Fashion companies are starting to find digital footing with shoppers, but the manufacturing side of the business is next in line for a digital upheaval.
As fashion continues to evolve into an industry based on demand instead of supply, apparel sourcing executives are eyeing a digital overhaul of their manufacturing operations to not only keep up with the times, but to deal better with ever-shrinking minimum orders and shifting trends, according to a global study from German consulting firm McKinsey & Co.
Of the 63 executives managing $135 billion in sourcing value whom McKinsey surveyed, 83 percent see future digitization of their companies’ apparel sourcing as having the ability to speed up decision-making, decrease production errors and increase orientation with their increasing savvy and fickle customers.
“Digitization offers great potential to shorten lead times and give consumers the products they want to have,” Achim Berg, a senior partner of McKinsey’s fashion consulting group, said. “This is the case whether it involves selecting production locations using advanced analytics, technological collaboration with suppliers or producing virtual prototypes.”
McKinsey said a majority of the manufacturing executives expect digitization efforts to cut costs by 5 percent and reduce sourcing times by two to four weeks.
Speed is on the minds of brands like Under Armour, whose chief supply chain officer Colin Browne told McKinsey, “Historically, our industry has had long lead times for relatively simple products.”
“While we increasingly talk about automation, the larger unlocking triggers of digitization come from thinking about how we manage speed differently,” Browne added.
The catch is that there are “major gaps to close” between what these companies do now and what they hope to be doing in the future.
“End-to-end process management is a case in point,” McKinsey said. “More than 80 percent of sourcing executives rate this as the area of highest future impact, but just 25 percent of them believe their current organizations have a high degree of digital maturity in this area.”
McKinsey noted that these companies would do well to invest sooner rather than later in the integration of something like product life cycle management software, which it said has been shown to increase productivity by a factor of 10.
Martijn Hagman, chief financial officer of PVH Europe and Tommy Hilfiger Global, said that PVH is looking to significantly reduce lead times through process optimization and digitization, but admitted many of the tools needed “are not there yet.”
He pointed to 3-D design technology, which allows for digital patterns, fitting and rendering, but said there’s no one program that manages these individual elements.
Automation is still on the menu, however, for at least some elements of manufacturing. More than half of the sourcing executives said sourcing locations will be chosen more for their automation ability than costs by 2025.
Integration of automation will not only increase production speed and efficiency when paired with traditional labor, but it will make the burgeoning trend of “proximity sourcing,” or getting apparel from regions that are closer to a fashion company’s base, more feasible.
“Every second [executive] agreed that proximity sourcing will become more important, [as will] being able to satisfy the wishes of customers with more quickly available products,” Saskia Hedrich, a coauthor of McKinsey’s report, said.
But the apparel manufacturing world isn’t headed for total automation and home-based sourcing, not yet at least.
Under Armour’s Browne said simply, “it will remain cheaper to produce in low-cost countries with AI and technology helping production” for the next decade or more. He added that the days of belabored back-and-forth for sourcing are gone and that fashion companies are now looking for “integrated partnerships” with their suppliers.
“The old sourcing model is dead,” he said.
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