Apparel retailers are turning to AI as supply chain regulations tighten in the US and Europe

Getty Images; BI AI is helping brands like ASOS, H&M, and Gap spot supply chain risks early. Retailers use AI for transparency into human rights and environmental risks in apparel supply chains. New laws require accurate compliance documentation; AI reduces manual work to save significant time. As the US and Europe tighten their supply chain regulations, apparel retailers face an urgent task: map and trace the many layers of their supply chains to gain full visibility into what's happening — not only at their direct suppliers, but also at their suppliers' suppliers. Extended producer responsibility in the US and digital product passports in Europe — both of which are being implemented in phases over the coming months — require businesses to submit accurate documents to prove compliance with regulations, said Mark Burstein, the senior vice president for Americas at the software company Inspectorio, which provides an AI-powered supply chain management platform for retailers such as Gap and Mango. Documentation could include factory audits, purchase orders, or records of water usage or carbon emissions throughout the supply chain, Burstein added. "Everybody is fully loaded into moving forward with all of this traceability, because the regulations are coming up," Burstein said. It's a key reason Burstein sees growing interest in AI within apparel supply chains, especially this year, he said. Manually providing documentation could take days or longer; AI is helping to shrink the process time to an hour. Another reason, Burstein said, is that risk events such as the pandemic, sudden tariff increases , and geopolitical conflicts are becoming more frequent. Brands like ASOS, H&M, and Gap are turning to AI platforms to unearth the complex layers of their supply chains, where sourcing, tariffs, water use, regulations, weather, and other factors impact how apparel is made and shipped. "AI helps them bring the hidden risk to the surface a lot faster, before the disruption issue becomes a larger operational problem," Kenchen Bharwani, a fashion consultant at Empire Apparel LLC, a wholesale company specializing in sourcing and managing off-price apparel, told Business Insider. Spotting risks and delays with AI Apparel supply chains can be challenging to trace because a single product may have dozens of components from around the world, Burstein said. For a seemingly simple shirt, cotton might be picked in Turkey, sent to China for milling, and cut and sewn in Vietnam before the final product is shipped to the US for sale — not to mention that tags, packaging, and buttons may all be sourced from different locations. OMJ Clothing, a custom suit maker in Charlotte, North Carolina, sometimes sources from 10 factories at a time and often struggles to keep up with the complex process, said its CEO and cofounder, Brad Rhyne. In March, Rhyne used the AI model Claude to develop a custom dashboard to trace factory orders and view their current status, creating "a single source of truth CRM," he said. Before the dashboard, a customer would contact the business to ask about the order status. Only then would OMJ dig in and realize something up the supply chain was delayed, said Rhyne. Now, the CRM pulls factory data into the dashboard so OMJ can proactively see delays before a customer reaches out, and either pivot to find a replacement or update the customer. "We're able to dig into it before it even becomes an issue," Rhyne said. Large brands are also using AI traceability tools to spot problems like human rights violations and environmental risks and take "corrective action sooner rather than later," Bharwani said. Vera Bradley uses TrusTrace's AI to monitor Customs and Border Protection's risk databases and screen for forced labor, and Adidas uses the platform alongside the World Resources Institute's Aqueduct tool to identify mills in flood-prone regions, she said. H&M has reported using AI to identify flood risks and factory closures in Bangladesh and scale back some production in the country. A press contact for H&M told Business Insider that the retailer uses AI to improve supply chain visibility, reduce waste, and help meet its sustainability goals . Some of the biggest retailers are committed to transparency, Bharwani added. She works with liquidated merchandise and has clients like Target , which publishes its global factory list. "It's thousands of suppliers that they work with, and it's so detailed," she said, adding that global fashion retailer ASOS, which she doesn't work directly with, has traced its supply chain with AI all the way to the farm level. Still, this process is an outlier. "ASOS is just the one in a million that manages to get as far as that," Bharwani said. "I don't think a lot of other brands have yet." Manual work gets automated Forthcoming regulations will make it essential for apparel retailers to keep tabs on their supply chain to comply with new laws, said Bharwani. US states are implementing extended producer responsibility policies, which hold apparel brands accountable for their products' lifecycle, from production through to after the garment is worn. The challenge: each state's exact policies and deadlines differ. The Uyghur Forced Labor Prevention Act , which came into force in the US in 2022, requires importers to provide documented proof that no forced labor was used. Burstein said retailers previously had their suppliers fill in spreadsheets to manage compliance, but brands have since realized it's "almost impossible to manage this manually," Burstein said. For retailers selling in Europe, Digital Product Passport rules mandate that brands include a QR code-linked digital record that discloses a product's materials, sustainability data, and traceability information. Textiles are among the priority product groups listed in the organization's rulebook. In a manual workflow, a brand would need to identify the individual regulations that apply to its product, organize data it's collected on the product, ask suppliers for anything that's missing, review the data for accuracy, and submit reports to regulatory agencies, Burstein said. That process can take at least 30 hours per purchase order. With AI, agents build the chain of custody , collect documents, and create compliance reports for specific regulations — shrinking the process to about one hour, including human review, he added. "It's literally manual work, hours and hours and hours, that we're eliminating here," Burstein said. Read the original article on Business Insider