#3: Off, near, or onshore! What’s the supply chain strategy of the season?

Welcome to Perspective, WFX’s monthly newsletter for fashion industry pros who love tech and innovation. In this issue, we’ll talk about emerging global supply chain and sourcing strategies amid rising geopolitical tensions and need for innovation.??

In recent years, geopolitical tensions have cast long shadows on global supply chains. The war in Ukraine, disruptions in the Red Sea, and escalating tensions between Iran and Israel have added another layer of complexity to an already fragile fashion supply chain.??

This turbulence is nudging brands to rethink their sourcing strategies. So, where is the pendulum swinging this time???

?? Onshoring Innovation & Flexibility: Today's creator-driven market demands faster, more responsive strategies. This means fashion’s challenges extend well beyond geopolitical tensions; there’s also the problem of slow innovation. 12-month supply chains were acceptable when trends were mostly marketing-driven, and 75% sell-throughs were the norm. But brands today need to adopt and innovate much faster to just keep up with the consumer. Onshoring some design and production capabilities allows companies to test ideas much faster, mitigating inventory risks and responding to consumer demands more efficiently.??

?? Nearshoring With a Touch of Friendshoring: The current landscape has prompted fashion brands and retailers to reconsider strategies, balancing low-cost offshore options with onshore and nearshore capabilities to limit risks. This trend reduces dependency on distant suppliers and benefits countries that are closer to European and American markets, such as Turkey, Latin America, and Vietnam. Another growing trend is "friendshoring," where supply chain networks favor countries perceived as political and economic allies.??

?? Supply Chain as a Service: SHEIN's recent decision to open its supply chain network to third parties is a notable example of adapting to these changes. This move would allow external brands and designers to leverage SHEIN’s infrastructure and technology, testing initiatives in small batches. This agile approach mirrors the "fire bullets first, cannon balls second" strategy, offering smaller companies opportunities similar to giants like Zara. This model has prompted many in the industry to compare SHEIN to Amazon's success with AWS, generating significant profits by offering third-party access to capabilities designed for internal use.??

What will be the immediate impact on the fashion industry? These shifts also influence fashion more directly in two key ways:??

?? The increased production costs are likely to be passed on to consumers through higher garment prices, potentially leading to decreased demand, especially amid growing economic uncertainty.?

?? Public awareness of ethical sourcing and global events has led companies to reevaluate supply chains. The rise in labor costs in China has further prompted a shift toward onshore and nearshore options, making them more competitive.??

All in all, choreographing a well-balanced mix of onshore, nearshore, and offshore strategies is mandatory for navigating the increasingly complex fashion terrain. This management requires strategic insight and digitalization of operations.??

Need an expert perspective? Our digital transformation team is here to help - Book a 1:1 call?

Check out our team's top picks on this topic!??

?? Digital transformation framework for fashion: Learn about this comprehensive yet easy to follow 5-step digital transformation framework designed for the garment and textile industry from WFX. The guide outlines essential strategies for integrating technology across all areas of manufacturing, from design to distribution.??

?? ‘Friendshoring’ and other trade buzzwords: Geopolitical factors will always influence sourcing strategies. Read this article to understand how emerging trade trends are increasingly pushing for securing supply networks with political and economic allies.??

?? Agility as a competitive advantage for fashion: This BCG article underscores the importance of integrating design, sourcing, and logistics processes, revealing that agile companies saw revenue growth of 25% more on average than their competitors in the past year.??

?? Fashion on demand: Explore how the trend of on-demand fashion is reshaping the industry. This McKinsey report delves into the benefits of made-to-order production models, highlighting how they can reduce waste and improve sustainability.??

PS: If you missed the last first on “digital factory twins in fashion”, catch up here!??

A big thanks to everyone who attended our seminar on Sustainable Manufacturing in Fashion at SaigonTex 2024 in Ho Chi Minh City. We’re back from our Vietnam Odyssey and coming to Bengaluru next! Come, meet the WFX team at Fashion Tech Week from 30th to 31st May in Bengaluru. Book an appointment in advance to shape the future of fashion technology with us!????

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