What pushes apparel brands to go for ‘high-level digitalisation’

As the apparel industry is on its way to digitalisation, each of the stakeholders is actively reaching out for solutions and there is no exception for fashion brands. In fact, brands are the first stakeholder to initiate the trend of digitalisation to cut costs, while the manufacturing suppliers often have more concerns before adopting the digitalisation process. However, different brands might have different concerns and attitude toward the trend, depending on the characteristics of their products.

So, now there are some open questions to look into! What are the factors that drive an apparel brand to embrace digitalisation? What is the scale of the brand’s operation? What are the product categories that it caters to?  What are the regions the brand has presence in? Why is there more customer leaning towards tech-based approach of fashion retail? Or, is it the attitude of the brand towards achieving long-term profitability?

If a broader scenario is analysed, the first thing that can be easily seen behind the apparel brands’ perspective in the journey of digital transformation is their product’s characteristics and then comes the rest. For instance, the most recent digital transformations in last decade have been done by the sports brands such as Nike, adidas, Under Armour etc. or the brands which have more fixed styles (similar SKUs) such as Uniqlo. These brands are adopting ‘high’ level of digitalisation in their production as well as supply chain processes.

Approach of brands towards ‘high-level digitalisation’

As the material used in apparels is more fixed in sportswear brands, they tend to go towards opting digital technologies to cut the cost down throughout the supply chain. Because of such factor by their side, they are able to do mostly successful strategic/investment partnership to cater to fixed and long-term ordering cycle by maintaining supplier turnover rate at below 5 per cent.

On the other hand, with half strategic partnership and middle-term ordering, apparel brands such as H&M are opting for ‘mid-level digitalisation’. These fast fashion brands, which require more flexibility with fewer orders of each piece, would need a more centralised digital solution instead of adopting a long-term solution and ordering from a few suppliers.

So long as the supplier can provide a solution with higher efficiency, higher quality and lower cost, brands will be more than happy to apply digitalisation. The suppliers like Shenzhou International Group – which is the biggest supplier of Nike, Uniqlo, adidas, Puma in China – apply digital transformation themselves as the brands they supply usually have similar SKUs, thus the innovation and the R&D cost will be more cost-effective in the long run.

For example, Uniqlo is a brand famous for its digitalisation progress. Unlike other brands that usually encourage the suppliers to adopt the digital transformation themselves, Uniqlo has initiated lot innovations at its own end first!

Case Study: Uniqlo’s Digital Transformation Journey

Four years ago in February 2017, Uniqlo opened a 200,000-square feet headquarters on top of its distribution warehouse in Tokyo. This project was aimed to drive the new strategy to transform its business model from ‘Selling what we produced’ to ‘Producing only what we can sell’.

According to Tadashi Yanai, CEO, Uniqlo, the strategy represented a shift from ‘Made for All’ to ‘Made for You’ through digital integration of planning, manufacturing and sales. The new headquarter was designed to foster such integration by placing its 1,000 employees from different divisions in the same workspace, which means locating all of the planning, marketing, production and logistics divisions on the same floor, and connecting them through a common digital platform as well.

Until the new HQ opened, it took 6 to 12 months for Uniqlo to decide the design, procure material, manufacture products and deliver them to its retail stores which resulted in a mismatch between customers’ needs and the products as well as caused a loss of sales opportunities and excessive inventories.

But then, the company began to instill RFID tags to all of its products, and connecting RFID data to its digital platform. With this new system, Uniqlo’s goal was to make accurate daily sales forecasts at each retail store, and to plan and produce its products in real-time.

Another development of Uniqlo towards digitalisation is the IoT project for its manufacturing plant in China. The project enables Uniqlo to start IoT-based automated production system and share the real-time production status with Uniqlo’s headquarters in Tokyo. This way Uniqlo’s whole supply chain – from production to retail – is connected to its digital platform.

The most recent tech intervention of Uniqlo is its own Supply Chain Management software called G1 (Global One) SCM system, which covers the management of the complete supply chain, starting from raw materials to delivery and inventory. Moreover, all the selected suppliers are required to adopt the G1 SCM system for better monitoring. As there is no integrated system solutions that can cover all sections in the supply chain, the G1 SCM system is a good demonstrator of the ideal flow of digitalisation in the apparel industry.

With the continuous advancement in this project, the whole value chain and supply chain of the Japanese brand are closely connected and transparent. With a comprehensive integrated software system, Uniqlo undoubtedly represents one of the industry pioneers in the digital transformation journey.

“Digitalisation makes demarcation of industries useless. In such a world, data is the most important source of competitiveness. As fashion and apparel products are the data itself, Amazon and Google will have a great power in this industry too. In order to overcome such challenge from these digital giants, we need to transform our supply chain system by using digital technology,” commented Tadashi Yanai.

The way forward…

Just for the sake of going digital will not deliver results and that’s the bottom-line. Only when the manufacturer and the brand themselves realise the importance of digitalisation, it is possible for them to enjoy the benefits together. After the discussion between the manufacturer and the brand, they would know what KPIs they are targeting after the digitalisation adoption, such as reducing cost, increasing productivity, optimising supply chain processes and improving operational efficiency. Therefore, understanding the need for digitalisation and prioritising the KPIs are the first two steps to take. And, that’s where Uniqlo has a stronghold on as it discusses its tech investment plans with its partner factories.