Digital technologies are transforming the apparel supply chain by challenging old operating models and unleashing new opportunities. This is the first in a series of reports that will investigate the different aspects of the digitalization of the supply chain. As the introduction to the series, this report:
Digital technologies are transforming the apparel supply chain by challenging old operating models and unleashing new opportunities. The apparel supply chain is composed of four main stages—design, manufacturing, distribution and sales—all of which can be radically transformed by digital technology. Digitalization can be applied in the different stages of the supply chain in various ways:
The digital transformation of the supply chain helps improve efficiency at each stage, resulting in a leaner process overall. Digitalization provides several operational advantages, including increased speed, flexibility and trust, and better use of resources. The application of digital technologies has the potential to reduce the time it takes to move an item through the supply chain by 48%, according to industry experts at sourcing giant Li & Fung, a sister company of Fung Global Retail & Technology.
However, given the interconnected nature of the supply chain, in order to maximize the benefit that digitalization brings, companies must ensure that the various phases of the supply chain work in synergy.
This report is the first in a series of reports that will investigate the different aspects of the digitalization of the supply chain. As the introduction to the series, this report provides an overview of how the apparel supply chain can be transformed digitally and the advantages that digitalization brings to the value chain. The report analyzes the four main stages of the apparel supply chain and illustrates how digital technology can be applied to each stage.
In apparel, as in many other industries, the supply chain is currently undergoing a digital transformation thanks to the rise of new technologies. Across sectors, digitalization is challenging old operating models and unleashing new potential.
The traditional apparel supply chain consists of four different stages that often operate in silos. But to maximize the benefits of digitalization, the different phases must be well connected and well coordinated, so that any increased efficiency gained at one stage can be reflected in smoother operations in the following stage. Digitalization itself can improve coordination by facilitating communication between different stakeholders along the supply chain.
This report is the first in a series that will investigate the different aspects of the digitalization of the supply chain. It provides an overview of how the apparel supply chain can be transformed digitally and the advantages that digitalization brings to the value chain. The report analyzes the various stages of the apparel supply chain—design, manufacturing, distribution and sales—and illustrates how digital technology can be applied to each stage.
A digital supply chain integrates and connects the stakeholders involved in the different stages of the process through digital technology. A number of digital technologies can be applied to the various stages of the apparel supply chain, as summarized below.
To reap the maximum benefits of digitalization, the digital transformation must involve the value chain as a whole, not just some of its parts. The stages of the supply chain are highly reliant on each other, so a problem at one stage will inevitably have negative consequences on the rest of the chain.
Similarly, the increased efficiency brought by the digitalization of one stage of the supply chain will not improve the overall operation significantly if there is not sufficient coordination with the other stages. Digitalization itself can support coordination within the value chain by facilitating communication between different stakeholders. For example, store managers can use in-store sensors to track inventory levels in real time and to process orders more swiftly.
An integrated digitalized supply chain enables stakeholders to run through the process in both directions:
This can create a virtuous circle that further enhances the synergies among the different parts of the value chain.
Digitalization helps to create a leaner process at each stage of the supply chain and between stages. A digital supply chain can bring significant advantages, including:
The graphic below shows the stages and typical length of time needed for each stage in a traditional apparel supply chain (note that many of these stages can overlap). It could take about 40 weeks for an apparel line to go through the supply chain from design to sales. Digitalization has the potential to reduce that time by 48%, according to industry experts at Li & Fung.
That means digitalization could cut up to 19 weeks off the process. Shortening the length of time it takes to move an item from design to store is crucial in apparel because fashion items tend to be very time-sensitive and retailers need to respond quickly to changes in consumer preference. (Our report Speed to Market in Fashion explores the topic in more depth.)
Product design and development can move from a paper-based process to a fully digital one. Aspects of production and purchasing can also be digitalized, for example, with the use of IoT technology. In this section, we examine in more detail how the stages of the apparel supply chain can be digitalized.
Product Design and Development: 3D Simulation Saves Time and Money
In the product design and development stage of the supply chain, digitalization allows designers to have all the information they need in one place and enables them to design an item virtually using software. All the patterns available to designers can be collected and easily accessed in a database of fabrics, which can also house information such as testing results of the materials.
3D software can be used in digital design to simulate how a garment would behave while worn on the body, while 3D simulation reduces the time and cost associated with creating multiple iterations of a sample garment. 3D design and communication technologies can also reduce travel expenses and the number of prototypes and samples used in the process, while minimizing fabric waste and saving time. Time is crucial for apparel manufacturers and retailers, given the general move toward fast fashion in retail.
Examples of 3D fashion design software include Marvelous Designer, Optitex and Browzwear, which feature 3D clothing simulation for garment designing. The graphic below illustrates how 3D fashion design software works:
3D printing is another technology that can be used in a digital supply chain. Essentially, a 3D printer is a machine that can produce physical items from digital design files. 3D printing could potentially eliminate all the stages in manufacturing. However, the technology is still limited by the range of materials that can be used, so 3D printing is currently confined to the design/sampling stage of the supply chain. We analyze 3D printing technology in more detail in our report Enter Design, Exit Sweater: 3D Printing in the Fashion Industry.
Digitalization is very important in the production stage of a resource-intensive industry such as apparel. An example of digitalization in apparel production is illustrated by Digitex. In a bid to apply digital technology to apparel production in order to improve efficiency and sustainability, a consortium of 28 European organizations representing the apparel industry launched the Digitex initiative to develop digital finishing technology, which applies digital and inkjet technology to apparel manufacturing. The Digitex project was completed in 2010.
Digital finishing applies digital technology to different phases of the production stage, including printing, coating and dyeing. This dramatically improves the efficiency of resource usage and the precision and quality of the manufacturing process. The technology developed by Digitex enables the production of smart textiles and fabrics that employ nanotechnology, which cannot be produced with traditional manufacturing machinery. Digital finishing technology can be integrated with sensors that monitor the resources used and the waste produced during manufacturing and it can connect production facilities with each other, enabling a more rapid response when adjustments are needed.
IoT technology can be used in distribution. For example, RFID and NFC tags can be used to track inventory and product movements within the supply chain. By enabling the accurate tracking of goods, RFID can support the logistics of multichannel models: services such as reserve-and-collect and click-and-collect rely on having a clear view of inventory, which RFID can provide.
US-based package delivery company United Parcel Service (UPS) provides an example of how logistics can be digitalized in order to improve operational efficiency. UPS drivers carry handheld computers equipped with built-in global positioning system (GPS) chips that enable managers to give the drivers real-time instructions. UPS also developed an app that enables customers to manage their parcel delivery. For example, customers can use the app to change or update their previous package delivery instructions.
Myrmex, a California-based tech company we met at London Tech Week 2016, provides a further example of digitalization of the distribution stage. The company’s Curbside Pickup System consists of connected robots and autonomous vehicles that minimize operational friction in logistics. The system is conceived to improve the logistics of very time-sensitive items such as perishable food, but it can be used by companies in other industries where timing is important—including apparel—to make delivery more efficient.
The system combines a fully automated loading system and an innovative click-and-collect terminal. Online order loading is fully automated through a system of robotic gear that handles the goods. This lowers costs and minimizes errors, making operations faster and more efficient. The robotic gear places the orders in the right sequence in which they need to be delivered.
Smart packaging is another digital solution that can be used in distribution. Such packaging has embedded tags and codes that contain information such as product provenance or messages to customers or logistics managers. The technology can be used to track packages throughout the supply chain and to prevent counterfeiting.
In the sales stage of the supply chain, digitalization can take the form of in-store technology, e-commerce, m-commerce and social media. Companies can use social media to interact with customers, promote and sell products and services, provide after-sales services and assistance, and manage returns. Geolocation and inventory-tracking technologies can also be used to expedite the processing of returns. For example, retailers can use these technologies to track items that are returned to a store and then sent to a distribution center.
We have covered how digital technology is applied in-store in a number of reports. In our 2016 report Letting Online Apparel Shoppers Try Before They Buy: New Multichannel Models, we highlighted a number of examples of digitalization in the sales stage of the supply chain, including:
These solutions help retailers minimize shipping and reduce in-store inventories by making it easier for customers to identify the right size of an item without having to try on different sizes in a store.
Smartrac, a Dutch tech company, provides a retail store optimization system that uses sensors to track store data, which are then gathered in the cloud in order to provide the same level of analytics available in an e-commerce environment to executives and employees. Smartrac’s solution can gather key performance indicators that can be used to help managers improve sales conversion rates. For example, the system can track:
Smartrac’s system can also show store managers what happens when an item is taken to the fitting room and how well employees are engaging with customers. The system provides brick-and-mortar retailers with a wealth of inventory information to improve stockkeeping, displays and sales conversion. Li & Fung’s retail tech company, Catalyst, has a new RFID partnership with Smartrac to offer in-store product tracking.
Other examples of digitalization in the sales stage of the supply chain include the use of sensors to monitor lighting and temperature in stores in order to use energy more efficiently. Sensors can also be used for manual tasks such as tracking in-store inventory or changing prices via smart tags that can be used to adjust pricing in real time during promotions. This enables sales associates to spend more time interacting with customers and may reduce the need for extra personnel, thereby reducing operational costs.
Digitalization also enables traceability in the supply chain. In the sales phase, it enables customers to trace back the history of the item they are buying. This is important, as consumers are becoming more aware of issues regarding product provenance, environmental sustainability and ethical sourcing.
Blockverify, a London-based tech startup, developed the use of blockchain technology to trace back the journey of an item through the supply chain. The technology assigns a unique code to a product, which can be tracked on a register and monitored at all stages along the value chain. This enables the identification of diverted products, stolen merchandise, fraudulent transactions and counterfeit goods. Such technology has been used to manage the supply chain of high-value items, including pharmaceuticals, luxury goods, diamonds and electronics.
Lastly, technology can extend beyond the sale of the product, into the customer-use stage. Notably, NFC technology can be embedded in apparel items to provide customers with a personalized experience and encourage brand engagement:
Digitalization of the supply chain brings many advantages to apparel retailers and manufacturers. A digital supply chain helps companies run smoother operations, use resources more efficiently, better coordinate the various stages in the product lifecycle, and better respond to unforeseen circumstances and changing consumer trends.
However, given the interconnected nature of the supply chain, in order to take advantage of the opportunities that digitalization brings, companies need to make sure that the digital transformation occurs within and through the different stages of the value chain. This can be achieved through a clever implementation of digital strategies that facilitate communication and coordination among the different stakeholders involved.