The planet is shaking – how digitization might help soften the blow

It’s no groundbreaking news that our world is in danger. The IPCC claims we have 12 years left until it is too late, others say 18 months, and some detractors think that doomsday is inevitable. However, one thing is crystal clear: a shift is needed, and even though we are already acting to be more environmentally friendly, we need to do more – if not only to soften the blow.

This change can only be achieved if everyone strives together, though the main advocates for change must be the industries and politics. Especially the fashion industry. Our high ranking regarding environmental damage is nothing new. Viewing greenhouse gas emissions, we managed sixth place and if you take more factors into account, like water usage, CO2-Emissions, and waste production, the outcome shines an even worse light on us.

This negative connotation tastes bitter, but looking upon fast fashion and ultra-fast fashion, it is no surprise. But we don’t want to shame ourselves too much, there already are incredible improvements in the works. Especially newest solutions in textile technology, transparency, circular economies, communities, or the growing second-hand market – just to name a few – challenge our improprieties.

However, these are not the only developments toward a more sustainable industry. Because let’s face it. Even if your products are made of the most sustainable and durable cotton, and produced most sustainably and ethically, having just 10% too many products is still wasteful and unsustainable. There are further advancements that can boost an eco-friendlier industry and most of us seem to forget about them. In this case, we specifically want to highlight digital innovations that encourage a lasting transformation supporting sustainable transformation. Through the usage of Smart Merchandise Management, some of the fashion industry's weak points can be improved and transformed.

Unlock your hidden sustainability

When Ben Vermin, founder of Chainbalance, worked for an international sportswear giant, he was shocked to see the number of unsold products vegetating in the warehouses. Mountains of unsold shoes, shirts, pants, and more, just sitting on the shelves. A waste of materials and a waste of money. Although sustainability was not a topic back then, Ben, already knew a change needed to happen. Not only to turn these lost sales into profit and clear the never emptying warehouses – but to save our planet.

The vast amount of overstock at the end of a season is the result of 2 major mistakes: bulk production and bulk allocation.

Many companies calculate their production for the next season based on financial targets, which translate into the buying quantity per SKU, as well as the stock left in the central warehouse. Not only do they buy high quantities that are not based on the actual sales data, but it additionally seems like no one dives into the complexity of ordering the right quantities per size, consequently ignoring size curves.

The leftover stock in other warehouses, stores, or retailers is mostly not considered when it comes to the production amount. For example, if the DC is empty, but there is 20% left in other storage facilities, often 100% is reproduced to fill the empty shelves. This is not only a waste of investment, but additionally leads to even more overstock.

Moreover, we are allocating products in bulk in the market, which leads to even more overstock and lost sales for POS or locations in need of those products. The consumer behavior is dynamic, but due to considerable assortments in style, colour, and size, we cannot allocate the products manually with static systems into the market, based on consumption.

And what possibilities are there to resolve the overstock?

Selling to second suppliers like TK Maxx, reducing the price for end-of-season sales, sending the products to outlet stores, or even shredding and burning them, cannot be the solution to the problem. There are options to prevent the overstock and overproduction from even happening before you need to come up with resolutions to solve these problems.

Smart Merchandise Management at the very beginning, the POS – a way to support sustainability

We all want to know how much we must produce to increase profits and, of course, to prevent overstock as well as possible. This is the goal, but not the first approach. Before you can make confident forecasts for production quantities, you must understand the sell-out behavior of your products for each POS. The journey starts with consumer behavior, directly at the point of sale – regarding wholesale, retail, e-commerce, and outlets alike. To understand product behavior, data is necessary. To analyse the data, trained solutions able to deal with bad and particularly little data streams are necessary. By implementing solutions such as Smart Supply® by Chainbalance, SKUs per POS are analysed daily and around 35% overstock is prevented. This increases the availability in the warehouses and further provides a more accurate picture of the consumption and the demand for production quantities.

Replenishment is only one of many instruments applicable to prevent overstock. Even more important is the initial allocation – the spawn of all evil, creating overstock, out-of-stock, store transfers, and lost sales. Based on the product performance, down to the size curve, Chainbalance can forecast for the optimal initial allocation, resulting in fewer out-of-stock and store transfers, which saves CO2-emissions and ultimately results in lesser overstock.

These features are used to further understand product behavior. By feeding the algorithm with more data and configuring small adjustments by the users, the solution can make confident forecasts for production quantities and prevents the unnecessary reproduction of slow movers and single sizes. The users of Smart Supply® will receive a demand forecast after 12 months, based on the analysis and decisions for each POS and each SKU. Of course, not without the ability to set predefined parameters like life cycles, growth, and new POS.