Logistics often operates in the background, but as a key success factor for fashion companies it should not be neglected. However, the current pandemic and unexpected events such as the blocking of the Suez Canal a few weeks ago pose a considerable challenge to the smooth flow of goods.
In an interview, professor Markus Muschkiet, head of the Center for Textile Logistics at the Hogeschool Niederrhein and the Fraunhofer Institute for Material Flow and Logistics, shares insights on the significance of clothing logistics, effects of the coronacrisis and the future of fashion logistics.
Why is logistics a topic that fashion companies shouldn't neglect in future?
Prof. Markus Muschkiet: In the fashion industry, speed and service are playing an increasingly important role for customers. Apart from the target group that is fixated on a particular brand, the products are interchangeable to a certain extent. In this case, of course, on the one hand the extent to which something is fashionable and on the other hand availability. If I have two online stores offering the same product at the same price, often a combination of different services is decisive, which are highly dependent on logistics.
And does logistics ultimately make the difference?
Yes, a crucial difference. If an item is not available in a bricks-and-mortar store, but I offer the customer the possibility of having it delivered to their home free-of-charge, there is a chance that this customer will stay. Although it may not be clearly visible: Logistics is a very important enabler for the fashion industry in the background. Stores cannot do without logistics and because these services can ultimately distinguish them from the competition.
The pandemic is placing a tremendous strain on the entire fashion industry and confronting it with never-before-seen challenges. How has the corona crisis impacted clothing logistics?
There are different processes and flows of goods that have never been seen before on this scale. Of course, one is aware of returns and backward material flow from the mail-order sale, but apart from a few exceptions, this sort of situation hasn't happened in retail before. Now, there are large quantities of unsold goods, but also timeless never-out-of stock articles, which aren't in season at the moment.
However, the white T-shirt or the dark blue sweater can be safely stored from a certain price category, but the storage is not free either. On the contrary: I need quality storage locations, which are dry and clean where I can store goods until the next season – this all costs a great deal of money. It is not the case that as a logistics company it is not possible to store goods and take them out of storage during a certain season. The costs and processes at the companies and brands associated with this are the problem, because they've never experienced anything like this and they've been in a situation where they're already having huge revenue drops anyway. We've got new logistics processes in the industry because of corona and we've got the costs associated with that at a time where everything is available except money.
What effect has the pandemic had on transportation prices?
In addition to costs in connection with warehousing processes, the costs for container transport to Europe have multiplied in many sectors. With respect to air freight, the prices have increased significantly. The transportation costs, which in the past were often one of the smallest and as a result least significant cost factors calculated on a per-item basis, have increased drastically.
How are fashion companies responding to these massive price changes?
Even in this area, there is no one-size-fits-all answer for the entire industry, however, there is a trend. There is also a difference between the situation last year and now. A few months ago, supply chains, some of which had been interrupted, had to be accounted for, which has resulted in upheaval, particularly with respect to seasonal items. Current events such as the incident in the Suez Canal a few weeks ago have brought this situation back. In order to be able to be delivered and, in the end, sold, even higher costs are being reluctantly accepted. No one wants to put off a customer in such a situation. In cases of doubt, they are resorting to air transportation.
Increased costs were not the only consequence of the corona crisis. In the past year, severe delivery delays occurred time and again. Has the situation improved in the meantime?
On the whole, international supply chains are surprisingly resilient. Of course there were delays, but in the meantime this has improved in many areas. The number of vaccines is increasing, the companies have taken hygiene measures to keep production going. Major delays are over, but if a local outbreak occurs again somewhere – in production, logistics or a port – delays can of course occur again. We will also have to deal with this for some time, but it is nothing compared to what happened last year.
Why has the fashion industry been hit so hard by the corona crisis?
That is due to the fast turnaround time of our industry. From 14 collections in the year to 'I don't have a collection anymore and bring new goods to the market every day': everything is possible. If I divide the year into fourteen sections, which to be honest is more the timing of slower companies and if I have a delay of one and a half or two weeks, this will more or less impact an entire collection that has to be written off.
E-commerce has experienced strong growth due to the lockdown. As a result, the customer was repeatedly confronted with delays in the past year. Why is that?
The systems of the parcel deliveries in many sectors already reached their maximum last year. The parcel deliveries have been continuously expanding their parcel centers for years and now had to process enormous growth in a short time. The Christmas business, which for many companies is a very busy time, has established itself as a permanent state for several months. It goes without saying that one thing or another is left undone and that not every parcel can be delivered within the customary time frame.
Now that many are now suddenly switching to e-commerce, many parcel delivery services have struggled to take on additional customers because existing customers have, in many cases, increased their quantities. However, the capacities were quickly increased. If I open a network unplanned or in a short period of time, scaling up over time, is not as effective compared to a long-term planned capacity expansion strategy.
What can we learn from the crisis?
That a company might have to take a slightly broader view with regard to production, in order to be more flexible.This means not just single sourcing, but multiple sourcing. This may also mean bringing individual processes back to the EU. Of course, to a large degree, this will not be to Germany, but e.g. to Romania, Bulgaria or Portugal in order to be more firmly positioned in Europe and more independent.
Even Brexit at the beginning of the year caused turmoil in the fashion industry. What is fashion logistics currently struggling with in that aspect?
The waiting times and all the delays, some of which are still occurring, are difficult. Procedures are not yet running entirely smooth. The customs departments, which otherwise was predominantly occupied with overseas countries, suddenly had a lot more to do with Great Britain. One should not underestimate the processes that had to be set up there. Even if we have a free trade agreement, Great Britain is now a third country. Even if companies are unable to pay customs duties, they of course still have all the registration and documentation obligations in this respect.
How can these problems be solved?
The situation will relax if the entire free trade agreement is implemented on all sides and the processes are established and are effectively integrated in the companies. New, complicated processes, which are not running smoothly, are expensive and inefficient for all economic stakeholders. Once the processes have been established and teething troubles have been dealt with, things will recover, only the additional costs for the processes will remain. In any case, we don't have a big problem doing business with Switzerland or Norway and the rest of the world. Of course, one must keep a few points in mind and have a customs department for this.
What does the future of fashion logistics look like?
The future looks fragmented. Demand is becoming more fragmented as customers are more likely to receive smaller quantities, and retail stores are also not being supplied as strongly. Due to declining retail, B2C transport will gain in importance and a larger share of B2C transports in comparison to B2B transports arise.
This article was originally published on FashionUnited.NL, translated and edited to English by Kelly Press.