Sewing up for a seamless supply chain
Ever since the “fast fashion” model emerged two decades ago, supply chains have become a key driver of success for apparel companies. Today, they are more strategically important than ever before, due to the added pressures brought about by several trends.
“Fashion is a form of ugliness so intolerable that we have to alter it every six months.” Oscar Wilde's words now sound utterly out of date. Nowadays, fashions change far more often than twice a year. And with consumers dictating trends, clothing manufacturers have always preferred a combination of low price and quality. This has lead to the flourishing of the apparel industry in many Asian and African countries due to good quality labour and affordable resources. Bangladesh is considered the poster child for the global apparel industry. It is the world’s second-largest exporter of clothing after China. Its factories employ four million workers, supplying retail giants like Benetton, Walmart, J.C. Penney and Hennes & Mauritz (H&M). Bangladesh, however, is just one link in the global supply chain. As a result of globalization, almost every item bought by consumers in developed countries is produced at least in part by low-wage workers in developing countries. Countries like Vietnam, Cambodia, Indonesia, Sri Lanka and India are Asia's top apparel makers outside China. India saw a rise in apparel exports to the US by 7.5 percent at 745 million square metres equivalent (msme) for the period January-September 2014 over the corresponding period last year, as per the latest data by the US Department of Commerce's Office of Textile and Apparel (OTEXA). As against this, China and Bangladesh posted 3.9 percent and -4.63 percent growth in apparel exports to the US, respectively resulting in shift in exports orders to India. As per OTEXA data, China shipped 8,108 msme apparel as against 7,800 msme for the said period last year, while Bangladesh saw shipments of 1,260 msme as compared to last year's 1322 msme. Globally too, India has been registering a 17.6 percent growth in apparel exports at $8.3 billion for the period April-September of the fiscal 2014-15, the Apparel Export Promotion Council (AEPC) stated. While China is becoming costlier due to increased cost of production and higher wages, apparel exporters in India cite global compliance issues in case of Bangladesh for such a shift, apart from issues like high rate of inflation and currency appreciation in both the nations. In recent times, rising labour costs have led to China reducing its focus on labour intensive sectors like textile even to the point of off-loading export orders. According to industry sources, costs have risen by anywhere between 25 percent and 45 percent. On the other hand, unhealthy working conditions and recent mishaps across textile units in Bangladesh have raised concerns among local groups in the US thereby putting pressure on apparel importers to look at other exporting nations like India and Vietnam. Apparently, India's 7.5 percent growth in apparel exports to the US is second only to its Far East Asian competitor Vietnam which has seen growth in bookings for apparel shipments of 13.14 percent. "In the recent past, two major competitors of India, namely China and Bangladesh have drawn flak from global apparel importers, especially those from the US for increased cost of production and compliance issues. This has helped India garner increased favour among apparel importers which the domestic industry here is trying to make the most of," said Rahul Mehta, president of Clothing Manufacturers' Association of India (CMAI). In terms of value in US dollars, Vietnam, India, China and Bangladesh posted apparel exports growth to the US of 15.63 percent ($6.9 billion), 5.64 percent ($2.6 billion), 0.26 percent ($22.4 billion), and -2.12 percent ($3.78 billion), respectively. However, banking on shipments for the festive season in December and a reviving global economy, especially in the western markets like the US and Europe, the industry is anticipating the growth in apparel exports to the US rise to almost 10 percent from current 7.5 percent, said a senior AEPC official. Tailormade solutions Tough competition, differing customer requirements and complex distribution channels repeatedly create new challenges for the supply manager in the fashion business. The retailers’ tight profit margins exert additional pressure on logistics service providers. Contract logistics companies that can manage the entire supply chain for companies possess the know-how and develop tailor-made solutions that pay off for customers. This is where leading logistics players such as DHL, UPS, Kerry Logistics, CEVA Logistics among others play a critical role. “Fashion companies frequently demand further valued-added assistance from their logistics service providers to go along with the core services. For instance, every individual handling step in the supply chain must be closely monitored to stop counterfeit goods. Services like stitching inspections, quality controls as well as ironing and washing services are also offered,” said a DHL report. For top-quality dresses that must be transported on hangers, special packaging solutions are used. Products that must be transported in vacuum packing in order to reduce transport volume and, thus, costs, must be returned to their original condition through the use of various treatment methods. Recently, CEVA Logistics was awarded a long term contract to provide freight management services to SuperGroup, owner of famous fashion brands including SuperDry. The contract award followed a competitive tendering process that included more than ten major global logistics providers. Under the new contract, CEVA will manage collections from the company’s many suppliers by air, sea and road. It will then provide airfreight and oceanfreight on forwarding services from around the world and the main sourcing areas of China, Asia Pacific and India to all SuperGroup locations, particularly into the UK and Benelux. The large-scale operation is being managed through CEVA’s “control towers” (freight management centres) in Hong Kong and the UK and will also include the management of consolidation centres in Asia. Earlier this year, Kerry Logistics secured a contract with Carhartt Work In Progress, one of the largest streetwear brands in Europe and which also has stores across Asia, to help streamline the streetwear brand's Asia distribution network. Kerry Logistics’ extensive warehouse and distribution facilities in Hong Kong will serve as an Asia-Pacific hub for Carhartt Work In Progress. Under the contract, Kerry Logistics will receive Carhartt Work In Progress garments from the brand's Asian manufacturers at its warehouse facilities in Hong Kong, and will distribute products around the Asia-Pacific region. “Using Kerry Logistics’ Hong Kong distribution centre will speed up delivery to our Asia-Pacific markets, and will reduce our logistics charges,” said Wolfgang Heldt, Head of Logistics, Carhartt Work In Progress. Supply chain woes As globalization demands that companies balance global consistency with local needs, it exerts many associated tensions on the supply chain. Also, the digital movement is bringing about greater price transparency, increasing the potential for product refreshment, and adding pressure on margins—all of which have key implications on supply chain flexibility. Furthermore, related to the digital trend, consumers increasingly demand ‘omni-channel’ offerings, requiring many retailers to add new supply-chain modes such as delivery from the store, in-store pickup, and exclusive collections. In the face of these trends, leading fashion retailers are building competitive advantage by redesigning and adapting their supply chains to best meet their individual strategies. This approach delivers—among other benefits—significantly reduced production costs by cutting development, manufacturing, and logistics costs. It also reduces the amount of time it takes a company to move from concept development to in-store placement. According to Veli Polat, Regional Director South Asia, Middle East & Pakistan at Lufthansa Cargo, “Infrastructural constraints including shortage of power supply are major challenges. The local regulations make it difficult for the industry customers to build up their own units and deliver the consignment to the airport as ‘ready for carriage’. This, if implemented, would however lead to significant improvements in quality and process performances.” Lufthansa Cargo offers a wide range of service products for transportation of freight to its customers. “As a value added solution, we offer ‘to door’ deliveries to the Consignee’s bonded warehouse which caters to the ‘repeating traffic’ with options to have flexible operation days (Product cd.Door) or fixed operation days (Product cd.schedule),” Polat added. The airline has designed express products customized to meet the needs and demands of the market requiring specialised attention, care and speed. “Our customers can choose from td.Flash, Emergency.Solutions or Courier Solutions depending on the degree of urgency of the consignment,” he said. “One of the biggest challenges in this sector is speed of processing, as many of the fashion lines are very time-critical, as well as representing large amounts of money tied up in stock inventory,” explains Saskia van Pelt of Amsterdam Airport Schiphol. Saskia adds, “In this respect, the work which Schiphol has done in recent years with members of its community and other stakeholders has really helped to strengthen our case as the gateway for fashion imports to Europe. Chief among this is E-Link - the smart card system that gives truck drivers security access, allocates handling shed doors for unloading and loading, and which replaces paper by carrying shipment data that can be swiped and uploaded to the handler’s system - and SmartGate Cargo – a public-private initiative which has streamlined customs processing to improve efficiency and reduce physical inspections delays. We have also streamlined the ramp transfer and handling process, by giving forwarders front-line facilities with direct airside access,” she says. Apparel manufacturers, importers, distributors, wholesalers, and retailers must have a good grasp on what will sell, where it will sell, and how to make sure it lands in the right place at the right time, say supply chain experts. Throw multiple color and size choices for each style into the mix, and it's easy to see the need for robust, flexible supply chain technology. Today's demanding in-stock requirements mandate exceptional forecasting and effective in-season management. Best-in-class collaboration, forecasting, and pricing software applications are now the price of entry for successful apparel retailers.