Why demand driven production is the solution for the (near) future

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“The fashion industry knew the system was broken but kept the wheel running all the same. Now it’s time for a reset.”

Adriana Hoppenbrouwer, Partner at The Fabricant
Our perspective is always 100% hindsight. According to our backward-looking viewpoint, fast fashion brands are doing remarkably well – despite McKinsey’s 2020 forecast of a 30% contraction in the fashion industry. Paradoxically, fast fashion brands have continued to thrive, despite the following:
  • Chronic overstock (inefficient business model)
  • Increasing public awareness of the waste from fashion
  • Long lead times paired with inaccurate forecasts
  • Lack of supply chain visibility and accountability
  • Poor working conditions for many garment workers
  • Environmental impact: The fashion industry contributes 4% of global greenhouse gas emissions and 20% of the World’s wastewater comes from fashion
While you might be wondering how fast fashion is continuing to thrive, the question we should be asking is, when will it collapse?

Social Media is a fashion sales catalyst

demand-driven production

Fast fashion brands are already aware of their precarious position, and moreover so are the social media influencers who have boosted fast fashion in recent years. The fast fashion model is built on cultivating an ever-growing hunger for cheap, fresh trends, accompanied by a Fear Of Missing Out (FOMO). In addition, this is served directly to house-bound, younger shoppers via social media influencers.

Social media is powered by novelty. So the pairing with fast fashion brands has worked so far, but the novelty of ‘Haul Videos’ is diminishing. In the face of increasing pushback from conscious consumers, many influencers are already turning away from promoting new ranges to preserve their own following.

In the words of Social media Fashion influencer, Tricia Panlaqui,Second-hand clothing and thrifting is so hot right now.”

Why demand-driven and on-demand production are solutions for the (near) future

Releasing 20,000 new designs each year and producing 75 pounds of textile waste per person, per year, will no longer be a viable business model. Instead, the fashion industry will need to adapt to new buyer sentiment and behaviour by offering demand-driven and on-demand manufacturing.

On-demand manufacturing leads to:

  • New cost-savings from near-zero waste
  • Producing only what is needed to profitably satisfy demand
  • Environmental benefits from reduced waste, pollution and water usage
  • A sustainable business-model that consumers crave and will insist on

For fashion brands and retailers, the question is: What does this actually mean, and what practical steps can be taken now to prepare for this shift?

“A typical fashion season enabled by mass production results in about thirty per cent overstock. This inflates the costs of goods and is not sustainable.”

Adriana Hoppenbrouwer, Partner at The Fabricant

1. Production on-demand

To make money now and in the future, brand and retailers must produce what customers want – now, and in the future. Given that it’s impossible to predict demand, we shouldn’t devote resources towards that goal. Instead, the focus of operations needs to move toward an integrated approach that serves the real demand.

By cutting down lead-time to weeks, days or even hours, it is possible to exactly match demand with production, by making items to order.

It requires a different process to the regular wholesale-to-retail supply model – instead customers directly place an order for a design. The design is then made-to-order for them and then shipped directly to the customer or shipped to a retail location.

Technology

  • Disruptive companies like The Fabricant and Sharecloth already implement technologies for on-demand fashion, but there is also room for brands and retailers to define their own solutions in this space. Given their market experience and capital, established brands are better positioned to dominate this area if they choose.
  • 3D-knitting and 3D-printing of garments is starting to become a reality, as is seen with Ministry of Supply’s 3D-printed blazer and face-mask.
  • Automated production is becoming more capable and sophisticated, using relatively traditional assembly techniques.

Implementation

  • Retailers and brands have an opportunity to explore new direct-to-consumer supply models. These act as an on-demand sales platforms that curate designs which can be selected (or potentially re-designed by the customers themselves) before the order is sent to be made.
  • Virtual modelling of designs can be provided by 3D rendering software, showing customers how the fabric looks and moves on a 3D mannequin, or an avatar of the customer themselves.
  • On-demand sales/manufacturing platforms can be seamlessly linked with (automatically generated) social media posts. In this way, people can announce and display their new, custom-made outfit to followers and friends, as soon as an order is placed.

The bottom line

  • Costs for this service are naturally higher, but profit margins can be expected to be on a parity considering the lack of waste.
  • Return-on-Investment is faster, due to very short lead times (for the brand) and minimal outlay.
  • Delivery times may be longer than the customer is used to, so clarity about this and live order tracking will reduce service burden even further.
  • Enables a sharper focus on make-to-stock evergreen items, with a selected range of durable items with enduring value.
  • These operations can run alongside existing systems and combine perfectly with an omnichannel supply model.

How does an on-demand manufacturing model fits with new trends and scalability?

The on-demand model is intrinsically a low-volume, high-margin game. The best fit is in the luxury segment, and in young shoppers who strive to be different. New trends are getting older, quicker – making it impossible to produce to scale in a profitable way in any case. Scaling up on-demand production capacity can be achieved more easily with strategic partnerships.

Does production planning in the supply chain still have a role?

Human involvement in production planning will limit the effectiveness of the supply chain. It is better to use technological solutions that automate reallocation, reordering, shipping, and buying decisions so they match real demand. Planning still has a role in ensuring customer waiting times meet an acceptable standard for the market segment, and in rationalising processes to maximise agility.

What big brands are already using on-demand models?

  • Adidas provides customisation through digital design with speed factories in Atlanta and in Germany.
  • Superdry developed limited-edition collections with a six-week design-to-delivery process.
  • Uniqlo has partnered with Shima Seiki, a 3-D knitting technology company, to produce on-demand customised knitwear.

 

2. Demand-Driven manufacturing

demand-driven production

Taking it down a notch, you can create a supply model that manufactures small batches based on current market demand, instead of implementing a make-to-order (“on-demand”) supply model for individual garments. This is much closer to a responsive supply chain that synchronises production with consumption, using agile production processes.

There is room in this area for total customisation of designs or with a made-to-order component, incorporating auction-style batch-selling, fuelled by social media interactions. Batch-shopping behaviour like this already exists; social media followers routinely place orders for identical outfits to those worn by their favourite influencers and celebrities.

3. Synchronise production with consumption

Without adopting an on-demand production model, improvements can be found by connecting the production more closely with actual consumption. With this model demand is not a driver for product creation, but it pulls more of an existing product out of the chain.

The best fit in this area is with evergreen items that are not so trend-driven, but it can be effective with small-batch, nearshored trend-driven items too.

A responsive supply model like this requires a free and rich flow of information across the entire chain, meaning relationships with suppliers must become much closer and more transparent. Digitalisation across the chain allows real-time insight, improving decisions about what to ship, order, make or buy.

Start implementing demand-driven and on-demand production solutions

  • Explore what waiting times your customer base is comfortable with. This will help determine which strategy to start with.
  • Organise meetings with all the departments, starting with smaller, focused separate discussions with Design/Purchasing and then IT/CIO and Sales/Marketing. Once you have a clear picture of what you want to achieve you can start to determine budget allocation and a roadmap.
  • Consider the holistic digital strategy and discuss this with the Marketing/Social Media department.
  • Research third-party software solutions that can support a more responsive or on-demand supply model.
  • Partnering with existing disruptive companies that have already made progress with on-demand models can save a lot of legwork and avoid preventable errors – consider teaming up with a partner.
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