Cost Optimisation
November 8, 2022

Logistics and Supply Chain Challenges in Fashion and Luxury Goods Industries

This article explores the challenges the Fashion and Luxury goods industries are facing.
Romain Fayolle

The fashion and luxury goods industries have faced tremendous uncertainty and fluctuations in consumer demand in the past several years due the covid-19 pandemic. However, as the global economy returns to pre-pandemic levels, it is expected to achieve a market value of 1.4 trillion euros in revenue, a 21 percent increase from 2021, according to Bain and Company. 

However, the current geopolitical issues, fears of incoming global recession, and the long term disruptions in supply chain systems, the fashion and luxury goods industry continue to face supply chain and logistics issues. 

There are three prevalent issues in the industry right now:

  1. Supply Chain Disruptions
  2. Increasing Logistics Costs
  3. Ethical Risk Management

The Challenges

Let’s break down the issues currently facing the fashion and luxury goods industries.

Supply Chain Disruptions  

The war between Russia and Ukraine, accompanied by trade sanctions, lack of access to Russian trading ports, increasing consumer demand for luxury goods has resulted in port congestion, high freight fees, and longer transit times, causing significant shipping delays for goods around the world.  

In the modern “on-demand” era, retailers have struggled with keeping up with massive companies like Amazon. One of the solutions has been to provide customers with a seamless shopping experience both online and in-person and enable them to enjoy the instant gratification of in-person shopping when they choose to buy online. 

The challenge for fashion and luxury retailers is to have the products available when customers want them, whether they want their items delivered to their doorstep or pick it up in-store. The development of omnichannel retail is a global issue, as brands worldwide are trying to adapt to their customers’ evolving needs. Being able to respond to the consumers’ demands in a timely manner remains critical.  

The increase in demand for quick delivery has increased the workload in warehouses, and all warehouse processes must become more efficient for the industry to thrive in an omnichannel environment. Industry professionals need to find a way to streamline picking, packing, and shipping methods so that orders can go out faster. 

Specifically, the war has made shipments to and through Russia difficult, especially for Bangladeshi apparel manufacturers. In 2021, Bangladesh exported around $687 million worth of goods to Russia. Now the war threatens to curtail their exports in 2022 if larger companies like H&M and Inditex suspend their Bangladesh operations because of the shipment delays. Bangladesh is just one example of the impact of the Russia-Ukraine War on the fashion and luxury goods industries. The supply chain disruptions caused by this war will have a ripple effect on countries that rely on the manufacturing and exports of luxury or fashion garments, causing them to delay or completely cease their operations, therefore, negatively impacting their economies.

Increasing Logistics Costs

Also businesses in the fashion and luxury goods industry are attempting to get back to their pre-pandemic levels, they are struggling with logistics issues. Inflation has increased, causing increased costs across supply chains and labour shortages

As discussed in the previous section, increased demand for goods has pressured companies to reevaluate their logistics. But speeding up delivery times means increased logistics costs, which could possibly decrease profit margins. 

However, logistics markets that are able to adapt with the changing environment can expect a CAGR of 6 percent by 2027. The challenge is figuring out how to evolve with the ever-changing consumer demands.

Ethical Risk Management

One of the ongoing issues in the fashion industry is the increase in consumer demand for ethical supply chains. Recently, the boycott of cotton produced in China’s Xinjiang region because of human rights violations shows that people care about where and who their products are coming from. 

At the Fashion Forward virtual seminar on February 3, 2022, the US Fashion Industry Association (USFIA) revealed that 100 percent of industry professionals stated they were concerned about managing risks from forced labour in apparel supply chains. Additionally, approximately 75 percent of the respondents claimed they had shipments detained because of withheld release orders on China’s cotton. The landscape on this issue is only poised to become more tangled as the US implemented a ban on Xinjiang-sourced imports as of January 22, 2002  under the Uyghur Forced Labor Prevention Act.

The issue is prevalent in Europe as well. The German sportswear brand, Puma, is hoping for sales growth in 2022 but is worried that a boycott of Chinese cotton would limit profit growth. However, with their primary rivals, such as Nike and Adidas, gaining consumer sympathy for standing up to human rights violations through a boycott, Puma is forced to follow suit.

Finding a Solution

Mitigating logistics and supply chain challenges becomes easy with the right tools in your arsenal.   Modern problems require modern solutions. Just as consumer demands have evolved, so has our ability to meet their needs with the help of technology. 

Platforms that harness artificial intelligence (AI) enable fashion and luxury brands to increase efficiency in global logistics and resilience in supply chains. Advanced analytics give you unparalleled intelligence at your fingertips by combining shipping data and trade policy changes that affect your brand’s products and transport routes. A robust system will also automatically perform compliance checks on shipping documents to improve accuracy and keep your brand in good standing. Some platforms will even let you set your own rules and regulations. 

The best platforms can work independently or when integrated with ERP and Transport Management Systems to increase efficiency and accuracy. Once your system is set up, you should have access to precise analytics to reduce revenue leaks and plan for the future.

With the EU’s GDPR laws being the strictest data privacy regulations in the world, it’s crucial that any technology you adopt be GDPR compliant. 

Holocene is the next-gen AI application for global trade within the fashion and luxury industries. Our system offers error-free shipping across the globe, a single knowledge repository of global operations, and transparent analytics. In turn, you benefit by saving order processing time and delay costs, streamlining your operations, and mitigating risks. 

Want to see how it works? Contact us today and schedule your demo.