2023 for Indian Fashion Supply Chains


The size of #GlobalFashionIndustry is almost the size of 6th or 7th largest economy of the world. China being the largest exporter while #europeanunion & #USA being the largest importers. 

#IndianFashionSupplyChains with the levers available are shaping up for the #realignedglobalsupplychains in the #fashionretailindustry be it #apparels or #footwear.

My understanding of the key Supply Chain issues for Indian Fashion Retail for 2023 look like,

a. International customer demand - Inherent characteristic of the #FashionRetail #supplychain is long ordering cycles. While we are in August 2022, order books for global customers for Christmas and New Year shall be booked. A slowdown in developed economies (due to #higherinflation which may have resulted lowering demand) may have left excess #inventory at the retailers. These customers of Indian Retail industry Supply Chain will slow down their demand in the coming months & quarters. Due to the long lead times, Indian Supply Chains may have built up inventory as an extension of the demand enthusiasm seen in the previous immediate quarters when international customer were even eager to advance the deliveries!

b. Impact of softening commodity prices - Peak commodity prices have softened. e.g. #Cottonprices are down almost 35% from the peak. It sounds good but from an Indian Supply Chain point of view, what looks to me is that if their #commoditystrategy was not one of the best then the Supply Chain is stuck with high input cost inventory which will not get translated into immediate high price sales. On top, if there is a demand contraction then the finished product demand may slow down. This may add a layer of complexity of a negative financial impact. A blow of that nature just after the recovery from #Covid19 is a double whammy.

c. Indian demand for fashion products - The estimates indicate that India shall be the fastest growing economy. This should ring bells as consumers shall spend more, buy more of retail products. From a Supply Chain perspective though, capacity management will be a difficult decision. Reason for that it be footwear, clothing or textile, majority of the capacity utilization is for export demand. e.g. For one of India's leading garments company, 65% of its demand comes from international markets & rest 35% from Indian market. How much demand increase will Indian market offer to compensate for a slowdown in international demand? Also Indian demand comes at a price point which may be much lower than the International prices which puts pressure on Supply Chain profitability.

d. Asset utilization & Working Capital Management - #Textile #Footwear or any other fashion industry is relatively higher capital investment industry. Indian Supply Chains have started investing freshly to built the Supply Chain in response to #PLI scheme. If the world economies slowdown, then it will stretch already high debt enterprises finances which in turn will impact the Indian Fashion Retail Supply Chain design. Many companies have taken initiatives to reduce the Working capital needs and have been successful with that in the past few quarters. With the new challenges 2023 may again result in increased working capital needs.

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