Solving fashion’s excess inventory problem with tailored ERPs

If you work in merchandising or even just fashion in general, you know the story: too much stock in some places, not enough in others, and the constant pressure to get it just right.

You’re not alone – in 2023, fashion brands worldwide found themselves with 2.5 to 5 billion excess items, worth up to an eye-watering $140 billion. That’s a lot of markdown tags.

The good news? There are solutions, and they don’t require crystal balls.

Between Microsoft’s flagship AI companion, Copilot, and dedicated fashion solutions built in Dynamics 365, here’s how you can reduce excess inventory and relieve some pressure.

Keeping pace with the latest trends

Traditional seasonal planning can only take brands so far.

Styles that go viral on social platforms like TikTok overnight cause explosive demand for specific items that weren’t part of your original forecasts.

Figures from McKinsey and the Business of Fashion show that trending styles fluctuated by up to 300% last year, with fashion content on TikTok growing 2.5 times in just three years.

Such volatility underscores the need for dedicated fashion ERPs. These systems help identify and respond to changes before they impact the bottom line. When a new trend emerges, prices and inventory levels can be adjusted to match actual demand.

The real magic, however, is applying this at a local level. Every store is different, right? A bestseller in London might sit on the shelves in Milan. Tailored ERPs are designed to help brands prepare and deliver the right mix of products to the right stores to maximise sales.

These solutions typically offer the ability to make in-season adjustments so that when a new trend hits, brands can see which stores need more stock or which ones don’t, helping to avoid marking down goods later.

For example, a brand may have created a demand plan and assigned products to stores based on item colour-level forecasts, but a new trend has thrown a spanner into the works. With the right system, though, they could update and adjust the assortment to capitalise on the latest information they have.

Protecting profits in a discount-driven world

Speaking of markdowns, let’s tackle that next. The industry at large saw a 5% jump in discounted items during 2024, according to McKinsey’s The State of Fashion 2025.

Some giants, like Nike, had to discount nearly half of their products.

Yes, that’s a lot of lost profit.

Fashion ERPs are the ideal solution for managing pricing and costs. The best way to think of them is like having a super-detailed map of every penny that goes into your products.

From the initial payment made to suppliers through to shipping and customs fees, everything is tracked and logged.

With all this data kept in one place, it becomes considerably easier to know exactly how low you can go when deciding on prices or promotions to turn a profit.

When it comes to planning markdowns (because, let’s be honest, some markdowns are inevitable), fashion ERPs allow you to be strategic.

They help you create promotional campaigns that clear inventory while protecting as much profit as possible. It’s not dissimilar to having a pricing expert by your side, making sure every discount decision is based on actual numbers, not just hopeful guessing.

Getting the right stock at the right place and right time

At the risk of stating the obvious, fashion shoppers are everywhere. Whether that’s online, in-store, on social media, or even at a live shopping event is irrelevant.

You must be able to serve them on their chosen channel exactly when they want it.

To highlight this, it’s estimated that 20% of US fashion purchases now happen through social commerce alone. Factor in shipping delays, and suddenly getting products where they need to be becomes quite the puzzle.

When stock is tight (and when isn’t it these days?), you need to make sure your most important customers don’t walk away empty-handed.

Fashion ERPs help prioritise orders based on your business rules – whether that’s keeping your flagship stores fully stocked or making sure your VIP wholesale accounts get their orders first.

These solutions also help with getting the right colours and sizes to the right stores. Based on your historical data, you can easily distribute sizes, colours, and fits across different stores or customer groups to keep shoppers happy.

To lessen logistics costs, fashion ERPs also provide smarter product packaging options. Instead of handling individual items multiple times (which costs time and money), you can move complete boxes through your supply chain until needed.

Think of it like those meal prep services that send you exactly what you need, when you need it – except for your stores.

Your products move more efficiently, arrive in better condition, and cost less to handle. But you still have the flexibility to break open boxes when only specific variants are needed.

Meeting sustainability requirements

To the surprise of absolutely no one, sustainability is still here, and it’s still a problem for fashion.

The EU will require reports on unsold textiles in 2025 and will ban the destruction of unsold goods by 2026.

While there are plenty of avenues that could be taken to champion sustainability, smarter inventory management is a particularly key one.

It isn’t just about profits anymore; it’s about future-proofing your business.

The days of treating all products the same are over. Fashion ERPs understand that some pieces, like a bestselling black t-shirt, need different rules than a seasonal item.

By planning at the category level, brands can set specific strategies for different types of products. Fast-moving basics can be designated as never-out-of-stock (NOOS), while trend-driven pieces can be more carefully managed to avoid excess stock.

NOOS items also help to reduce waste. Since fewer garments are needed season by season, brands don’t need to produce as much, meaning less offcut fabric is generated.

They also help promote longer lifecycles since items, like denim jeans, are worn year-round and are created to last, meaning your consumers will be throwing less away.

By all means, smarter inventory management and NOOS pieces won’t magically solve the industry’s environmental problems, but they’re a lot better than doing nothing at all.

Breaking down silos for end-to-end success

Perhaps the greatest benefit that fashion ERPs offer is the ability to get each department working from the same system. That means the same data and processes, so nobody is working from different information.

When everyone comes together for proper end-to-end process management, the numbers tell the story: fashion brands that coordinate across departments see 10-15% cost savings, while those trying to optimise individual departments only achieve 5-10% savings.

Why such a big difference?

Because when everyone works from the same playbook – or, in tech terms, the same data – everything clicks.

Imagine a world where your planning team instantly knows about supply chain delays, your buyers can see real-time sales trends, and your logistics team understands exactly what each store needs before they even ask.

That’s not just a nice-to-have anymore – it’s the new standard for successful fashion brands.

Equipping your merchants with AI-driven insights

Yes, of course, we were going to talk about AI. We just thought we’d save the best until last.

AI tools, like Microsoft Copilot, are super powerful and can help merchandisers bring new assortments to market faster.

Imagine giving your merchants a smart assistant who can instantly answer questions like “Which products are trending in our Southern stores?” or “What’s the optimal product mix for our downtown locations this summer?”

Instead of spending hours digging through spreadsheets and reports, your team can simply ask these questions in plain English and get immediate, data-backed answers.

This AI advantage becomes especially powerful when combined with your fashion ERP.

While your core system keeps track of every product movement and sale, Copilot helps make sense of all that data.

For example, when planning next season’s buying, merchants can quickly understand how similar products performed across different channels, what size ratios worked best in specific locations, and which price points hit the sweet spot for profitability.

AI tools like Copilot help your teams create more dynamic product assortments and curate portfolios that resonate with customers and emerging trends.

Retailers can plan at the individual store level and get ‘hyperlocal’ with products as opposed to the cluster or store level.

With your teams already working in unison, these AI capabilities don’t just add value – they multiply it.

Every insight gets shared automatically, every prediction becomes more accurate, and every decision gets easier. It isn’t the future. It’s the here and now.

Fashion ERPs aren’t an afterthought; they’re a necessity

Yes, brands lost billions last year due to unsold goods. Fashion continues to change quicker than ever, but that doesn’t mean brands have to struggle.

Fashion ERPs exist, and they’re ready to help.

K3’s solutions are embedded in Microsoft’s Dynamics 365 ERP platforms, offering brands a single solution to achieve everything outlined in this article. Copilot even seamlessly integrates with D365 to give you that little extra edge.

As the data shows, brands that facilitate cross-departmental collaboration – such as those offered by fashion ERPs – can witness 10-15% cost savings.

But that’s not all. According to Forrester’s research, businesses using D365 Finance and Supply Chain Management can benefit from:

• 122% ROI over three years with D365 Finance
• 55% productivity increase for finance teams with D365 Finance
• $3.5 million legacy cost savings by migrating to D365 in the Cloud
• 90% ROI over three years with D365 Supply Chain Management
• 15% production volume capacity increase with D365 Supply Chain Management
• $1.5 million improved operational efficiency with D365 Supply Chain Management

Undoubtedly, this year’s fashion winners will be those who are both smart and nimble, keeping costs down while staying responsive to customer demands.

With the right tools in place, you can turn inventory challenges into opportunities and thrive.

Interested in learning more about K3 and Microsoft’s solutions? Feel free to drop us a line today.