Supplier engagement key for luxury fashion brands, says OC&C

17 March 2021 Consultancy.asia 3 min. read

Closer collaboration between brands and suppliers will be crucial for evolution of the luxury fashion industry according to a new report from international strategy consulting firm OC&C.

In its latest report on the luxury fashion segment, OC&C Strategy Consultants has outlined four strategic imperatives for high-end fashion businesses in what the international advisory firm describes as an important phase in the industry’s transformation. Already under pressure to evolve prior to the outbreak of the global pandemic, Covid-19 has according to OC&C highlighted the limitations of an inefficient and rigid business model.

Naturally, closed borders and domestic lock-downs have accelerated the shift to digital channels, but for brands to cater to the contemporary demands of online shoppers their engagement with suppliers will be as crucial as that with consumers. To compile its report, OC&C interviewed CEOs from leading luxury businesses, and they all pointed to better integration with upstream suppliers – traditionally concentrated in Asia – across both planning and production.

Supplier engagement key for luxury fashion brands, says OC&C

Production flexibility

While the design and sale cycle of the fashion industry is challenging in its own right, with products drawn up some 12 months in advance of arriving in stores, OC&C employs an unsteady lorry-driving metaphor to describe the special difficulties associated with volumes and mix planning. Luxury businesses need to become nimble go-karts, the firm contends, as “The cost of flexibility is lower than the cost of going off-road: this is the pandemic’s true lesson.”

One key in adding flexibility will be for fashion houses to review the nature of their relationships with suppliers. In a bid to better manage variances in forecasting, OC&C believes that brands will be required to work together with suppliers in balancing the supply risk and cost of flexibility. This extends to evolving beyond single-season arrangements and instead developing transparent, structural relationships where both parties can share in the opportunities and risks.

Reshaping seasons

A further impact of Covid-19 driving the imperative for flexibility has been the disruption to traditional seasonal collections, accelerating the trend toward, ultimately, an “endless flow of products and ideas with the aim of continuous newness.” Here, suppliers will need to follow suit by adapting their own operating models and capabilities, in order to deliver smaller volumes of product on much tighter schedules while maintaining their cost competitiveness.

Flow management

With respect to smaller volumes, and customer service including timely deliveries becoming a key differentiator in consumer loyalty, each step of the supply-chain will require significant changes according to OC&C, from production to warehousing until point of sale. Thus, the logistics and quality management model and its organisation will be of far greater importance than at present. One aspect will be for suppliers to reconsider their approach to deadlines.

“For suppliers, the cultural leap is in managing dates as ‘mandatory’ appointments and not as non-compulsory deadlines,” the authors of the report state. “Today’s fashion system is used to loose time management and is not structured to govern the complexity of a model designed for repeated and daily appointments. In the future, suppliers will necessarily be engaged with brands in managing the end-to-end process.”

Sustainability

Lastly, while luxury brands will have to up the pace of their releases to compete, they’ll be expected to do while under ongoing pressure on matters of sustainability.

Once again, suppliers will have a major role to play. “For suppliers in key sourcing geographies, there is a unique opportunity to work together and build new leading-edge production platforms, combining their manufacturing quality and innovative operational models in a new unbeatable manner,” the report concludes.