Managing Supply Chain in Fashion Industry
with Venu Nair, Managing Director, Marks & Spencer Reliance,India
Due to the inherent dynamic and complex nature of the fashion industry, fashion retail has its own special demands from the supply chain. With increased marketing channels, outsourcing options and fashions changing not only from season to season but also within the same season, it is important for retailers to invest in creating a flexible and responsive supply chain. Consumer awareness and satisfaction are probably the two most important factors in creating a sustainable fashion business which is increasingly becoming global.
In this interview with Mr. Venu Nair, Managing Director, Marks & Spencer Reliance,India, we attempt to understand the complexity of managing supply chain in the fashion industry and how the apparel retail business functions in India.
Supply Chain in a Complex Industry
tejas@iimb:
Fashion is considered an extremely dynamic and complex industry that requires its supply chain to be responsive and flexible. We have seen fashion houses like Zara whose entire business model is based on their supply chain. Can you elaborate on this? How pivotal is supply chain in creating a good fashion house?
VN:
Supply chain is a very important part of any fashion or apparel retail business. Given the long lead times that there are in the industry, it is important to have a effective supply chain to help you buy products as close to the season as possible. There are different strategies that people can adopt and different levers that can be pulled, depending on how fashion conscious that particular product is; for example, in the case of a white shirt one can pretty much predict what quantity can be sold within the season. And even if it were to pass on to the next season, little cost would be incurred. However, this may not be the case for other apparel clothing. It varies with different garments, colors and from season to season. This makes it critical to have a flexible and responsive supply chain for any fashion or apparel retail business.
tejas@iimb:
Amongst the activities that constitute a typical supply chain-sourcing, manufacturing, logistics, raw materials, markdowns- which results in the biggest cost to products? How is this addressed within Marks & Spencer?
VN:
Markdown is definitely the biggest cost. As I said earlier, the key is to try and get through the line, as quickly as possible. This is where it becomes challenging since one must try to forecast demand as accurately as possible.
Demand Forecasting and Role of Technology
tejas@iimb:
Forecasting demand would be a complex exercise for fashion industry considering how consumer preferences keep changing rapidly. How is demand predicted in such an industry?
VN:
Past data of sales is definitely an indicator and merchandisers do rely on history of sales data to forecast demand. However, this cannot be the only guide. There are other factors that come into play. For instance, weather is a big factor- not just for places that are cold like the UK but for other countries as well. So, forecasting is about looking at what happened in the past and putting it in perspective with the present and immediate future. Some retailers adopt a trial approach where they put a small quantity in stores to check the consumer reaction and then accordingly predict demand.
tejas@iimb:
Technology seems to have transformed the way most businesses run. What role does technology play in the apparel retail business?
VN:
With technology, things have certainly become simpler. Email is extensively used for communication. Even some of the most personalized activities have now become easier. For example, earlier fits of clothing used to be checked on live models and this incurred both cost and time for sending and receiving the samples. But now a lot of these activities are done using e-fits.
Apparel Retail and Manufacturing in India
tejas@iimb:
Marks & Spencer has historically been the leading retailer in UK. How different is the market in India compared to the British homeland? Does the business operate with the same strategy or does every geography works independent of one another?
VN:
Marks & Spencer as a brand has been established based on the five principles of Quality, Value, Service, Innovation and Trust. These underlying principles remain the same and are common across all our locations. In India, we stand for aspirational clothing at an affordable price. We have established 24 stores across the country. We operate as a joint venture with Reliance retail and offer products across womenswear, menswear, kidswear, lingerie and beauty.
tejas@iimb:
Asian countries especially China and Hong Kong have emerged as a strong hub for manufacturing of apparel. Where does India stand on a relative basis? What are the factors that make China and Hong Kong better destinations for apparel manufacturing?
VN:
India is amongst the top 5 manufacturing countries in the world for us. It is primarily a hub for casual clothing per se. In terms of sheer volume and scale, it hasn’t done as well as China in apparel manufacturing. The two areas where China scores over India are greater productivity and consistency in quality.
Future of Fashion Retail in India
tejas@iimb:
With the strong influence of internet in our daily lives, online retailing has become a flourishing business today. How is this expected to change the dynamics of the traditional fashion industry? Do you see this as a welcome move or is online retailing expected to be a disadvantage of sorts?
VN:
Online retailing is a reality today. It is certainly a welcome move for the fashion industry. Online retailing has been working well for a number of products like books and it's starting to do well in apparel too. Apparel with standard sizes, like socks for instance, can easily be purchased online. It certainly helps in showcasing more variety in ranges across width and size. In the future online retailing is definitely going to become more and more important.
tejas@iimb:
How do you envision the growth of Indian fashion industry in the future? Does India have the potential to be a fashion powerhouse like Gucci or YSL? How is the domestic demand expected to change in the near future?
VN:
Gucci and YSL are brands but India is a country so you can’t really compare the two. For India as a country, there is no one kind of clothing or one kind of player which all of India is crazy about. Regarding the international scene, India certainly has began to make a mark. There are some Indian fashion designers who have gained international popularity. Large scale fashion events are being conducted to showcase the work of Indian designers within the country as well. Domestic demand is definitely expected to increase further which is one of the reasons for Marks & Spencer’s foray into the Indian market. India has great potential as a market for apparel retail and fashion in India is certainly a flourishing industry.
Conclusion
Supply chain is a very important part of any fashion or apparel retail business. Hence, the key for any retailer is to try and buy as close to the season as possible. Moreover, demand forecasting is an important exercise and although past sales data is an indicator, many external factors like weather are critical in order to establish a responsive and flexible supply chain. The advent of technology, coupled with growing fashion consciousness, has made India a potential market and apparel retailing in India is only expected to grow more and more in the near future.
Profile
Venu Nair is the Managing Director of Marks & Spencer Reliance,India. He is a Mechanical Engineer from the National Institute of Technology Calicut and is an alumnus of S.P. Jain Institute of Management and Research.
