Fashion industry shifts toward on-demand production to combat excess inventory

The fashion industry is facing significant financial challenges due to excess inventory. According to estimates by McKinsey and The Business of Fashion, unsold clothing produced in 2023 had a retail value between $70 billion and $140 billion, representing approximately 2.5 to 5 billion items.

In 2024, approximately one-third of analyzed brands continued to struggle with improper inventory levels. Data indicates that the average time products remain in stock, known as inventory days on hand, reached record levels in 2024, sitting 14% higher than the pre-2020 average. This surplus often leads to increased discounting; in the first half of 2024, the share of discounted fashion products in the United States rose by 5 percentage points year-over-year.

To combat these losses, the industry is exploring a shift toward on-demand production, where manufacturing begins only after a customer makes a purchase, rather than relying on traditional forecasting models that often miscalculate demand for specific sizes and colors.