Risks in the Fashion Supply Chain Due to Price Pressures
The Fashion industry is under tremendous price pressure from both the highly competitive retail marketplace and from Global currency fluctuations. The effects of these are numerous:
- A dramatic negative impact on margins.
- In many cases, a significant shift in Global supply base to achieve better prices e.g. Bangladesh.
- Huge price and lead time pressure on vendors.
- As a result, potentially weak suppliers (financially), where those suppliers are not efficient and 'geared up' to cope.
- A higher risk of failed orders as vendors try to achieve more than they are capable of.
- Poor quality product, as higher risks are taken.
- Social compliance issues, again as risks are taken to meet price points and delivery.
- An increase in air-freight, missed shipments and delivery penalties.
Whilst some significant 'promiscuity' in the supply base will exist as companies search for best prices, major buying offices also have to consider stability in the supply chain. They will look to work with proactive suppliers who can consistently respond and perform, in all areas of lead time, quality and price.
The good news is that HUGE opportunities exist to improve supply chain efficiency, for those companies prepared to change the excessively manual, typically spreadsheet based systems that are still used by 90% of all companies, both vendors and buying offices alike.
Existing working practices are a key factor in the creation of excess costs (excessive style change, overtime, air freight, delivery penalties etc), many of which could be avoided through better coordination and visibility of priorities.
Excessively manual systems severely hinder visibility and the ability to respond and manage priorities.
To maintain an effective supply chain in this environment, excellent visibility and coordination are essential.
THE REAL RISK FOR MANY COMPANIES IS 'CARRYING ON WITH THE INEFFICIENT METHODS THEY HAVE NOW', BUT SOMEHOW EXPECTING A DIFFERENT RESULT'.
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