As Coronavirus Spotlights Supply Chain Flaws, a New Model Emerges

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As the recent trade war with China revealed, fashion apparel sourcing needs to be nimble and efficient as retailers and brands shifted factories to Vietnam and other countries. And as the coronavirus outbreak is showing, retailers and brands need supply chains that can also be managed remotely.

But product development processes are not up to snuff.

However, the days of slow, costly and unsustainable supply chains may be coming to an end.

A new, digitalized supply chain model is being developed by Li & Fung and retail predictive analytics platform, First Insight Inc. Using Voice of Customer retail analytic software, brands and retailers who use this solution can make better product and pricing decisions — earlier, faster, and more sustainably, the companies said.

The model was recently presented during a WWD webinar titled, “Speed and Sustainability: The Digital Supply Chain of the Future.” The digital event was presented by First Insight and Li & Fung and featured Jim Shea, chief commercial officer at First Insight, and Sean Coxall, president of supply chain solutions at Li & Fung.

With the current supply chain processes, Shea said new products fail “at a relatively high rate, particularly in the fashion industry.”

“Many sources have quoted failure rates of well over 50 percent, we’ve seen it as high as 60 to 75 percent,” Shea said on the webinar. “And that’s really baked into the markdown budgets that are extremely high in the retail industry.”

Shea said the second part of the challenge “is that new products take a very long time to bring to market. Many retailers are still performing in-store testing; basically taking a small manufacturing run a product and putting it in a subset of the stores, letting it run for several weeks or even months and using those reads to make their final buy decisions. While that process is costly, it typically is not very accurate.”

Even without the duress of a supply chain disruption, product development processes are weighed down by high sample costs as well as wasted time as samples have to be shipped back and forth to Asia. And once samples are approved, sourced and developed, the lead time for final products can take months. Meanwhile, when items finally make it to stores or appear online, many products are destined for the clearance rack because it’s not what shoppers want.

In regard to the impact of COVID-19, Greg Petro, chief executive officer and founder of First Insight, said, overall, that “market and supply chain disruptions are causing unprecedented shifts in both supply and demand.”

“For the first time in the history of modern retail, supply is constrained,” Petro told WWD. “With limited product availability, it is more important than ever to make fast and accurate product design, selection, and pricing decisions. With 3-D product design, brands can make and review design iterations without creating physical samples. This, combined with digital product testing, enables retailers and brands to make customer-informed product selection decisions fast while improving sustainability.”

Petro said “acting quickly” can help brands and retailers “lock in their share of scarce supply.”

“With both supply and store traffic reduced, picking the products that customers will love and pricing them correctly is key to success,” he noted. “Pre-market digital product testing with consumers enables this, maximizing margins.”

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Product Selection  Speed to Market  Improve Speed to Market  Li & Fung  digital supply chain  Coronavirus  COVID-19  Digital Supply Chain of the Future  Supply Chain of the Future