The fashion industry is no stranger to supply chain turbulence, particularly after the last few years of fluctuating demand, economic uncertainty and geopolitical conflict. Despite this, many brands have yet to implement effective systems for mitigating the bullwhip effect.

For the uninitiated, the bullwhip effect occurs when retail demand fluctuates, causing even greater wholesale, distributor and manufacturer demand fluctuations – leading to operational inefficiencies and disorganisation throughout the supply chain.

Robust inventory management systems, however, can prove to be an effective tool for fashion businesses hoping to minimise such risks and maintain a seamless supply chain.

Why is the fashion industry unique?

Fashion as an industry has inherent volatility, most typically characterised by the influence of seasonal trends, short product lifecycles, and changing consumer preferences. These dynamics can significantly amplify the bullwhip effect, causing a ripple that is more pronounced and difficult for companies upstream to navigate.

Brands often manage multiple vendors, suppliers and manufacturers across various channels throughout their supply chain. A brand may have fabric sent from China to Bangladesh for sewn dresses, then shipped over to England and distributed to several warehouses via lorries. This process is complex.

Companies need to have an auditable trail throughout their supply chain to understand better where demand fluctuations can have an impact. It is also worth mentioning that the degree to which fashion businesses feel the impact of the bullwhip effect can vary significantly since some are more susceptible by nature.

For instance, fast fashion turns over many styles and collections on a monthly, weekly, or even daily basis. These brands will need help managing small retail demand fluctuations more so than luxury brands, who have historically shown more resilience in times of uncertainty.

Similarly, any business that runs promotional events, such as flash sales and discounts, is also prone to sudden spikes in demand, leading to a distorted view of actual consumer preference.

With that said, even luxury brands aren’t immune to demand fluctuations. Some items have a limited shelf life, such as high trending items like the latest Gucci bag, which require selling and shipping fast to capitalise on the hype. If these goods aren’t moved while trendy, they can quickly end up with markdowns or promotions to clear excess stock.

More generally, the cyclical nature of fashion can spur exaggerated fluctuations in demand due to retailers placing large orders in anticipation of upcoming trends. All this should suffice to say that the broader fashion industry desperately needs solutions to navigate uncertainty better.

Utilising inventory management systems

The application of inventory management systems can profoundly affect companies looking to minimise the impact of supply chain disruptions. Chiefly, these solutions provide real-time visibility into stock levels and order statuses, enabling proactive decision-making.

With this level of visibility, businesses can examine their supply chain holistically and better understand potential issues to lessen the risk of overreacting to short-term fluctuations.

As mentioned above, brands frequently produce collections containing various colours, sizes, and fits. The problem is that there could be hundreds, if not thousands, of stock-keeping units (SKUs) per collection. Depending on how many collections a brand produces each year, they could handle hundreds of thousands of items annually.

Naturally, the more SKUs a company has to handle, the bigger the risk of overstocking or stockouts. Comprehensive inventory management solutions are critical to managing stock to ensure the right goods are delivered at the right place and right time, helping mitigate fluctuations in demand and drive profitability.

Visibility empowers companies to determine problems earlier and allow them to swiftly change their plan to avoid or, at the very least, mitigate the impact of the issue. This transparency is vital to identifying and addressing disruptions before they escalate.

Separately, companies can foster stronger relationships with their suppliers, manufacturers, and retailers. Such relationships yield additional insights into market trends, further shaping and informing decisions to build a more responsive supply chain based on collaboration.

Proactivity is key

While the bullwhip effect poses unique challenges for fashion companies, these issues can be navigated with a strategic and technologically advanced approach.

Robust inventory management systems paired with proactive supply chain strategies empower businesses to weather storms of unpredictability and enable seamless supply chain operations.

At K3, our purposefully built and tailored fashion solutions are embedded within the Microsoft Dynamics 365 technical infrastructures to support brands from concept to consumer.

Crucially, our solutions provide granular visibility into supply chain operations to generate intelligent and actionable insights for brands to leverage.

By utilising such data, companies can avoid problems earlier, cut costs, and communicate potential issues internally and to shoppers to enhance customer service.

If you’d like to learn more about how joint offering can support your business, drop us a line today.