The Future of Apparel Sourcing: Speed, Sustainability and Digitization

The apparel industry has faced immense supply chain disruptions in recent years, from factory shutdowns during the pandemic to inflated shipping costs and raw material shortages. These challenges have prompted apparel companies to rethink their sourcing strategies and adopt more agile, streamlined, and digitally-enabled models.

Speed and flexibility have become critical factors in apparel sourcing as companies strive to meet changing market demands while reducing lead times and costs. According to McKinsey, the old paradigm of lengthy production cycles no longer aligns with the speed of consumer demand in today’s environment. As such, speed and flexibility have become critical factors in apparel sourcing. Brands are implementing more responsive processes to meet shifting market expectations while reducing lead times and costs.

As the COP28 climate summit intensifies its focus on sustainability, brands also face pressure to reduce emissions across their supply chains. Implementing cleaner transportation modes, optimizing logistics networks and sourcing recycled or lower-impact materials can help mitigate environmental footprints. Levi's partnership with Infinited Fiber Company to launch jeans using regenerated cotton exemplifies this shift.

To achieve this, companies are streamlining their supply chains and simplifying their product assortments. This allows them to optimize production processes, minimize excess inventory, and reduce the risk of overstocking.

Simplifying Product Assortments

Companies are also reevaluating their sourcing-country mix to balance stability and flexibility in their supply chains. Partnerships between brands and retailers are playing a crucial role in navigating industry challenges. Companies like Zara and H&M have led the charge in rationalizing product assortments to speed time-to-market.

Zara limits its assortment to around 2,000-4,000 SKUs per season versus H&M’s 18,000-20,000. The constrained variety allows them to focus manufacturing efforts on faster-selling items.

US brand Everlane has taken this even further with just 61 core products offered year-round [9]. Reformation also maintains a simplified catalog, averaging around 100 SKUs per season focused primarily on best-selling silhouettes and sustainable materials

This strategy minimizes excess inventory risk, streamlines production, and enables quicker design-to-shelf turnover to react to trends. US brand Everlane has taken this even further with just 61 core products offered year-round.

The potential for digitization to transform apparel sourcing is significant. By leveraging data and analytics, companies can better understand consumer preferences and optimize their production processes. However, there is still room for improvement in areas such as automation and predictive analytics.

Reevaluating Sourcing-Country Mix

Apparel companies traditionally chased low-cost country sourcing, leading to dispersed, lengthy supply chains. Today, there is a rebalancing towards proximity and flexibility alongside cost savings.

Brands like Gap, Inc. have diversified their sourcing base across geographies to mitigate risk exposure, while increasing regional capacity for faster replenishment. Strategic partnerships between retailers and sourcing agents are also on the rise to navigate this new paradigm.

Digitization and Data-Driven Sourcing

Digital solutions provide immense potential to enhance apparel supply chain planning and efficiency. Advanced predictive analytics using AI can forecast product demand more accurately, while 3D design software accelerates prototyping.

Virtual sampling company Browzwear achieved over 90% accuracy in predicting best-selling styles for leading brands, illustrating the promise of data analytics. However, end-to-end digitization across design, sourcing, manufacturing and delivery still faces barriers to seamless adoption.

Integrated Operating Models

Ultimately, supply chains are only as agile as their weakest link. Leading apparel companies thus emphasize cross-functional integration rather than working in organizational silos.

Close collaboration between sourcing, production, design and commercial teams enables faster decision making to meet consumer needs proactively. Brands that leverage sourcing as a competitive edge are integrating it into strategic discussions around assortment planning and stock allocation.

The future of apparel sourcing lies in flexibility, responsiveness and seamlessness to keep up with the speed of fashion.

Barriers to fashion's digitization:

While the drivers pushing fashion toward increased digitization are strong, there remain significant barriers slowing the pace of change. As outlined previously, resistance to change, skills gaps, data security concerns and integration challenges have hampered adoption.

Additionally, the high touch-and-feel nature of apparel and footwear has made online transition more difficult. For decades, fashion retailers have invested heavily in experiential store environments where customers can try on, feel and evaluate products before purchasing. Replicating this tactile experience digitally has been a major roadblock.

Augmented reality and virtual try-on technologies have attempted to simulate the physical retail experience online. Brands like Nike and Lululemon have invested heavily in these technologies with mixed success so far. While promising, these digital solutions remain unable to fully replace the in-store experience that fashion shoppers have come to expect. With e-commerce representing over 20% of apparel sales today, this gap highlights a key priority area for brands seeking to remove friction in adoption.

Siloed systems and ways of working also pose integration and scalability challenges. Disparate legacy software systems make connecting digital initiatives across the value chain difficult. Breaking down these silos both technologically and culturally stands as a primary obstacle for fashion brands seeking large-scale transformation.

Thus the path to digitization spans both technical and organizational considerations unique to retail fashion. Overcoming these barriers requires patience, investment and support from across the C-suite. But for brands that navigate these hurdles, the payoff promises improvements in efficiency, sustainability and innovation over the long term.

Global Economic Shifts Reshape Fashion in 2024

Alongside the ongoing digitization push, seismic shifts in the global economy and consumer priorities stand to reshape fashion this year. Surging inflation, recessionary warnings and geopolitical tensions paint an uncertain landscape with brands needing to reevaluate strategies.

McKinsey research finds over half of fashion executives anticipate industry conditions worsening in 2024. Navigating regional fluctuations will be key, with execs bullish on North American expansion while scaling back investments in Europe.

These macro trends filter down to consumers in a bifurcation of spending habits. Value-focused shoppers turn toward resale, rental and budget retailers to offset squeezed budgets. Yet resilient luxury sectors cater to less affected high-income segments continuing discretionary splurges.

Cultural shifts also stand to transform market dynamics. Younger generations drive exploding demand for gender-fluid fashion, with half of Gen Z purchasing across gender identity lines. And dress codes blur as hybrid work and casualization trends reinvent formalwear interest.

Fashion brands able to align regional strategies, balance pricing segmentation and adapt to emerging consumer cohorts will thrive amidst the volatility. But for all, careful navigation of crosscurrents remains essential in 2024.