Next Season’s Hottest Trend: An Agile Supply Chain

Waste in the fashion industry had reached a breaking point–before the pandemic. Traditional industry models for production and order fulfillment are effectively asking customers and our environment to pay for the industry’s inefficiency.

Image courtesy of SHEIN

Waste in the fashion industry had reached a breaking point–before the pandemic, 85% of all new garments were discarded within a year and 25% of raw materials sourced to produce clothing were discarded, unused. The pandemic further revealed waste in the supply chain. A McKinsey report from May 2020 estimated the value of excess inventory from spring/summer 2020 collections was between €140 billion and €160 billion worldwide (between €45 billion and €60 billion in Europe alone) — more than double normal levels for the sector.

Traditional industry models for production and order fulfillment are effectively asking customers and our environment to pay for the industry’s inefficiency. For most fashion companies, releasing a new style requires a significant investment in inventory – often thousands or tens of thousands of units per style to fill warehouses, regional distribution centers and store shelves – of which a significant amount will never even be worn. The cost of this wasted investment is then passed on to consumers and our environment, as brands increase prices to recoup financial loss and unsold garments are burned or thrown away after being destroyed.

Producing items in such a high volume also slows down the rate at which designs reach the customer. In turn, brands find it difficult to keep up with the latest trends and prefer to focus on a core collection of “safe” styles rather than bold and exciting designs. As the industry progresses, it will be vital to disrupt traditional production and fulfillment systems. Brands must think creatively to implement agile supply chains that can actually meet customer demand without excess waste or astronomical pricing that alienates the average consumer.

But how can brands actually do this?

I believe that investment in technologically-empowered growth strategies will usher in the future of fashion. Since we founded SHEIN, it has been our mission to develop the tools necessary to meet the demands of modern consumers without abandoning quality, affordability or style. To meet these goals, we have built, from the ground up, a fully-digital supply chain and sales platform to stay well-informed of what is in demand by consumers. We then produce and deliver the products quickly to anywhere in the world while creating less wasted inventory. We have never strayed from our mission of leading the development of alternative processes and technologies to bring fashion into the modern era and meeting customers where they are shopping: on mobile devices, online and on social media.

Recent trends in the fashion industry have made it evident that consumers demand quick access to a wide range of on-trend fashion and lifestyle items that they can afford. The following strategies will enable brands to continually meet this demand and clearly demonstrate the power of technology to bring fashion into the 21st century.

Dedication to Environmentally Friendly Technology: The LATR Model

The test and reorder model is certainly not a new concept to the fashion industry, but it is very difficult to execute on a large scale. Resolving this conflict requires tailored software tools, specifically developed to analyze inventory and sales and implement large-scale, automated test and reorder (LATR) strategies. An at-scale LATR model improves production efficiency by utilizing real-time order and customer interest tracking to predict sales and control production.

Image courtesy of SHEIN

This technology allows for initial production of new items to be limited to 100-200 units per SKU, rather than the thousands, or tens of thousands, that is typical within the industry. LATR software tools immediately identify the SKUs that are popular among consumers and initiate the re-order process to replenish inventory. If a SKU does not sell as expected, the production process is immediately halted to control deadstock to within 100-200 units per SKU. Creating technology that analyzes demand in real-time and acts on those insights is key to achieving an agile supply chain that can update product offerings in real-time and significantly reduce waste.

In a perfect world, fashion companies should be able to offer customers close to infinite style options (whether it be the latest trends or classic looks). That could meet individual preference, producing each style per single piece only, while reducing the burden on our environment. It would then replenish each piece sold–in a moment’s time–for the next customer. At SHEIN, we are dedicated to making long-term improvements on these three steps while moving, over time, toward this ideal model. It will only be possible if brands across the industry dedicate themselves to making long-term improvements on these three steps.

Empowering a Thriving Fashion Ecosystem

Technological development will serve as the core business model for fashion brands that wish to thrive in today’s consumer market. In fact, cutting-edge tech is what enabled SHEIN to grow globally while adhering to our values and agile supply chain structure. This technology is most useful when leveraged to offer SaaS platforms to suppliers and contractors. These tools create shared value by optimizing the efficiency of the entire supply chain, both creating growth opportunities for suppliers and improving the customer experience.

It is crucial that brands partnering with independent manufacturing partners allow transparent access to digital collaboration and dispatching tools, and provide sales information about a partner’s items as soon as it becomes available. This transparency will empower them to significantly improve productivity and reduce miscommunication, resulting in increased profits and previously unimaginable turnaround rates.

The Power of Innovation

My belief in the power of innovation is not without reason — SHEIN’s success is the product of many years spent developing innovative technology and processes to disrupt and improve the traditional fashion industry, at every step of the supply chain. We are committed to uplifting the experience of our customers, employees and business partners by harnessing technology and innovation that avoids the zero-sum choices faced by other fashion companies, between a broad product offering, on-trend styles, value for money and timely order fulfillment. We believe that fashion is not for the few but for the many, and we will continue to make the beauty of fashion accessible to all.

It is up to us, our industry peers and the larger community of fashion retailers to solve the issues that have plagued our industry, rather than continuing to shift the consequences between our consumers and the environment. We at Shein are continuously innovating our technology, because we understand that effecting change requires constant improvement. We are committed to joining collective initiatives and investing in technology to reduce environmental impacts like water use and waste. Our goal in all this is to offer product variety that encourages individuals of all cultures and sizes to express their unique perspectives on fashion.

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