Uncovering the costs of the apparel supply chain
GS1 UK’s new cost-to-serve white paper digs deep beneath the surface of omnichannel apparel retail costs to ask if sales are up, why is margin down?
London, 2 November 2016 – GS1 UK’s latest white paper on ‘Managing the apparel cost-to-serve in the omnichannel environment’ analyses the end-to-end supply chain costs, the challenges in managing these costs and how retailers can overcome them. The paper has been published in partnership with management experts from LCP Consulting and Cranfield School of Management.
The team’s research identified the key levers which apparel retailers and brands can use to gain greater insight into their omnichannel processes – improving decision making and shining a light on hidden costs. The paper also highlights how the application of GS1 standards can result in 20-30% savings in operational costs.
Jacky Broomhead, Market Development Manager, Apparel at GS1 UK said: “Online is driving sales growth but the higher costs of processing and fulfilling omnichannel orders is eroding margins. As online becomes a higher percentage of total retail sales, and more stores close, we need to address the cost impact of cross channel selling now, before it becomes a bigger issue. Our paper highlights the importance of the supply chain in delivering this and outlines the tactics to improve costs without sacrificing staff or customer service to ensure future sustainability.”
As UK apparel retailers and brands are embracing globalisation and omnichannel retailing, there is an increased uptake of GS1 standards to help them identify, understand and effectively manage the apparel cost-to-serve in order to boost profitability. GS1 standards make for fewer errors, more accurate planning – and can help retailers understand just how much they can afford to invest in the superlative service the online apparel market now demands. And they enable retailers address the paradox of higher sales but reduced margins caused by the meteoric rise of “anytime, anywhere” shopping.
Stuart Higgins, Retail Partner at LCP Consulting said: “For apparel retailers and brands to manage and reduce the total cost-to-serve in their omnichannel supply chains, they need to identify the key cost areas and levers at each stage of the value chain. They should factor in considerations such as risk, inventory, margin, profitability, product characteristics, sales and distribution channels, and product life cycle, which are then allocated at product level to provide an end-to-end view of revenue, cost and profit generation. Our experience is that, by deploying cost-to-serve effectively, retailers can understand cost build-up and manage net margin erosion through the value chain more effectively in order to drive increased profitability.”
Richard Wilding OBE, Full Professor & Chair of Supply Chain Strategy at Cranfield School of Management said: “Understanding the cost-to-serve customers is increasingly important for apparel retailers, because without good cost transparency, organisations can rapidly lose money and destroy their profit. The apparel retailers we interviewed found it challenging to provide a complete view of their omnichannel supply chain costs due to increased complexity, lack of transparency and the high levels of volatility being experienced in the market. Many are now reviewing their systems, performance indicators and drivers of cost-to-serve.”
GS1 UK’s white paper on ‘Managing the apparel cost-to-serve in the omnichannel environment’, which involved research conducted with leading online retailers and other organisations was launched at a briefing yesterday, attended by 30 leading retail professionals. The paper is available as a PDF download from www.gs1uk.org/costtoserve.
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About GS1 UK
GS1 UK is a community of over 30,000 members working in retail, foodservice, healthcare and more. GS1 UK is one of 112 independent, not-for-profit GS1 organisations operating across 150 countries worldwide. GS1 UK helps everyone involved in making, moving and trading goods, automate and standardise their supply chain processes using the common language of GS1 global standards.
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