Supply chain segmentation in the apparel industry

The nature of the apparel industry is enigmatic. Customers want differentiated products and agility, yet apparel is mainly produced in low-income countries with long lead times to compete on cost. This mismatch leads to poor planning, simultaneous over- and understocking, resulting in markdowns and lost sales. Supply chain segmentation has been widely used to combat this problem. Companies differentiate based on fashion and basic items and use agile and efficient supply chains, respectively. In this capstone project, we used segmentation to redefine the supply chain strategy for the company BAGSZCORP, a leading backpack manufacturer in Europe. In 10 years, BAGSZCORP has grown from a startup producing backpacks for school children to a portfolio of multiple brands, with numerous additional categories such as footwear, and an omnichannel retail strategy. This growth, however, has been fueled by a one-size-fits-all supply chain strategy. As a result, the company has seen operational inefficiencies and low inventory turnover despite their enormous revenue growth. By segmenting products and customers based on demand and variability, we discovered an inventory reduction potential of 6,2 million Euro for BAGSZCORP. Various strategies including production in Europe and increased safety stock of raw materials, are discussed in context of the apparel industry in general