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How fashion brands can cut down overstock and diminish risks with on-demand manufacturing

Overstocking and pollution damage the business and reputation of the fashion and textile industry. The root of the problem is that manufacturing is still based on the outdated inventory model and works on predicted demand.

Author:
Janne Souza & Lui Iarocheski

Fashion overproduction rate is staggering, ranging between 30 and 40 percent in any given season. A major flaw in the traditional fashion system is the inexact matching of supply and demand. It's well past time for a fashion business that generates $2.5 trillion in annual revenue to rethink the way it produces and stocks products. The traditional fashion system is not only wasteful financially, but is also harmful to the environment.

There are numerous serious consequences of inventory and demand forecasting models that rule the fashion manufacturing industry, including overproduction, overstocking, and pollution. In spite of today's advanced technology, which facilitates automation and increases manufacturing efficiency, the fashion industry still depends on conventional production and supply chain models.

Developing and marketing products often takes up to a year because of their lengthy and inefficient design and manufacturing processes. The vast majority of major brands manufacture their products in developing countries. The factories typically take several months to deliver the garments and have a minimum order quantity of tens of thousands for each model.

Overproduction ultimately leads to surplus stock and tonnes of unsold inventory. So what happens to all the inventory that isn't sold? Unless they are sold at a big discount during sales campaigns, they are donated or disposed of in landfills in developed countries, polluting the environment further.

What brands do with the deadstock?

They sell through discounts and outlets

Three-quarters of all clothing sales are now made at a discount. Discount shops now outnumber full-priced stores at some traditional retailers. And the excitement of bargain shopping, however, cannot guarantee that all things are sold.

Sell in bulk into non-competing markets

For example, European brands often re-label their deadstock and sell to Australia.

Donate to charities

While this may seem to be a positive idea on paper, donating and discarding unsold clothing in low-income countries may have a negative effect on local economies and communities. Besides, demand for such charities is falling, partly because of the low quality of donated products from fast-fashion retailers.

Destroy (though almost never admit)

Clothes are shredded and recycled, or they are incinerated. The public has no way of knowing how unsold or damaged clothing is disposed of.

Tackling fashion’s waste and overstock with on-demand manufacturing

Producing excess products that do not sell wastes financial and material resources, leading to risky discounting and an increase in inventory. Liquidating stock by discounting it reduces margins and decreases the brand value. Consequently, bargain-seeking buyers will continue to look for lower cost options.

So, what can be done in this challenging market environment to maintain (or increase) margins while appealing to consumers' demands? Due to the ongoing Covid-19 pandemic, many fashion labels have jumped on the latest craze for mass customization, limited series, one-off pieces, and more broadly, on-demand manufacturing.

A growing number of industry experts believe that, fast, on-demand  manufacturing is becoming an important part of the next normal for fashion. Innovative and disruptive fashion brands might find it the perfect time to shake things up and improve upon the status quo.

Today's fashion businesses struggle to predict demand months in advance, which can be extremely risky. Producing on-demand eliminates that risk by starting production only after the customer places an order, allowing fashion brands to reduce their upfront cash need and minimize excess inventory.

When procurement, production and distribution don't begin until after the customer order is placed, the customer is at the heart of the proccess. This allow companies to eliminate excess inventory, improve sustainability and gain or mantain market share.

Gonçalo Cruz, Platforme's CEO & Co-founder, in interview for Sourcing Journal.

With on-demand production, brands no longer have to keep products in storage, as production only begins once a customer order has been placed. Brands must then instantly activate production by sending the quantities and the product specifications required to their suppliers. In this way, production performance and quality can be improved because goods can be made by the exact specifications provided by the customer.

As designers seek to refocus their business models and emphasize both ethics and economy, on-demand manufacturing has become increasingly influential.

What are the advantages of on-demand manufacturing for fashion?

Capture the latest fashion trends

In today's competitive, fast-moving fashion market, an agile process—which is ideally suited to low volume, high mix goods, or those with limited product life cycles—is a vital survival technique. This strategy is perfect for the fast fashion industry, where it gives you a leg up on the competition by allowing you to introduce fresh, on-trend goods to market before your rivals and before the trend shifts.

Make what sells, when it sells

On-demand manufacturing allows you to offer thousands of different style variations to your customers without having to carry inventory, resulting in higher profits. When brands produce on-demand, they can have full visibility into every aspect of their orders, enabling them to provide quick feedback to their customers, resulting in a more personal relationship.

Increase profits and customer satisfaction with customization

Fashion customers increasingly seek unique, personalized items that distinguish them. The evolved trend of customization is leading to a new business opportunity for those using on-demand manufacturing: made-to-measure.

Take care of environmental issues

Producing on demand, brands will be able to save their unsold stock from ending up in landfills because of faulty forecasts, earning the loyalty of conscious consumers. According to the findings of the 2019 Pulse of the Fashion Industry survey, 75% of consumers regard sustainability as an extremely or very important question. More than a third of American consumers said they will be willing to pay 25% more for sustainable goods in the CGS 2019 U.S Market Sustainability Survey.

Discover a new way of doing business

‍Start generating positive cash flow before you begin production by producing small numbers of garments on demand. As a result, you will have a higher profit margin and avoid overstocking by producing in precise quantities. Make sure to offer unique shopping experiences and products to earn customer loyalty.

A well-designed technology stack can help streamline e-fashion. PlatformE built an end-to-end on-demand platform - from the 3D customizable products and product configurator to the technology stack that manages orders, production, all the way to delivery (factory to consumer).

Now, personalized goods can be designed, sold, and produced faster and more efficiently than ever before. You can let your clients' imagination run wild while PlatformE orchestrates the on-demand production.

Read more: The Sustainable Fashion Production Supply Chain - small batch, quick turnaround, and nearshoring