The Apparel Retailers' Warehouse Of The Future

Apparel, Footwear, Fashion

The Apparel Retailers' Warehouse Of The Future

In this article on future technology trends in the retail supply chain, Tim Waters, managing director at Alvarez & Marsal, predicts how the warehouse of the future might operate.

When gazing into the future it is difficult not to be constrained by today's operational realities, especially when faced and challenged by them on a daily basis.

Today's apparel retail businesses have evolved into manufacturers with some of the most complex global supply chains. They have largely reacted to globalisation, sourcing merchandise, woven fabrics, and raw materials from all parts of the world.

They also have one of the most complex combinations of market, product mix, and long lead time scenarios that don't face other manufacturers and retailers, creating the perfect storm for the chief supply chain officer.

Though the rush to manufacture in low cost economies has worked for some, many others still struggle with its complexity. How long before the last 'low cost' economy matures into an average cost economy and passes the tipping point where 'near-shoring' will make sense?

In researching the issues facing apparel businesses on the high street, it is clear that most suffer from having the 'wrong' merchandise in store at the wrong time.

They are largely unable to react economically to events such as changes in climate, high street & online consumer volatility, fashion quirks, and localised or regionalised physical size differences.

These issues often lead to merchandise being marked down in price or held in stock for too long, increasing the need for cash and margin. By the time autumn comes around, most retailers don't stock the right sizes & colours, putting coats & other items on display that are clearly left over from the summer.

The warehouse of the future should therefore help in addressing the need to hold stock in the first place. After all, we only hold stock because we cannot respond to consumer demands quickly enough at the right cost.

Imagine a facility in-market designed specifically for this purpose: a mix of warehouse and factory, where robots are waiting to cut and sew fabric, only to then pack and load it too.

The fabric is delivered to a customer who placed the order last minute, requesting items designed by a fashion designer in Paris or New York. The product is then tracked using RFID and GPS to its destination. The fabric and trim are held at bulk level and only converted at the last moment.

If this technology is available today, the question remains as to why this facility doesn't currently exist. The investment is clearly high, but it may not be higher than holding six to eight months of stock continuously, marking down up to 20% of your merchandise. Indeed, some retailers actually give stock away to make space, only to do it over again. For a large player in the market these costs can run into billions of dollars every year - surely enough waste in the system to drive this type of investment.

'Near-shoring' is an overnight reality that cuts lead times to days rather than months. Crucially, this brings manufacturing output to the door of the consumer, allowing retailers to react to the weather, fashion trends, localised size differences and other variations in demand.

Leadership in this space will perhaps appear once the last low cost economy has vanished, with necessity being the mother of invention.