Underlines has written much about brands and retailers since the onset of the pandemic but not so much about the supply chain and the seismic changes that we have seen and will continue to see in the coming years. Alongside all the renewed spotlight on sustainability and end to end transparency (and of course the planned 26th Climate Change Conference scheduled for 1-12 November in Glasgow) there has been the sharp and to some unwelcome realisation that dependence on one country or one supply source has thrown up vulnerabilities that need to be addressed and quickly. Stockpiling and cheap apparel will soon be consigned to history.
One of the main casualties of the pandemic is the loss of trust between suppliers and buyers (evidenced by order cancellations, broken contracts and withheld payments). There is a real movement toward balance adjustment in apparel supply chains. Hence some production has been moving closer to market and withdrawing at least part of production from China. Other Asian competitors such as Vietnam, Bangladesh and Cambodia have picked up some of this slack and were benefitting even before the pandemic.
Nonetheless China is still best placed globally and finding a comparable alternative will not be easy. China has been the obvious choice due to economies of scale and lower labour costs, and for the past two decades it was all about building capabilities in regions with sourcing offices and going direct to manufacturers. But things are changing – increased labour rates, erratic exchange rates and cost of raw materials are all changing the attraction of China’s role of the go-to destination for most of the apparel business. Likewise the incredible rise of their own domestic demand with some 200million Chinese now falling into the middle class bracket and the large cities becoming consumer-driven means that its role in the garment industry and the country as a whole is changing very rapidly.
Vietnam has enjoyed the most success here (largely due to the trade clash between the USA and China that started in 2019 and continued through pandemic). But in our world at the moment with open/shut business operations and lockdowns occurring on a regular basis it makes it difficult for countries even such as Bangladesh to compete efficiently on supply and timely delivery.
With this unpredictable backdrop there has been a headlong rush into digital investments in the chain where it is possible. These developments are being fast-tracked with global travel largely restricted for some time to come, factory shutdowns, social distancing and office closures now a regular fact of life. New digital investments in 3D modelling, digital sampling, virtual showrooms, product lifestyle management and quality assurance are all part of a solution. Of course ‘necessity being the mother of invention’ has brought welcome benefits with a lowered carbon footprint, less textile waste and indeed faster decision making.
The development of the ‘digitalised’ supply chain has real potential to be more agile and ‘smarter’, better able to deal with extraordinary events in any and every country. It also signals an end to huge forward ordering alongside improved inventory accuracy and clarity of demand with the benefit of less waste and unnecessary excess stockpiling.
But just how prepared are businesses for the rapid turn of events?
A new report from the Capgemini Research Institute examining the impact of the past year’s disruption on consumer product and retail (CP&R) supply chains has found that 66% of organisations say their strategy will change significantly in the next 3 years, as they adapt to the pandemic and embed resiliency into their operations. (According to the findings, just 28% of consumer product organisations and 23% of retailers believe that their supply chain is agile enough to support the organisations evolving business needs. COVID-19 was a huge wakeup call for CP&R companies: 85% of consumer products organisations and 88% of retailers say they faced disruption, while 63% of consumer product organisations and 71% of retailers say it took three months or more for their supply chains to recover from the disruptions).
And here digitalisation becomes crucial in determining mid and long term survival and future profitability – organisations understand the significance of digital investment in improving visibility. 58% of retailers and 61% of consumer product organisations are planning to increase investments in digitisation of supply chains. In particular, 47% of organisations are planning to invest in automation, 42% are planning to invest in robotics and 42% in artificial intelligence. 64% and 63% of organisations are also planning to make extensive use of artificial intelligence and machine learning across transportation and pricing optimisation respectively.
The transparency of the whole textile chain (or end to end if you will) is a concern to all of us – consumers, brand managers, retailers, regulators and investors in the apparel industry. The whole business of making something cheaper to protect margins seems positively archaic now! If the garment is cheaper at store level but has travelled thousands and thousands of miles to be delivered to you, many consumers will in the future turn their backs on it. Likewise consumers have changed during this lengthy restriction to their freedoms: the idea of buy better and buy less is not just held up as an ideal but as something that is necessary in the future to protect our planet and our own sense of well-being.
The sustainability issue too needs to be addressed more clearly: there is a heightened awareness and focus on our environmental footprint but often not enough information or misleading information. In any discussion of sustainability and accountability ‘green washing’ must be exposed and the human rights of those involved in the textile industry pushed to the top of the agenda. As I mentioned before, sustainability is not a USP but actually a licence to operate and will become more so as this decade progresses. When the looming threat of life and death decisions on a country’s health are levelled, consumers will emerge more thoughtful about their purchasing decisions in relation to apparel.
It is a tough time for anyone in the textile supply chain and hundreds of thousands of jobs are disappearing in the UK alone as large department stores and chains close down branches which are no longer viable with a large shift to e-commerce. Many brands are now aware that dot.com is their ‘new’ flagship store: the physical shopping experience will not disappear but it will become a co-ordination of digital and physical. The high street as we knew it at the beginning of 2020 will be fundamentally changed – attracting people by cultural and food experiences as well as selected retail outlets which are perceived as authentic. Where this leaves the larger shopping malls and out of town centres is less certain in terms of apparel retailing.
We have no blueprint for what has happened in the last 12 months but forward thinkers are gearing their supply chains and operations for any eventuality with strategic planning and nimbleness in a world where time has seemed both stagnant and dizzily precipitous in the same instant.
