Experts decode methods to master inventory management, generative AI, unified commerce and sustainable practices.
By 2024, India’s apparel market is forecasted to skyrocket to an impressive US $ 105.50 billion, as per Statista. But here’s the kicker: Indian retailers are grappling with unsold inventory as they have started to write off unsold inventory due to product obsolescence and are sourcing merchandise closer to the season, reducing the sourcing period from the previous 120-150 days to just 60-90 days, as per multiple reports.
The companies emphasised the necessity of these write-offs, despite their efforts to clear unsold inventory through extensive discounting. These measures are expected to affect their bottom lines this fiscal year.
In the initial three quarters leading up to December (2023), the top five retail chains – Reliance Retail, Titan Company, Avenue Supermarts (owner of DMart), V-Mart Retail and Shoppers Stop – together opened 44 per cent fewer stores compared to the corresponding period the previous year.
Shoppers Stop Ltd.’s CEO, Kavindra Mishra, informed analysts that when they ordered merchandise for last year’s Spring-Summer and Autumn-Winter seasons, they didn’t anticipate the current slowdown. They had to account for obsolete inventory worth close to Rs. 9 crore. This decision impacted their gross margins by 60 basis points. One basis point is equivalent to 1/100th of a percent.
The retail industry encounters various challenges due to its complex value chain, encompassing procurement, supply chain management, transportation, retail operations, promotion and customer service. As a result, executives are prioritising supply chain management more than ever. A fundamental shift towards a sourcing model that offers flexibility, speed, sustainability, digital enhancement and consumer-centricity is essential.
Experts call for adopting a more modern approach to demand prediction, such as demand sensing which uses real-time data and advanced analytics to understand and predict customer demand. Additionally, retailers and brands should focus on unified commerce to ensure visibility into inventory held by distributors, partners and dealers. Leveraging AI and digitalisation to gather consumer feedback from various social media platforms and making sense of it is also essential. Regarding sustainability, businesses should aim to provide a unique value proposition in the market instead of solely seeking a price advantage for their sustainable practices.
Mastering Inventory Management
In addressing the challenges of inventory management, Vinit Doshi, Head of Product, Sourcing and Design at Celio, a prominent French menswear brand in India with 75 standalone stores and more than 700 point of sales, underscores the importance of keeping the design-to-delivery model more agile and refrain from trying to predict everything.
“While we do introduce many new designs, approximately 50 per cent of our range consists of items that are trendy and relevant to the current market, but not necessarily ground-breaking innovations exclusive to our brand. These designs may be new, but they don’t always require entirely new fabrics or materials. Therefore, we’ve developed partnerships with suppliers who understand our needs and can quickly produce these items.”
He added, “We deliberately chose to concentrate solely on products that can be manufactured and implemented efficiently. In cases where we need to reproduce a successful item, we aim to do so within 60 to 75 days to take advantage of its popularity within the season. Essentially, our strategy is to focus on selling what’s already in demand and refrain from trying to predict everything.”
Moreover, their goal is to operate within a much tighter window, ideally spanning from 60 to a maximum of 120 days per cycle.
Vinit also mentioned that Celio usually sells about 85 per cent to 90 per cent of their seasonal stock during the designated season, including end-of-season sales. The remaining 10 per cent is strategically reallocated: a portion is designated for factory outlet sales and another is reserved for e-commerce channels. Within their e-commerce sales, approximately 50 per cent consists of new inventory, while the remaining 50 per cent comprises stock from the previous season.
Focus on demand sensing
To rely solely on historical data to accurately predict demand, even if it’s for just three months in advance, is no longer effective, stressed Anirban Majumdar, VP – Business Consulting, Stellium, a specialised management consulting firm providing all kinds of supply chain solutions.
Anirban said that by the time the product reaches the point of sale, it’s already outdated, rendering the accuracy of such forecasts as extremely poor. The need of the hour is to find out a more modern approach to demand prediction, which is where demand sensing comes into play.
Demand sensing leverages real-time data and advanced analytics to comprehend and forecast customer demand accurately. This empowers businesses to optimise their supply chain and inventory management effectively. Unlike traditional forecasting methods, which typically operate on a weekly or monthly basis, demand sensing operates on a daily or bi-daily basis.
Some of the common demand sensing techniques include analysing Point-of-sale (POS) data; monitoring social media activity and sentiment to detect trends and changes in consumer behaviour; examining weather forecasts and historical data to anticipate the impact of weather events on demand; evaluating economic indicators like GDP growth, unemployment rates and consumer confidence; employing machine learning algorithms to analyse large datasets and identify patterns and trends for predicting demand.
“Social media chatter from platforms like Facebook and Instagram can serve as a valuable input. Tracking trends and customer responses to specific designs or products can provide real-time insights. For instance, if certain colour variants of a design are gaining traction while others are not, this information can inform adjustments to production focus,” said Anirban.
| 44%
Upto December 2023, Reliance Retail, Titan Company, Avenue Supermarts (owner of DMart), V-Mart Retail and Shoppers Stop together opened 44 per cent fewer stores compared to the corresponding period the previous year. |
Decoding their inventory management strategy, Chetan Daga, Senior Consultant from global business management consulting firm Argon & Co, stated that once seasonal forecasting is available, the firm conducts a classical ABC Analysis. This analysis categorises inventory items into three classes: A (high-value items), B (medium-value items) and C (low-value items), based on their significance to the business. Depending on the focus, either units are sold or product value is considered. After categorisation, tailored inventory management strategies are applied to each class.
Drawing on a case study from one of their previous projects, Chetan said they conducted numerous network design studies for fashion retailers striving for more agile and dynamic supply chains. “One scenario examined our client’s multiple regional Distribution Centers (DCs), spanning regions like north, south, east and west. The question arose: Could we designate one of these regional DCs to function as a central DC? The rationale behind this idea was to eliminate the need for multiple inventories in different locations, which would otherwise increase the overall inventory in the supply chain system.”
According to Chetan, by doing so, one may face the trade-off of being farther from customers for certain types of products. However, this set-up offers advantages in terms of warehouse management.
Highlighting an innovative way to tackle excess inventory, Avnish Naik, a Warehouse and Logistics Expert with over 20 years of experience in supply chain management and former Head Logistics and Warehouse for the Textile Division at Raymond Limited, said, “During my tenure with Raymond, we had excess inventory and its value had decreased by 80 per cent. However, we found a solution by repurposing it into a new product: a gifting pack. By bundling these items into kits, we were able to sell them and recoup their full valuation.”
“Initially, the idea was to clear out old inventory, but it evolved into a cost centre. We ended up sourcing new materials to create an entirely new business. It’s something worth considering.”
eShakti, a clothing boutique that offers custom-fit clothing for women and girls, has a fresh approach to predict demand and manage inventory.
“We gather data through customer panels (a group of individuals selected by a business or organisation to provide input on products and services for research purposes) composed of existing customers who provide feedback scores. We create samples and ask customers to score them based on various attributes such as price, style, colour and so on. By gathering this feedback, we can quickly determine which designs to proceed with for production. This process is easier for online companies to engage in compared to offline ones,” said Vivek Paliwal, COO, eShakti.
Vivek said they maintain raw material inventory instead of finished goods inventory. Their product category is divided into two categories – perennial and fast fashion. Perennial items remain in demand throughout the year, while fast fashion items change rapidly, sometimes every week or fortnight. They procure raw materials based on a fortnightly basis from their trusted supplier base.
Seasons no longer adhere to traditional patterns; they are ever-changing. Therefore, eShakti also maintains a stock of RFD fabric, which offers flexibility for printing and embellishing designs according to current needs. For instance, if a trending item like red mushroom pants emerges globally, they swiftly respond by creating digital designs, printing them on RFD fabric and bringing the product to market.
Using Generative AI
Even though it’s still in early days, generative AI shows great potential for boosting productivity, speeding up product launches and enhancing customer service. Fashion companies can use this technology to develop designs that sell better, cut down on marketing expenses, personalise customer communications and streamline operations. It can even transform supply chain management, store operations and support functions. Now is the perfect time to start exploring this technology, stressed Venky Nagan, former Group CEO, Asmara, one of the biggest names in the global apparel sourcing domain, having more than 1,000 employees across 13 countries.
Venky cited the example of Midjourney, which is a prominent generative AI tool for crafting images from text inputs. “By leveraging generative AI tools like Midjourney, users can simply input their preferences, such as requesting red Hawaiian printed lady tops and receive perfectly curated collections as options. This software operates entirely on AI, boasting a vast database of images and products to streamline the design process significantly.”
Further highlighting the capabilities of Midjourney, Venky said, “When it comes to collections, there’s a balance between newness and core items. For core items, predictive software aids in determining purchase quantities and selection. On the other hand, for new items, decisions can be postponed, allowing for more flexibility and informed decision-making.”
In December 2022, fashion designers from the Laboratory for Artificial Intelligence in Design2 (AiDLab) in Hong Kong wowed audiences with a fashion show featuring designs supported by generative AI. Fashion innovators are already tapping into the potential of generative AI through tools provided by tech companies like Cala, Designovel and Fashable. These tools facilitate the generation of new ideas, experimentation with various design iterations and the streamlining of design workflows without the need for costly prototypes.
“In future, AI will be a significant game-changer and those who adopt early will reap the benefits,” said Deepti Dakhole, Managing Director, My Lil Princess, a D2C brand specialising in kids’ partywear apparel.
Echoing this sentiment, Venky stated, “For emerging brands, retailers and start-ups, embracing technology right from the beginning is crucial. They have various options available, ranging from slightly more expensive to cheaper tech solutions, but they shouldn’t overlook the early advantage that technology offers.”
For brands, consumer feedback is becoming increasingly valuable, especially with younger demographics being more willing to provide feedback. But making sense of the feedback is easier said than done as brands have to integrate data from multiple channels. Nowadays, customers interact with brands through various channels like Google, WhatsApp, Instagram and other tech platforms. It’s no longer just about the store and website.
“Collating feedback can be challenging due to its unstructured nature. However, with digitalisation and AI, we can now gather digital traces of our brand from various sources (tech platforms) and integrate them with our product and sales data. This allows us to analyse the feedback comprehensively and identify areas for improvement,” said Ranjan Sharma, CIO and Head of Supply Chain, BESTSELLER India, a part of BESTSELLER, a family-owned fashion company founded in Denmark. BESTSELLER India currently has 362 exclusive brand outlets and markets and sells six BESTSELLER brands – Jack & Jones, Vero Moda, Only, Selected Homme, Jack & Jones Junior and Vero Moda Girl.
Ensure Success with Unified Commerce
Experts agree that investing in Unified Commerce, a more holistic approach that integrates all sales channels, processes and data, is crucial for providing a complete and smooth customer experience, a priority that every retailer and brand must focus on now more than ever. They must pay attention to all aspects of technology, from customer experience to data systems. This means connecting customer profiles, histories, rewards and incentives across both physical and digital channels to create a single view of the customer and provide a truly unified shopping experience.
Customers don’t view a unified experience across retail and online as an optional feature; they simply expect it.
“I believe it’s crucial to treat every customer as one, regardless of whether they shop online or offline. What I often observe among supply chain professionals is a tendency to overlook the individuality of the customer. They may think it’s solely the responsibility of salespeople or marketers to understand the consumer’s perspective,” said Avnish Naik.
According to Avnish, when considering warehousing and the supply chain for both physical stores and online presence, it’s essential to have visibility into the inventory held by one’s distributors, partners and dealers. Without this insight, providing timely service becomes challenging. Moreover, factors like sustainability and cost come into play. While it may seem more cost-effective to ship from a nearby location, the lack of visibility often leads to opting for a central warehouse strategy, despite potentially higher costs, because it offers better inventory oversight. “Invisible inventory ties up capital as inventory essentially represents money in a different form,” he cautioned.
When it comes to supply chain management, collaboration – spanning from the manufacturing of the product to its delivery to the end customer – is the key.
Sharing the practice of VIP Clothing, a leading Indian company specialising in manufacturing and marketing innerwear under well-known brands like VIP Innerwear, Frenchie, Frenchie X, and VIP Feelings, Kapil Pathare, Director, stated, “Currently, we manage four warehouses in our set-up. All these warehouses are seamlessly integrated using SAP, providing us with comprehensive insights into our stock across various channels. Moreover, we’ve connected this SAP integration to our dashboards, which offer real-time visibility into the inventory levels, sizes and assortments in each warehouse. This set-up enables our logistics team, based in our Mumbai office and supply chain heads, situated in different locations, to monitor the availability of products across warehouses. If necessary, products can be relocated based on consumer demand.”
Kapil said it’s essential to assess not only the type of stocks but also the inventory turnover ratio. Understanding the duration for which stocks are held, whether it’s for one, two or four months is vital. A faster stock turnover ratio indicates efficient management. This, in turn, impacts Return on Investment (ROI), a key consideration for businesses. Consequently, businesses strive to align with partners who prioritise optimising sales processes and investing in essential elements.
Headless commerce
Many businesses have transitioned to headless commerce, leveraging cloud-based solutions, pointed out Jaydeep Shetty, Consulting Partner, GreenHonchos, a full stack e-commerce solutions company that integrates strategy, technology and consumer experience to build and manage retail brands online.
At its core, headless commerce involves splitting the front end of an e-commerce application (storefront and user experience) from the back end (data and business logic). Headless commerce is fast becoming one of the most prominent trends in e-commerce. By going headless, one can develop various front-end experiences tailored to different customer touchpoints. Whether it’s your website, mobile app, voice assistant or point of sale (POS) system, they can all connect to a single backend system through APIs. This approach empowers emerging brands to truly embrace omnichannel strategies and expand globally at a rapid pace.
On the backend, brands can utilise loosely connected, specialised services to address their intricate operational requirements. With a composable tech stack, there’s a flexibility to integrate preferred CMS, CRM or DXP seamlessly. Plus, there’s no vendor lock-in, allowing businesses to switch to different services as they evolve.
“Nowadays, most brands operate entirely on the cloud, integrating cloud platforms like Infor, Genesis and Unicommerce with Shopify ( an e-commerce platform that helps small businesses build an online store and sell online through one streamlined dashboard) for front-end operations and utilising other providers for point-of-sale systems. The seamless integration of these cloud-based solutions makes it easy for companies to switch between CRM systems or move to different providers,” said Jaydeep.
Jaydeep added that headless commerce is particularly beneficial for smaller companies generating less than 100 crore, as they may not want to invest in complex systems like SAP.
Sustainable Makeover for Fashion Supply Chain
With the growing emphasis on climate change, industry leaders urge businesses not to hesitate to invest in Sustainable R&D, as it promises rich rewards down the line.
Giving his two cents, Nohar Nath, ED, Kishco Group, a fifth-generation business which has been active in the global textile industry for over 80 years, said it’s crucial to first recognise that sustainability isn’t just a short-term need; it’s a long-term necessity. “In industries like pharmaceuticals and automobiles, there’s always a significant investment in research and development. This investment isn’t questioned because it leads to innovation and progress. Similarly, we must view sustainability initiatives in the same light,” said Nohar. The Kishco Group offers a range of services, including raw material procurement, waste handling for upcycling and recycling and the production of various textile products such as fibres, yarns, fabrics, garments and associated items.
While Indian consumers increasingly prioritise sustainability, with over 60 per cent expressing willingness to pay more for eco-friendly products as per a survey by Bain & Company, effectively communicating this value remains a challenge, noted Sucharu Uppal, Joint President of Birla Cellulose, a leading player in the viscose staple fibre (VSF) industry.
Fabindia serves as a prime example of a business effectively conveying sustainable value. As India’s largest private platform for products that are made from traditional techniques, skills and hand-based processes, the retailer has 357 stores across 127 cities within the country and 13 international outlets across 7 countries.
“Roughly 70 per cent of our customers make purchases from us at least three times a year. They possess a deep understanding of our products, recognising that they are handcrafted and made with care, often following the principles of slow fashion,” said Nitin Joshi, Head – Supply Chain, Fabindia, India’s largest private platform for products that are made from traditional techniques, skills and hand-based processes. The retailer has 357 stores across 127 cities within the country and 13 international outlets across 7 countries.
Businesses should also not solely seek a price advantage for their sustainable practices, but rather aim to offer a value differentiator in the market. “A manufacturer explained to me that they obtain approximately 5 per cent – 6 per cent waste from their spinning process and 8 per cent to 10 per cent from their cutting table waste, all consisting of cotton. These waste materials are then blended back into their yarn production. Despite incorporating up to 15 per cent recycled material, they maintain their pricing, as their recycled cotton yarn commands the same value as virgin cotton yarn,” stated Rahul Bhajekar, MD, GOTS, the world’s leading processing standard for textiles made from organic fibres.
“The key point here is that fast fashion is here to stay, without a doubt. However, we can explore a hybrid model where sustainability is integrated into certain aspects of our supply chain or the products we manufacture. For instance, incorporating a small percentage of sustainable fibres alongside traditional materials could be a starting point, perhaps around 10 per cent – 20 per cent,” said Delzaad Deolaliwala, Chief – Fibres and Yarns, BOHECO, India’s foremost industrial hemp and medical cannabis company.
“Fashion players like Inditex and Marc O’Polo cater to customers who require new merchandise monthly to maintain a steady flow of sales. This strategy aims to avoid prolonged periods of selling the same products, maximising sales opportunities. However, these brands also prioritise sustainability by incorporating eco-friendly materials, such as cotton or cellulose-based fibres, into their products,” explained Rupak Chakraborty, Business Head, Alok Industries, a subsidiary of Reliance Group and an integrated manufacturer of Apparel Fabrics (Woven and Knits), Home Textiles (Bed & Bath), Cotton and Polyester Yarns and Garments. With headquarters in Mumbai, Alok Industries has manufacturing facilities in Silvassa and Vapi.
Experts also stress the importance of empowering sustainability heads within organisations. “The culture of a brand is often shaped by its leadership, with decisions predominantly driven by marketing and finance teams rather than sustainability departments. Unfortunately, this often results in sustainability initiatives being sidelined, with little decision-making power allocated to sustainability heads,” claimed Nohar.
| “In industries like pharmaceuticals and automobiles, there’s always a significant investment in research and development. This investment isn’t questioned because it leads to innovation and progress. Similarly, we must view sustainability initiatives in the same light.” Nohar Nath ED, Kishco Group |
Sustainability in logistics and warehousing
Experts also call for fashion players to adopt a more sustainable approach concerning alternative modes of transportation and carbon-efficient warehousing practices.
It’s worth noting that there’s been significant improvement in rail infrastructure over time, making it a viable and efficient alternative to road transport, especially for nationwide connectivity. Many retailers, particularly those operating in remote regions like the northeastern parts of the country, are increasingly considering rail as a preferred mode of transportation due to its speed and reliability.
However, one common concern is the perceived lack of proper handling in rail transportation. Conducting pilot runs to ensure cargo reaches its destination intact and undamaged would help alleviate these concerns and build confidence in utilising rail transport.
Regarding warehousing, a key initiative is transitioning to solar-powered facilities. While many solar power solutions have been proposed, the return on investment (ROI) remains a challenge for retailers, especially considering the steady growth in demand, which necessitates frequent upgrades to warehouses. Despite this, incorporating solar power into warehousing remains a priority, aligning with sustainability goals and long-term environmental benefits.
“We’re currently in the process of converting our entire warehouse network into solar-powered facilities. While we’re committed to this initiative, the upfront costs involved in installation and fixed expenses are substantial. Unlike residential solar panels, there is currently no government subsidy available for solar-powered warehouses or other commercial settings,” explained Nitin. He suggested that government subsidies for commercial solar installations could facilitate achieving a return on investment within 3 to 5 years. This would make solar-powered warehouses a more financially feasible and sustainable choice.
