Thursday, 24 November 2022

The Waste Of Overproduction

Written by
Rate this item
(1 Vote)
Anne Nygård

The public lens is on the costs and waste occurring in different industries, including fashion, and raising awareness of the production chain issue or many issues within it.

Producing more apparel is not smart or positive for the environment as new data show consumers' misconceptions, causes and risks of overproduction.

Overproduction and Waste: The Current State

Stock inefficiencies and inventory ‘black holes’ are exacerbating the supply chain crisis for apparel firms according to new research. Although the figure might look some, 6% of the stock is lost, of which 2% is damaged or perished and the additional 4% is simply overproduced. This loss is the equivalent of 3% of annual profits and is estimated at $15.3 billion in terms of the sale value of the lost stock. (1)

The Report: "The Missing Billions: The Real Cost Of Supply Chain Waste"

This data has been published in a new global report released on November the 10th, 2022 by Avery Dennison (link to), a leader in materials science and digital identifications solutions. "The Missing Billions: The Real Cost of Supply Chain Waste" is an in-depth report assessing the state of global supply chains and the issue of waste across the US, UK, France, China and Japan. The data analysed 65 global apparel companies including manufacturers, wholesale and distribution firms, and retailers. (2) It found that the biggest contributor to supply chain waste is faults with packaging with respondents rating this as 5.3 out of 7 in terms of severity of concerns. This was closely followed by inefficient transport and delivery and damage to products when handled (both concerns rated 4.9 out of 7). Respondents are in a good position to judge this, since three quarters (74%) track supply chain waste.

Demand volatility is listed as the biggest disruption to supply chain operations by nearly a third (29%) of respondents. Transport issues also feature highly with the ‘increased cost of transportation' stated by 15% and an equal number citing ‘availability of transportation and logistics capacity’. A massive 89% of respondents said they are coming under pressure to become sustainable and estimate that 27% on average of their total company sustainability impact comes from their supply chain activities. But despite this awareness of the problem, they are not investing the budget required to fix it. Just 4% of technology budgets are specifically dedicated to supply chain sustainability improvement. When asked about the greatest challenges to achieving supply chain resilience, the largest barrier is integrating disparate systems (stated by 19%) ahead of ‘legacy equipment too costly or difficult to upgrade’ (17%) and budgetary limitations (16%). The report highlights an intention to address these issues with a step change in the breadth of technologies used over the next three years to boost efficiency. For instance, while 54% currently track unique items in their supply chain, a further 46% plan to in the future. The use of RFID technology to help with supply chain tracking is used by 44% of apparel companies surveyed in the report today but all (100%) of those stated they will use the technology within the next five years. Other technologies that can help with broader efficiency are also major investment targets. The use of robots or cobots will see a 12x rise in the next three years from 6% today to 75% by 2025. Autonomous delivery vehicles will see a 6x increase from 12% today to 74% in three years. The use of predictive analytics and machine learning will be used by all companies surveyed by 2025, rising from 32% today, a 3.1x increase.

Jérôme Lemay, industrial director for RFID at Decathlon, who was interviewed as part of the report comments: “Decathlon has experienced material improvements in our operations from our investments in Digital ID solutions. We have decreased mark-downs, increased turnover and item level profitability and improved efficiencies at the point of sale. Running real-time inventory also allows Decathlon to replenish inventory automatically and improve efficiencies.” Lemay continues: “Areas of opportunity for digital ID solutions within Decathlon include improving upstream visibility among raw materials suppliers to better map availability with demand. We are also currently piloting solutions for consumer engagement which will help us engage with customers around topics such as sports coaching and sustainable practices.”

Shoppers Driven By Better Choices For Longer-lasting Products

"The Missing Billions: The Real Cost of Supply Chain Waste" also surveyed 7,500 shoppers globally to understand shifts in consumers’ spending. (3) Unsurprisingly, the cost is a high priority for consumers globally when it comes to buying products. However, quality is ranked equally alongside cost as the number one concern at 22%. UK consumers are the most cost-conscious with 28% listing it as the top priority followed closely by France and Japan, both at 25%. China is a significant outlier with just 6% of shoppers surveyed stating cost as their number one concern. The data also reveals some concerning trends around sustainability with just 16% of shoppers putting sustainability in their top three deciding factors and only 12% prioritising the ethical sourcing of their products. However, the research also points to a shift in the desire for durable products with ‘durability’ ranked by 1 in 2 global consumers (48%) as a top five concern, suggesting there is an opportunity for businesses to shape the future of sustainability by putting a greater focus on product durability and in enabling the circular economy. Shoppers also signalled the importance of transparency with 43% agreeing that when buying clothing, “transparency about a product’s journey to the consumer is important to me”. However, despite good intentions, most consumers know very little about what it takes for a product to end up in their hands.

The research found that over half of global consumers (54%) mistakenly believe fast fashion is made entirely by machines.

Francisco Melo, senior vice president and general manager at Avery Dennison Smartrac comments: “The current supply chain disruption is leading to a waste crisis in the apparel industry and elsewhere. Having visibility is key to optimising supply chains for efficiency and sustainability, as well as helping to build trust and transparency with consumers. Digital identification solutions play a vital role in supply chain planning strategy and it is encouraging to see that companies are committed to further drive this change through the increased use of RFID technology in the coming years.”

To keep an eye open on the industry stay on Fashions Finest. Find everything in your inbox when you sign up for our Friday newsletter and more content on our Instagram page.

(1) Based on ‘inventory lost or wasted’ feedback from research respondents calculated against inventory carrying costs gleaned from balance sheets of Fortune 500 companies. This has then been extrapolated to the global market size for the apparel sector estimated by Statista.

(2) Business-to-business research took place via 18 qualitative interviews and surveys among 250 global supply chain technology executives across five industry sectors. The research took place between May and August 2022 across China, France, Japan, UK and USA.

(3) The consumer research was powered by Canvas8 and was conducted as an online survey between June 3 and June 28, 2022. The survey sampled 7,500 consumers across China, France, Japan, UK and USA who had household responsibility for the purchasing of apparel, food and/or beauty products.