In fashion and apparel industry, effective purchase order management can mean the difference between growth and stagnation.
With excess inventory causing companies to lose $1.1 trillion annually, and 70% of chief procurement officers emphasizing the need for improved supplier transparency, the need for streamlined purchase order (PO) processes has never been more critical.
This comprehensive guide explores how modern purchase order management solutions are transforming operations for clothing, apparel, and fashion brands.
What is Purchase Order Management?
A purchase order is a formal document that outlines the terms and conditions of a purchase between a buyer and a supplier, detailing items, quantities, prices, and delivery dates.
Key elements of a purchase order:
- Stock keeping unit (SKU) details: Unique identifiers for each product
- Quantities: The number of items to be ordered
- Pricing: The agreed-upon price per unit
- Delivery dates: Expected delivery dates from the supplier
- Supplier terms: Payment terms, shipping terms, and other relevant conditions
Traditional clothing purchase order management often relies on a reactive approach. Businesses periodically assess their inventory levels and place templatized purchase orders based on current stock.
This method, while simple, can lead to significant challenges in the dynamic ecommerce industry such as stockouts, overstock, and operational inefficiencies.
A more strategic approach to fashion purchase order management involves a proactive mindset. Businesses can anticipate future demand and optimize inventory levels by leveraging data analytics.
The key factors at play here are historical sales data, seasonal trends, supplier lead times, current inventory levels, and forecasted demand. Analyzing these metrics can help optimize inventory and expenditure, leading to better profit margins and a higher rate of customer success.
Challenges in Fashion, Apparel, and Clothing Purchase Order Management
The last decade has illustrated how susceptible supply chains in the fashion and apparel industry are to market conditions and global changes. COVID brought about supply chain disruptions. Factories were shut down and companies were unable to fulfill orders in time.
Post-COVID, the economic downturn led to decreased demand. Many leading global fashion players reported excess inventory levels, some up as much as 40% over the previous year.
Here’s how your current processes fare:
1. Diverse SKUs and inventory levels
Whether you are using spreadsheets or platforms like Shopify, the features provided offer little support for store owners managing a large number of SKUs and multiple stores.
The inventory is manually updated, prone to errors, and can take away from time better spent building better supplier relations or optimizing processes.
2. Multiple suppliers and varying lead times
Sourcing from multiple suppliers with different lead times and minimum order quantities (MOQs) can be challenging.
Coordinating with suppliers, especially international ones, requires careful planning and communication.
If you’re relying on manual methods, this puts a lot of cognitive load on your team.
To make the system more accurate you require efficient systems to track and forecast demand accurately, freeing your team of redundant tasks.
3. Shipment tracking and timely deliveries
Ensuring timely deliveries is crucial to meet consumer demand and avoid stockouts or excess inventory. Tracking shipments and managing logistics can be complex and time-consuming, especially if you are:
- Using multiple warehouses
- Rely on multiple suppliers
- Have multiple Shopify stores
- A global supply chains
4. Minimizing manual errors
Juggling multiple SKUs and variants can be challenging if you rely on manual stocktakes.
Manual processes in purchase order management can lead to errors, such as incorrect order quantities or shipping addresses, which can result in delayed fulfillment, in turn, affecting your ability to serve your customers.
5. Seamless communication
Different suppliers often use different communication channels and processes. The lack of standardization at your end can lead to misunderstandings and errors in quality control or shipment. Going back and forth between multiple channels to communicate with different suppliers can lead to increased response times and inefficient tracking of orders placed.
Look for tools that centralize and standardize the process. While these challenges may seem daunting, implementing the right best practices and automation tools can help fashion brands overcome them effectively.
Let's explore proven strategies that successful brands are using to optimize their PO management.
Best Practices for Effective Fashion Purchase Order Management
If you’re still using traditional stock takes, you’re choosing a reactive approach to demand management.
Given the volatility of the fashion and apparel industry, this approach causes a loss of sales in stockouts or excess expenditure to store overstock. Implementing these best practices can help optimize apparel purchase order management:
1. Centralized purchase order data
Your team is juggling between multiple spreadsheets aiming to manage inventory for different variants, warehouses, and Shopify stores.
Apart from being prone to errors, this system also adds to the time and effort required to perform simple everyday tasks. A centralized system allows for better visibility and coordination across teams, ensuring all stakeholders can access the latest information.
Example: Instead of managing separate spreadsheets for different product lines or seasons, imagine having all your purchase orders, from winter coats to summer dresses, accessible in a single dashboard.
This allows your team to spot trends across seasons and make informed decisions about future purchases.
2. Clear communication with suppliers
Effective supplier relationships are built on trust, transparency, and mutual respect. To foster collaboration and build trust, be open about processes, challenges, and expectations. Timely payments also strengthen supplier relationships. Provide clear payment terms and follow through on time.
The most overlooked factor in building supplier relations is providing constructive feedback and recognizing good performance. This reinforces positive behaviors and builds long-lasting partnerships.
When a fast-fashion brand needs to quickly replenish a trending item, having standardized communication channels means they can instantly check supplier capacity, confirm pricing, and place orders - all within the same system.
3. Demand forecasting
Thermals and sweaters sell faster in the winter (or even throughout the year in colder regions), while swimsuits and shorts sell faster in the summer. While manual stock takes work for stores with fewer SKUs, it is difficult to understand the demand fluctuations for each product when the inventory grows.
Understanding consumer trends and the seasonality of demand helps reduce overstock and stockouts.
Utilizing demand forecasting techniques can help optimize order quantities, freeing resources for other important projects.
4. Regular inventory reviews
Regularly reviewing inventory levels can help identify trends and plan proactive purchases, avoiding last-minute rush orders.
This isn’t limited to understanding inventory quantities for different SKUs but visualizing historical sales to determine consumer trends.
Monthly reviews of how each of your products fare during that month will make sure the assumptions you made last month still hold true. Factoring in changing demand and planning for it will create a knock-on effect on the inventory you need to buy.
5. Real-time purchase order tracking
Tracking the status of purchase orders in real time allows for better control and enables timely follow-up with suppliers. Better demand planning starts with
- Tracking inventory (what is on hand) and in transit
- Lead time and stock coverage per SKU
Having a centralized, holistic view of your inventory can help you optimize processes and lead to better profit margins.
Benefits of Automated PO Management Tools for Apparel and Clothing Brands
While best practices help you take a more proactive approach to the market and consumer trends, implementing them using your traditional systems and tools will put a huge cognitive load on your team.
Here’s why automated PO management tools can help:
1. Reduced manual errors
The fashion and apparel industry is unique due to its vast product variations. One product comes in sizes and colors. This results in a large number of SKUs, even for relatively small catalogs.
Consequently, manual stock-taking processes are susceptible to errors, potentially leading to overstocking or understocking. Automated PO management tools can help track inventory effectively and send out orders based on stock health rather than guesstimates.
2. Improved inventory management
Fashion purchase order management tools provide real-time insights into stock levels. They enable accurate tracking of inventory on hand, incoming stock, and items ready for shipment.
Additionally, they offer valuable insights into demand forecasts, helping businesses adapt to rapidly changing trends and seasonal fluctuations in the world of fast fashion. By leveraging these tools, businesses can optimize purchasing decisions, reduce the risk of stockouts and overstock, and ultimately improve overall inventory efficiency.
3. Enhanced supplier relationships
Imagine the frustration of placing last-minute orders only to realize your supplier can't fulfill them on time, or worse, missing out on opportunities to negotiate better pricing with suppliers. Automated PO management systems can prevent such scenarios by providing real-time alerts when stock levels are at risk. Timely and accurate order placements foster stronger relationships with suppliers, leading to improved collaboration and potentially better pricing.
4. Streamlined workflows
By centralizing data within a single platform, automated PO management systems eliminate the need for constant switching between multiple tabs, such as spreadsheets, Shopify admin, and messaging apps.
This streamlined approach saves time and resources, enabling teams to focus on strategic initiatives rather than mundane tasks.
5. Data-driven decision making
Leveraging automated PO management systems provides businesses with access to detailed analytics and forecasts, empowering them to make informed decisions regarding purchasing, production, and inventory management.
By analyzing historical data and identifying trends, businesses can accurately predict future demand, optimize inventory levels, and avoid stockouts or overstock. This data-driven approach enables businesses to make strategic decisions that can significantly impact their bottom line.
Key Features to Look for in Purchase Order Management Software for Fashion Brands
To effectively manage their supply chain, fashion brands should consider fashion purchase order management software with the following features:
1. Seamless integration with inventory management systems
Integrating with popular inventory management systems like Shopify and ERP solutions streamlines operations by eliminating the need to switch between multiple tools. This unified approach reduces the complexity of managing inventory and simplifies tasks like order fulfillment, returns, and exchanges.
2. Real-time inventory tracking and health categorization
Real-time tracking of inventory levels and categorization into health statuses (healthy, at risk, excess, or stockout) empowers businesses to make informed decisions about purchasing and replenishment. This proactive approach prevents stockouts and overstock, ensuring optimal inventory levels.
3. Interactive and customizable dashboards
Collecting data for supply chain management can be challenging, especially when dealing with large inventories and numerous SKUs. Data analysis may not be the core competency of supply chain teams. Even with access to relevant data, extracting meaningful insights and drawing accurate inferences can prove to be a mammoth task.
Customizable dashboards provide visual insights into key metrics such as historical sales, inventory levels, and sales goals. By analyzing these metrics, businesses can identify trends, identify top-performing products, and make data-driven decisions about future purchasing and production.
4. Automation of purchase order creation and tracking
Traditionally, purchase order creation involves a multi-step process starting with stock-taking, considering lead times, accurately filling out supplier information and quantities, and finally sending out the order. While this is a critical task, it's often a repetitive and time-consuming process. Skilled teams are burdened with these mundane tasks, hindering their ability to focus on strategic initiatives like negotiating better deals, optimizing operations, and analyzing market trends.
Automating this process can free up valuable time and resources, allowing teams to concentrate on revenue-generating activities.
5. Raw material management and finished goods orders
While popular PO management apps like Stocky, Procurify, and Kissflow are effective for managing finished good, they often fall short when it comes to raw material management. This limitation can be particularly problematic for businesses that manufacture their own products. Apps like Prediko, on the other hand, offer comprehensive support for both raw materials and finished goods, making it a more suitable solution for businesses with complex supply chains.
6. Supplier communication and collaboration tools
To centralize the procurement process from start to finish, the software tool you choose for apparel purchase order management should also have communication and collaboration features. An inbuilt mailing or messaging feature or process management tools like a Kanban view of tasks and orders can help simplify the final steps of the process for your team.
Case Studies: Streamlining PO Management in Fashion, Jewellery, and Apparel Brands
As a small business, you began with a made-to-order model, where each order was processed individually. Managing inventory was relatively straightforward with a limited number of products and orders. Using simple spreadsheets to track orders and stock levels met your needs.
However, as your business grew, you realized the limitations of this approach. Maintaining accurate inventory levels became more challenging with increasing order volume and product variety. You recognized the need to establish a safety stock to buffer against unexpected fluctuations in demand. Despite meticulous manual tracking, you encountered issues with overstocking, leading to wasted resources and increased storage costs.
This was how Kimai discovered they needed a fashion purchase order management tool like Prediko. Prediko’s customization met Kimaï's specific needs, incorporating crucial supply chain factors like supplier lead times, target stock levels, and outstanding orders. Within a day, the team was seamlessly integrated into the platform, collaborating effectively on sales forecasts and future orders.
Since implementing Prediko, Kimaï has experienced several significant benefits:
- Faster deliveries: Reduced delivery times by 43% due to optimized inventory management and a focus on micro-stocking
- Lower production costs: Achieved an 11% reduction in production costs by improving supplier collaboration and leveraging better pricing
- Increased operational efficiency: Saved 10 hours per week on inventory management through automated data synchronization and streamlined workflows
Take another scenario.
Your business uses international suppliers and multiple warehouses to store your products. This adds to the complexity of managing inventory. Manual stock takes time, and you are unable to optimize your inventory to avoid recurrent overstocks or stockouts, despite wasting man-hours to solve this simple issue.
We Are Jolies and Kate Hewko faced these issues before they discovered Prediko. Prediko's advanced forecasting capabilities transformed We Are Jolies and Kate Hewko's inventory management.
By accurately predicting demand patterns, the brand streamlined its replenishment process and eliminated stockouts. With AI-driven forecasting, these brands confidently anticipate future sales and receive timely restocking alerts tailored to supplier lead times and minimum order quantities.
How Prediko Transforms Purchase Order Management for Fashion Brands?
Managing the intricate supply chains of fashion brands requires specialized tools. Prediko offers a comprehensive solution specifically designed to address the unique needs of the fashion and apparel industry. Here's how Prediko empowers fashion brands to streamline purchase order management:
1. Buying Table
Prediko’s highly customizable buying table provides a comprehensive view of your inventory. You can choose to view 90+ metrics like inventory quantity along with metrics like health, retail price, and gross profit percentage. These filters help SKU categorization and make placing orders intuitive and simple.
2. Effortless order creation
The interactive Buying Table also displays a health bar for each SKU, showing you if you are facing stockout or at risk of running out of a certain item. Adding to that, Prediko displays live purchase order recommendations, which factor cover levels, days of stock, lead time, current sell-through rate, and forecast plan.
This helps avoid the mental gymnastics it takes to determine when to and how much stock to order for each item variant.
See Prediko in action,
3. Flexibility for your suppliers
Prediko allows you to set customizable minimum order quantities to accommodate specific supplier requirements. Additionally, you can add detailed supplier notes for clear communication and reference.
4. Visualize your workflow with Kanban boards
Prediko's Kanban-style dashboard offers a clear, visual overview of purchase order status, simplifying tracking and monitoring. With features like 1-click supplier imports and real-time inventory sync with platforms like Shopify and ShipHero, Prediko streamlines the entire procurement process. By automating tasks and providing real-time insights, Prediko empowers businesses to make informed decisions, reduce errors, and improve overall efficiency.
5. Comprehensive raw material management
Unlike other supply chain management apps. Prediko allows you to track raw material inventory alongside finished products, ensuring a holistic view of your supply chain. You can create and manage purchase orders specifically for raw materials, ensuring timely acquisition of the components needed for production. Prediko even enables you to upload your bill of materials (BOM) to simplify raw material calculations and optimize order quantities. This comprehensive approach to raw material management streamlines the production process and reduces the risk of delays or stockouts.
Prediko delivers benefits specifically tailored to fashion brands. AI-powered demand planning helps optimize replenishment cycles, ensuring faster delivery to customers. Improved communication and collaboration with suppliers through Prediko's platform foster stronger relationships and potentially better pricing.
By leveraging Prediko's comprehensive features, fashion brands can gain a competitive edge through streamlined PO management, improved inventory control, and enhanced supplier collaboration. Take a free trial today to see how Prediko can benefit your brand.
