Optimising Logistics Costs for Brands
In addition to leveraging technology, clothing brands are increasingly focusing on sustainability as a cost optimisation strategy, says Alina Kisina.
In the highly competitive fashion industry, efficient logistics management is paramount for maintaining profitability and customer satisfaction. As e-commerce continues to reshape retail, clothing brands are increasingly focusing on cost optimisation strategies in their logistics operations. This effort enhances their bottom line and overall operational efficiency. However, rising costs, supply chain complexities, and reverse logistics present significant challenges that require strategic solutions.
Rising costs and supply chain challenges
The fashion industry is currently grappling with escalating costs and intricate supply chain issues. Global factors such as political tensions, economic instability, and rising commodity prices are impacting the market, leading to concerns about sustainability and budget constraints. Managing the transportation of goods from suppliers to warehouses and then to customers is crucial in shaping overall logistics costs. Implementing a Just-In-Time (JIT) inventory management strategy decreases storage requirements and expenditures. However, thorough interaction with suppliers is required to ensure timely delivery.
Additionally, geopolitical tensions and trade policies have led to increased tariffs and regulatory hurdles. For instance, the US-China trade war and Brexit have disrupted traditional supply chains, forcing clothing brands to seek alternative sourcing and manufacturing locations. This not only affects production costs but also complicates logistics planning and execution.
Managing omnichannel complexity
Clothing brands are also facing the challenge of managing omnichannel complexity. Customers frequently visit physical stores before making purchases online, therefore the logistics operation must enable a seamless customer journey. This includes ensuring product availability in-store, on the website, and at third-party retailers, facilitating easy returns, and optimising storage for varied product types. Effective storage methods, such as hanging racks and shelves, are crucial for efficiently handling numerous orders.
The rise of omnichannel retailing requires robust inventory management systems that can synchronise stock levels across multiple platforms in real-time. Investing in logistics management software offers real-time visibility into inventory levels, shipment tracking, and delivery route optimisation. Using data-driven demand forecasts to avoid overstocking and stockouts. Techniques such as just-in-case (JIC) inventory management, which keeps a safety stock on standby to safeguard against disruptions, can be considered with JIT for a more balanced approach. This synchronisation helps prevent stockouts and overstocking, reducing associated costs and improving customer satisfaction. Furthermore, efficient warehouse management systems (WMS) and automated storage and retrieval systems (AS/RS) enhance storage efficiency and order fulfilment speed.
The reverse logistics conundrum
One of the most significant challenges in logistics for clothing brands is reverse logistics, which refers to the process of managing returns, exchanges, and repairs. The fashion industry is particularly vulnerable to high return rates due to the fast-paced nature of trends and the need for customers to stay up-to-date with the latest styles. According to a recent report, nearly 60% of fashion purchases will be made online by 2024, further exacerbating the issue of reverse logistics. Apparel brands highlighted the issue of reverse logistics’ impact on the margins leading to additional shipping cost and taxes to the brand at the Borzo Connect conference. In fact, they even highlighted that these costs are lower if the purchase takes place through the brand’s website compared to large ecommerce websites.
Returns can be complex and costly due to several factors. First, the variability in return reasons—ranging from size issues to quality concerns—requires a flexible and responsive returns management system. Second, the condition of returned items can vary widely, necessitating careful inspection, processing, and potential refurbishment before they can be resold. This process requires additional labour, time, and resources, adding to the overall logistics costs.
Strategies for optimising reverse logistics
To tackle the challenges of reverse logistics, clothing brands are implementing various strategies. One approach is improving the returns process itself. By providing clear and easy-to-follow return policies, brands can reduce the incidence of returns and streamline the process when returns do occur. Return data should be analysed to discover trends and product faults. This can help design and manufacturing processes reduce returns due to poor fit or quality issues or brands may offer virtual fitting tools to help customers make better purchasing decisions. Additionally, investing in automated return management systems can help in quickly processing returns, reducing the manual effort required, and speeding up the time it takes to get returned products back into inventory.
Moreover, some clothing brands are adopting sustainable practices in their reverse logistics operations. This includes refurbishing and reselling returned items, recycling materials, and reducing waste. Not only does this approach minimise the environmental impact, but it also creates a positive brand image focused on sustainability and generating additional revenue stream for brands.
Strategies for cost optimisation
To navigate these challenges, clothing brands are adopting various strategies for cost optimisation. One key approach is to outsource logistics operations to third-party logistics providers (3PLs). These companies offer specialised expertise in managing inventory, shipping, and returns, allowing brands to focus on sales and marketing. By leveraging advanced inventory management solutions and dynamic demand forecasting, brands can mitigate the risks associated with overstocking and stockouts, improve operational efficiency, and enhance their responsiveness to market changes.
3PLs can also provide scalable solutions that adapt to seasonal fluctuations and market demand shifts, helping brands manage peak periods without incurring unnecessary fixed costs. Additionally, these providers often have established networks and relationships with carriers, which can lead to better shipping rates and service levels.
Moving away from relying solely on overseas production and regarding closer sourcing possibilities will help to reduce the effects of rising fuel prices and trade delays. This improves supply chain resiliency and may minimise lead times.
Technology integration and collaboration
Another critical aspect of cost optimisation is technology integration and collaboration. Advanced ERP systems, AI for forecasting, and blockchain for transparency are examples of how technology can provide the tools needed for real-time decision-making and seamless adaptation to changes. Effective communication and collaboration among all stakeholders, from suppliers to retailers, are essential for ensuring a seamless flow from production to customer delivery.
For instance, AI-powered demand forecasting tools can predict sales trends and inventory needs with high accuracy, reducing the chances of overstocking or stockouts. Blockchain technology can enhance transparency and traceability across the supply chain, ensuring that all parties have access to the same information and reducing the risk of fraud and errors.
Collaboration platforms that integrate with supply chain management systems can facilitate better communication between manufacturers, suppliers, and retailers, ensuring timely updates and coordinated responses to disruptions. This integrated approach helps in aligning all stakeholders towards common goals, reducing inefficiencies, and improving overall supply chain performance.
Sustainability and cost efficiency
In addition to leveraging technology, clothing brands are increasingly focusing on sustainability as a cost optimisation strategy. Sustainable practices, such as using eco-friendly materials, optimising production processes to reduce waste, and implementing energy-efficient technologies in warehouses, not only benefit the environment but also lead to cost savings in the long run. Minimising vacant space in shipments and optimising packaging sizes can also help to reduce carbon impact.
Brands are also exploring circular economy models, where products are designed for reuse, recycling, or upcycling. This approach reduces the need for raw materials, decreases waste, and creates new revenue streams from recycled products. Moreover, sustainability initiatives often resonate well with consumers, enhancing brand reputation and customer loyalty.
Conclusion
Cost optimisation in logistics is crucial for clothing brands to stay competitive and meet customer expectations. While forward logistics has advanced through technology and partnerships, reverse logistics remains a significant challenge. By improving returns processes, leveraging data analytics, outsourcing to 3PLs, integrating advanced technologies, and focusing on sustainability, brands can manage reverse logistics more effectively, reduce costs, and enhance overall efficiency. Embracing these strategies will position clothing brands to thrive in the dynamic retail environment.
About the author:
Alina Kisina, in her present role with Borzo, is leading Global Business and operations for the company. Prior to being elevated as CEO, she was building last-mile delivery for enterprise customers globally as VP Sales. With her nearly two decades of experience, Alina has been responsible for revenue growth and made Borzo pivot and transform into the enterprise delivery segment. She is an expert in building strong, efficient sales teams for achieving revenue targets.
