Fashion has a waste problem. Three-quarters of our clothing will end up incinerated or landfilled. Plastics – still heavily relied on for fashion packaging –  are thrown away 72% of the time, never to be recycled.

The industry must change, and rapidly. I believe that the fashion industry must adopt demand forecasting in order to reduce its enormous quantities of waste.

The statistics around the fashion industry’s levels of waste are alarming from every angle: environmentally, economically, and ethically.

What Is Demand Forecasting?

The UN says that by 2050, the equivalent of three planets may be required to provide the natural resources required to maintain current levels of consumption, of which fashion is a major contributor. More than $500 billion of value is lost every year due to the lack of recycling and reselling, according to the Ellen MacArthur Foundation.

And ‘fast fashion’ business models are, according to Eco Age, encouraging a race to the bottom. Fast fashion brands outsource production to countries that later on compete for this inward investment. In doing so, wages are lowered, not raised. Sustainability is discarded, not upheld.

It is not difficult, though it is very worrying, to comprehend why designer Phoebe English told an Environmental Audit Committee’s investigation that the industry has become a ‘monstrous disposable industry.’

Or, why American designer Eileen Fisher claimed “The clothing industry is the second-largest polluter in the world … second only to oil.”

Sustainability and Demand Forecasting

So, what is to be done? To my mind, there are two solutions. The first is one I am directly involved in with Delta Global, manufacturing sustainable luxury packaging for fashion brands including Tom Ford, Tory Burch and Net-a-Porter.

When we analyze the data around fashion packaging, it is again clear from the perspective of the environment, market, and morals that changes to packaging sustainability are essential.

In this instance, fashion is slowly moving towards the inevitable. It is perhaps not happening as quickly and as widely as I would like, but the industry is moving steadily in the direction of sustainable packaging.

The second solution is proving to be somewhat slower on industry uptake, with the notable exception of one or two examples. This solution is demand forecasting – and, properly applied, it can vastly reduce fashion’s inadvertent fondness for landfills.

The great frustration is that the entire sector understands comprehensive changes must be made. Yet progress can be discouragingly slow. McKinsey and The Business of Fashion’s The State of Fashion 2020  report stated that:

“The global fashion industry is extremely energy-consuming, polluting and wasteful. Despite some modest progress, fashion hasn’t yet taken its environmental responsibilities seriously enough. Fashion players need to swap platitudes and promotional noise for meaningful action and regulatory compliance while facing up to consumer demand for transformational change.”

Although these words are from 2020, they could have been articulated at any time during the last ten years – at least. Part of why the “promotional noise” is loud but “meaningful action” is subdued in an industry that is essentially about want, desire, aspiration and luxury – and sustainability implies the sacrifice of something.

It is a misunderstanding, but a prevalent one. If we are to be sustainable, businesses believe we are to relinquish something – a material, a profit, a luxury value. And this misconception has somewhat stunted the shift into full sustainability.

It is because demand forecasting does not threaten to diminish but instead offer an upsurge, namely in profit by way of sustainability, that I am an advocate for its adoption. Retailers and brands are likely to embrace this change if they perceive they will gain rather than lose something.

Recent Insights on Demand Forecasting

At last year’s National Retail Federation’s Big Show in New York, Arti Zeighami of H&M was invited to the stage to discuss sustainability in relation to fashion.

Given the subject of his talk, it may have surprised attendees to learn of Zeighami’s job title – Head of Advanced Analytics and AI.

The demand forecasting theory is a simple one. As Zeighami argued in his address, aligning demand and supply with absolute precision means sustainable supply chains, massively reduced waste, and increased profits.

How does it work?

Well, in essence, it predicts future sales by using historical data, adjusting in real-time to make amendments to quantities of orders. Using machine learning and algorithms, businesses can make informed decisions on production, distribution, and sales.

To implement this, fashion brands and retailers must seek to either outsource or create their own AI departments. This is precisely what H&M did in 2018. The data they have been gathering since 2018 will give the retailer a competitive advantage of three years over their rivals. In a changing and increasingly fraught market, this could be the difference between survival and closure.

How Does Demand Forecasting Improve the Supply Chain?

Regarding production, only what is sold is produced.

This means less raw materials and resource usage. Since fashion is such a significant resource drainer – from water to paper to plastic – its reliance of raw materials must cease. It can only do this with an informed and robust grip on its production methods.

There is a great but necessary challenge to be faced in the distribution of fashion products. The ideal is offering products exactly when consumers demand them.

Through AI, retailers will have a much more accurate forecast to inform logistics and distribution. The fashion industry currently emits 10% of the world’s greenhouse gasses. Optimizing distribution would dramatically cut CO2 emissions.

Sales strategies informed by real-time forecasts allow intelligent pricing and an increased chance of clearing inventories. Store-by-store markdowns and price adjustments, increasing the sales of slow-moving items, means one of the most galling of fashions discrepancies is ultimately alleviated. Specifically, the appalling number of items that are simply burned or buried.

[To share your insights with us, please write to sghosh@martechseries.com]