An Enterprise Resource Planning (ERP) system integrates and automates business processes such as manufacturing, finance and supply chain. It is used to facilitate the connection of different systems across a business, making operations smoother and easier to conduct. Automation helps to build sustainability – less paper, less water, less waste – while increasing efficiencies, customer loyalty and profitability. Furthermore, the increased visibility that Retail ERP software provides, enables organisations to collaborate with partners and supply chains more easily and efficiently to create sustainable, circular business models.
How can ERP software help a fashion or retail business?
Some of the key benefits of ERP software for the retail industry include:
- Customer management – storing customer purchase data allows you to identify patterns and offer tailored services
- Demand forecasting – predictions of inventory and trends is key, ERP takes all data into its decisions, maximising sales and lowering cost of inventory
- Financial management – implementation and execution of budgets can reduce the number of tasks per employee, freeing them up to use their expertise elsewhere
- Profit tracking – ERP can give a flyover of your financial data and can show you losses and where gains can be possible
- Supply chain management – knowledge of where your resources and products are is key to being able to meet the demand of customers, ERP allows you to track where your goods are in transit
Sustainability and stock management
To drive change in the fashion or retail industry there is an increased focus on sustainability through improved stock management systems and greater control over inventory, giving a clearer view of where the goods are in the business. A by-product of this is a reduced level of waste caused by avoiding over-ordering and excessive manufacturing.
Most fashion brands are now starting building carbon emission models from which they can highlight how they are improving their sustainability through a reduced carbon footprint. Carbon footprint is very often used as the proxy for sustainability with many organisations. But to build a true sustainable model it requires more than just cutting your carbon emissions.
Highlighting where you are reducing carbon emissions is a very easy thing to present to stakeholders and the outside world, whereas it is not so easy to admit your warehouse control is poor and that you are now going to do something about it. Fashion companies may use their carbon footprint and reduced carbon emissions to provide them with cover when overhauling their stock management systems, but it should not be used as a shield to avoid them addressing this extremely serious issue.
This scenario is exacerbated by the fact that companies in the fashion sector typically operate with very low levels of stock accuracy. As many as 90% of the companies that approach Xpedition have little visibility of where their stock is within their supply chains.
It is not unusual for companies to see limited stocks in certain stores and to then ship new inventory in from say a Netherlands hub when they could have sourced the required items from other stores in the UK that had excess stock. It is often easier for companies to simply order more items than to track those in the existing system.
The primary characteristic of successful companies in the fashion space is undoubtedly an ability to adapt, which we are finding is the key differentiator between those brands that will survive and thrive versus those on a steady path of decline. This agility has enabled the more progressive businesses to implement the structural changes that have been taking place within the fashion sector over recent years.
For instance, we have seen bespoke suit makers from Savile Row move from typically having five face-to-face meetings with a client when buying a new suit, to instead, using the latest technology to reduce this to an average of only one physical interaction. They have also embraced remote learning to continue to train the skills of bespoke tailoring to trainees around the globe.
Fashion companies have also had to adapt to remote working and create clothing and accessories that are better suited to Zoom rather than face-to-face meetings. There has also been the disruptive move to more casual attire that has forced tailors to be particularly radical in how they have changed their ranges and adapted their business models.
The management of inventory in this new world is certainly proving to be a major challenge. Fashion businesses will need to get their heads around the issue because managing supply chains more efficiently will become increasingly important as sustainability moves up the agenda. The move towards resale and circularity will require even more visibility of stock in the supply chain.
Tony Bryant, director of global business development at K3, said at Xpedition’s Fuelling Innovation in Fashion Event for London Fashion Week that he has no doubt what he calls the “post-sale” of clothing will become vital for fashion businesses.” Kids clothing, especially at the higher end, involves outfits often lasting only three-to-six months so we could see a model evolve whereby the retailer accepts the items back [to be resold] and replaces them with the next [larger] outfit for the customer,” he explains.
The issue of returns can also be damaging as shoppers tend to forget about their green principles when it comes to returns. They might select a fashion brand for its environmental credentials but then demand free returns and post back products without regard for the environmental impact. One-way retailers can limit returns is to adopt sizing tools but there has been a disappointing level of success from such solutions to date.
The balancing of sustainability with profitability will become an imperative and the only way this can be managed successfully is with full visibility of the inventory across the whole of a business. The quality of the data within an organisation is paramount. According to Bryant, it is only with this visibility that stores can become true showrooms, with potential fulfilment from another store or via home delivery, rather than the outlet holding racks of stock in all sizes.
The single view of stock also allows fashion businesses to more successfully leverage the value of marketplaces like Farfetched, which Bryant says can account for as much as 60% of the total value of goods sold by certain operators. “It is the [data-driven] curation of the ranges on these marketplaces that is very important for the shopper. Collaboration with the marketplaces to decide the ranges is vital,” he says.
Data is not only about inventory of course and should be recognised as an asset of great value in helping businesses acquire new customers. This chimes with a Gartner estimate that by 2025 as many as 90% of large organisations will have a Chief Data Officer and that data will truly become a major value creator rather than being seen as a compliance headache. But this can only happen when the data is clean and accurate as it can then drive granular customer insights, which ultimately deliver personalised communications.
How does Retail ERP software empower decision-making?
During the critical planning phase, many apparel decision-makers have to make commitments without the benefit of current trend information or reliable forecasts. They often pull historical sales data from separate wholesale, retail and e-commerce systems to forge the best-laid plans they possibly can. But by the time they are capturing sales orders for the upcoming season, there could be business factors playing out that would materially change their current course — if they only had clearer visibility into those factors.
To combat this problem, companies can utilise retail ERP software to more fluidly compare plans to forecasts. As pre-season planning progresses, the business can evaluate forecasts, which will change based on actual sales, customer behaviour and market information. They can see how forecasted results affect gross profits, volumes, and sourcing. Then they can adjust their future business plans accordingly and take steps to mitigate issues that may be building up during the current season. An accurate forecast may only be available weeks or even days before a wholesale selling season starts, whereas the business plan typically is in place months or a year in advance. When fashion professionals can truly leverage both, they can better see the best mix of product types they need to stock and sell, to hit their gross margin targets.
For example, after one week of selling the wholesale selling season spring, actual sales could show a significant decline in sales vs. a planned increase. The business planner can take action to try to address this discrepancy, both for the current wholesale selling season and future seasons. Planners and salespeople can investigate their ERP solution to see the margin made on sales orders by both the order line level and the overall order level. This provides helpful clarity into how to adjust your product plans during this wholesale selling season’s phase before garments are produced. The fresh insights from the forecast also can be used to adjust raw material procurement and production capacity commitments with vendors, for future seasons. Putting greater emphasis on planning and leveraging stronger data can help companies enhance product lifecycle management, says Sonia Hernandez, an associate partner with The Parker Avery Group, a strategy and management consulting firm focused on the retail industry.(i)
Digitally transform to increase agility
It is certainly apparent that there are many challenges faced by businesses within the fashion industry however there is sufficient agility and resourcefulness within many organisations to embrace uncertainty and discover new opportunities. Those organisations that adopt a disruptive mind-set welcoming change and aligning themselves with the right technology and collaborative partners will be the ones that successfully differentiate themselves from the also-rans.
Xpedition’s all-in-one business management solution for fashion is a fully integrated, proven platform that provides businesses with all the necessary tools to boost productivity, improve speed to market and minimise cost. The solution is underpinned by Microsoft Dynamics 365 Business Central and K3|pebblestone and is completely cloud-based.
As one of the UK’s leading and trusted Dynamics 365 implementation partners, Xpedition has an enviable reputation as a reliable advisor to ambitious fashion organisations, particularly those looking to build more efficient and sustainable operations.
Speak to one of our Consultants today to discover how Xpedition could support you to transform your business with Apparel ERP software.
- Soniar Hernandez in Optimizing Time to Market, K3 Business Technologies, (2020) https://www.k3btg.com/docs/downloads/k3fashion/optimising-time-to-market.pdf
This article was first published in part by Retail Insider Disruption drives differentiation in fashion sector (2021) https://www.retailinsider.com/2021/09/disruption-drives-differentiation-in-fashion-sector/