Two Fundamentals of Effective S&OP in the Fashion Industry

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One of the major challenges faced by the fashion and apparel supply chain is the distinct contrast between long finished goods lead times and short product lifecycles in the market. This dichotomy drives organizations toward a formalized S&OP process in attempts to better forecast on the long-term horizon. Doing so will enable better inventory optimization 6-12 months out. Traditional forecasting technologies and methods, like the use of spreadsheets and judgment forecasts, will begin to fall short when faced with global materials sourcing networks and constant new product introductions. Well-designed Sales & Operations Planning (S&OP) improves forecast accuracy levels, enhances inter-departmental collaboration, and provides c-suite visibility across the supply chain.

Challenge 1: Long lead times

According to the American Apparel & Footwear Association, 97% of clothing sold in the United States is made in other countries, predominantly in Asia. International sourcing combined with exceptionally complex manufacturing processes results in many lead-time variances driven by differing workday calendars, international restrictions and tariffs, unexpected weather delays, and more.

Challenge 2:  Short product lifecycles

Fashion, in particular, has a monumental obstacle when it comes to supply chain planning largely because the product lifecycle is so short. Not only do fashion designs change yearly, but also seasonal and regional fluctuations add complexity to the already high number of SKUs needed to fulfill various color and size requirements. The result is a constant phase in and phase out of products with an ever-present need to improve forecast accuracy for new product introductions.

When properly executed, an S&OP process can help solve for this unique set of challenges in the fashion industry. By breaking down departmental barriers, aligning the organization to the same set of goals, and providing executives with a clear line of sight across the supply chain, S&OP can greatly improve manufacturing performance.

An organization’s S&OP process must contain two fundamental aspects to address issues related to forecast accuracy and “silo” planning operations.

Fundamental 1: Advanced Analytics Forecasting

Typically, judgment-based forecasts rely on inherently biased and error-prone data; and basic statistical forecasting can detect patterns and trends in the data, but falls short on reaction time. However, using advanced analytics forecasting allows deep statistical modeling of historical data, and in some cases comparable data, to generate the most accurate forecast result. With this, the entire supply chain profits from an improvement in the sales or demand forecast, especially regarding the ability to plan long-term.

Fundamental 2: Unified S&OP

Forecast accuracy is paramount in supply chain performance, but a unified approach to business planning improves the S&OP process. While traditional S&OP practices begin to draw in stakeholders across functional departments, teams often fall back into their silos between monthly meetings. No matter how accurate the demand signal, the efficiencies are lost if the downstream operations do not use it properly. The right visibility and alignment across the organization is just as important as getting the demand plan correct.

Let us just say that the fashion industry is brutal all around. Companies have to be just as innovative and agile with their processes as they are with their clothing designs. Combining S&OP best practices with advanced analytics forecasting enables visibility, alignment, and groundbreaking performance for fashion and apparel companies in the coming years.