3 Key Areas For Change In The Fashion Industry in 2019

This is the second half of an article titled “How customers are stressing the hell out of the supply chain”. Part I is a little more industry relevant, but if you want more context, you can read here.

The “Value Chain” in 2018 led me around the world to 27 cities including Los Angelos, Shanghai, Tokyo, Washington D.C., Baltimore, Hong Kong, Copenhagen, London, New York, Nashville, Amsterdam, Lille, Brussels, Stuttgart, Nairobi, Toronto, Chicago, Detroit, Billund, Paris, Porto and Miami. It was a flood of meetings with brands, retailers, manufacturers, non-profits, NGOs, and government.

In the process of all that travel, I had time to think. Are we automating apparel because it is possible or because it represents the kind of world that we want to live in? It’s nice to build something that people want, but should we build it? How should we build it? What do we need to put into place to make it and the people around it successful?

The purpose of life is right in front of us: It’s to create a reality we want to inhabit — to reach towards the better end of our conscious experience. At each moment, in every second of life, we are given a choice about how we want to conduct ourselves in this world, and though it might not always seem like it, each of these choices are of consequence. They each interact with culture to give it a new form; a form that we are responsible for creating by either doing what is right or doing what is wrong in that specific moment. Zat Rana

Here are 3 key topics in 2019 that will require significantly more focus and energy than they received in 2018, assuming that reflects the reality we want to inhabit.

Skills Gaps & The Worker

Workers need to increase their skills to speed up the supply chain and not compete against technology. That is not about sewing faster. Technology is coming and if we act now it can augment workers rather than replace them. However, they need to move up the value chain of operations and products (more complicated sewing is higher margin). If they don’t they will be put in more forced labor situations by increased costs or made obsolete by basic automation.

Workers have to keep pace with the advances of technology so that they complement each other instead of being a zero sum game.

The future of work and the worker has been a consistent theme in the backdrop of robotics. What happens to the seamstresses if the robots take their jobs? It’s a hot question. It stokes a lot of fear surrounding the influx of robotics into our daily lives and the possible threat to our way of supporting our family and finding meaning. However, it distracts from the real challenge. If robotics enter apparel manufacturing and take all the jobs (Not a realistic scenario, see below under Technology) and people are pushed into forced labor situations like paying for their job or having their passport withheld, then we need to take action to stop these trends. However, if robots don’t take the jobs in the numbers and quantities that people fear, does that change anything? Aren’t the workers already being extorted to work and being held hostage? As costs go up and deflationary clothing comes down, doesn’t that only grow the problem? In fact, robots are the counterintuitive solution.

Currently in the US factories we operate in today, a human hasn’t been fired and or let go due to any robot capability. Churn is coming down (the basic styles have the newest workers who are most likely to quit) while new orders and capacity has increased. New hiring remains unaffected because no factory could meet its actual hiring needs. This includes most factories globally. Sewing clothes is not a growth industry for the world’s youth and 30% of new hires quit after the Chinese New Year in footwear according to several global brands. While still early, this is worth documenting. If there are good people, they are hired. Additionally, existing seamstresses have been upskilled & repurposed to higher margin operations (robots can’t do) and goods which has been good for business. Can it last?

Yes, it can. Robots aren’t that great at the dexterous moves needed to make a garment. It’s called Moravec’s Principle. It means that robots are good at the things humans aren’t and vice versa. Rather than introducing the fear of robots into the conversation, let’s ask, who is responsible for skills development and the meaningful employment of humans? I would argue regardless of robots, we have this same challenge today. Who is responsible for the worker? Is it the brand, the manufacturer, the government, not for profits or the worker themselves?

Getting a handle on this in 2019 will provide an enormous wind in the sail for better product, faster. The economic impact will be felt in smaller inventories in the supply chain and less out of stock with higher margin premium goods on the floor.

AI & Robots

The fashion and apparel industry has a significant focus on retail tech, but supply chain tech like robotics is grossly misunderstood. We have to get clear on 4 main keys to make technology work on a product, environment and business model level.

First, in the apparel industry robots and sustainability should be synonymous. Robots don’t make unlimited numbers of goods. They enable making the good in response to demand rather than forecasting blindly. While sustainability and corporate responsibility talk about using organic or less polluting materials and implementing better chemical regulations, we need to find a business model that works by making less. While incremental gains are important, the industry faces a sustainability crisis. Gen Z is worried about the health of earth and apparel is starting to look like a Twinkie.

Second, I understand that brands and retailers leave automation capabilities to manufacturers because they think that it will allow them to be more nimble. Keep your money focused on operating costs instead of capital costs and remain flexible to pick up and move to another trusted vendor in another region that can give you more margin.

However fashion brands are missing the forest for the trees. The future isn’t cheaper product. It’s increased capability.

Capability in the future will allow for business model flexibility delivering to more than one type of demographic in more than one type of situation. The consumer has just started to demand flexibility in apparel. It’s only going up from here. While everyone needs clothing, not everyone needs it through a big box brick and mortar. You won’t be able to use the same supply chain and serve them all. If your supply chain dictates your value proposition, then you will limit who you can serve. As there are less people to buy, a deflationary good like apparel will continue to weigh on shareholders.

Third, design will need to learn to be a team player. This race for capability is putting design and technology on a collision course. Design wants automation to reproduce at scale and automation wants design to listen to what is possible. Ultimately, you can’t have design always win. Not if you want to see measurable results in the next 5 years. It will be the businesses that figure out where to compromise and where to double down that will be the winners.

Fourth, every brand should add a CTO to their management team. Not a CIO or head of innovation…a real bonified technology executive that understands the intersection of business, engineering and supply chain. The Chief Supply Chain officer has too much on their plate and too much risk in adding technology they don’t really understand. The process for understanding new technology, the pace of change, its impact, and the accessible funds to generate the appropriate returns is too slow. If I was an analyst, I would look skeptically on any public company initiatives to change social, sustainable or long term profitability if there is no CTO. Brands must go beyond design and sourcing in 2019 and that requires heavy investment in technology.

CULTURE- The world is abuzz with talk of business models and fashion and apparel are no different. However I have seen many runways and many presentations on Internet 4.0 and the Factory of the Future, but few on apparel’s culture of the future. Does the fashion industry have the right culture to make change come to life? What should the industry risk appetite look like for new solutions, research, collaboration, etc?

This industry doesn’t move fast, but that doesn’t make it right. If we aren’t actively solving our supply chain problems now, then will we be publicly announcing “proactive forced labor” initiatives in 10 years?

Full garment automation will change the apparel supply chain permanently for the better. The fly wheel is moving and the question is at what velocity? How are we answering the tough questions? And what should we be doing right now?

I think we should be focused on workers, technology and the culture of fashion. I hope customers will demand it because that’s the world I would like to live in. What do you think?