Apparel sourcing industry has witnessed a rollercoaster ride in last couple of years. Many times it seems to be on track but sometimes it’s still off track and that’s a prolonged scenario. Order fluctuations, reduced order volumes, extended payment terms, shipping delays, political instability in major manufacturing hubs and rising consumerism have left many in the industry in a situation of financial uncertainty or to be precise – in actual financial distress. Sourcing strategies should constitute effective risk management and a framework on how suppliers can adapt to survive amidst uncertain future disruptions!
Disruptions are becoming frequent and severe
In a world that’s becoming riskier as magnitude of interconnected supply chain shocks is massively increasing, what comes to the mind when one thinks about sourcing risks across the apparel supply chain? It’s majorly the combination of Cost, Capacity, Stability, Sustainability and Overexposure which the apparel supply chain is trying to find a right balance between.
There are so many things one needs to be mindful of, amidst pandemic, recognising there’s been issues and things changed so drastically that it didn’t even take a second to disrupt the decades-long sourcing practices in the apparel industry. The geo-political environment, US-China relations and Ukraine-Russia war are only adding to the woes. Therefore, the industry needs to constantly re-invent itself and start thinking differently about contingencies and back-ups.
Over-dependency on China is a concern
And this re-invention, planning is the utmost need of the industry today as apparel sourcing is moving out of China but global supply chain – whether it’s factory or raw materials suppliers – seems to be not ready for this shift at big scale! There are gaps and voiding these gaps is important.
Sakshi Dua, Vice President (Marketing and Merchandising), Li & Fung opined, “I would say the biggest gap is infrastructure that still remains to be a bit of a concern, whether it’s the scale of the factories, or in terms of raw material sourcing. There is over-dependency on China for everything. We need to collaborate more to level up the expectation and to possibly solve some of these things.”
Moving out of China for some other vendors requires a sheer capacity because the kind of capacities that the apparel industry used to get in China was massive. The problem is that the brands aren’t able to find the right partners outside to fill these capacities. Even if it is raw material such as synthetic fibres/fabrics, the countries are dependent on China as they don’t have good enough mills to make synthetic fabrics and that’s the borderline area. To put things in a larger perspective, the global apparel trade constitutes about 70 per cent MMF-made apparels for which China is still a go-to place for brands.
“The kind of quality and product diversification that we used to get there is still a challenge with other countries. A vendor in China would be making for A+ customers of the world and he will also be making for local vendors. So we have a huge diversity there. But when we move out to some other country/vendor, their capacity for diversification is the major question. Additionally, we know China is a strong logistics hub with great number of ports. Do other countries have these many ports? So there is a risk. But yes we may come to a solution at the later end, but these are the pop-ups/problems that brands and buyers are facing currently,” mentioned Aanshul Ved Grover, Sourcing Head, Bestseller India.
Inconsistent demand and retail industry’s non-readiness have to be addressed
It’s a fact that in apparel retail industry, capacity is driven by the end-consumers. One of the issues that the brands and retailers face is failure of demand planning. The changes in the retail buying behaviour, inventory management and consumer buying pattern aren’t studied well that have led to store closures and even bankruptcies of fashion retailers. A manufacturer is also at the receiving end and even if a retailer makes changes to its planning without studying the market sentiments well, it is him, at the end of the day, who should be able to provide the required capacities, or to be able to execute a style in production that has not been done before because the demand in the market has changed.
This has been proved to be a difficult scenario for the manufacturers, exporters and raw materials suppliers. What should the supply chain be thinking about to manage the changing demand?
Anindya Ray, Chief Sourcing Officer, Arvind Ltd. asserted, “What’s been happening is the digital world that we live in has democratised a lot of things – trends, designs, input and the way consumer is buying. What this has resulted in the backend has been the end-consumer’s perspective towards the product he or she is going to buy and from where! Traditional buyers/sellers were not able to sell to these new-age consumer guys.”
So, has the emergence of these new brands proved to be beneficial for the apparel sourcing industry? Probably not. These were the brands who had no legacy in business and they didn’t think of seasons and designs – that’s a very unconventional approach. So these sellers started buying in a very different way in low volumes, leading to a ‘disconnect’ between what happens in the backend and the frontend of the retail industry.
Anindya suggested, “We have to stop thinking frontend and backend differently – it has to be a single chain. And if we don’t think in this way, we won’t exist five years from now. Retailers today want small quantities but at the same price as bulk orders. The stakeholders in the entire supply chain have to understand that the process is changing in the frontend of retail. We need to get back right in terms of agile/flexible manufacturing. It’s not like these solutions aren’t known, but we need to understand that we need to apply them to survive for long.”
‘Right First Time’ quality needs to be looked at more aggressively for better sourcing planning
In a post-pandemic world, the entire goal of the apparel industry has been shifted from a traditional supply chain – which might have been a 40-45 week end-to-end supply chain from concept to hitting products into the stores – to just around 7-8 weeks. It’s true that the most important factor in reducing this cycle time is an efficient product development process but it’s also an undeniable fact that an order placed by a buyer gets delayed mostly due to shopfloor inefficiencies – particularly the quality issues, and hence quality should play a key role if a factory wants to see an enhanced delivery rate.
The evolution of quality management in garment factories has probably been the fastest in last decade and it’s disrupting even further in a post-Covid-19 world. The expectations of customers (brands/retailers) have changed over the years and a lot of conventional perceptions related to quality concept in garment factories have been debunked. The factories need to pay attention to ‘Right First Time’ products only because of two reasons – 1) To keep cycle short and 2) To save costs of unnecessary rework and rejection. And, this is why, the stakeholders are now willing to do things in different ways, pushing greater investment in digital assets.
Mohit Mathur, Chief Sourcing Officer, Ace Turtle commented, “What is required from the manufacturer community is optimisation of their efficiencies, making a product right first time and not depending on the quality inspectors to catch the defective products. We have to look for the futuristic mindset. The faster you move on your turnovers, the better it is for the industry.”
The concept of subcontracting needs to be re-looked at
Talking about how safe is the supply chain, who is responsible for subcontracting that’s traditionally done in the apparel sector, industry experts acknowledge that most of the times, it’s the retailers or the sourcing companies that are forcing exporters to take on business when they don’t have the capacity. So one of the increased causes of concern is unauthorised subcontracting from the social standpoint that raises serious question – where are my products getting made? “As retailers or sourcing companies, I no longer have the visibility of the supply chain and it is a risk,” averred Rakhi Handa, Consultant.
From the export side, many times subcontracting may not seem to be the best way. Everybody wants to have their own factories and complete infrastructure to be able to control things.
However, the fact of the matter is a large chunk of manufacturers are not able to invest in a vertical set-up but a group can come together and have infrastructure by segments and then they can work together. “Maybe through this subcontracting way, we will find the best way forward which will be agile having those pieces in sync moving at different pace,” commented Rakhi Vashisht, Director Raw Material Assurance, Target.
Endorsing the idea of evolved subcontracting, Sakshi suggested, “I don’t think it’s a sin. I think collaboration is the need of the hour and that’s how we will progress. Amidst this sudden influx of business and then dropping business, we need to form channels, group of factories working together, mitigating and helping each other rather than trying to solve this problem individually. I think transparency, communication and picking your partners correctly is very important and that’s the only way.”
In the words of Anindya, “There is nothing wrong with subcontracting if the product is good but the main thing is if we trust our vendors. The question we need to ask is how many years have our vendors been with us? Do we really trust them to do the right thing? If we are tactical, we will also expect them to be tactical. If we have strategic long-term relationships, they will then take care of the project.”
“In terms of categories such as outerwear, activewear, denim and lingerie, India has a few players. And the first destination to source these products that comes to mind of buyers is China. I think there is huge opportunity for such products in India but the intent needs to be there, dialogue needs to be there and the basic investment determination needs to be there,” – Rakhi Vashisht
Technology plays a role in mitigating sourcing risks
Anybody who thinks technology is not playing a role in textile and apparel industry today is probably living in an old world. Factories that still use excels fail to drive positive change in the apparel supply chain. Factories and retailers who do not communicate in real-time on vendor performance, shopfloor performance and process visibility fail to bring any change in the sourcing industry.
Mohit had an interesting observation here. “Earlier manufacturers had to send approval papers from couriers; we have replaced that process by having high definition cameras inside our partner factories, laundries, fabric mills. What has this done is that we get real-time live visual images of products where each of our partners are supposedly seeking the approvals and we give a go-ahead in less than 10 minutes. We have other examples too as organisations which are partners with us have switched to 3D design because we know that this is the future,” said Mohit.
Until a couple of years ago, the front-end – retail – was getting digitised all over the world but nobody seemed to have connected the dots in the backend. How do you integrate the entire database because you can’t take quick decisions unless you have data on your fingertips? This gap needs to be fulfilled for mitigating operational risks in the sourcing industry.
“Our complete quality process is digitised for three-and-a-half years and most of our factories have been transformed digitally. We know how many pieces are coming out of the line in an hour. One of the most important things in supply chain is having reliability and predictability which is what we are experiencing in digitally transformed processes,” informed Anindya.
Though companies are going digital, discussions are becoming more fact-based, more efficient, quicker that are leading to quality improvements and speeding up all the initiatives. There is a lot more to be done. If a project takes 15 months for completion, around 70 per cent time gets consumed in deciding if a company wants to finally go-ahead with the thing and remaining 30 per cent is the actual time consumed in making it. Ironically, all the companies are focusing on 30 per cent time whereas the need is to work on reducing 70 per cent time using tech-integration that can make entire supply chain work seamlessly.
Traceable solutions need to be pushed into supply chain
The woke customer of today demands for eco-friendly fashion products as well as wants to know how was the product made just to ensure no unethical practices were followed at any stage in manufacturing and sourcing. On the other hand, transparency is being asked for by fashion brands and retailers as the complex nature of apparel product manufacturing has resulted in lack of trust along the supply chain partners. This is why tracing credibility at each stage of fashion supply chain is becoming a crucial necessity – something that was always a crying need of the fashion industry yet it went unnoticed due to lack of technology as well as lack of intent of the industry’s stakeholders.
Imagine, would there be a worldwide outrage, had the below-mentioned incidents (that took place in 2020) happened around 5 years ago or even before:
- Use of forced Uyghur labour practices in China’s biggest cotton farming region, Xinjiang that supplies over 20 per cent world’s needs of cotton and cotton-made apparels…
The relentless activism, rise of consumerism and advent of technology have brought traceability to the forefront of the industry and brands are actually showing a serious intent, gradually yet steadily, to develop a healthy supply chain. Traceability actually targets – reduction of wastages, finding of unsafe workplaces, labour abuses and unethical low wage distribution. The issues come down to a lack of transparency. Importantly, the information such as place and date of production, product composition and environment-related certificates remain on the blockchain technology where it is visible to all in the supply chain and is accessible to consumers.
Rakhi Vashisht touched upon traceability aspect with her experience, “I met a vendor in Pakistan and they introduced me to the technology company as they developed an app. This app was given to farmers and they were doing everything online. Whenever they sell cotton, every info was available online and I was amazed to see that. This shows that there are solutions out there, we just need to bring them together. The vendor had a commitment and the technology company reversed their way of tracing and tracking and it was possible.”
