brands are expected to open stores in India in the next two years.
The textile value chain is complex and covers all stages in product life cycle including supply of raw materials through to disposal after use. For a textile product, the value chain starts with fibre production. This can either be sourcing of natural agricultural materials and their subsequent processing to extract the fibre (e.g., cotton), or crude oil extraction and the manufacture of chemicals from which synthetic fibres are made (e.g., polyester), or a combination of both. Subsequent manufacturing stages involve spinning the fibres into yarn, and knitting, weaving or bonding the fibres in some other way into fabric. The fabric is then subject to chemical and/or mechanical processing to produce a textile with the desired properties (e.g., softness). The next step in the value chain involves cutting and sewing the textile into the product, followed by getting the product to the user (distribution and retail). After its first use, the textile product may be used again, as happens with donated second-hand clothing, or it may be recycled to a different use. Each one of the steps in this supply chain has potential for optimization.
The Indian retail landscape has changed dramatically over the course of the pandemic. As foot traffic in stores diminished owing to social distancing norms, online sales saw record-breaking revenues for retailers. Moreover, customer demands for safe and contactless home deliveries established the fact that adopting omnichannel selling practices and offering innovative delivery options is necessary for growth in 2020 and beyond.When the things come back to normal, the bar for D2C share of the business would be reset at a much higher level compared to pre Covid scenario.
As & when things come back to normal,Demographic and Consumption Trends promise Accelerated growth for Organized Fashion Play. Major favourable shifts in the demographics such as significant population with Age < 30 years, shift from rural to urban areas, risingaffluent middle class, increase in nuclear families &rapid development in rural area are expected to result in increased demand. In addition, emerging megatrends like increase in brand consciousness, greater participation of women in workforce, rise of digitization, rising influence of media &technology &rise in aspirational buying would result in growth of organized fashion market. In short, the Indian market offers great promise. Despite structural challenges that include inequality, infrastructure, and market fragmentation, we expect that strong economic growth, scale, and rising tech savviness will combine to make the country the next big global opportunity in fashion and apparel.
To capitalize on the massive potential, the apparel industry needs to ensure that they are on top of their supply chains. Supply chains hence are emerging a some of the key focus areas with a lot of focus and energy being spent on realigning the supply chain strategies to suit the emerging business dynamics. A few of the key areas Apparel world is focussing on making their supply chains:
Omni Enabled: Apparel retailers are focusing bigtime on getting omni channel ready. Brands are working on Integrated online & offline retail play with the stores migrating to become “Phygital” enabling “Buy Online Ship fromStores “BOSS. There is clear focus on achieving high quality omni-channel experience aided by “hyperlocal.”
Agile: The Industry is also moving towards increasing agility in Design, Merchandizing & Supply Chain. Right from introducing new styles every fortnight, revamping supply chains through automated assortment planning,delivering higher inventory turns or enhancing speed of delivery with orders to despatch < 2 hours, there is a clear focus on agility. This includes adopting technologies such as analytics, automation, micro-factories for rapid prototyping, and more onshoring and “nearshoring” — sourcing goods from nearby countries. Together, these initiatives will enable companies to “respond quickly to source and develop products, squeeze production timelines, and streamline distribution. “ continued investment in speed” as predicted by McKinsey’s in their “ The State of Fashion 2019” report is here to stay.
Digital: The Industry is also focussing on enabling Supply Chain 4.0 - the application of the Internet of Things, the use of advanced robotics, and the application of advanced analytics of big data in supply chain to significantly improve performance and customer satisfaction.” This will make the overall supply chains much more fast, flexible, granular,accurate,& efficient.
Transparent: Organizations are also focussing on making their supply chains transparent & collaborative. By increasing supply chain transparency, companies can connect better with their consumers &suppliers, build trust, achieve better visibility to drive improvements, and react faster and more effectively to situations.
Predictive: As the supply chains are becoming more complex, multiple events like pandemics, natural disasters, geopolitical instability, demand variability, geographic and supplier specific challenges can have a detrimental impact. Organisations are now focussing on using advance analytics tools using AI & Big Data to enable real time predictive analysis of emerging events, from financial, regulatory, operational, geopolitical, and natural disaster perspectives.
Sustainable: Environmental and social compliances are no more optional. The general motto these days is “Compliance first, Business next”. Accordingly, apparel industry too is focussed on adopting sustainable practices into the complete supply chain lifecycle, from product design and development to material selection, manufacturing, packaging, transportation, warehousing, distribution, consumption, return, and disposal. Environmentally sustainable supply chain management not only reduces the total carbon footprint, but also optimizes end-to-end operations to achieve greater cost savings and profitability.