Exploring the UK Fashion supply chain crisis

Fashion is a constantly evolving landscape, and its effects are felt around the globe. It touches everyone's lives in some way – from the trendy fashionista to those merely looking for affordable clothing options; it truly affects us all. This is why the dynamics of the fashion industry enjoy so much attention.

The fashion industry consists of many players. Contrary to popular opinion, brands, online stores, design houses, and fashion magazines are not the only players in the fashion industry. Models, embroiderers, and designers also play important roles in fashion.

Demand in the fast-paced clothing fashion industry has been unpredictable, impacting the supply chain. Hence, establishing a robust supply chain network is a major way the fashion industry can improve its efficiency and stay competitive. The complexity of the fashion supply chain is defined by attributes such as high volatility and a short product cycle. This article provides insight into the unique dynamics of the fashion industry.

A background in supply chain management in the fashion industry

Whenever we shop, we identify as key players in the long chain of events in the fashion world. Have you ever thought of the makers of the clothes you wear? Or the kind of life they live? The fashion supply chain is characterised by various stages involved in its production. The supply chain is the force behind a flourishing fashion era and is key to setting and adopting trends in the industry.

Therefore, the fashion supply chain involves monitoring the individual steps of the manufacturing process, starting with sourcing raw materials, moving down to the factories where these materials are sewn into garments, then how they are distributed to the retailers and delivered to the customers. It's a lengthy process that can be broken down into five main processes.

Let's start with the design process, which involves the fashion designers selecting the trims, style, finishes, and other clothing items. The designers are usually the ones controlling the rest of the supply chain. The next phase, the production stage, involves creating and gathering the raw material, then turning it into fiber and moving the fabrics to another process of dyeing, washing, screen printing, and finishing.

Afterward, the garment makers cut the clothes and make it into wearable pieces by sewing them, following the specifications of the designs and patterns. After carefully crafting the clothes, manufacturers distribute them to retailers, who then provide these stylish products to shoppers worldwide.

Problems facing the fashion supply chain in the UK

Despite being home to several household fashion brands, the iconic British fashion industry is suffering from a daunting slump in supply largely due to Brexit and Covid-19.

In June 2022, London UK- SAP SE announced new research showing that nearly all the UK companies acknowledged that there needs to be an improvement in their supply chain. SAP SE said at least 58 percent of these companies felt their supply chain required significant growth.

Inventory management challenges

A report by Unleashed, an inventory management software, also revealed that the clothing fashion industries in the UK are holding 57 percent, compared to the pre-pandemic period, as the current supply chain issues have reached a point where something needs to be done about it.

According to Fashion United, in Unleashed Manufacturers Health Check's report, "the firm analysed more than 4,500 SMEs through four parameters; value of stock in hand, Gross Margin Return on Inventory (GMROI), fulfilment days and prices paid for goods purchased."

Unleashed mentioned in its report that fashion businesses had been forced into accumulating large quantities of products, with fashion and clothing producers having the 7th most substantial increase in stock in hand levels of any sector for Q3 2022.

The clothing industry, however, decreased its overall GMROI by 81.5 percent compared to other sectors. In addition, the industry was said to have made a slight cut in fulfillment times, compared to pre-pandemic levels, falling 27.8 percent.

The CEO of Unleashed, Gareth Berry, said, "What started as a supply chain crisis appears to have evolved into an inventory crisis at the individual business level", adding they have encountered prices ease and shipping times, "but that's at the expense of firms who are forced to hold far more stock just to stay operational."

Berry stated that it's a difficult situation for fashion manufacturers that will exhibit real cash flow pressures. "Managing those stock levels down in the coming months will be a delicate task," he added.

The Fashion industry and inflation

According to RSM UK's Lead International Partner, Simon Hart, the present shape of the supply chain issues in the UK has emanated from Brexit-related sourcing concerns, changing into those around the pandemic, plus the Russia-Ukraine war and, currently, the inflation crisis.

Experts think that smaller fashion companies would feel the impact of inflation more than bigger companies. According to Clare Alexander, a Fashion Brand Consultant, "The current inflation crisis has definitely made building a brand more challenging."

Other challenges facing the supply chain include extreme climatic conditions such as the floods in Pakistan and drought in Texas, political upheaval, and trade tensions disrupting the cotton supply in China.

Covid-19

The Covid-19 pandemic was also a major disruption within the retail sector. This led to retailers canceling orders from suppliers, refusing to pay for goods already in the production process, demanding reductions in the costs of clothes that had already been shipped, and delaying payments for long periods.

These challenges are not new, but they are intertwined. They depict much wider issues in the garment manufacturing system. For example, the UK parliament, in July 2022, mentioned that UK retailers have, for decades, forced buying practices on their suppliers that have led to illegal contract violations.

The UK parliament said, "The volatility facing suppliers, as a result of these practices and the need to meet their fixed costs, have led to the problem being passed down to workers in the form of wage reduction and mass unemployment."

Moving Forward

For the fashion business, finding solutions will benefit the industry in many ways. Firstly, it will minimise the inherent risk when purchasing raw materials and selling the products. Additionally, it will improve the quality of fashion products and increase the industry's profit levels, among many other advantages.

Experts have suggested many ways the industry could solve the problems associated with supply chain management. Firstly, producers should know their inventory and maintain increased automation, as this will enable balanced warehousing costs, inventory levels, and customer demand. According to experts, "when you keep track of your inventory, it will enable you to plan and replenish products before they run out." In addition, automation minimises inventory shortages and ultimately reduces overhead costs.

Professionals also prescribe collaboration with industry players. Steady and sustainable partnerships with manufacturers, vendors, industry peers, regulators, logistic teams, and financiers are important to prevent logistics friction. Some factors that lubricate collaboration with industry peers include information-rich dashboards, automated permission, alerts, and real-time updates.

Additionally, bulk buying from suppliers can also aid in reducing costs due to discounts in volume. However, depending on a supplier can be disadvantageous, as a variety of suppliers can be of support and more secure in case of supply chain interruptions.

Fashion consultant Alexander noted that for many smaller fashion brands, there is a mounting challenge of finding solutions to the problems mentioned earlier. She then suggested that there may be a good effect to it as well, such as having fewer competitors. This huge step is what Alexander calls a "leap of hope".

With proper planning, new fashion brands can thrive even during economic recessions. It's what Alexander points out as the "lipstick effect,"; which means that consumers can
still, find a way to spend money on small luxury items if they can't afford more expensive ones.

She added that new businesses need help. There are many things to be considered for a rising fashion brand, such as finding manufacturers, pricing, marketing, and, most importantly, targeting the right audience.

The brand consultant also suggested that new fashion brands do not consider the importance of having a consultant. Clare explained this by pointing to a
recurring mistake amongst new brands, in which they overbuy materials and neglect marketing. This leads them to be stuck with loads of stock. She said, "Everyone got ideas, doing the research validates yours. First, you need to search if there is a gap in the market. "If there is, what are the needs of the consumers? What do you need your brand to stand for? And which audience does it target?"

Conclusion

The fashion industry is driven by an ever-changing mix of varied customer needs and exotic trends, making it a unique challenge to stay ahead. But the complexities of managing supply chains are now shaking up how success in this dynamic field can be achieved - will companies rise to the demands with flexible strategies or succumb?