IG&H has entered a strategic partnership with o9 Solutions, a software development company that focuses on planning and decision-making processes. We spoke to Santiago Garcia-Poveda Maria, Global Vice President of Retail and Apparel & Footwear at o9, to get his thoughts on sustainability in the industry.
With pressure to reduce CO2 emissions and initiatives like the Digital Product Passport, brands must change at some point. Is there a sense of urgency?
There is certainly a lot of interest in the topic, all the way up to the boardroom. But I don’t think it is urgent; many brands are actually waiting to confirm the regulatory evolution. Then, once regulations come into effect, I believe they will create a sense of urgency and justify a lot more investments. Meanwhile, the sustainability discussion is too often separated from the impact on business performance. This makes it easy to deprioritize when times are difficult. I believe that many steps in the sustainability transformation are net positive for the environment and the business, like reducing overproduction or optimizing capacity utilization. However, these are rarely presented in such a way to strengthen the business case.
What is the fashion digitalization journey like?
Brands have started to digitalize the ‘sexier side’ of the business first. They began with the frontend (think e-commerce, CRM, loyalty programs). On the backend, the digitalization efforts were very isolated and not connected to the bigger picture.
The last couple of years have been very volatile, confronting the industry with the limitations of its technology stack. Overall, the trend we see now is companies going more from Point to Point Solutions in the backend to an integrated platform approach. This allows you to connect the different steps of the process both vertically and horizontally.
How can brands connect sustainability to business initiatives?
The key challenge now is getting reliable data, especially as you go up the chain and outside your own scope of work. Technology can help bridge that gap by connecting sustainability metrics in all business initiatives; measuring is the first step to improving. For example, with a digital twin of your organization, you can get a total company footprint or a product footprint, and you can model scenarios with the CO2 and business impact of different actions, like shipping by air vs. by sea. When merchandising, demand and supply come together in one single planning tool, you can unlock a lot of value. But when you add sustainability on the same platform, you can immediately embed sustainability in all business planning processes to make better decisions for the business and the planet.
We make fashion's operating model spin faster than it should; it is bound to slip up.
Tech aside, what about things like creativity, designs and inspiration?
Creativity will certainly remain! There is a fine balance between arts and science. I think that technology will be able to provide progressively more guidance and directions to those arts.
How do you view the topic of sustainability in the fashion industry?
I’d say it’s the industry’s most fundamental issue given how much change it requires. The complex and polluting manufacturing process, the limited share of recycling, and the fact that both the operating model of the industry as well as its economics lend themselves to a + 30% overproduction. Together with our increasing requirements as consumers (full flexibility, perfect availability and service within hours), we make the model spin faster than it should. For example, roughly a third of deliveries are returns. We have products going in circles.
That doesn’t exactly sound like an easy fix… do you have any pointers?
There is no simple silver bullet to solve these issues, but there are some initiatives that can help move us in the right direction, like more fine-grained demand planning to help make better decisions and buy fewer buffers (overbuying), as well as adding agility by collaborating with suppliers to reduce lead times and allow in-season reorders.
Can you elaborate on that?
It is integrated business planning: connecting demand to supply and enhancing reaction. We have seen new business models like Quick Response and Read & React launching capsule collections to gauge demand and respond very quickly. Production might be a bit more expensive because you produce onshore or nearshore and in small batches to have short production lead times. But, ultimately, high sell-through would compensate from a margin perspective.
You mention nearshoring but the volumes you achieve in Asia are not possible in the EU. How do you view that dilemma?
Nearshoring places production or supply in locations close to the markets of consumption. Two things to address the production volume dilemma. First, better collaboration across the end-to-end (E2E) supply chain is necessary. At o9 we have the supply chain collaboration platform to allow for the integration between brands and suppliers to share forecasts, capacity, inventory and orders. This can significantly reduce lead times.
Second, you must balance the onshore and offshore capacities. The idea is to leverage nearshoring for short lead time and smaller volume needs (think of trendy products you can produce in smaller runs). Offshore remains a solid choice for continuity of predictable items. For instance, these two elements are key levers to Spanish clothing company Inditex’s ability to put a shirt on the shelf in just a couple of weeks.
Any advice you’d like to share with fashion leaders?
Now is the best time to act! We have a unique opportunity to shape the industry’s journey early on, so let’s start developing that vision and then ‘walk the walk’.
In that process, it is important to make sure you have a long-term perspective and an incremental approach: What changes will take you in the right direction and generate value in the short term?
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Santiago Garcia-Poveda Maria is the Global VP of Retail and Apparel & Footwear at o9 Solutions. He joined o9 in 2021 after holding several positions at McKinsey, where he worked for Adidas and Esprit, among others. Santiago studied at Universidad Politécnica de Madrid and the University of California (MBA). He is married to Ines and has a baby boy. Santiago loves golfing and the outdoors.
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