As we approach the final quarter of 2023, fashion companies are grappling with significant challenges. Prominent industry players are witnessing a surge in operational costs, which is eroding their profit margins in the face of inflationary trends.
In this demanding environment, apparel retailers and brands are feeling immense pressure. In addition to rising costs related to manufacturing, shipping, fuel, and labour, they also face challenges stemming from sluggish growth, declining consumer confidence, and a shift toward more budget-conscious shopping habits.
To navigate these inflationary pressures and changing consumer buying patterns, apparel brands and retailers must adopt a comprehensive strategy that addresses pricing, merchandising, and supply chain dynamics. Precise adjustments may be necessary to protect profit margins without alienating customers already grappling with recent price increases.
Given the ongoing impact of global inflation on the economy, a digital ERP core can play a pivotal role in helping companies maintain their competitiveness and profitability by addressing any supply chain obstacles that may arise.
Here is an example of how one of our customers has effectively addressed these challenges using a Digital ERP system like SAP S/4HANA Fashion to streamline operations, elevate customer experiences, and sustain business growth.
Streamlined operations by eliminating legacy systems
This global fashion brand faced a critical challenge with its legacy ERP system, which had undergone extensive customisation and lacked the scalability required for its growth plans. As this ageing system approached the end of its maintenance and support lifecycle, it posed a significant threat to the brand’s operations, especially in the face of market challenges that could impact costs and supply chain efficiency.
In response to this pressing challenge, the brand embarked on a transformative ERP journey in collaboration with Rizing and SAP:
- This transformation involved a meticulous, phased migration of business-critical functions from the legacy ERP to the modern digital ERP, SAP S/4HANA Fashion.
- The approach was carefully managed to minimise technical debt and prioritise the enhancement of direct-to-consumer and finance operations.
This strategic move not only streamlined operations but also delivered additional benefits, including accelerated franchise adoption, smoother personnel onboarding, efficient support systems, and compliant tax and legal structures spanning 29 countries. Ultimately, these improvements paved the way for cost-reduction opportunities through more informed and efficient decision-making.
Accelerated omnichannel capabilities to meet customer demand
Our customer faced significant deficiencies in their omnichannel capabilities. Their objective was to gain a deeper understanding of consumer purchasing behaviours across different channels and enhance the overall shopping experience. This ambitious initiative involved programs such as creating an endless aisle experience in physical stores and streamlining the returns process.
The digital ERP played a pivotal role in achieving this goal by providing our customers with a comprehensive 360-degree view of consumer behaviours. Every order, regardless of the channel, was meticulously consolidated, revealing invaluable shopping patterns across diverse markets. This insight helped personalize promotions and allocate the in-store workforce more effectively toward pricing activities that yield the highest ROI.
In addition, the implementation explored loyalty programs and in-store activities with omnichannel pricing strategies. This accelerated decision-making processes to respond swiftly to competitive price changes.
Optimising inventory costs through data-driven insights
Expediting decision-making when it comes to inventory management is crucial for apparel retailers in the current inflationary landscape. It’s an opportune moment to eliminate bottlenecks and streamline operations by establishing KPIs to track shifting consumer behaviours and measure the effectiveness of their market actions.
Access to these reports can help establish guardrails around key share-of-wallet KPIs, including consumer basket size, and units per transaction. If these guardrails are breached, apparel retailers can adjust their pricing and purchasing strategies accordingly.
For our customers, this meant replacing the decentralized ERP with a digital ERP core, which provided a centralized, aggregated view of inventory. This played a pivotal role in keeping inventory costs low and optimizing supply chain management.
- Single view of inventory: Provided more accurate inventory planning and reduces the risk of overstocking or understocking, thereby minimising carrying costs.
- Cost-Effective order fulfillment: Integration with the customer’s OMS engine enabled efficient management of consumer orders; selecting the most suitable and cost-effective location within the customer’s network to fulfil customer orders.
- RFID technology in stores: Enhanced operational processes and enabled precise inventory tracking. This reduces the need for costly expedited shipping or last-minute replenishments, which can significantly increase transportation expenses.
- Dynamic demand response: Ability to make dynamic pricing adjustments and align production and inventory strategies accordingly. This agility helps minimize markdowns and clearance sales, preserving profit margins.
- Seasonal adjustments: Ability to accurately forecast seasonal demand fluctuations and adjust inventory levels accordingly. This prevents excess inventory at the end of a season, reducing the need for clearance sales and associated cost reductions.
- Allocation management: Ability to make informed allocation strategies by identifying which products are in high demand in specific regions or store locations. This helps allocate inventory more efficiently to meet local demand, reducing the need for costly inter-store transfers or additional production runs.
Revamping ticketing procedures
For fashion businesses, revising ticketing procedures can become a labour-intensive task, especially in a tight job market. This fashion brand faced delays and inefficiencies by relying on manual data extraction from the legacy ERP system. This slowed down the availability of timely ticketing information, particularly for price updates or label replacements.
By leveraging a digital ERP core, this centralisation of critical data eliminated the need for manual extraction and uploading into ticketing handheld devices. Products designated for outlets can now skip local or central distribution centres for repacking or relabeling when necessary.
The challenges are significant, but so are the opportunities for innovation and growth. Digital ERP systems, like SAP S/4HANA Fashion, emerge as pivotal tools. This and more customer stories of fashion companies using SAP S/4HANA Fashion illustrate the power of technology in helping fashion brands thrive in the face of adversity, ensuring they remain agile, competitive, and customer-centric.
For more on how a digital ERP solution like SAP S/4HANA can help you, set up a learning session with our solution experts.