The changes that have taken place over the past 20 years have made forecasting in the apparel industry more difficult. The consumer demand in the industry itself involves some intrinsic attributes that have always made forecasting accurately a challenge. When it comes to apparel, many consumers buy goods based on an impulse, for instance. Shoppers often wait until the point of purchase to decide that they’re going to purchase a particular item. It’s critical to forecast your sales and inventory needs as accurately as possible, so you won’t miss sales due to a lack of product supply. No matter the technique, for next era fashion companies like Spykar Lifestyles who introduces new items every year or fashion season, the need to measure forecast accuracy so as to more finely tune future forecasts has never been more critical than it is now. Sandeep Jain, VP- Accounts & Finance informs Upamanyu Borah, more about how they have been ensuring accurate sales forecast so as to curtail any expensive consequence, including missed sales opportunities due to product outages and an overburden of unsalable inventory.
We have seen fast-growing denim brands like Spykar whose entire business model is based on its supply chain. Can you elaborate on this? How pivotal is supply chain in creating a good fashion house?
The key to success for any fashion brand, in addition to quality product, is an efficient supply chain which must include timely in-warding of materials and timely supply of end product to the retailers, and other distributors or vendors.
Fashion industry works on a 2-4 season basis and hence there is lot of fluctuations which are not fixed, both inward and outward. Therefore, the same needs to be managed in an effective way.
Amongst the activities that constitute typical raw materials sourcing, manufacturing, supply chain logistics, markdowns- all of which result in the biggest cost to products. How is this addressed within Spykar Lifestyles?
We monitor inventory level and sale-through online on a regular basis to ensure that non-moving items do not stay in rack longer than expected. Items/SKUs which are non-moving or slow-moving are transferred to promotional category and get liquidated by way of discount offerings that are put on them, without losing time. Additionally, we maintain a robust process of selection of garments for commercial production.
Forecasting demand would be a complex exercise for consumer fashion companies since consumer preferences keep changing rapidly. Basically, what do you do to develop more accurate and reliable forecast and how do your tech-savvy channel partners aid the process?
Demand forecasting in the fashion industry plays a very important role for any manufacturer and distributor, and the same applies to us. Since we do not repeat any of our design styles, the elements of forecasting and planning becomes very important for us. Each and every SKU is unique for us but at the same time, we ensure that those are not on the rack for more than a season. Here, tech provides a little support except for identification of slow-moving items.
One essential element of forecasting is understanding how to use it to your advantage. By nature, human errors are inevitable—even with ample research, no prediction is guaranteed to be perfect. However, overall accuracy is an important factor, as fashion life cycles are relatively short-lived.
We do receive feedback from channel partners regarding what and how will be the demand in the next few months, however, at present, due to the downfall in production cycles, we are getting lesser support and decision-making seems to get more complicated.
What according to you are the three most factors in differentiating the ‘manufacturing and distribution’ aspect of your supply chain strategy?
Not three, there are many. But, graphing and interpreting forecast information, and developing styles as well as selecting the style which we decide to commercially launch on a timely basis—are a few of the critical differentiators.
Tell us about your current supply chain capacity utilisation and overall what is the production capacity that you are meeting?
Due to subsequent lockdowns led by the pandemic, we are operating at a production capacity of around 70 per cent as of now owing to contraction in business activity because of raw material and labour shortages.
Presently, for the fresh garments segment, we are having processing capacity of around 75 lakh pieces a year from our warehouse. This can be enhanced to 1.25 crore pieces per annum, should the need arise.
To enhance production and also because there are challenges with respect to quality manufacturers for Denims, we continuously work towards adding new vendors, resulting in more choices and ultimately better costs. At the same time, our regular vendors are geared up to enhance production, if need be.
How are you seeing the overall COVID turbulence intensify across the market segment you are present and the supply chain techniques that you have implemented and proved helpful?
COVID has impacted retail big-time and many of the effects are also sustained by the fashion industry. After a lot of discussion and brainstorming sessions and also after taking our production partners in confidence, we remodelled and rescheduled our production plans. Complemented by the good understanding between Spykar and its 3PL partners, both the company teams are able to make adjustments to minimise the losses due to COVID. After all, during these testing times, shippers and providers are forming more collaborative partnerships, focussed not just on delivering service products, but on shaping the supply chain’s long-term success. Our network partners are very cooperative, encourage development and help grow synergetic partnerships. They are geared up to provide the best support as and when required.
How can Fast-Moving Consumer Fashion (FMCF) companies leverage latest technologies that would significantly improve efficiencies in their logistics operations? What changes, if any, are required in infrastructure, IT and otherwise?
Technology supports faster handling of material which is the key for lead time reduction that makes for a stronger competitive position in the marketplace. At the same time, it is a great medium to reach consumers faster and also more effectively by way of various social media platforms today. Practically, technology helps companies to stay updated with the latest developments and enables them to be quick to implement the same to ensure they are ahead of others.
Besides in terms of transportation and delivery, companies get the recommended transit time for all product shipments. Supported by vehicle telematics and online tracking systems, supply chain teams can track all the consignments on a single personalised dashboard that acts as a “one-stop, single-window” solution for all the needs of its users.
In general, from a domestic perspective, what is the key to best practice in the consumer fashion supply chain space? And, what needs to evolve to better standards?
I believe there are two key points from the supply chain point of view. Firstly, companies need to have the infrastructure which is capable of handling the peak of a process efficiently. Significantly, in the fashion industry return of material is much prominent, therefore companies should have the right facilities at place to handle returns efficiently to ensure quality control and reduce time loss and work in process inventory.
Secondly, companies need to have good partners who can upgrade or downgrade the supply capacity as per the requirements without compromising on quality.
