Helpful hints

Solving the Fashion pricing dilemma with on demand manufacturing

The traditional manufacturing model is no longer compatible with the agility needed to remain competitive in today’s fashion industry landscape.

Fashion equation

In today's fashion and apparel world, demand is driven by a new type of consumer: ultra-connected, conscious of environmental and social issues, and not ready to wait. This consumer, fueled by Internet-driven possibilities, wants exactly the product they imagine, personalized and delivered yesterday. Despite these weighty expectations, they still demand brands compete on price.

How can the fashion industry continue to deliver in this environment?

Agility in Fashion industry is key

Agility has become a hot topic in any conversation about best-run businesses in the fashion industry. Underneath the buzz lie three important concepts: speed, adaptability, and scalability. Speed allows companies to meet consumers’ ever-shorter delivery expectations, especially among today’s key market demographic: millennials. Adaptability means companies can propose new products and variations to keep consumers engaged with on-trend and Instagramable offers. And scalability allows companies to deliver on-trend and personalized offers in the form of smaller, more frequent runs.

Too far offshore manufacturing

Let’s face it: the traditional sourcing model, offshore manufacturing, just doesn’t respond to these new demands. Located thousands of miles away from the end-consumer and flagship boutiques—in China, Vietnam, India, or Bangladesh—they aren’t able to respond to the immediate, interactive and responsive requirement that lies at the very heart of agility.

Faster wins

While many of these production locations have become expert in mastering speedy production workflows, this simply isn’t enough to offset shipping time. The average lead-time to ship inventory from Asia to the US or Europe is thirty days. In a competitive environment, where many fast-fashion brands renew in-store offers every two weeks to keep clients engaged, shipping isn’t an option. The intangible price of not being considered on-trend is just too high. Add this to tangible shipping costs and the scales are tipping heavily away from the off-shore option.

Not so cheap

Not only is shipping expensive, it entails a host of other problems: high and volatile fuel prices, customs, import taxes—it adds complexity to workflow. Currency exchange rates are generally favourable but are not at all stable, and other unpredictable aspects like weather conditions impact the cost and dependability of offshore production. The decision to produce offshore boils down to lower labor costs, yet even this premise is no longer certain: wages are rising across Asia. “These regions’ average minimum wage was just around 63% of the global average in 2015, but it has risen to nearly 82% in 2019 and is projected to catch up with the global average or… overtake it by the end of the next 10-year period,” according to credit rating agency, Fitch Ratings, earlier this year. “Rising minimum wages across Northeast and Southeast Asia will gradually erode the competitiveness of economies in these regions.”

A transparency-friendly environment

Beyond cost and speed, bringing production closer to the end-consumer and brand home solves another growing concern: horror stories of far-off and uncontrolled working environments and conditions have led to a growing awareness around how and where items are produced. Consumers want to know where and how their clothing was made, attributing points and purchases to brands that can provide a story coherent with an environmentally and socially aware consumer voice.

Putting the real cost of off-shoring into question is just one factor in re-calculating the traditional equation of quality-production-logistics. This balance of factors used to investigate how fashion companies are doing overall needs to be reconsidered in the context of our digitally enhanced marketplace. Intelligent and considered use of automation, centralization, and, of course, data also headline as success factors in today’s fashion landscape.

Read our e-guide ‘Quality.Logistics.Production: why it’s crucial to optimize now’ 

If you want to get the bigger picture, download our latest e-guide ‘Quality.Logistics.Production: why it’s crucial to optimize now’