Through the eyes of apparel CEOs, procurement can often be mistaken as a support function, where materials are obtained at the highest possible quality and margins. This preconception will inevitably change with the coming of profound disruptions within nearshoring, and through up and coming initiatives like the circular value chain.
With today’s fashion market being heavily affected by influencers, demand spikes in the latest apparel products are largely affected by what these people are wearing. On that note, there is a greater call for agile production in smaller and therefore leaner batch sizes to accommodate any rise in sales. Supply chain plays a huge role in satisfying these needs through on-demand replenishment.
Platforms such as those on Amazon Prime and Asos have spoiled consumers by providing next day delivery services, which has created a phenomenon that if it does not come in a few days, it’s a slow delivery. Retailers need to react at high speeds and they need to start pushing for leaner supply chains.
Additionally, there is significant pressure on profitability due to decreasing full price sell-throughs, as well as increasing concerns regarding the environmental impact of overproduction, which needs to be addressed using more sustainable supply chains. H&M has been mentioned for the 8th time as one of the most ethical companies in the world (H&M most ethical). Part of this is due to their green supply chain that is heavily focused on renewable energy and energy efficiency. They commit to fully eliminate greenhouse gas emission from their operations with their goal to become “climate positive across our entire value chain by 2040” (Climate emissions).
Nearshoring not only provides lead time improvements to meet the needs of seasonal and volatile fashion markets, it can also be commercially viable due to potential savings in freight and duties. For instance, US apparel companies have been able to increase their margins even without higher full-price sell-throughs, simply by moving their production of basic items such as jeans from either Bangladesh or China to Mexico. Examples are the case of Hudson, 7 For All Mankind and True Religion where up to 70% of their denim products are being produced in Mexico and brought back to the U.S. duty-free (taking advantage of free trade).
Traceability and sustainability are becoming increasingly important for designer goods where reputation is king. The need for having a circular value chain becomes paramount to not only build customer loyalty, but also to capture additional value from the business’s materials and resource, inherently saving money for not just them, but their customers and suppliers as well. The circular fashion value chain involves a zero-waste design process that produces renewable fibres through sustainable technology from nearshore fabric industries. After which, automation of the garment production process can serve to minimise waste by reducing the number of unsold clothing. Further savings can also be realised as shipping is now eliminated from the production process. For example, Timberland is working together with tire manufacturer, Omni United to produce a line of tires meant to be recycled into footwear outsoles once they’ve reached end-of-life on the road.
Is apparel coming home? Today, the industry is at a crossroad where speed beats marginal costing advantages and basic compliance ought to be complemented by an appropriate sustainability strategy.
4C Associates have significant expertise in helping companies actualize the cost savings, be it through freight when nearshoring plans are in play, or in the way companies manage their manufacturing process. In addition, 4C has helped transform businesses, to better operationalize the way they buy their materials and manage their inventory. If you would like to find out more on how we can help, please do get in touch with us.