How to tackle the apparel supply chain’s biggest problems

The live discussion, held yesterday (October 11) during GlobalData’s apparel conference, aimed to shed some light on the world events that are currently having the biggest impact on the industry and some quick fixes to the biggest problems facing it provide brands, retailers and sourcing executives.

The biggest issues currently facing the apparel supply chain and the entire sector

1. Inflation and rising energy costs

dr Sheng Lu, associate professor of apparel and fashion studies at the University of Delaware, told the audience that the latest data from the Office of Textiles and Apparel (OTEXA) released earlier this month shows that the volume of US apparel imports has sunk.

He explained: “There is a lot of uncertainty in the US economy, such as how to deal with inflation, which is affecting consumer clothing consumption. And while we’re seeing shipping costs coming down, businesses are still facing rising procurement costs, so it’s a really challenging time.”

However, he argued that now is a great time for apparel brands and retailers to test vendor friendships and partnerships.

He said: “Like it or not, fashion brands and retailers still have a huge impact on vendors and there is much they can do to support them during these trying times. For example, how you deal with your existing sourcing orders and when you are ready to make the payment and what price you are willing to pay. I still think there are many areas where brands and retailers can engage with vendors and show support.”

He was quick to add that an important lesson the industry has learned from the pandemic is that the relationship between suppliers and importers is vital to the success of the entire industry.

2. Russia-Ukraine War

Gherzi Textile Organization partner Bob Antoshak said the impact of the Russo-Ukrainian war on the apparel sector is based on both hard economics and psychology.

He explained: “Psychology is terrible right now and it’s weighing on all markets. The price of cotton, for example, has fallen sharply. It doesn’t make sense when cotton gins are suffering from a drought in Texas and 60% of Pakistan’s cotton has been wiped out by a flood. Normally, cotton prices should move quickly in the other direction, but that’s just not the case. The question is why? The psychology is bad and the demand is bad.”

Antoshak said that the inventories that are occurring downstream have spread throughout the supply chain, creating imbalances between supply and demand.

He added: “Linked to this are the unknowns of war. Our industry may have limited involvement in these markets, but it has a knock-on effect that is affecting so many other areas. The unknowns of the conflict will weigh heavily on the entire apparel supply chain, all the way back to the farm. It’s going to create imbalances throughout the supply chain and this final quarter is going to be really tough.”

However, Antoshak insisted that clothing brands cannot and should not repeat what happened at the beginning of the pandemic when certain suppliers were turned away.

He explained, “It didn’t work out well last time and the industry learned that together is stronger than by cutting and running.”

3. Floods in Pakistan

Antoshak highlighted that the recent floods in Pakistan have hit the textile and cut and sew sectors directly, with many factories affected.

In addition, he said the remaining parts of Pakistan’s garment and textile industry that were not affected are now struggling with domestic cotton shortages.

“The US has been a major importer of Pakistani cotton in recent years, but what happens when Pakistan is forced to import cotton from, say, the US? It also comes at a time when a lot of the Texas cotton crop was lost due to a drought. Normally one would think that this would drive up prices, which would increase the operation of Pakistan’s mills. In addition, many cotton sales are settled in dollars. When you combine all these factors, this is a really challenging time for the Pakistani garment industry.”

4. Sustainability

Lu pointed out that there are some concerns that brands and retailers are overlooking the ongoing issue of climate change, such as the impact of the floods in Pakistan, in favor of more pressing issues.

Fortunately, his observations and research showed that this was not the case: “I recently did a study in collaboration with the US Fashion Industry Association (USFIA). We spoke to some of the biggest US fashion companies who have announced they are dedicating more resources to sustainability. This includes investing in employee and supplier training to develop a more sustainable and socially responsible sourcing model.”

He believes companies are changing the way they think about the issue: “It used to be seen as a liability, but today more companies see sustainability as an investment that will financially pay off in the future.”

For example, he continued, “A current project I’m working on is to understand companies’ sourcing strategy for clothing made from recycled materials.”

He explained that sourcing these products can help fashion companies achieve their goals, such as: Such as reducing their dependence on China, diversifying their sourcing base and expanding nearshoring and onshoring, and accelerating time-to-market.

He added: “Indeed, sustainability itself and acting to be sustainable offers the fashion industry a lot of potential for future business opportunities.”

5. Supply chain disruptions and forced labor controversies

There are two major trends when it comes to tackling supply chain issues, Lu said. Sourcing diversification remains the key issue as today sourcing managers have to consider many factors such as cost, speed to market, flexibility, agility and all kinds of compliance risks.

Confident that a relatively diverse sourcing base will mitigate all kinds of risks, Lu said: “Like it or not, there are no perfect suppliers, and all countries have their own advantages and disadvantages. Because of this, brands today need to source from a variety of countries to balance all of these factors. For some products, time to market may be a priority, for example sourcing closer to home.”

Strengthening relationships with key vendors is also incredibly important, and Lu pointed out that this second trend doesn’t conflict with the first.

“Today, brands and retailers like to work with so-called super suppliers who may have a presence in multiple countries or be able to do vertical manufacturing, which can help fashion companies achieve their goals in the short to medium term,” he said.

What are the solutions to the biggest challenges facing the apparel industry?

Anotshak believes the solution to these problems facing the apparel industry is twofold. He said: “First, diversification of sourcing is important. For many years, brands became complacent and sole sourcing, which worked well for them at the time.”

In fact, he bluntly told the audience that the sourcing model needs to change because the world has changed: “Supply chains are broken and economies are in turmoil, not to mention the fact that we’re also having a war now.”

The second part of his solution lies in partnerships. He said: “This isn’t just about buying from Vendors 1, 2 and 3 or Tier 1, 2 and 3. To be successful, these partnerships need to go deeper and establish themselves.”

Antoshak concluded, “The brands and retailers that implement sourcing diversification and partnerships will have a much better chance of navigating this difficult flow that we are all on right now.”

Lu agreed with Antoshak’s arguments, but was happy to add: “The companies that are willing to invest in the future are more likely to succeed and reap the rewards. There are many areas that companies can invest in now, such as sustainability and new technologies, and that includes investing in our young future professionals.”

He also kindly advised brands and retailers to regularly read industry-specific publications like Just Style to benefit from the regular insights and analysis shared on how to navigate these challenging times.

Thankfully, despite these challenging times, Lu said he is confident about the future of the apparel industry. He explained: “We must not forget that apparel is a $2.5 trillion business worldwide and for everyone who works in it – we have to make it successful – and we will.”