As inflation soars and we navigate an economic downturn, there are more challenges ahead for commerce. The supply chain continues to be a sticking point: Nearly 70% of retailers in a recent National Retail Federation survey reported that they’ve built an additional two to three weeks into their supply chains — and consumers are literally paying the price.
“Inventory is by far the most important part of the business,” says James Theuerkauf, co-founder of the commerce platform Syrup Tech. “It’s the biggest source of cost. The biggest source of risk. And super costly if you get it wrong.”
What the last two years has shown us is that the commerce supply chain is not designed to keep up with the pace of today’s on-demand retail marketplace—not to mention consumer desires for both affordability and sustainability. A rapidly-growing sector of data platforms and mobile technology is poised to fix these issues. How? By allowing brands to respond in real-time to get ahead of supply shortages and eliminate ongoing logistics chaos.
Data-Driven Efficiency in the Supply Chain
The first step is having clear data that’s readily available. According to Theuerkauf, too many brands still rely on emailing spreadsheets to have any intelligence into what orders need to be fulfilled or the products they need. Startups today are trying to help by instead collecting a treasure trove of data — in apparel, for example: sizes, colors, styles, as well as the costs to ship each item — and sifting through the information using artificial intelligence. Syrup Tech collects that sort of information for retailers, along with store data on historical transactions and inventory, to produce what they call a demand forecast. Brands then use that forecast to make assessments across their storefronts and warehouses as to where there is excess inventory or a lack of supply, moving items from one location to another to meet customer demand.
“The core underlying problem is you don’t know how much you need,” Theuerkauf says. “That’s really what you have to fix.”
For retailers to know exactly when to go back to the main supply chain to place another order, they need an idea of what styles are selling more quickly. Syrup Tech helps there, too, by giving brands key metrics on their re-orders: how much it costs to ship an item, the time it takes to ship the item, and where bottlenecks in the supply chain might slow down transport.
Barely five years ago, this sort of granular visibility into underlying inventory was near impossible. These days, access to data is becoming much easier thanks to a growing class of digital tools like Syrup Tech.
Stemming Waste at the Source
But what do retailers do when those new orders are placed? Planning for backlogs in the chain of commerce is just as much about making sure items that are ordered are exactly what’s needed as it is about moving inventory around to where it’s needed. All the garments wasted every year — either because they weren’t what customers wanted or weren’t designed to a brand’s specifications — could fill the equivalent of 20,000 football stadiums.
A variety of mistakes can happen at the manufacturer long before samples are shipped across oceans or driven many miles to their destination. Dresses that are supposed to be red might be more orange or pink. Shirts that are supposed to hit right at the waist might be too short or too long.
“These large apparel brands that do well for themselves, they’ll receive a round of sampling that’s off by two or three inches,” says Nicole Stratton, manager of partnerships at the commerce-logistics platform Silq. “There could be 30 to 80 different tasks that go into manufacturing a T-shirt.”
Silq tries to get brands ahead of any miscues by dispatching teams of two or three people to the manufacturers that make up the first cog in the supply machine. Samples that are off — maybe a sleeve length is too long, or the length of a shirt is too short — get rejected by Silq workers on the ground who know an apparel brand’s design specs. This ensures that garment samples don’t have to be shipped back to the manufacturer, which Stratton says is very costly. When shipments of items are finally ready, Silq provides a guaranteed landing cost. That figure lets companies in the U.S. know how much it’ll cost to get an item from the boat to the port to their storefront — and then alerts brands via mobile app when those shipments are ready to go.
In other words, the same sort of data visibility that can shorten the supply-chain on the front end of commerce can also help correct problems at the back end before a container ship leaves the port. That means items spend less time being shipped back and forth if there are any manufacturing miscues, reducing the overall cost — and ensuring the consumer at the end of the line isn’t stuck paying more.
A Long-Overdue Digital Revolution is Coming
When the pandemic hit, the global market for new tech in commerce logistics was worth $230 billion. Over the next five years, that market share is projected to exceed $850 billion. More and more companies are interested in outsmarting their supply-chain woes: A recent Gartner survey found that 52% of executives in the fashion industry list cost-cutting from the factory floor to the storefront as one of their top priorities, and they plan on using new digital tools to do it.
“The apparel supply chain is insane. It’s stuck in the Stone Ages,” says Theuerkauf. “To improve your inventory accuracy, you need the right software.”
While no clear winner is here yet to address all the current supply chain problems, we’re certainly starting to see solutions emerge, as Syrup Tech and Silq show us. Applications can help ease some of the supply crunch across multiple touchpoints. And as these tools evolve, we’ll see even more verticalized solutions: the Milk Moovement, for example, offers visibility into the dairy supply chain or Nivoda, streamlining the purchasing of diamonds for retailers and offering a zero inventory model for online diamond retailers. From tracking, ordering, and stocking inventory, there’s a huge opportunity for companies to support everything from sourcing parts for cars to food production and more. With this visibility, commerce can be streamlined to recover margin and avoid passing exorbitant costs of inefficiencies onto consumers, not to mention curb the environmental impact. With the right tools in place, we may finally see sustainable, affordable commerce logistics at scale.
If you're building anything in supply chain efficiency and visibility, I’d love to connect. Reach out to me at [email protected]