Will the green tag save us? Overproduction: the underdog of sustainable fashion

Browsing through stores, searching for new pieces or inspiration, green tags peak out of many shirts or pants - an eye-catcher symbolizing sustainability regarding material compositions, use of resources, or working conditions. Today, nearly every brand in the fashion world offers a range of more sustainably produced goods. This is a promising sign for change in our industry.

We are taking significant steps toward a more sustainable fashion industry. Yet, organic cotton, recycled materials, and natural dyes are just the tip of the iceberg. There are countless opportunities for technical innovation to advance sustainability further. What are these opportunities that lie beneath the surface? Which aspects of sustainability remain "untouched territory"?

Untouched territory: underlying challenges of sustainable fashion

While improved materials, ethical production, and CO2 emissions are in the spotlight, other critical factors — like sustainable logistics and responsible production volumes — receive comparatively little attention. Why are these topics so frequently overlooked?

Towering over us, these value chain components seem impossible to tackle. How can we reduce the emissions of something as essential as shipping, for example? But, while the logistics industry grapples with its own challenges, another underdog demands attention: overproduction.

92 million tons of textile waste (Source: erth.org)

Exaggeration? No, reality. 5% of landfills are taken up by textile waste (Source: business waste.co.uk), while the rest ends up in incinerators or the overflowing secondhand market, doomed for a life of catching dust on a shelf. The key to addressing this problem is precise production quantity planning, but the unpredictability of consumer behavior and trends presents a significant challenge.

Sighing and (maybe) cursing in front of a massive Excel file while calculating the demand for the following order: which merchandise planner or buyer hasn't experienced this scenario? And even after the prognosis is finished and the order is placed, uncertainty remains. How well will these items sell? How much overstock will there be? How much discount (and therefore margin loss) needs to be considered, to prevent high overstock? It seems like an impossible challenge. But digitalization offers a promising solution.

Smart Merchandise Management to the rescue – Chainbalance's mission to reduce overproduction

Chainbalance Smart Supply®, an intuitive merchandise management solution, enables fashion brands to efficiently manage their allocation, replenishment, and assortment optimization. How? By combining nearly 20 years of experience in fashion and software development with data and smart algorithms.

When I worked for an international sportswear company, I was shocked to see the number of unsold products in the warehouses. Mountains of unsold shoes, shirts, and pants just sitting on the shelves. It is a waste of materials and a waste of money. Although sustainability was not really a topic back then, I knew a change needed to happen.

As a firm believer in getting to know the brand, the product, and the data first and then creating a forecast, Chainbalance works the value chain backward by starting with replenishment, allocation, and assortment optimization to collect necessary data and then optimize production. In the spirit of "selling more with less," Chainbalance aims to reduce overproduction and overstock from NOS products by accurately predicting future demand.

The challenges of purchase order forecasting

Never-out-of-stock (NOS) products are assumed to always be available in sufficient quantities. A steady supply stream should be provided since the demand should be more predictable than newly introduced fashion articles. Yet, reality is different.

Calculating purchase orders is tedious, taking hours to complete and presenting limitations - especially the depth of calculation. The quantity of the next order is based on historical data from previous sales. Forecasting is complex, considering the sheer number of articles a fashion brand offers - millions of SKUs across various sizes and colors. This is the main reason quantity planning traditionally focuses on product groups and standard size curve distribution - it saves time.

However, this approach has one major problem: the difference in demand on the option and size level is ignored. We don't expect every size and color to sell equally well. Without taking note of the different size or color variations, large amounts of leftover products at the end of your sales cycle are inevitable. Chainbalance vision is to improve the accuracy of this process to decrease overproduction and the manual effort.

Chainbalance ‘Smart Purchase Order Forecast’

Forecasting for NOS items is more reliable than forecasting fashion products because you can dive deep into product behavior, overstock, and understock. But, because of the earlier mentioned limitations many companies reorder based on their last purchase without analyzing each option and size, leading to stock-outs or overstock situations. To avoid stock-outs, most brands add a certain percentage of safety stock, increasing the risk of overstock at the end of the season and, therefore, lost capital and margin loss.

Chainbalance's new 'Smart PO Forecasting' feature considers all these factors, creating an accurate forecast for each NOS product, including size and option variations. It further reduces the safety stock from order to order, freeing up your capital and reducing overstock. Pretty great, right? It's an efficient way to reduce overproduction and CO2 emissions - essential steps for achieving sustainability.

Key to unlocking sustainable growth? While the fashion industry is making significant strides toward sustainability by embracing organic materials, ethical production, and eco-friendly processes, we must not overlook other systemic challenges that threaten this progress. Overproduction remains a critical component of the sustainability puzzle. Addressing this issue can reduce Overstock, overproduction and carbon emissions.

Technological advancements, such as Chainbalance's 'Smart PO Forecasting', offer a way forward by tackling the limitations in production planning that lead to overstock, understock, and overproduction. Through accurate demand forecasting, fashion brands can make more informed decisions, significantly reducing their environmental footprint and increasing sales. This means producing only what is necessary, eliminating the guesswork that has long plagued the industry, and achieving a better balance between supply and demand.

Do you want to learn more about Chainbalance and how to reduce your manual effort while increasing sustainability and sell-out with accurate production planning? Contact us here.