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Supply chain attracted a fifth of retailers’ tech investments in 2021

By Angela Gonzalez-Rodriguez

30 Dec 2021

Business

Image: Digital Transformation of Fashion

More than 20 percent of the investments that have been made in the fashion and retail-tech space in 2021 have been in the supply chain, according to new research. Planning inventory flow, finding alternative suppliers and resilient transportation top the list.

“We’re seeing, for example, that 23 percent of the investments that have been made in the fashion and retail-tech space have been in supply chain,” said in a recent podcast interview Anita Balchandani, a McKinsey partner based in London who leads the firm’s Apparel, Fashion & Luxury Practice in EMEA.

“In particular, we’re excited about innovations such as the role that technology can play in much more predictive demand forecasting to enable the flow of product; the role that technology can play in on-demand production; the role that technology can play at the design front end and really eliminate a lot of the waste and the long lead times related to the physical production of samples,” added Balchandani.

Addressing supply challenges through technology

Per ‘The State of Fashion 2022’ report authored by McKinsey and The Business of Fashion, about half of global businesses suffered supply chain disruptions in 2021, with one in eight severely affected.

For the majority of executives, these challenges will not only persist in the near future, but will also impact their margins negatively in the next couple of years. As vividly pointed out by Joseph Phi, group chief executive of supply chain management at Li & Fung, “The supply chain assets are running at full capacity. It’s bursting at the seams. So my opinion is that these frustrations will continue until at least the second half of [2022 or]… even extend into 2023.”

Planning inventory flow, finding alternative suppliers and resilient transportation routes are top of mind for apparel executives worldwide. As leaders innovate to create efficiencies, those areas have been prioritised, attracting a high volume of investment in the industry. Some of the most sought-after measures range from upgraded inventory management to logistics tracking solutions.

Other areas that are expected to grow in appeal, investment-wise, are:

Cross-functional and vertical integration, largely by bringing distribution or production in-house. As shown in a CB Insights’ report from May, investments made by retailers in technology that make supply chain and logistics faster and more efficient nearly doubled on a year-over-year basis to 8.6 billion dollars.

Fulfillment and Logistics. Simply put, the last mile experience is facing its day of reckoning due to e-commerce’s explosive growth. Last mile reinvention has emerged as a top initiative for many retailers, says Euromonitor International, adding that for global retail professionals, AI and the Internet of Things (IoT) are the most promising technologies to achieve the necessary improvement. In-Store Experience: One third of global retail professionals surveyed by Euromonitor in the third quarter of 2021 believe COVID-19 will accelerate initiatives to enhance the in-store experience and role within the overarching business strategy. Image: Digitalisation