Tariffs, compliance expectations and digitising supply chains are among the issues keeping leaders of fashion brands and their supply partners up at night, new research reveals.

In its State of the Supply Chain 2025 report, Inspectorio, a global supply chain solution provider for sourcing, sustainability, compliance and quality, noted that while tariff uncertainties are top of mind for retailers and brands, there are a number of other key issues facing the fashion industry.

Drawing on survey responses and expert interviews across industries, the report highlights a need for supply chains that are resilient to external shocks and aligned with the evolving values of consumers, regulators, and investors.

Inspectorio CEO Chirag Patel said: “Perhaps never in living memory have leaders faced the level of value chain volatility experienced today. As the Covid-19 pandemic vividly illustrated, a functioning supply chain is foundational — not merely advantageous —for any organisation. The reality is clear: if you cannot reliably deliver your product, your business faces existential risk. Today’s global trade complexity — driven by factors including geopolitical uncertainty, evolving consumer expectations, emerging production markets, and shifting regulatory landscapes — requires supply chains to meet unprecedented standards of performance, resilience, and adaptability.”

What trends are surfacing in fashion supply chains in 2025?

Tariffs and the diversification conundrum

Nearly all surveyed executives (95%) cite tariffs as a primary disruptor, prompting rapid shifts in sourcing from China to Vietnam, Cambodia, and nearshoring destinations. Yet this approach comes with caveats: companies that pivot too quickly can face unforeseen trade policies, elevated logistics costs, and complex compliance requirements in new regions.

This climate of unpredictability has led 36% of companies to relocate or plan relocations away from former strongholds — mainly China — toward Vietnam, Cambodia, and other countries in Southeast Asia. Yet leaders acknowledge a potential double bind: diversification can mitigate tariff risk in one geography, only for new policies to emerge in another. Nearshoring efforts — such as shifting production to Mexico or Eastern Europe — offer a hedge against international supply chain chokepoints and shipping uncertainties, but they do not entirely replace the specialised capabilities of established hubs like China.

At the same time, more than 75% of organisations have increased compliance budgets to handle emerging rules around forced labour (e.g., UFLPA) and Extended Producer Responsibility (EPR), reflecting a global patchwork of regulations that many leaders find both fragmented and resource-intensive.

Despite escalating compliance demands, 20% of executives worry they are diverting too much effort from tangible factory improvements toward regulatory overhead. The urgency is real: ignoring forced labour or sustainability mandates can lead to seized shipments, customer backlash, and reputational harm. As a result, traceability tools — for example, digital passports and AI-driven checks — are quickly becoming the new norm for verifying sourcing claims and mitigating legal risk.

Sustainability as baseline

Survey data shows over 75% of respondents recognise sustainability as a key purchase driver, yet fewer than 10% see consumers willing to pay a premium for eco-friendly options. This tension forces suppliers to integrate recycled materials, reduce carbon emissions, and adopt greener processes as standard practice rather than a brand differentiator.

Retailers, meanwhile, often push sustainability costs upstream, leading to margin pressures for suppliers and a greater focus on operational efficiency and cost neutrality in eco-innovation. Those who excel at balancing these trade-offs —particularly mid-tier and mass-market players — gain a crucial edge in a polarised market where premium and discount segments squeeze the middle.

Rising environmental urgencies and stricter laws have recast sustainability from a voluntary ideal into an operational necessity. Scope 3 emissions tracking, once a nice-to-have, is now demanded by regulators and large retail customers. More than 38% of companies already deploy digital passports or blockchain to demonstrate product provenance, yet the next wave of legislation — particularly in the EU — may make full product passports mandatory. In this environment, partial visibility will no longer suffice. Leaders that invest in end-to-end transparency can swiftly isolate problematic suppliers, pre-empt forced labour allegations, and credibly attest to carbon reductions or ethical sourcing.

The digital imperative: From awareness to action

Less than 10% of surveyed companies have reached near full automation, revealing a major opportunity gap for digital solutions. Early adopters of AI-driven analytics, automated compliance checks, and real-time risk modeling report notable gains in forecasting accuracy and lower lead times. However, barriers persist: 70% of leaders highlight cultural resistance and a lack of clear ROI metrics as roadblocks to deeper digital adoption. Pilot successes in AI-based compliance or container forecasting can help overcome scepticism — but only if they scale into an integrated digital roadmap that aligns procurement, quality, and ESG objectives under a shared data framework.

Rethinking risk and compliance

As unforeseen events and geopolitical upheavals increase, forward-thinking executives combine predictive analytics with multi-tier traceability and robust governance to identify vulnerabilities far in advance. Whether it’s forced labour or climate-driven raw material shortages, companies that unify compliance and quality oversight can catch warning signs early, reduce “audit fatigue” for suppliers, and channel resources into real, on-the-ground improvements. Collaboration across brands — through pooled audits, standardised certifications, and shared worker grievance systems — further streamlines these processes and builds credibility with regulators and consumers alike.

Building resilience for 2025 and beyond

Elevate supply chain agility: Geopolitical risks and unforeseen events necessitate ongoing scenario modelling, flexible sourcing, and a willingness to pivot rapidly.

Unify sustainability, compliance & cost efficiency: Align style (meeting consumer expectations for design and authenticity), performance (ensuring efficient, compliant operations), and impact (reducing environmental harm and upholding human rights) to meet rising ethical demands without compromising margins.

Adopt data-driven, proactive approaches: Embrace AI, real-time analytics, and automated compliance not as pilot experiments but as fundamental levers for competitive advantage.

Invest in traceability & collaboration: Combat “audit fatigue” by pooling brand efforts, standardising verifications, and supporting factories with robust worker-voice mechanisms. Collaboration deepens trust between brands and suppliers while credible traceability reduces reputational risks.

Position compliance as a catalyst: Rather than viewing forced labour or EPR rules as burdens, leverage them as opportunities to invest in tools and processes that deliver operational dividends, reduce waste, and strengthen brand reputation.

By Just Style