Apparel sourcing trends 2023 and beyond
As we enter a new decade, the apparel industry is facing a rapidly changing world, shaped by new consumer behaviors, technological advancements, and global challenges. The industry has been disrupted by the COVID-19 pandemic, which has accelerated the shift towards digital channels and altered consumer preferences, leading to a surge in demand for casual and athleisure wear. This has presented both opportunities and challenges for apparel sourcing, which faces a perfect storm of volatile demand, supply chain disruptions, rising costs, and increased pressure to be sustainable and socially responsible.
To address these challenges, the industry is undergoing a fundamental transformation towards a more flexible, fast, and digitally-enhanced sourcing model that is consumer-centric and sustainable. This transformation requires a holistic approach that spans all areas of the product development process, from design to delivery. Apparel companies are adopting advanced analytics, virtual pretesting, 3D design, and digitizing interfaces to improve operational and design processes, and aid transparency.
In the coming decade, the industry will continue to focus on digitization and forging strategic relationships with trusted suppliers that invest in digitization, sustainability, and social responsibility. There will be a renewed emphasis on reshoring and nearshoring to secure the supply chain, while dual or multicountry sourcing will increase in-season reactivity and analytical sourcing decision-making. Nonphysical sample approval will become the norm, with virtual sampling replacing video sample assessment. Fabric consolidation, platforming, and fabric prebooking will become even more common, leading to reduced product complexity.
To cope with ever-changing consumer demand, successful apparel companies of the future will need to revamp their operating models, tools, capabilities, processes, and the role of their sourcing teams. Chief Purchasing Officers (CPOs) will take responsibility for turbocharging the adoption and ownership of digital tools while filling the digital skills gap. Flexibility and speed will be maximized while protecting margins, with a strong network of supplier partners. An end-to-end (E2E) mindset will be enabled across the organization, presenting solutions for the apparel industry of today and the uncertain years ahead.
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The apparel industry has been through a lot in the past few years, with technological advancements, changing consumer preferences, and global supply chain disruptions forcing companies to adapt and innovate. The COVID-19 pandemic has only accelerated these trends, exposing vulnerabilities in the industry and highlighting the need for more resilient and agile supply chains.
In this article, we'll explore the key trends shaping apparel sourcing in 2023 and beyond. Specifically, we'll cover the impact of supply-chain disruptions on the industry and how companies are adapting to this new reality. We'll discuss the importance of speed and flexibility in sourcing, and how brands are simplifying their assortment to manage costs. We'll also examine the role of partnerships in navigating the challenges of the industry, as well as the potential for digitization to transform sourcing operations.
Additionally, we'll delve into how apparel brands are deciding on their sourcing-country mix, balancing stability and flexibility in their supply chains. Finally, we'll discuss the move towards a more integrated operating model and how this can accelerate success in apparel sourcing. By the end of this article, you'll have a comprehensive understanding of the latest developments in the apparel-sourcing industry and what to expect in the coming years.
The impact of supply-chain disruptions on apparel sourcing and how the industry is adapting to this new reality.
The COVID-19 pandemic has significantly impacted the apparel sourcing industry and exposed vulnerabilities in global supply chains. The disruptions caused by the pandemic, such as factory closures, logistics challenges, and shifts in consumer behavior, have highlighted the need for more resilient and agile supply chains.
As we move forward, it is becoming increasingly clear that supply-chain disruptions are not a temporary challenge but rather a new normal. The apparel industry must prepare for the unexpected and build supply chains that are adaptable and flexible. This will require a more proactive approach to risk management, the development of contingency plans, and greater collaboration between all stakeholders in the supply chain.
In the coming years, we can expect to see a renewed focus on supply chain resiliency, with companies placing greater emphasis on diversification, redundancy, and transparency in their sourcing strategies.
Furthermore, the renewed focus on supply chain resiliency and diversification is likely to shape the future of apparel sourcing. Companies will need to prioritize transparency in their sourcing strategies to ensure greater visibility and traceability throughout the supply chain. This will help them mitigate risks and respond to unexpected disruptions more effectively.
Overall, the apparel industry must adapt to this new reality and build supply chains that are more resilient, agile, and sustainable.
Growing Focus on Recycled Fibers in the Apparel Industry.
Along with the need for resilient supply chains, the apparel industry is also facing pressure to become more sustainable. Companies are increasingly looking towards recycled fibers as a key component of their sustainable material strategy. Despite recycled fibers making up less than ten percent of the global fiber market in 2020, a quarter of respondents in a recent survey indicated that they intend for more than half of their products to utilize recycled fibers.
The use of rPET (recycled polyethylene terephthalate) from plastic bottles is expected to continue to increase, with a quarter of surveyed companies planning to replace at least half of their virgin polyester products with rPET over the next few years. However, companies are also optimistic about the development of closed-loop recycling, despite pre-and post-consumer recycled textiles having less than 0.5 percent market share in 2020.
By 2025, survey respondents aim to replace at least 30 percent of their virgin cotton with mechanically recycled cotton, and to use garment-to-garment recycling in at least 30 percent of their polyester and viscose items. While these targets may seem ambitious given the current state of recycling, industry leaders are coming together to solve the challenges of collection, sorting, and recycling on a systemic level. As new recycling technologies move to industrial scale, we can expect to see even more direct investment into sustainable and recycled materials by apparel brands and retailers, to speed up scaling and secure supply.
The "Textile Exchange Preferred Fiber and Materials Market Report 2021" states that 24% of companies plan to make at least half of their products with recycled fibers by 2025.
Recycled fibers ramping up as costs on the rise
According to the "Textile Exchange Preferred Fiber and Materials Market Report 2021," 24% of companies plan to make at least half of their products with recycled fibers by 2025. However, as sourcing executives' expectations of price hikes are at an all-time high due to the end of the era of sourcing-cost deflation, the fashion industry is facing increasing pressure on margins. Shipping costs have become the leading driver of concern, followed by raw-material costs, with shipping prices expected to stay high due to limited capacity and more pricing discipline. Raw-material prices have surged, with cotton and polyester prices increasing by more than 30 percent within the last year. As a result, many sourcing executives are unconvinced that changes to their sourcing strategy will contribute significantly to cost reduction. However, there is a gradual shift of focus from input cost to net product margins, with nearly three out of ten companies planning for a five- to ten-percentage-point increase in the share of products sold at full price.
The importance of speed and flexibility in apparel sourcing, and how companies are simplifying their assortment to manage costs.
In today's rapidly changing global market, speed and flexibility have become key factors in apparel sourcing. Companies are realizing that they need to be more agile and responsive to market demands in order to stay competitive. To achieve this, they are simplifying their product assortments and streamlining their supply chains.
Simplifying the assortment helps manage the costs of speed and flexibility, as it reduces the complexity of the sourcing process. By focusing on a smaller, more curated range of products, companies can optimize their production processes and reduce lead times. This also helps to minimize excess inventory and reduce the risk of overstocking.
At the same time, companies are also investing in technology and digital tools to improve their sourcing processes. By leveraging data and analytics, they can better understand consumer preferences and optimize their production processes accordingly. This not only helps to reduce lead times but also improves the accuracy of demand forecasting, which in turn helps to reduce waste and minimize costs.
Overall, the importance of speed and flexibility in apparel sourcing cannot be overstated. As the industry continues to evolve, companies that can adapt quickly to changing market demands will be the ones that succeed. By simplifying their assortments, investing in technology, and streamlining their supply chains, companies can achieve the agility and responsiveness they need to stay ahead of the competition.
How apparel brands are deciding on their sourcing-country mix, balancing stability and flexibility in their supply chains.
In recent years, apparel brands and retailers have been reevaluating their sourcing strategies and exploring new options beyond traditional manufacturing hubs like China and Bangladesh. The COVID-19 pandemic further highlighted the importance of having a diverse sourcing-country mix to mitigate risks and disruptions.
When deciding on their sourcing-country mix, companies need to balance stability and flexibility in their supply chains. While some companies prioritize stability by sourcing from countries with well-established manufacturing capabilities and infrastructure, others opt for more flexible sourcing arrangements that allow them to quickly adapt to changing market conditions and consumer preferences.
To achieve a balanced sourcing-country mix, many companies are diversifying their sourcing to new countries with emerging manufacturing capabilities, such as Vietnam, Cambodia, and Ethiopia. Others are exploring nearshoring options, sourcing from countries that are closer to their home markets to reduce lead times and transportation costs.
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Overall, the key is to strike a balance between stability and flexibility, and constantly monitor and adjust sourcing strategies based on changing market dynamics and supply chain disruptions.
The role of partnerships in apparel sourcing, and how brands and retailers are working together to navigate the challenges of the industry.
In recent years, partnerships have become increasingly important in the apparel-sourcing industry. Brands and retailers are realizing that they can no longer go it alone and must forge strategic partnerships to remain competitive. These partnerships can take many forms, including collaborations with suppliers, manufacturers, and logistics providers. By working together, companies can leverage each other's strengths and expertise to create more resilient and agile supply chains.
One example of a successful partnership is the collaboration between Nike and Li & Fung, a leading sourcing and supply chain management company. Through this partnership, Nike has been able to streamline its supply chain, reduce costs, and improve its speed to market. Similarly, other brands and retailers are exploring partnerships with technology companies and startups to enhance their digital capabilities and stay ahead of the curve.
Overall, partnerships are becoming a critical component of successful apparel-sourcing strategies. As the industry continues to evolve, companies that prioritize collaboration and innovation will be better positioned to thrive.
The potential for digitization to transform apparel sourcing, and the areas where the industry still has room to improve.
The potential for digitization in apparel sourcing is vast, and it has already transformed many aspects of the industry. From using data analytics to forecast demand and optimize inventory, to using blockchain technology to increase transparency in the supply chain, digitization has helped companies become more efficient and agile.
However, there is still a long way to go in terms of fully integrating digital solutions into the apparel-sourcing process. For example, many companies still rely on manual processes for managing orders, communication with suppliers, and quality control.
Another area where the industry has room for improvement is in sustainability. While some companies are using digital solutions to track and reduce their environmental impact, such as using AI-powered algorithms to optimize shipping routes and reduce carbon emissions, there is still a need for more widespread adoption of sustainable practices in apparel sourcing.
Overall, the potential for digitization in apparel sourcing is significant, and companies that embrace it fully are likely to have a competitive advantage in the years to come.
The move towards a more integrated operating model, and how this can accelerate success in apparel sourcing.
In recent years, the apparel industry has seen a move towards a more integrated operating model, with companies seeking to streamline their supply chains and improve collaboration across departments. This approach allows for greater efficiency, faster decision-making, and improved communication throughout the sourcing process.
By integrating different functions such as design, sourcing, and production, apparel brands can better align their strategies and improve their overall performance. This also allows for better control over the supply chain, from product development to delivery, reducing the risk of disruptions and delays.
One way companies are achieving this is by implementing digital tools and platforms that allow for better data sharing and collaboration. By using cloud-based systems, for example, different teams can access and share real-time information, leading to more informed decision-making and greater agility in responding to changes in the market.
In addition to technology, an integrated operating model also requires a cultural shift towards greater collaboration and communication. By breaking down silos between departments and fostering a more collaborative working environment, companies can improve their overall performance and achieve greater success in apparel sourcing.
Achieving Process Efficiency in the Product Development Cycle
Many sourcing executives anticipate that new ways of working will be required within their own companies to support the evolving sourcing model. While challenges are expected in relationships within the ever-changing supply chain, transforming ways of working is a major ongoing challenge for most companies. This requires overcoming numerous hurdles to achieve speed and flexibility.
The lack of digital tools is considered the main hurdle, with 71 percent of respondents ranking it among their top-five challenges. Additionally, there is a skills gap in the implementation of digital tools, with five out of ten CPOs citing it as a challenge.
Even in advanced sourcing organizations, siloed ways of working and unclear division of responsibilities exist, leading to misalignments and bad communication. This is the number-one obstacle to implementing speed and flexibility, named by 29 percent of respondents. To overcome this, sourcing, merchandizing, and design departments need to work together in virtual product teams or under one roof.
Speed and flexibility come at a cost, with 58 percent of CPOs listing the prioritization of cost over net product margin as a top-five dilemma. Sourcing decision-making needs to become more intelligent, including full-price sell-through in the mix.
Lack of internal calendar discipline is also a hurdle, caused by a mix of underlying problems ranging from overall long lead times to a lack of segmented calendars and limited integration of consumer insights in assortment planning. This is named by half of the companies as a top-five problem. Best-practice companies have moved to defining calendars at a granular level, deploying calendar managers, and incentivizing calendar discipline. Clear decision-making roles and responsibilities for all teams involved in product planning to launch are crucial.
While accountability for end-to-end process efficiency and individual steps in the product-development process remains an area for development. Many companies track various KPIs, however, only a few use them to incentivize improvement toward clear targets.
Accelerating for Success
The pace of digitization in sourcing is only going to accelerate. As sourcing executives, it's crucial to stay ahead of this change, driving the development of digital abilities and ensuring that the organization owns the tools it needs to succeed. While many companies have invested in digital tools and processes, very few have fully mastered the end-to-end control needed to support product development. The solution lies in a fully integrated digital setup, including 3D designing, clean-sheet costing, and supplier integration. By focusing on full-scale digital and analytics transformation, apparel companies can trim time and cost from the process, building the organization of the future.
Smaller batch sizes and shorter lead times are here to stay, and the organization of the future needs to define calendars and fulfillment models that allow for healthy margins. To achieve this, investing in powerful calendar managers and understanding the requirements of different timelines is key. It's also important to develop strategic nearshoring capacities, understand the strengths and weaknesses of different sourcing markets, and set clear guidelines and KPIs to judge markets based on flexibility and net margins. By redefining strategy to fit new customer demands, the sourcing organization of the future will be tailored for speed and flexibility.
Investing in transparency and supplier production pays off quickly, so it's crucial to onboard suppliers onto the PLM system and take full control over manufacturing and delivery timelines. Future laws will also necessitate the digitization of the full value chain of tier-one and tier-two suppliers, creating full transparency throughout the supply chain. Customers increasingly demand knowledge of where raw materials are sourced, and creating a digital ecosystem will improve speed and flexibility while ensuring sustainability and ethical production. By near- or reshoring, securing feedstock for sustainable fibers, and boosting a circular textile approach, apparel companies can ensure sufficient and flexible raw-material supply.
Misaligned incentives and priorities can be detrimental to the sourcing organization, so it's crucial to map and create joint KPIs to achieve required shifts. Beyond purely financial priorities, poor process and planning focus, including poor calendar discipline, can have long-term repercussions. To achieve end-to-end alignment, it's important to include these factors in organizational targets. The sourcing organization of the future will also need to ensure that its focus is not solely on the best cost price, and to rethink the responsibility split between headquarters and sourcing offices. Sourcing offices will change their role, moving from a focus on order management and negotiation toward an integrated supply-chain perspective, and strengthening their skill sets in strategic supplier-relationship management, fabric management, and design and sampling.
designer fashion at Fashion Group International, Inc.
1 年this topic and your work are amazing . thanks