5 Tips To Manage Supply Chain Risk In The New Year

Summary: The global pandemic has changed the game and urged businesses to adapt to the new normal which also involves new supply chain changes that pose risks to the end-to-end business. Embracing supply chain risk management (SCRM) strategies is the best way to make your fashion company thrive in this ever-changing trade.

The pandemic has literally given the fashion industry a reality check and proven how vulnerable businesses are when it comes to dealings of the global supply chain. Raw materials are sourced from across the globe, while manufacturing happens in a different region altogether. Ultimately, the finished products are sold in certain international markets that have a demand for the goods.

Trade between different countries is at the helm of the fashion industry. Therefore, it is important to keep an eye on global affairs to ensure your business is not affected by any events, be it natural calamities or revised trade laws. There are a bunch of supply chain risks that are predicted for the coming year, and fashion companies should be prepared to deal with them beforehand so that business runs smoothly. Find out about the potential risks and ways to deal with these challenges below.

Factors Affecting The Global Supply Chain Currently

Climate Change Affecting Raw Material Sources

Global warming and climate change is real and it is slowly but indefinitely about to become more visible. Climate change can easily affect fashion businesses badly. For instance, the deadly floods that have plagued Pakistan are destroying cotton crops. Therefore, there could be a shortage of cotton and sourcing cannot be done from Pakistan for a while.

Russia-Ukraine War Impact On Energy Prices

The ongoing war between Russia and Ukraine is affecting energy prices and other resources. Russia is one of the biggest suppliers of oil and gas, and also wheat, metals, and more. Due to the war, prices are being increased to meet the country’s current requirements.

Traffic Log Jam

Supply constraints, exacerbated by shortages in shipping containers, are beginning to impact business operations worldwide and especially in the US. Increased freight costs and even accidents that resulted in the loss of products in the ocean are causing huge problems for US retailers.

Ongoing Covid-19 Lockdowns in Countries

China has introduced another wave of lockdowns due to the pandemic. Since China is one of the biggest countries in the supply chain that manufactures and supplies fashion goods across the globe, these Covid restrictions affect the global market drastically. China accounts for nearly 20% of the global manufacturing trade.

5 Ways To Deal with the Supply Chain Risks

To secure your fashion business from falling prey to these supply chain risks, you need to put certain SCRM strategies in place. Here are 5 ways to do it.

1. Map Out A Solid SCRM Strategy

Business owners need to understand and research the current market properly and then devise supply chain risk management strategies accordingly. Having a digitized supply chain and also conducting a timely market is of utmost importance. For example, leading fashion brand Zara has now begun creating smaller batches of clothing as the market demand for certain trends is ever-changing. Zara’s approach helps avoid stagnant inventory and also is more sustainable for business in the long run. 

2. Diversify Production & Sourcing 

Don’t put all your eggs in one bag. Since the supply chain is so diverse and widespread, having secondary manufacturers and suppliers to fall back on in case of unprecedented adversity is a good move. It will ensure the production and delivery of orders are not disrupted. This will protect your business from labor shortages in certain countries or even natural calamities affecting raw material attainment.

3. Develop a Tight Knit Supply Network

It isn’t wise to rely on vendors from just one location to get production and delivery of your business orders. In case there is trouble in that specific location, your entire order is stuck and that causes huge delays and loss of business, not to mention an overall setback in staying current with fast-fashion demand and trends. Opting for vendors from different geographical locations will secure your flow of order production and deliveries. It is also great if these vendors have digitized functionings so that it is easy to keep track of various stages of your order.

4. Follow Sustainability Guidelines & Maintain Transparency

Companies must improve transparency and traceability to embed sustainable and ethical practices in apparel manufacturing. The lack of transparency leaves brands unsure about the collection they want to support and whether or not the goods produced are truly in line with the demand for sustainable clothing lines. Traceability of production and sourcing can help identify inefficiencies in production, reduce waste, and also identify and revise processes that impact the environment badly.

5. Digitize The Supply Chain

Digitize all processes within your supply chain and have them integrated into an online platform. This will make the entire process transparent for all the stakeholders and will grant you more insights into the production and shipments of your order. This transparency will also help your company plan and manage inventory better. An integrated online platform for all stakeholders such as brands, manufacturers, suppliers, distributors, and retailers will make communication easier and workflow more efficient.

Identify the supply chain risks for the new year and use these essential supply chain risk management strategies to keep the business strong in 2023.

Key Takeaways

• New supply chain risks are emerging and they threaten business in the new year.
• Fashion companies need to put a flexible SCRM strategy in place so that their respective businesses can work around supply chain shocks.

Fashinza is an AI-driven fashion tech company that supports fashion companies in end-to-end business dealings. With a network of digitized vendors and a portfolio of top global fashion brands as clientele, Fashinza is the best one-stop shop to build and maintain a strong supply chain.