Though pandemic-induced factory closures and port bottlenecks might be increasingly a distant memory for most fashion companies, it doesn’t necessarily mean supply chains have become more resilient to shocks.
Last week, when Dr. Martens issued its second profit warning in two months, the British boot brand cited “people and process issues” impacting its supply chain, requiring it to lower expected full-year EBITDA to between £250 million and £260 million ($309 million and $321 million), around £16 million to £25 million less than previously stated.
The company said fixing its supply chain could cost up to £11 million while up to £25 million of wholesale revenue could be lost. Shares in the company fell nearly one-third on the day of the announcement. As one analyst told Reuters, it’s “another big migraine” for Dr. Martens, following a profit warning late last year as strikes at a UK port and labour shortages at the bootmaker’s Dutch distribution centre weighed on earnings prospects.
While perhaps an extreme case, Dr. Martens demonstrates how multiple pressures can hit a supply chain, with long-lasting and costly consequences. Though global supply chain snarls related to the Covid-19 pandemic have largely subsided, supply chain executives in the fashion industry surveyed by BoF Insights expect a range of pressures to persist into 2023 and beyond.
Upstream factors are chief among future concerns, including the rising cost and availability of raw materials. At the same time, respondents have not shaken off the impact of the previous upstream challenges related to shipping and ports.
A key for brands now will be to take a targeted approach to strengthening specific parts of their supply chains, be it around people — such as appointing a chief supply chain officer — or processes — by introducing greater digitisation to mitigate last mile delivery issues.
For more insights on supply chain strategies, see the in-depth analysis from BoF Insights: Building Resilience and Value in Fashion’s Supply Chain.
BoF Insights is The Business of Fashion’s data and analysis think tank that arms fashion and luxury executives with the business intelligence they need to make better strategic decisions. Building upon its unparalleled industry access and knowledge, BoF Insights provides companies with in-depth research and analysis, executive briefings and training, and bespoke advisory services designed to support clients in answering their most critical business questions and solve for their most pressing challenges. Interested in working with BoF Insights? Reach out to firstname.lastname@example.org.