The future of the fashion manufacturing supply chain is hanging in the balance. A time bomb ticking quietly unnoticed. The current situation of worldwide quarantine, a result of the COVID19 Corona Virus pandemic will undoubtedly have a long-lasting effect on almost every aspect of life as we know it. The fashion industry will see heavy casualties.
No industry will be left unaffected. Few will benefit from the crisis and most will suffer.
The fashion industry as a whole is one of the largest industries globally. The effects of the current lockdown will bring in many disruptions and changes to every aspect of fashion. The one that is currently not spoken much about yet underpins everything else is the supply chain. After all, if the manufacture of goods is disrupted, so would be the availability and sales.
Preparing now and taking course corrective actions to mitigate the outcome is imperative. Understanding what the key areas to focus on and how the supply chain will be affected is crucial to making strategic adjustments now.
Let’s look at what the immediate challenges would be for the fashion manufacturing supply chain…
1. UNPREDICTABLE LEAD TIMES
Manufacturing lead times have always been a challenge in the fashion industry, especially for small to medium-size brands.
With the current economic pause, lead times will become even more exasperated. But the causes for these delays will be deeper than what you might think.
Delivery & Shipping Lead Times
On the surface, the reduced travel availability will be the cause.
Reduced flight services will mean longer shipping times. Sending samples back and forth for approval will, for a while at least, seem like a thing of the past. Getting express or next day delivery may not be an option at all.
Regular deliveries of production and raw materials will take extra time not only because of travel disruptions but also in terms of processing and ensuring the goods are safe to be introduced into the working environment.
In the absence of strict worldwide agreed guidelines, the delays will be open for interpretation and exploitation.
But the delays will also be caused by the absence and shortage of raw materials and components. The economic slow-down and complete shut-down of manufacturing activities will mean that the flow of production would have been disrupted too. On some occasions, raw materials may have even decayed as a result of the inactivity and processing abandonment.
The impact on this vertical chain is tremendous and at this point unknown. But what is certain, is that there will be negative implications that will trickle up and down the chain and affect deliverability and lead times as a direct result.
2. MANUFACTURING OUTPUT
Now you’d be forgiven for thinking that once the quarantine is lifted everything should go back to normal. We all want that. But the reality for us all and the fashion manufacturing supply chain will be drastically different.
Managing Social Distancing
To begin with, all factories without a doubt will be advised to follow the rules of social distancing which though not confirmed at this point, most likely will remain in place for the foreseeable short-term future.
This would mean having to re-organise the workplace and create space.
That would not be so easily and always possible. Many factory units are small and cramp workers and machines together. To adhere to the social distancing guidelines would require a huge effort of reorganisation, clearing up and freeing space and even then – that would not be enough to get back everyone together.
What some forward-thinking factories like Hermepiel in Spain have already done is to move their workers to work in shifts, thus ensuring the manufacturing output remains as high as possible.
The next factor to consider is the return of the workforce.
Employees return back to work
Getting workers back to work into the fashion manufacturing supply chain will present different challenges to different businesses.
To begin with, here employers will have to ensure workers who return are tested and they are healthy to resume work. That is a new unforeseen cost to all manufacturing employers and it’s sad to say, but to many small manufacturers – a cost too much to bear.
Would they find the funds to buy tests and protect their workers? This remains to be seen. Undoubtedly some will do. At the time of writing this Eduardo Hernandez – the MD of Hermepiel is spending approximately 38Eu per test per worker. The factory employs 250 workers. Not an impossible cost to bear, but still – it is an unforeseen expense at a time when every penny counts.
Would the fashion brands support their manufacturers in this endeavour? Would they care if manufacturers test their workers or not? Or would they return to wanting to get what they want at any cost? Time will show soon enough.
In terms of getting workers back to work, there is also the small detail that perhaps not all workers will or can return to work. Depending on circumstances some may choose to remain with their families as they would be needed there more. Others may choose not to for personal or health reasons.
The challenge of getting Asia back to work
Those manufacturing offshore in Asia will face a bigger problem.
While Chinese factories may be getting back to work, we already hear of reports that not all workers are back. But China has an advantage to the rest of the world in this respect. Being that it is run by the Communist Party – discipline here will be the advantage most other countries will lack. The workforce in China belongs to the party. Anyone who doesn’t toe the line is penalised. So sooner or later if not enough people return, those who do will work harder and longer to close the gap on productivity.
The same will not take place in other countries. Take India and the neighbouring countries for example. A large fashion manufacturing hub and raw materials and finished goods manufacturing hub.
The sudden quarantine and economic shutdown there have created a huge workforce problem with their so-called “migrant workers”. These “migrant workers” are the millions of men and women working in factories and supporting services. Those who managed to set off back to their rural homes before the imposed travel ban will not be in a hurry to return back to the cities. Those who got caught up in the travel ban and have no money and food are living under even harder conditions than normal. As soon as the ban is relaxed, many will choose to return back to their villages and homes to see their families. This will also accidentally coincide with the onset of the monsoon season when work slows down in any case.
So, restarting the manufacturing economy in Asia will not be as simple as one may think. This will lead to low and unpredictable manufacturing output and delays.
Financing the manufacturing operations
In times of economic crisis, the basic business philosophy is – hold on to your cash.
This (mis)guiding principle will have a long-lasting implication on the fashion industry, at a time when fashion brands will need their manufacturers to keep going.
To begin with, those manufacturers unable to pay in cash for the purchase of raw materials or secure credit will suffer and be the first to go out of business. This is of great concern to many manufacturers.
To remain in operation and get back faster to work, manufacturers will need more than ever to be recognised as partners and helped (not punished).
Many designer brands small and large have until now neglected to acknowledge the large part the suppliers and manufacturers they work with play in their business. Without a product to sell there are no sales, no marketing, no pr, no influencers…there is nothing!
Yet – what we have seen repeatedly happen in an economic downturn is that the supplier base is the first to be affected.
In a larger than ever scale today we see large high street brands as well as small brands cancel orders, refuse to honour payments and settle invoices, ask for discounts as a prerequisite to payment, promise payments when sales come at a future date and more.
In the case of the large factories working with the large multinational retailers – these manufacturers have already had to purchase all raw materials and pay their workers in order to complete the orders placed with them. They have already been squeezed over the past and their margins greatly reduced in exchange for promises of continued business.
To keep going and survive manufacturing businesses will have to borrow money at a time when banks will be inundated with borrowing requests and restrict lending. Caught between the shortage of funds and unsupportive customers – there is not a lot of hope in the manufacturing sector for many.
“The strength of the relationship between manufacturer and designer is at an all-time test now. Everyone can see who the ethical brands and customers really are now” said Mukesh Kaira, the MD for Aabhiaachi Creations from Noida, India.
Who will survive and at what cost- remains to be seen.
3. RISING COSTS
Because the manufacturing industry is a business just like any other (though many brands conveniently chose not to think of it in these terms) all these disruptions, will have undoubtedly, cost implications.
The shortage of raw materials, the increased costs that factories operating shift work will incur, the lower output due to workflow disruptions…these will all lead to an increase in the cost of goods.
As much as manufacturers may wish to honour old price quotes and agreements, it may not be possible for them to do so in the months to come. Not until the economy stabilises and gets back to what we think of as “normal”.
Shipping costs may also see increases. While petrol prices might be low at present, the disruption in services and emerging trade wars will be reflected in increased operating costs.
Shipping consultancy Alphaliner reported 46% of scheduled departures on the major Asia to North Europe route had been cancelled in February alone.
“We are beginning to see the impacts in terms of trade flows,” said Richard Ballantyne, chief executive of the British Ports Association trade body. “This will mean higher costs for shipping and problems further down the supply chains such as increased costs and shortages of certain commodities.” Not to mention the increased need to hold goods due to cancelled orders no one will claim and want to accept, or the inability to deliver goods due to businesses shut down temporarily or permanently.
This domino effect will affect the supply chain across every level and ultimately end up in the hands of designers and fashion brands.
FASHION BUSINESS REMEDIES IN TIME OF ECONOMIC DOWNTURN
So, while the above paints a grim picture – all is not lost. Here is what steps fashion entrepreneurs and brands of all shapes and sizes can take to mitigate some of the damage this unprecedented crisis will have upon everyone.
1. DESIGN & DEVELOPMENT
With shops closed for weeks on end and spring turn into summer in the meantime, we all need to accept that shopping this year will be topsy turvy at best.
The unsustainability of the fashion calendar at large has often been questioned in the past. Should we have so many collections and seasons? Should brands skip a season to get to a more reasonable schedule…? Questions no one was prepared to answer and take action on. But now we have no choice – it is out of our hands. Armani has already publicly announced he is skipping a season and focusing on the design and development on SS21 collection to be revealed in September. I consider his plan ambitious and practically impossible for most other brands. So all of a sudden skipping one or many seasons is a reality. Just like that!
This calls for the abandonment of seasons in my opinion. At a time when seasons are not as we know them to be, in any case, and even the smallest of businesses sell globally via the internet – creating collections that are trans-seasonal seems like the best way forward. Particularly now when no one knows how long a new collection will take to be developed if any deadlines can be respected and when offline or online launch can, as a result, take place.
Working on an ever-evolving seasonless collection, where each piece and product launch/drop builds on each other would be the most cost-effective and least wasteful way to design at the moment.
Then you can layer on a limited edition capsule collections that target particular seasonal aspect – like coats and heavy knits, swimwear …etc
Another important aspect I must mention here is the complexity of the design. Great design and execution always have a place in the market. There are always customers for it.
But in time of economic downturn, when people reduce their spend (according to McKinsley report fashion spending by consumers may see a drop as much as 70%) having products at good prices is vital.
Good prices are driven by raw material costs and labour. If you have no control over the former, you have control over the later. This time perhaps calls for simpler designs that will allow for lower manufacturing costs. I will touch more on this later on.
2. MANUFACTURING FORWARD PLANNING
To ensure stock flow is not interrupted (too much) and manage your critical path most effectively for your business as well as allow your manufacturers to also manage their production flow – now more than ever it is important to forward plan.
Forward planning your production is a process most small to medium-sized brands fail to implement and appreciate the benefits it brings. By planning in advance based on sales data, large brands are able to secure a better price for both raw materials and manufacturing. Suppliers and manufacturers are able to better plan their resources and where possible also secure better prices. This creates harmony and a greater sense of partnership. Sadly, the majority of the fashion industry doesn’t place a high value in talking about this process and making efforts to implement it.
But now you have to.
Again – all the little and large things we have avoided doing all these years we are now forced to face and implement fast as a matter of survival.
Forward planning your development and production will allow you to spot the gaps and foresee the problems.
Any increase in raw material costs can be offset potentially at a design level. Working with your suppliers and manufacturers to agree on a schedule will create a sense of security in times of uncertainty. Not to mention being able to also have a bigger sense of control by being able to anticipate and delays and build in buffer time into your timeline.
The forward planning will also give better visibility of costs on securing raw materials and manufacture and allow for time when vital funding agreements and payment plans can be reached.
3. A CASE FOR A DIVERSE SUPPLY CHAIN
For those in the luxury sector perhaps the manufacturing disruption will be lesser to a small degree. Being that your manufacturers maybe UK, Europe or USA located (ie you have a domestic supply chain) the biggest impact will be seen in the rising cost of production and delivery lead times.
To gain a sense of control over both, it may be prudent to consider establishing your own small manufacturing unit temporarily or perhaps even in the longer term. With so many workers out of jobs, the availability of skilled workers will be abundant. Hiring seamstresses on contract hours, part-time or full-time basis has never made more sense than now.
This will allow you to continue work for clients, develop new products, manufacture small runs of new collections and above all offer customisation which is where a big part of the value in the luxury sector can be derived from.
Establishing your own manufacturing will naturally add a certain level of complexity, and careful risk assessment must be done. But accepting that these are not times to focus on perfection but rather take inspired action is what will separate those who will still be around in years to come from those who won’t.
The middle to lower market brands will have larger challenged to grapple with. Their manufacturing is reliant on offshore factories. An idea here would be to forward plan carefully and design and buy in a way that allows for close to home customisation of products in order to create a sense of newness and continuous supply of goods to sell.
A large dose of creativity would be required at this moment not just in terms of design but also planning, costing and pricing, funding and marketing.
Again, here it wouldn’t hurt to create a closer to home supply chain. In fact – in my opinion, which was also echoed in my talk with various fashion industry insiders, creating a shorter supply chain will not only be more sustainable but also required in the immediate and foreseeable future.
Being able to visit easily your manufacturer, go and collect your stock on short notice if needed, make quick decisions and take fast actions is what will become increasingly important for brands and their future growth.
Working with farther away factories on more basic layers of your collections and using your own manufacturing or domestic manufacturers for special, higher price point products and collections will add much-needed flexibility and agility.
4. MAKE TECHNOLOGY WORK FOR YOU
With restrictions and potential fears associated with travel, checking prospective manufacturers and quality controlling production will be difficult in the coming months.
If this pandemic had happened a couple of decades back this would undoubtedly spell the end of most businesses. But not now.
Now – we have everything at our fingertips to replace what used to be “in-person” and manually done and do it virtually.
Modern software to manage the product life cycle is available to any brand, even the smallest “one-man” band of a brand. BombyxPLM is one such solution that offers an industry-standard process at a low cost to the fashion industry. Bringing such technology in what is usually an un-systemised and mistakes prone process will save much time and money within a short time, let alone over a longer-term within a growing business.
Other software like Techpacker offers similar accuracy and increased efficiency, not to mention the improved levels of communication designers and manufacturers can always benefit more of.
Creating systems commonly referred to in other industries as SOP (Standard Operating Procedure) is something fashion can benefit from.
As we have all seen already, working remotely may become the norm in the future. We are all learning to accept that having everyone in the office or studio is not a necessity. Working remotely with members of our own teams has many benefits but for it to work – you must have clear processes set in place. Project management tools like Asana, Trello and Slack have long been used in other industries effectively. Meeting via Zoom or Skype is how many businesses operate.
Prospecting a new factory, having regular “in-person” meetings with your suppliers this way is a practice long overdue in the fashion industry.
While not ideal, if needed even quality control to a certain degree can be done remotely in this manner. Alternatively, hiring a local professional and training them via the use of your SORs is also a great solution. They can be your local team member on the ground, your eyes and ears and bring many benefits to any organisation.
Opening up to “possibility thinking” and clear problem solving with and alongside your supplier chain is what will see you through.
So really, as much as we are going through tough times, the changes we are required to make individually and collectively as an industry are not impossible. They call for creative and innovating thinking, fast decisive actions and collaborative spirit.
Despite the hardship ahead of us – the only way forward is in being united. In accepting and acknowledging that the supply chain – the lifeblood to any fashion business – is a partner, not a foe. That we need to help them, so they help us. Now more than ever working closely with your suppliers is a necessity.
“We have to understand the current scenario we are all forced to operate from and stand collectively (buyer /supplier /workers and co-workers) to survive this crisis. Only in this collective working we can overcome this issue and do better in the future” said Mukesh Kaira, from Aabhiaachi Creation garment manufacturing in India.
Panic driven decisions that result in late order cancellations, asking for discounts, not picking up the phone and working through the problems with your supplier base is a form of broken thinking. It may feel intuitive to do so and protect your own, but, in fact, the opposite effect would be achieved.
Opening up to “possibility thinking” and clear problem solving with and alongside your supplier chain is what will see you through. Taking measures now how to reduce your costs, increase or steady your sales by maintaining manufacturing flow and ensuring your place in the market are the actions we must open up to, accept and take action on.