The global apparel supply chain has probably seen more changes in the business landscape in 2020 than ever before. Also, there has never been a time when the industry had to deal with such disruptive supply chain issues, all at once. Understanding the rapid changes in apparel supply chain due to the pandemic is critically necessary today. However, as they say, every crisis comes with an opportunity and the ruptured supply chain has brought forth some hidden opportunities which the industry needs to sense.

The cracks that appeared within the supply chain during the COVID-19 era…

The global apparel supply chain is typically the link that connects the source of raw materials, the factories where those materials are converted into garments, and the distribution network by which the clothes are delivered to consumers. With the pandemic, each link in the chain was disturbed as there are many players and countries involved in a single chain, resulting in a usually free-flowing chain to break in many places. Adding pressure to the already fragile supply chain is the decreased and cautious consumer spending due to lockdowns and job cuts.

The fallout of the pandemic is now well documented and after the initial panic cancellation of orders, major impacts have been bankruptcy, factor liquidity, customer credit risk/credit availability, supply chain liquidity, mobility (no travel), countries closures, non-payments, term renegotiation, and company reorganisations. All of these have put the global industry in deep trouble.

Today fashion and apparel brands are reevaluating their supply chains, based on hard lessons learnt to identify ways they can be more resilient, agile and robust in a bid to recover from one of the worst crises that has hit the world and the industry.

In a recent survey by the EUROSTAT, taking the clothing and textile manufacturers in confidence, some critical concern areas were highlighted. While reduction in sales has been found as the most crucial concern with 96 per cent vendors voting it as most critical, when it comes to complications in supply chain, around 65 per cent vendors have faced the brunt of negative disruptions caused by pandemic.

The key solutions…

As retailers search for the right direction, some key trends that are a must for success in a post-COVID world have been put forward by retail experts. And not surprisingly, technology plays an important role in all the strategies.

The biggest area for re-looking and re-building is Inventory Management. Traditionally inventory has been considered as a way of ensuring continuity in business. But in the current crisis with stores closing down, this very inventory proved to be a burden, both financially and for the smooth flow of the supply chain. Many apparel retailers experienced a glut of inventory, which forced them to liquidate merchandise at a steep loss.

The biggest direction to address this challenge has been to turn to digital transformation, with the help of emerging technologies such as artificial intelligence, blockchain and IoT. Digital transformation will help retailers make and execute decisions much more quickly, based on rapid changes in demand.

Left totally unprepared for the eventuality, retailers have now accepted the importance to investment in crisis mitigation for which again companies will need a digital supply chain that unifies all the systems, applications, processes and information in the supply chain, connecting all stakeholders on a single digital platform. These platforms will work not only in crisis but also for planning and forecasting, postponement techniques, vendor management and sourcing, omnichannel inventory visibility and much more.

Without doubt there has been an increased emphasis on sustainability along the supply chain. Recent examples include a big brand like Walmart partnering with ThredUp to sell pre-owned items and Allbirds and adidas are working together to create a sport performance shoe with the lowest carbon footprint ever. Today, end customer is looking for good value, beyond just price, which encompasses everything from environmental practices to social responsibility. Retailers and brands have realised that sustainability will continue to be a focus for consumers and businesses need to not only adopt but also reevaluate and rebuild supply chain processes with a much greater emphasis on transparency.

In addition to coronavirus, industry has to deal with rising political instability in EU and USA, upsurging tensions due to trade war and its potential extension to other countries which makes it even more necessary that supply chain partners work with more collaborative approach than before. In future supply chain, the industry has to have a diverse portfolio which is not really leveraged to any one space, to avoid risk mitigation.

This is another strong reason why the industry need to think about building its supply chain using multiple lenses and one lens could be – where’s the best place to work and another may be where the safest place to work is… Next is how to make sure that the companies and their workforce have flexibility, no matter where they need to work. In the past, the supply chain partners might have had their businesses rooted in just two or three countries, not be totally diversified, but that’s not going to really work now.

Case study of how global trading company Li & Fung is reinventing…

Sharing how Li & Fung is addressing the issues of broken supply chain, Jason Kra, President, Li & Fung Americas admits that the biggest starting point is that Li & Fung is talking about ground realities, how can the industry have a supply chain that’s very stable, how does it support its customers and vendors, and how does it make sure the group is anticipating the problem that’s possibly next down the line. Guided by the philosophy of its Executive Chairman – Spencer Fung – who says that the word in Chinese for crisis is comprised of two characters – one is danger and second is opportunity, the company is moving ahead seeking opportunities in challenges.

As the travelling is restricted today and the companies can’t send their employees to other countries, the environment of remote-control business operations can be successfully built only if the industry and its supply chain partners do have local components as well. And this is what the strength of Li & Fung is as it is strongly communicating with its local partners to support its global partners, in the countries wherever it is rooted deep.

The same echoes a recent letter of the Chairman of Li & Fung Group which reads, “While we continue to help our customers diversify their production from China to other countries in our global network, it is unrealistic to move all activities out of China due to the sheer size of the country’s manufacturing base and its unique upstream value chain that is hard to replicate in scale. We therefore expect that “Made in China” will gradually become “Managed by China” as Chinese manufacturers themselves move offshore and supply essential components to other global manufacturers. This, together with a proliferation of bilateral trade agreements is usurping the previous multilateral framework and necessitate a wholesale rewiring of global supply chains. We expect a new equilibrium will ultimately emerge over time. Over the past few decades, we have put in place a global sourcing network of unrivaled breadth and depth.”

Another solution suggested by Jason is to think ‘speed to market as currency’. By using digital assets and digitalisation of supply chain, the global apparel industry can unlock this value. As 3D is on rise and the industry is rapidly adopting it, the same need has to be understood by a larger base of the supply chain partners. The companies can create product and make decisions in 3D and then they can use information of supply chain and automate the decision making, which will reduce in-person decision making as the industry has seen in the past.

The entire goal is to look at traditional supply chain which might have been a 40-45 week end-to-end supply chain from concept to hitting products into the stores…Now, the industry has drastically come down to just around 7-8 and stakeholders are willing to do things in different ways, pushing greater invest in digital assets.

As far as Li & Fung’s recent efforts of creating future supply chain is concerned, the group has extensively been working on it. Li & Fung partnered with Chinese e-commerce bigwig JD.com back in July this year to leverage its scale and digital capabilities in order to continue its journey of creating the end-to-end digital supply chain with US $ 100 million investment. With the breadth and depth of its global sourcing and production ecosystem, pan-Asia logistics network, and industry leading digital product development capabilities, Li & Fung is helping not just JD.com but the global retailers and brands navigate a highly uncertain and ever-changing macro environment created by the pandemic.

In addition to this, Li & Fung has also roped in an experienced professional Deepika Rana as Chief Customer Officer to integrate the company’s supply chain solutions in over 50 production markets of the company to create a customer-centric offering, by partnering the local vendors in those markets.

*The feature has been written by Nitish Varshney with the valuable inputs of Ila Saxena, Editor, Apparel Resources