In Fashion’s Global Supply Chain, a Ruthless Race to the Bottom | BoF Professional, News & Analysis


The pandemic has made uncertainty and disruption the new normal. Successive lockdowns are accelerating radical shifts in fashion’s business model and as the industry scrambles to recalibrate, the supply chains that sustain it are breaking down.

Suppliers typically operate on a lead time of 90 to 120 days, meaning orders placed by Western retailers in the more optimistic late summer and autumn period are about ready to be shipped. From March onwards, there will be hardly anything to produce, said Mostafiz Uddin, managing director of Denim Expert Limited, a denim supplier in Chittagong, Bangladesh. The darkening outlook as new variants of Covid-19 spread during November and December meant few clients placed orders ahead of Christmas. One month of retail closures can reverberate through the supply chain for six, and with lockdowns ongoing in major markets, there is little respite on the horizon.

“Every single day we sit in front of the TV, and we forget that we are in Bangladesh,” Uddin said. “We think, “OK, how many people died in the UK today, and when is the lockdown ending?’ … Because our life depends not on the conditions [here], but on the conditions in the Western world.”

The Human Cost of a Race to the Bottom

The industry is already under intense strain. Many brands simply cancelled orders when first faced with lockdowns last year, refusing to even pay for goods that had already been shipped. The shock to the garment supply chain was swift and devastating.

By July, about 400 manufacturing firms representing 150,000 jobs had suspended operations in Cambodia, according to industry manufacturing associations and the European Chamber of Commerce in the country. In Bangladesh, the world’s second biggest garment exporter after China, 348 factories closed between March and April 2020, according to its manufacturers and exporters’ association. A recent survey of suppliers found that orders for the current season were down 30 percent compared to last year.

Essentially [brands are] asking the factory to make products for free.

With orders only trickling in, manufacturers are also facing a pricing squeeze. More than half the suppliers in a survey of 75 across Asia, Africa and the Americas, conducted by Penn State University’s Center for Global Workers’ Rights and the Workers’ Rights Consortium, said they had accepted some orders below cost since the pandemic started.

“Essentially [brands are] asking the factory to make products for free,” said Ayesha Barenblat, founder and chief executive of ethical fashion campaign group Remake. “In many ways the humanitarian crisis for garment workers continues to deepen and widen.”

With businesses squeezed, labour costs are the first to be cut — and the wider social and economic consequences are far-reaching.

“The apparel sector is such an important sector for workers who are entering the formal economy for the first time,” said Tara Rangarajan, who sits on the management team of the International Labour Organisation’s Better Work programme. With the garment industry suddenly shrinking, there’s a risk of its predominantly female workforce entering less formalised, or more exploitative forms of employment, she said. “That’s why it’s so important that we don’t let the pandemic lead to worsening conditions but rather allow it to be a wake up call.”

A New Reality

The pandemic is not the only pressure point on fashion’s traditional supply chain. The rise of ultra-fast, online-only fashion companies is playing havoc with manufacturers’ business model, and the changing retail landscape is likely to feel long-lasting and far-reaching consequences.

Where traditional retailers would make large orders of each style, their more nimble, digital competitors have found success in a test-and-repeat model, ordering limited runs and swiftly doubling down on styles that sell. For factories, it’s a costly planning nightmare; the pivot to smaller, quicker inventory restocks could make sourcing from countries like Bangladesh and Pakistan — where lead times are longer and order minimums are relatively high — less attractive to buyers.

Manufacturers are caught shouldering much of the cost of uncertainty, with inventory volumes and associated labour requirements increasingly difficult to predict. “Those components of supply chain which have historically been much more formulated … are now going to change, [with] speed being the name of the game,” said Yossi Nasser, chief executive of lingerie supplier Gelmart.

But as the industry consolidates, some are finding ways to pivot.

Manufacturing giant TAL Apparel, which makes clothes for brands including Lacoste and Patagonia, is known for making dress shirts and formalwear, but it was a 50-million-piece order for masks “that saved us” during the pandemic, said chief executive Roger Lee. Over the last year, the company accelerated plans to close its two costly manufacturing facilities in Malaysia and launched a consumer-facing mask brand.

We’re changing from supply chain to demand chain.

Others see opportunity in adapting to the fast-paced needs of ascendant, digitally native brands. Sean Coxall, a former executive at supply chain solutions giant Li & Fung, launched his company, 707, in January to offer supply chain solutions to direct-to-consumer upstarts.

“We’re changing from supply chain to demand chain,” he said. “If you’re a factory, you need to forget the old way of asking for 100 days’ lead time… you know everything needs to be a lot more flexible and agile right now.”

Gelmart, known for its white-label products, has set up a venture arm for new or up-and-coming brands looking for funding and technical know-how. Unlike many suppliers left high and dry by a dramatically changing retail landscape, Nasser sees opportunity and leverage in the fast-paced demands of digitally native brands.

“The market’s driving them to focus more on growth, [so] they wouldn’t mind paying, let’s say 30, 40, 50 cents more per item to capture that sale, so they could generate more revenue growth,” he said. Nasser is betting even traditional retailers will focus on placing orders with a quicker turnaround amid the e-commerce boom.

But while the opportunities may be real, so is the cost of the ongoing shakeout. The ability for manufacturers to adapt is uneven, favouring vertically-integrated multinational suppliers or small players with savvy storytelling and a unique selling point.

Elsewhere, suppliers are getting squeezed and the changes are exacerbating longstanding socio-economic inequality and uneven power dynamics in the globalised fashion system.

“The current model… showed its true colours when the pandemic hit,” said Rangarajan. “[It] isn’t one that is sustainable and it isn’t one that we can rely on for the social and economic development of producing countries, or the workers themselves.”

Related Articles:

Clothes Retailers Cut Orders While Factories Fight To Survive

Where Should Fashion Brands Manufacture Now?

The Year Ahead: Consumers to Seek Justice in the Supply Chain



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