TFR | Strategy Consulting

Part II of Supply Chain in Fashion

The Rubik Model

Today, retail is not only about the “what” (product) but about the “how” (experience). It’s a configuration model like the Rubik cube, a flexible model with many possibilities: standard collections, capsules, customization, renting, resale, subscription boxes, and so on. The customer is at the center of everything. This customer is more and more environmentally conscious while companies improve their operations having a better sourcing and quality control, supply chain transparency and logistics traceability.

Slow Circular Fashion to battle VUCA (Volatility, Uncertainty, Complexity and Ambiguity) and Climate Change

Being customer-centric pushes supply chains to be fast, agile and responsive to change. Flexibility is critical but, also having a proactive strategy in a business that is based on inventory turns and cash flow is king. Furthermore, the latest news shows how unpredictable and volatile phenomens are in a world that is hyperlinked and globalized. See how Balenciaga was impacted by its ads involving children. Brands need to be very careful. Company values and culture matter.

The new economy, and new retail, require supply chains to manage different scenarios, fluctuating demand, prices and lead times, amongst ohters, in a context where sustainability and circular economy are emerging as the right way of doing business. The fashion industry is the second largest polluter in the world, just behind the oil industry. Experts estimate that 50 million tons of clothing are thrown away each year much of which is not made from biodegradable materials (Vogue. 2019).

According to the Ellen McArthur Foundation, the equivalent of one garbage truck of textiles is landfilled or burned every second. An estimated USD 500 billion value is lost every year due to clothing being barely worn and rarely recycled. Washing clothes releases half a million tons of plastic microfibres into the ocean every year, equivalent to more than 50 billion plastic bottles. If nothing changes, by 2050 the fashion industry will use up a quarter of the world’s carbon budget.

So, isn’t “Fashion Sustainability” an Oxymoron? How do companies that base their business model on product freshness and inventory turnover, while selling thousands of garments globally (Inditex placed 545.036 tons of garments in the market in 2019), call themselves sustainable?

More and more niche players are betting for sustainability but they are too small to have an impact. So, maybe the best way to make a positive impact is that mainstream brands embrace sustainability. Therefore, there are many reasons to be optimistics when Inditex, H&M, Fast Retailing, GAP or C&A are commited to move towards a more sustainable ecosystem.

Brands, manufacturers, retailers and consumers have not only to agree on developing environmentally-friendly processes, from design to execution, but also on consumption: reduce waste; use organic and recycled materials; use higher quality materials to increase product lifespan; reduce the negative impact of transportation; ensure fair wages; preserve the ecosystem; support local sourcing, production and distribution; be transparent; recycle and upcycle; amongst others.

If I had to mention two brands that are excelling in corporate sustainability initiatives, I would say Patagonia and Stella McCartney (also worth mentioning Cuyana, Amour Vert, Reformation, EcoAlf, People Tree or Everlane as niche players).

PATAGONIA

Patagonia is synonymous with sustainability, a brand born with the aim of respecting the environment and which, from its early stages, was a company that applied a circular economy, transparency of their supply chain and a close collaboration with “heavy users” in order to innovate and perform their products.

Mr. Chouinard (founder), his wife and two adult children have transferred their ownership of Patagonia, valued at about $3 billion, to a specially designed trust and a nonprofit organization. They were created to preserve the company’s independence and ensure that all of its profits — some $100 million a year — are used to combat climate change and protect undeveloped land around the globe (NYT. Sept 2022).

Patagonia is not a fashion brand. The brand introduces itself as a “designer of outdoor clothing and gear for the silent sports”. But in my opinion, it goes far beyond. In 1957, Yvon Chouinard, a fan of rock climbing and surf, founded Chouinard Equipment to start selling pitons. Around 1970, he became aware that the steel pitons made his company were causing significant damage to the cracks of Yosemite. These pitons made up 70% of the company income (Let my people go surfing. Yvon Chouinard. 2006); but he decided to take a chance and introduced an alternative to steel pitons, for the good of the environment.

This has become an historic example of how one person, Chouinard, was determined to understand, and make work, the ecosystem between business, leisure and the environment: aluminum chocks that could be wedged hand rather than hammered in and out of cracks. They were introduced in the 1972 catalog, the company’s first. The bold move worked. Within a few months, the piton business atrophied, and chocks sold faster than they could be made (On Writing: The 1972 Chouinard Catalog that changed a business – and climbing – forever. Matt Linderman. 2011).

Since 1985, the initiative “1% for the Planet”, an alliance of businesses that understand the necessity of protecting the natural environment, gives 1% of sales to the preservation and restoration of the natural environment. In 2005, the California-based clothing company launched the Common Threads Initiative – Reduce, Repair, Reuse, Recycle, Reimagine with the objective of making all Patagonia clothes recyclable.

They then launched other initiatives or programs like Worn Wear, that allows customers to trade in their older gear for credit toward buying new products from the company. Worn Wear has a specialized online shop and has also opened offline stores offering secondhand clothing, recycled and upcycled garments and accessories. Patagonia owns the largest garment repair facility in North America. Beyond “apparel”, the company that was founded in 1973, created Tin Shed, a Corporate Venture capital fund to invest in environmentally and socially responsible startup companies.

In relation to sourcing and production, Patagonia launched in 2007, the Footprint Chronicles, an informational tool, considered to be “radical transparency”. A map showcases all the factories, farms and mills around the world that Patagonia partners with, adding information on why Patagonia works with every specific supplier, showing the address of each factory and items produced. The initiative was renewed recently, taking into account their owned and operated offices too. Today, other brands are giving visibility of their supply chains too like Inditex, H&M or Mango.

Then, in 2017, the company started selling food: Patagonia Provisions. Products are healthy, ethically sourced, and shelf-stable products, including wild salmon, mackerel, buffalo jerky, beer, snacks, soups, etc. According to the California-based company, “we rely on like-minded farmers, fishermen and researchers as our partners to create our foods. All of them use regenerative practices that restore, rather than deplete, the planet”.

How is Patagonia managing its Supply Chain to achieve its environmentally-friendly objectives?

In 2005, the company embraced the GT Nexus (today Infor Nexus) platform to gain visibility into its supply chain. Patagonia was relying on paper, Excel spreadsheets, and manual processes to execute transactions, all in all an inefficient way of managing data and business. The company was working with 108 different suppliers at the time and documents and processes (e.g. purchase orders, invoices) were quickly getting out of control.

Armed with a centralized, cloud-based network of its supply chain partners, Patagonia was able to automate many of its processes. Work in Process (WIP, is a production and supply chain management term describing partially finished goods awaiting completion) was embedded directly into transaction workflow, improving productivity and accuracy while reducing extra costs. Pack & Scan streamlined processes at the factory and shipment levels and Procure-to-pay brought the entire financial supply chain into the cloud (Patagonia Business Case. GT Nexus. 2015).

Using cloud supply chain platform, it centralized all sourcing and production decisions. Results included:

• Eliminated costs of manual data entry
• Gained visibility to shipments
• Eliminated letters of credit
• Reduced air freight
• Reduced labor costs
• Going cloud

To win in the digital age, companies must operate as agile business networks that connect systems, processes, and partners of all types with visibility, automation, and insights from source to customer (Infor Nexus). Supply chain networks can directly connect buyers, suppliers and third parties (eg. 3PLs, banks) together in a single platform. The outputs include having a “single version of the truth” (no conflicts of calls, mails, different versions of a document), updated on a real-time basis and giving verifiable visibility to all stakeholders. Thus, finance providers (e.g. banks) are connected to the transaction journey and their role goes beyond accepting an invoice.

Today, Patagonia is the activist brand. It breaks political taboos, endorsing (Democratic) candidates that will help protect natural resources. The company said it is making the move “because of the urgent and unprecedented threats to our public lands and waters”. In regards to Black Lives Matters, it was surprising to visit Patagonia’s website (september 2020) and read the following message: We’re learning how to become an antiracist company. Again, activism, transparency and honesty.

“We aim to use the resources we have – our voice, our business and our community – to do something about our climate crisis”. I could copy or describe many other initiatives and examples, but it’s worth visiting patagonia/stories/our-footprint site where you will find information about materials, recycling, traceability, fair trade, fair labor, supply chain environmental programs, etc.

In conclusion, values, green marketing and supply chain to deliver a single version of the truth.

Know more about how fashion companies are adapting to the digital era: Fashion Goes Tech