Overproduction Won’t End Until Fashion Stops Rewarding It

As more and more retailers go extinct, survival has become downright Darwinian, but companies are often fighting the wrong fight. In this exclusive interview with Hertzman Global Intelligence, Future-Proof Fashion executive advisor Bill McRaith, who formerly built global supply chains for PVH, Walmart, Victoria’s Secret and more, explains what’s needed to fix the industry’s fundamentally broken operating model. And why change management and incentives are as important as new supply chains.

HGI: After decades building supply chains for some of the largest retailers and brands, what problems are you trying to solve now that you’re with Future-Proof Fashion?  

Bill McRaith: Sasha McFarlane, who was part of my Value in the Future team at PVH, founded the company, continuing a mission we had begun at PVH. Future-Proof Fashion’s mission is profitable growth underpinned by sustainability, and we talk about this as two “bookends.” At the front end, we need to end fashion’s dramatic overproduction problem; at the back end, we need to solve for what to do with apparel at its end of life. 

HGI: Why is overproduction still so entrenched in apparel’s current model when everyone concedes it is so problematic?

BM: Because that’s how it was always done and it’s hard to break that pattern, however wasteful it is. We’re asking designers and planners and merchants at different points in the process to guess what a consumer will want at some point in the distant future, without knowledge of the weather, the competitive environment, the tariff environment. And now with social media, we’ve shifted from a world where brand marketers told consumers what to buy, to a world where consumers, divided into 1,000 tribes, tell brands what they’re going to buy. 

The average specialty retailer has about a 75 percent full-price sell-through, which we’ve come to accept as normal, but it’s terrible.

Plus, if you’ve got a four or five month supply chain from P.O. to delivery, then you’ve got another 8 to 10 weeks of inventory sitting in your warehouse, so you’re 6, 7 months away from your consumer on your guesses. How do you tackle all that for fewer markdowns, more full-price sales, less cash tied up in a distribution center? At PVH, we were exploring what that would look like if we changed the model. 

We met with many brands and retailers, knowing it would have to be a collective effort. It extended past my retirement, so I carried the model into Future-Proof Fashion, and it goes under the name Project Interlace—solving for ordering too much of the wrong stuff; too little of the right stuff.

HGI: How does Project Interlace provide a matchup? Is it more about timelines or costing?  

BM: It presents an offshore, nearshore and onshore matrix, all capable of producing the same garment. Each has a different cost and a different reaction time. Offshore might be the lowest cost at $5 but at five months out; nearshore might be $7.50 but take two months; onshore could be $10 but take just a week.

Instead of thinking of one item with one price, you plan for cost over time—three prices and three timelines. The higher the cost, the shorter the reaction time, and this allows you to only make what the consumer actually wants, and use the lowest-cost option that meets the timing need. What’s interesting is every single person we’ve presented this to has loved the model. No one has said it can’t be done.

HGI: So if the math works, what’s holding companies back? 

BM: Fear of change. This is not a supply chain issue, which would be easy. I’ve built supply chains all over the world from [previously undeveloped] greenfield sites in China and elsewhere. The hard part is changing behavior inside the brand. Merchants have been rewarded for 30 years for getting the right product at the lowest possible cost, best [initial markup percentage]. That’s how they’re incentivized and praised. So when you tell them, “You might pay more for some units,” their reaction is, “I can’t afford to do that.” Even if they’re making more on the back end. 

But maximizing profit and minimizing cost are two completely different discussions, and that’s why we created Incentive Driven Architecture, or IDA. 

HGI: How should companies apply Incentive Driven Architecture?

BM: You’ve got to ask: what is driving people’s decisions every day? Why are they overbuying? Why are they continuing to see profits spiral downwards? It’s because they’ve been patted on the back for cost reduction, not profit maximization.

“When CEOs struggle to understand why their initiatives of growth are struggling, they need to look less at processes, tools, systems etc. and spend time understanding if everyone is motivated, rewarded and incentivized to pull in the right direction.”

—Bill McRaith, Future-Proof Fashion

IDA is not another strategy framework. It is a way of engineering behavior in complex systems by working at the level where outcomes are actually produced: individual decisions, reinforced through incentives, feedback and structure.  

No one came to work today to do a bad job. So when CEOs struggle to understand why their initiatives of growth are struggling, they need to look less at processes, tools, systems etc. and spend time understanding if everyone is motivated, rewarded and incentivized to pull in the right direction. Too often they aren’t.

HGI:  Essentially, you’re telling people that they’re going to end up saving money in the end, even if they pay a bit more up front, but it still requires rethinking a legacy process.

BM: That’s why you have to get this in front of the CFOs and the COOs. I’ve had supply chain people, and separately, sustainability teams, tell me they love this, but they don’t know how they could possibly get the rest of the organization to change their behavior on it, even if they came in financially flat by rebuilding the design-to-store value chains. Using some of the companies I’ve worked for, how do you run this across the world to the 5,000 or 6,000 people in the head offices to change from the way they’ve been doing it for the last 30 years? This is where COOs become the primary driver, able to reach across all parts of the organization, no biases, no silos.

HGI: What else in fashion needs a rethink right now?  

BM: Well, the term MOQ is a completely fictitious concept unfounded in reality. Having run factories in the UK, in China and around the world, a supplier could make five of an item or 100,000 of an item—there’s no such thing as MOQ in a production sense. If a supplier is speaking to the head or buyer at JC Penney, they’re thinking about their MOQ, not the retailer’s; the supplier is thinking about what they’re prepared to pay for an item and therefore how much they have to charge, or what the minimum order has to be, in order to break even.

But a supplier could always produce less and often make it more profitable for the retailer— who, instead of ordering 100 and marking down 30, could just order 70. Maybe the supplier charges an extra 50 cents or a dollar per unit, but the profit the retailer keeps—or the markdown they avoid—makes that 50 cents irrelevant in the scheme of things. The problem is that people treat MOQs as a real thing, when in reality it’s largely made up.

HGI: You’ve described this moment as a retail “extinction event.” Is resistance to change speeding this up? 

BM: I do believe we’re in a 5-to-10-year extinction event, and 10 years from now the names at the top will be different. There’s something called the sigmoid curve, which shows that everything rises, peaks and declines, and survival depends on introducing a new curve before the old one collapses. The problem is the “executive kill zone”—the period of change where performance wobbles as you shift models. Most organizations resist that, even when they know it leads to a better future. The market doesn’t like wobbles! Hence the executive kill zone; those who trigger and lead the change may not be around to see the positive benefits it produces. Few executives have the appetite to lean into that pain!

If you’re under 55 in this industry, you’ve only known this operating model—offshore, long lead times, single cost, single supplier. So when someone says, “We need to rewire this,” it’s overwhelming.

At one company I worked for, we cut the design timeline from 12 months to six. On paper it made sense but it was a disaster. Merchants were so used to thinking 12 months ahead that they didn’t know how to operate in a six-month model. We learned you can’t just change processes; you have to change how people think and work within them.

HGI: You’re focusing on overproduction and merchandise misalignment as a business problem where others would frame it as a sustainability problem. Why this approach? 

BM: Because you have to lead with profit. We originally led with the planet impact—billions fewer garments produced, massive carbon reductions. People applauded, but nothing happened. When we flipped it and led with profit impact, the conversation changed.

Future-Proof Fashion asked consumers openly why they buy product. Without a checklist or leading questions, sustainability was mentioned by only about 6 percent. At the moment of purchase, consumers are thinking: Do I love this? Is the price right?

So at the end of the day, it’s our responsibility to build the system properly from the inside. We can’t assume the consumer will force change. Only profit will force change. You have to speak the CFO and COO language.

I spent 35 years of my career building then working with many of these value chains. They were right for their time, but that time has gone. I was complicit in extending their life beyond their use, so guilty as charged on all counts!