Stocktake: Redesign the fashion supply chain

Accenture stitches up the clothing industry, urging an overhaul of its supply chain and a move towards more sustainable practices; concerns about the economic impact of disrupted supply chains overall; and consumer sentiment is recovering slowly around the world, meaning they are more receptive to resuming normal life and listening to normal brand advertising messages.

Complete makeover for fashion industry

The fashion supply chain needs a complete makeover to rebuild after the pandemic and develop radically different sets of circumstances when it comes to operating values and supply chain practices. This is the advice from John Watling, MD of the retail business at Accenture in Africa. Accenture describes the apparel sector as one that has been fundamentally altered by the impact of COVID-19; with “abrupt order cancellations, halted payments for suppliers and workers; along with enforced factory and store closures”. This is in tandem with a drop in customer spending and a “sharp decline” in demand for clothing and footwear and most luxury labels.

Research conducted by a team at The Dock, Accenture’s flagship R&D and innovation centre, finds an emerging picture of a sector that is ready for disruption and willing to change. In Threads that Bind: Transforming the Supply Chain, they craft this together with insights from some of the world’s largest clothing manufacturers and identify six key considerations for restarting the fashion supply chain in a post-pandemic world. In Watling’s own words:

1. Brands and suppliers need to make sustainability systemic by making it integral to their strategy.This means aligning their existing purpose with sustainability goals and considering it against measures of business growth. This should make sustainability an equivalent factor to cost, lead time and quality.
2. Sustainability only works if it makes economic sense.Our research shows how brands and suppliers can understand how to reduce their negative impact on the ecosystem to maintain and grow their business in the long term.
3. Organisations need to develop partnerships and build strategic cross-tier relationships to put themselves on the leading edge of the industry.
4. The industry needs to find common ground when it comes to sustainability standards and working practices.The good news is that the industry already operates in an environment of high interdependence so this should be an extension of existing practices, rather than a radical evolution.
5. Audits are an industry-wide challenge.If brands collaborate to standardise audit requirements and their frequency, they could radically improve the efficiency and visibility of one of the most challenging parts of the apparel supply chain.
6. Legacy systems need a radical restyle.Brands and suppliers need to improve inefficient processes, by upgrading systems and unlocking the trapped value in the formidable amount of data they are already collecting.

Fundamental supply chain disruptions continue

The logistics and supply chain sector must make sure they can capitalise on opportunities now, to continue successful operations into the future. This means greater use of digital technology to achieve optimal customer service levels, timely delivery and improved customer communication. “We have seen a fundamental disruption across supply chain components,” said Dr Greg Cline, head of corporate accounts at Investec for your Business. “While it initially started as a network type disruption, given the lockdown in China – where these would usually be easily managed with risk mitigation strategies – it quickly became evident that as organisations and people became more impacted and facilities were shut down, the knock-on effect created fundamental shifts in not only supply and demand, but operational execution, capacity and cargo flows – something we are still seeing today and is likely to impact the sector going forward.”

Gert Pretorius, MD for MiX Telematics Africa said that given the economic slowdown, major losses will be seen in the long run, as many companies struggle to get back on their feet. From an import perspective, there has been a substantial decrease in trade. While the focus has shifted internally in terms of preparing health care sector capabilities and trying to manage the impact on people’s livelihoods; there have been significant efforts from government and the private sector to fuel business. However, the economy hasn’t opened up enough for businesses to create enough demand to be ordering and importing aggressively.

As Dr Cline indicated: “Many companies are trying to preserve their cash flow given the uncertainly of the market, timeframes around the easing of lockdown levels and how much disposable income consumers will have. As such, there has been a definitive slow-down in the number of imports and the anticipated demand is not yet well understood. As such, this is the time to re-examine the relationships with your suppliers and customers. Make sure that you have negotiated equitable payment terms with your suppliers and at the same time, create an overall customer experience that will bring customers to your door.”

This week in numbers:

90%

According to GWI Coronavirus Research – the fourth multimarket research wave conducted in May 2020 – in several countries, 90% or more of the population now expect the global situation to take six months or longer to resolve (those consumers in Australia, Japan, New Zealand, Philippines, Singapore, South Africa). That many of these markets are in APAC suggests that consumers in this region feel like the rest of the world will be playing “catch up” with the progress they are perceived to have made. Since April, concern about the coronavirus situation in one’s own country has fallen almost everywhere. The most notable declines are in Australia (-13 points), Canada (-13 points), China (-10 points), and New Zealand (-13 points), indicating that a country’s perceived success in handling the outbreak and moving further along the “recovery” journey is a strong influencer over consumer sentiment. Notable falls in concern were also seen in some of the European countries which were hit the hardest, including Italy (-8 points), France (-6 points) and the UK (-5 points). The sense that these markets are over the worst and moving to recovery will be influencing this, although it’s worth noting that overall levels of concern still remain high (at around 75% or more), reports GWI, in the research shared by local affiliate in South Africa, YouKnow.

QUOTE of the week:

“Doing nothing is not an option—when it comes to sustainability, brands no longer have the luxury of choice around whether to share their consumers’ values. And the risk is higher when it comes to fashion: this is an industry where the consumer expects to see their own shifting values and tastes reflected almost immediately on the rack. In a post-COVID world, customers are likely to be even more discerning than ever before.”

– John Watling, MD Accenture in Africa retail business.

 

*Stocktake is a weekly roundup of current FMCG retailing and brand news, curated and edited by Retailing Africa Publisher & Editor, Louise Burgers. Keep the industry updated and send your announcements and news to: news@retailingafrica.com.

Louise Burgers (previously Marsland) is the Publisher and Editor and Co-Founder of RetailingAfrica.com. She has spent over 20 years writing about the FMCG retailing, marketing, media and advertising industry in South Africa and on the African continent. She has specialised in local and Africa consumer trends and is a passionate Afro-optimist who believes it is Africa’s time to rise again and that the Africa Continental Free Trade Agreement (AfCFTA) will be a global gamechanger in the next decade.

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