Your Supply Chains Are Out of Date and This is the Tech That’s Taken Over

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Sourcing Summit 2017

If your company hasn’t yet discovered how outmoded it is, wake up, because EBIT, brand value and shoppers who care at all about what you’re putting into the apparel space, are all at stake.

“We’ve always done it like this” is now an obsolete refrain, disruption has already happened and speed to market won’t solve all of sourcing’s problems. Massive wholesale change is what companies keen to stick around should be after.

“We think the supply chains of the current industry—no matter how efficient you make them—are effectively out of date, from a customer’s perspective,” Pano Anthos, founder and managing director of consumer goods and retail accelerator XRC Labs, said during a technology and innovations panel at the Sourcing Journal Summit in New York Tuesday. The first question millennials (who happen to represent today’s largest consumer market) always ask is ‘why?’ and that fact has contributed to, as Anthos explained, “a radical change in the way things are getting done.”

[Read more about the Sourcing Summit: Consumers Are Telling You What They Want to Buy—Are You Listening?]

Small startups with new ideas are getting big backing from retailers and consulting firms because they see where the puck is going.

And one place it’s heading, is toward on-demand manufacturing.

Demand for on-demand

One startup XRC Labs has invested in is Ziel, an on-demand apparel design and manufacturing company making clothing for brands and retailers that want to sell their own private label. Ziel makes these goods for companies without demanding a minimum order quantity and they deliver in less than 10 days.

“The average brand and retailer in the USA has 40 percent oversupply and 10 percent undersupply almost,” Ziel founder and CEO Marleen Vogelaar said. “That leads to about 20 percent write-offs and 30 to 40 percent discounts in the industry, excessive marking down. There’s like a 60 to 70 percent EBIT problem in this industry and nobody’s fixing this? What would happen to Macy’s if they could only solve 6 percent of it, how would they be doing?”

On-demand manufacturing is a solution to part of the problems in this market, Vogelaar said, but it won’t be a panacea.

This made-to-order method will work well for product that’s trendy, for making more of what Beyonce posted on Instagram last night available today and for making goods in the U.S. that are more eco-friendly at a cost that’s palpable.

“If you don’t take the risk [of making too much product too far in advance] and you don’t have that 60 to 70 percent problem on your PNL, then all of a sudden you can actually be competitive from a cost of goods sold perspective,” Vogelaar said. “Not a cost of goods made—we can never compete with that with Asia—and to 10 to 15, probably 20 percent of all apparel made is actually very well suited for on-demand and that’s where it could make an impact.”

As Anthos added, companies like Nimbly are making custom fit knits in 30 minutes using Shima Seiki 3-D knitting machines, with sizes that are more consistent than sewing lines are creating for brands’ disparate size scales. Ministry of Supply is making a jacket in much the same way.

“Yeah, you’ve got to wash it, the standard knitwear stuff still has to be done, but it’s a lot closer and it’s on demand at a price point that absolutely rivals…what you could be sourcing out of China at one tenth the quantity,” Anthos said.

For Pete Santora, chief commercial officer for SoftWear Automation, a “10-year-old startup” that’s using sewbots to automate manufacturing, the focus for on-demand manufacturing shouldn’t be on what the technology can’t make yet—although Vogelaar says Ziel will be able to make a suit on demand in three years’ time—but what it can make now.

“On demand, to me, really means on demand, made to measure. It means no inventory, it means a really local supply chain,” Santora said. “If we stop thinking about solving for the purple dinosaur [the complex garment that can’t yet be made] and we start thinking about goods that are possible, we can start creating local supply chains that have on-demand.”

Demand for data solutions

Studies have claimed more data will be created in 2017 alone than in the history of time, and though too many brands still know too little about what to do with all that data, some systems are shifting the way companies run their supply chains altogether.

Data analytics platform StyleSage is one such company trying to show others how to use data to improve their supply chains and how they move their physical goods.

“It’s not easy to change your supply chain overnight—it’s a multiyear process. You’re looking at sourcing from a different place, from a different factory. It’s not an easy exercise, but the part you can change is the business process,” StyleSage CEO Jade Huang said, adding that that will help companies “make quicker decisions so that the parts that cannot be changed easily can move a little faster because you frontloaded a lot of that decision power.”

FullBeauty Brands has tapped into the StyleSage platform to help it adapt to its customer and move toward a one-to-one experience using segmentation and behavior data.

“We are using the interface where you actually have all the themes,” FullBeauty Brands director of consumer insights Joel Hoff, said. “You can follow different bloggers, you can see the different colors that are coming up. It’s very easy to use.”

Really, it’s about having as much information on your target customer—and what they might want to wear—as possible, in the earliest stage of the game so that sourcing teams can operate a little faster.

The right data, according to Huang, can help companies identify the 80 percent of their business that’s the core collection they know they’ll sell a certain quantity of at a certain price, plus the 20 percent that can be made using on-demand batch processing so they can be nimble enough to capitalize on trends that need to be turned quickly.

“That’s how our data really comes into play,” Huang said.

Demand for digitized compliance

There’s been little in the way of innovation when it comes to compliance, but it too is now going digital.

Inspectorio has found a way to automate and digitize the entire quality control and compliance process, and people are starting to pay attention. Target just announced Tuesday that it will implement the new technology to bring more speed, better quality and greater transparency to its factory inspections.

By connecting the Inspectorio platform to their own existing PLM or ERP systems, companies can share inspection data in real time via a mobile app, uploading photos to show quality and production progress. The platform uses a machine learning algorithm that learns from the data being collected and can provide recommendations for ways to be more efficient in minimizing supply chain risk and improving overall supply chain performance.

What Inspectorio is doing, according to CEO Carlos Moncayo, is bringing a level of transparency similar to what Yelp or Tripadvisor brought to the hospitality industry.

“What we are leaving right now in sourcing is an era I call the Yellow Pages era, where you can create an artificial image of who you are as a vendor and factory,” Moncayo said. “It’s very hard to get deep, real, valuable information…we’re just changing the dynamic and bringing objective, actionable data and offering that to everyone that’s using the platform and just making the entire process more efficient.”

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