Supply chain resilience holds key to recovery

Fashion brands and clothing retailers have seen their supply chains struggle under lockdown measures imposed by governments trying to contain Covid-19. The shutdowns, of course, began just in time for 2020’s spring season, causing maximum disruption.

According to data and analytics company GlobalData, the global apparel market saw a sales decline of 15.2% in 2020 – a loss of US$297bn compared with 2019. The ten worst impacted markets, in terms of value, will represent 85.0% of this total loss, with the US accounting for 42% of all lost spend.

But experts say that by using new technologies, shortening supply chains, building long-term relationships with suppliers, and bringing some outsourced processes back in-house, brands can fare better in times of crisis – and even boost profits when times are good.

“The disruption has been very significant,” says Dirk Vantyghem, director general of trade association Euratex, which represents European manufacturers. “This whole textile and apparel industry has very globalised supply chains, we have very few vertically-integrated companies, so there’s a lot of specialisation.”

He adds the pandemic was “a wake-up call,” alerting the industry to its vulnerabilities.

Bernice Pan, founder and creative director for fashion company Deploy in London, says more flexible supply chains with smaller, quicker, more demand-sensitive production runs would help brands and suppliers alike withstand global crises.

For example, a wave of cancellations of large production orders last spring are estimated to have put a million Bangladeshis out of work. Pan says these disruptions and the pain they caused could have been avoided if brands planned production more intelligently.

“This is where technology can really help us,” she explains. In the past, “fashion relied on a long chain of predictors and forecasting.” But modern sales software, backed up by artificial intelligence (AI), “can tell you exactly, on the spot, how much you’re selling where and what your customers are doing.”

Brands can use that information to plan more frequent orders, instead of one for an entire season. When crisis strikes, sunk costs will be lower and business can restart more quickly.

It also means they are less likely to over-purchase, so they can reduce losses from unsold stock. “There is no reason not to use these technologies better to plan production,” Pan says. “We should be able to produce and have 90% sell-through, as opposed to 50-60% sell-through” when demand is lower than expected.

Pan says her company, Deploy London, has adapted to supply problems during the pandemic by repurposing its in-house sampling facilities for small-scale production. Although that cannot replace normal production, “everyone is suddenly cutting 80% of their order volume; that 20% of your order volume is basically smaller-scale anyway,” so it is sufficient for the company to operate and honour its contracts.

This tactic could be scaled-up for larger companies if they still have their own sampling capabilities – but most outsourced them in the 1990s and early 2000s.

Vantyghem notes the crisis has prompted some European retailers to bring production closer to home. Retailers were already “thinking about their sourcing options” before Covid-19 hit, but the crisis “accelerated the decision to diversify; including from one country to multiple countries, and from faraway production options to those nearer-by.”

He points to the sudden demand for face masks as “one example where there was a total lack of supply, and combined with that there was confusion over the technical standards that these masks should comply with.” In response, “there’s been an upswing of production capacity for face masks in Europe.”

Fashion companies can and should shorten the distance between garment production and materials sourcing, advises Pan. Her company, for example, uses European materials for its UK production, while its Taiwanese production uses materials from Taiwan and Japan.

“I logically planned that to reduce the logistics of shipping everything all over the world,” she says. Shorter supply chains support the strategy of having faster production runs, and cutting costs on logistics instead of quality. Besides being better for business, Pan says her approach is also better for the environment.

Obviously, the European Union, Taiwan and Japan all have relatively high wages and won’t be appropriate for all products. “Europe has to focus on quality products, not on price,” says Vantyghem.

But regardless of where a brand’s suppliers are, Pan emphasises that building long-term business relationships with them – instead of constantly switching suppliers in search of the lowest price – pays off in a crisis by providing better foresight.

“Cost tends to be one of the biggest drivers of how they plan what to buy from where, and where to cut and sew,” she says. “That in itself is not a very crisis-preventive solution, because we can’t control what happens where,” whether it’s power cuts, strikes or epidemics.

But working with the same partners over the long-term means “if they can foresee something happening, they actually do let us know,” rather than waiting for the crisis to arrive.

Main image: A wave of order cancellations put a million Bangladeshis out of work