To successfully carry out the digital transformation of your business, it is necessary that all the processes that are part of the value chain be transformed with sustainability from its initial phases.
How has the fashion industry and its supply chain changed in recent years?
The business started to follow in the footsteps of fast fashion giants launching new products every month. And generating large quantities of surplus stock that market demand was unable to absorb, facilitated both the development of models that took advantage of the opportunity of this lack of efficiency and the increase of new mechanisms that favored the liquidation of stock through price reductions.
Faced with this need for efficiency in the supply chain to achieve the highest profitability of the product, all fashion companies, one way or another, little by little, have begun to become aware of the importance of investing in technology.
The appropriate way for technology to transform this value chain is to begin by being efficient and sustainable in the planning process.
But for this, another of the great challenges facing the Retail is the speed at which the market moves, and the need to make this transformation in a short time and based on models based on the commitment to the customer as central element of its strategy.
How can technology help in this new paradigm shift?
It is very common for retailers throughout their sales campaigns to have most of their circulating capital invested in stocks of the current season. But what if the pace of sales in some stores does not meet expectations?
In those cases, excess stock ends up quickly becoming a liquidity problem because it does not become cash again, except by reducing the margin with discounts and promotions or, even worse, once they accumulate to feed other channels such as outlets , postponing his conversion.
Implement technology that helps to identify in advance the products that do not reach the expected level of rotations, on the one hand, and that this technology is capable of governing the replenishment with the stock coverage according to the sales forecast, will represent the key factors to help retailers to achieve an adequate ROI of their investments.
In addition, it will be fundamental to be able to implement predictive technology that has already been developed taking into account the key key parameters for the business of a retailer, such as those listed below:
The speed with which Circulating Capital will be achieved
In all types of companies, one of the main guidelines for improving results lies in the control of working capital as a key to ensure a healthy level of financial exposure. This level is necessary for the company itself and to prevent contingencies of possible temporary shortage of liquidity throughout the years.
Management suggestions proposed by new technologies should focus on obtaining returns that provide an increase in liquidity.
KPIs and Good Practices
The fact that there are more and more successions in companies, ranging from families – founders or local investors – to becoming part of groups and international investment funds, entails a change of scenery. Investors, guaranteeing their entry into capital and contribution, demand that best practices be applied in operations and that a rigid control be implemented based on KPIs and benchmarking. The technology must perfectly control the business indicators in each of these cases.
Fashion and Finance: Perfect enemies, or can they go hand in hand?
The natural tendency to try to adjust the amount of product stored clashes with the need – a classic of the companies in the fashion retail segment – to buy or manufacture raw material and finished product well in advance of the time of sale. On the one hand, we have the companies that have to present the collection beforehand, especially in the case of those that operate with representatives and wholesalers. On the other hand, those that work with suppliers in distant geographies, in order to maintain competitiveness in terms of costs compared to the giants of the sector that started productive relocation decades ago.
Here is the importance of having a technology that is capable of correctly executing a sales, product and purchase planning, to adjust them to the assortment needs and to the rhythm of sale of all the countries, channels and stores.
Fast fashion, Fast retail and the planner’s dilemma
As an addition to the complicated life of the planning departments of retail companies today, as we have said before, in recent years there has been the need to introduce many new products throughout the season, in order to favor the «Traffic» of visits to the store and to keep the consumer «connected» to the brand.
All these challenges make each purchase decision more risky and the level of success is a key factor that can lead to shortage of product or surplus stock.
The shortage of product is surely a less desirable situation. If it is not identified well in advance, it can become a lost sale, reducing the company’s results. Proper planning and especially the use of effective tools to identify potential breakages in advance will provide corrective measures to limit potential damage. All this having also been able to apply excellence in the management of visual merchandising, in the search for other options in the assortment, of substitute products in proximity, or even being able to redirect consumption towards other products of the brand. Always with customer service as the goal of our strategy.
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