Sustainable Retail Begins with Effective Inventory Management
Upwards of 150 billion garments are produced annually, 92 million tonnes of which end up in landfills. From the retailer’s perspective, roughly 30% of clothing is expected from the start to need marking down to make way for new designs. We should be asking ourselves why.
The answer, simply put, is due to an imperfect system for getting inventory where it is needed to sell. We can’t achieve perfection, but we can significantly reduce the numbers with the next level of machine-learning-driven inventory management. There are major improvement opportunities within the scope of sustainable retail, and the industry now has the technology on our side to effect change.
Sustainable Retail: An Industry Imperative for Apparel & Beyond
Sustainability in retail is a matter of doing the most we can with the resources we use and ensuring that no one is forced to foot the bill economically, socially, or environmentally. Sustainable retail must reduce waste, optimize resources, and support ethical sourcing.
Unfortunately, sustainability in the retail industry is far from the standard today. Certainly, not all factory workers are paid fair wages. If not handled responsibly, dyeing fabric processes lead to water pollution. Places in Chile and Ghana have become dumping grounds for unwanted textiles, including unworn fast fashion leftovers. These are not unrelated aspects of sustainability that need to be addressed; they’re interconnected. Unethical labor practices often accompany wasteful production processes, and the environmental harm caused by toxic dyes and excess waste contributes to global pollution, particularly in vulnerable communities. When unsold clothing piles up in landfills overseas, it reflects a system that prioritizes quantity over quality, speed over sustainability, and profit over people.
For many retail brands, the issue has been a lack of transparency. They are not directly involved in many of the upstream and downstream supply chain activities. They pay vendors and suppliers but don’t control their operations. When they let go of unsold inventory, it is hard to know where it ends up.
Ultimately, consumers and retail brands each have key roles in the sustainability movement. Consumers increasingly demand accountability in all aspects of the supply chain, and brands must respond, making it their concern to know their complete scope of sustainability and make responsible decisions.
Retail at a Crossroads: The Challenges of Sustainable Retail
While consumers may be the ones driving demand for sustainable retail, they aren’t the experts diagnosing the problem. To improve sustainability in retail most effectively, it’s important to recognize that it is a multifaceted challenge. Overproduction and waste are very visible issues — just think of the sobering images of heaps of discarded clothing in the Atacama Desert in Chile — but there are also supply chain inefficiencies and inventory visibility issues that contribute to unsustainable practices and offer the opportunity for sustainability improvements.
Overproduction & Waste
Not only does overproduction lead to waste when items are discarded, but every article of clothing produced has a greater environmental cost in terms of materials and resources like energy and water. Clothing manufacturing releases carbon emissions into the atmosphere, so simply cutting down on overproduction benefits the environment on multiple fronts.
However, retailers don’t think twice about buying more inventory than they can sell. Driven by the need to avoid stockouts and achieve fast inventory turnover, they accept that a significant percentage is destined for landfills from the outset. The fast-paced nature of fashion cycles pressures retailers to refresh their offerings to keep up with trends. In addition, the economics of bulk production also reinforce overproduction, where it is more cost-effective to produce at high volumes.
Inefficient Supply Chain Management
Inefficiencies within the supply chain carry a significant environmental toll. Inefficient logistics come at a cost of resources and energy. Items may be transported multiple times between warehouses or held in transit longer than necessary, increasing the carbon footprint of each article of clothing. Unoptimized supply chain management can also mean that inventory arrives too late to be sold in-season, contributing to the excess waste problem above.
As retailers often rely on multiple vendors, each operates under different systems and timelines, adding complexity to managing the entire global network. Varying levels of technology integration make it difficult to track products accurately and streamline logistics. Without complete integration, retailers find it difficult to make informed decisions with agility, and the lack of flexibility limits their ability to respond effectively to changes in demand. This leads to the third issue.
Inventory Visibility Issues
A lack of inventory visibility makes it harder for retailers to manage stock levels efficiently. Without dynamic insights into where inventory is and how it is moving across channels, retailers are more likely to overproduce or hold excessive stock to safeguard against demand fluctuations. This results in more clothing becoming unsellable due to seasonality or trends. Limited visibility also means items are sometimes kept in storage too long, increasing energy consumption and waste as they are transported unnecessarily between locations.
Data silos and limited visibility force retailers to make decisions with incomplete information, as it creates obstacles to accurate demand forecasting. Without improved visibility, retailers struggle to achieve the operational efficiency needed to support sustainability.
Sustainability & Profitability
These retailer challenges — limited visibility, inefficient supply chains, and expectations to avoid stockouts and keep up with fast fashion cycles — contribute waste to the environment in the form of carbon emissions and discarded textiles. But they also cut into retailers’ profit margins and by addressing them, retailers can become more competitive. They can reduce costs by minimizing unnecessary transport and ensuring that stock is allocated to the right locations at the right time. Even overproduction for the sake of avoiding stockouts can take an unnecessary cut into profit margins. While this is common practice to maximize sales, if retailers can find how to improve their inventory decision-making, they can reduce their reliance on the practice and improve their profitability.
