TOPSECTOR Fashion
Where in the supply chain of the fashion industry can we gain the most in terms of carbon emission reduction?
Assignment
Besides rapidly changing trends and shifting consumer demand, the fashion and apparel industry is involved with ethical and environmental concerns. Fashion supply chains have been balancing between affordable and ‘fair’ for quite some time. Now that supply chains have become more transparent than ever, companies can utilize this information for the better. The main question of this project: “Where in the supply chain of the fashion industry can we gain the most in terms of carbon emission reduction?” as environmental part of the sustainability trifecta: Environment, Social, Governance (ESG).
Project summary
The client is a publicly funded network of businesses, research institutes and (local) government. Greening supply chains is one of the major topics for the coming years. As a result, industry characteristics are identified and compared. Not only to find the right impact within the supply chains, but to learn from other industry verticals. After all, medical technology and fashion have very little similarities but can learn a lot from another in terms of supply chain sustainability.
Our approach
This project started with a generalized supply chain setup of an industry vertical (fashion and apparel in this case). The fashion supply chain archetypes are based on manufacturing locations, warehouse locations, customer locations and transportation in between. Based on BCI costing, carbon and lead-time databases, the product flows are modelled and impacts are reflected.
Product flows are split in high and low value flows, warehouses are sized to the required capacity and the modalities are picked based on existing trade-lanes. Unlike the medical device industry for example, the fashion industry utilizes much less air freight. As a result, the application and impact of reduction measures was different. Final mile transportation and warehousing are more dominant as the emissions related to these elements are different in comparison to other sectors such as medical devices.
We modelled the supply chain for the fashion industry based upon various supply chain configurations (centralized supply chain, decentralized supply chain, regional setup). The traditional approach of cost reductions is not always the best solution. The only way to figure out what’s best for you is to start modelling your supply chain and pointing out the aspects which impact your business on a cost, customer satisfaction, as well as carbon emission point of view.
At BCI, we created a carbon emissions database tailored to the different modalities and are aware of the risk associated with using averages. To increase the reliability of your supply chain model, a next step after modelling, is the accounting approach to carbon footprint. That’s where we assign the actual emissions to your products, customers, suppliers, and operations.
Result
The result of the project was a scenario overview with different supply chain designs (central versus decentral versus regional supply chain networks). As a result of the designs, product flows change and the associated costs, customer service levels and carbon emissions changes with them. The scenario’s identified origin of carbon impact and enable the customer to ‘play around’ with different strategic scenario’s. In the end, the balance between costs, customer satisfaction, and lowering carbon footprint result in a better supply chain and will become part of your future license to operate.
The results of the project were compared to the outcomes of other industry sectors such as medical devices. Differences occurred with, for example, different types of real estate between the sectors, different service level requirements, different modalities and to some extent, the value of the products in the supply chain. As you can imagine, a scattered supply chain with a relatively low value-dense product cannot be profitable. The balance between costs, customer satisfaction and carbon emissions are to be found to make the right decisions.
“It’s surprising to see that transportation downstream has such a major impact on total carbon emissions. We expected and somewhat knew costs were up in that part of the chain, but it doesn’t seem to make sense to keep promising short lead-times while keeping this emission ratio.”