With the apparel industry facing higher costs and widening sourcing networks, supply chain expert Sandra Smith tells just-style news editor Joe Ayling how retailers are adapting. She explains how cost pressures, ethics, sustainability and technology fall into today's sourcing considerations.

Now softlines technical consultant at Bureau Veritas, Sandra Smith has over 30 years' of experience in the textile and clothing technology sector and has worked with major retailers including M&S, Next, Arcadia Group, Littlewoods, Sainsbury’s and Tesco.

just-style: What do you see as the main challenges facing clothing retailers at the moment?

Sandra Smith: Fashion retailers need to make sure they get the right product lines in store at the right time. Good stock control and keeping returns to a minimum is crucial for clothing retailers if they want to protect their bottom line.

Additionally, with wage inflation in sourcing countries and with the rising cost of raw materials, retailers need to optimise the efficiency of their supply chain if they want to keep their level of margins without increasing their prices to their consumers.

just-style: How can fashion companies meet these challenges?

Sandra Smith: In order to remain competitive, clothing retailers need to ensure their sourcing strategy and supply chain are optimised. One key element is for retailers to get full visibility of their whole supply chain so they understand where inefficiencies lie, which will enable them to put corrective actions in place. With clothing manufacturers often sub-contracting to smaller mills, it can be quite difficult for retailers to be 100% sure of the origin of their products. At Bureau Veritas, we work in partnership with a number of major UK retailers to help them meet this challenge.

just-style: With sourcing costs escalating in the apparel and footwear industry, are high street price surges inevitable?

Sandra Smith: I can certainly see the high street prices increasing gradually. The first rise in prices will come with the increase of the VAT rate to 20% from January 2011. Additionally, we’ve recently seen the prices of cotton rocketing due to shortage of supply following floods and cold weather in Asia – this will have to affect retail prices.

We can also expect to see more and more governments in sourcing countries setting minimum wages for garment workers. But even without labour regulations in place, European and US retailers are more and more conscious of the need to provide apparel workers with decent wages.

Retailers are becoming increasingly ethically-aware and would not want to be accused by consumers of exploiting workers in Asia. The recent wave of suicides in Chinese mills has opened the eyes of the industry when in comes to low wages and has highlighted the need to offer people decent incomes.

just-style: With manufacturers in Bangladesh and Cambodia rallying for higher wages, are the days of cheap labour nearing an end?

Sandra Smith: I think the era of “cheap labour” will end soon in favour of “fair wages”. I think the whole industry understands the importance of providing workers with decent incomes and retailers and brands realise the value of being seen as ethically responsible. Unethical brands will be less and less appealing to consumers.

just-style: How does the fashion industry perform when it comes to sustainability, when compared with other industries?

Sandra Smith: We see a growing number of major retailers working on reducing the environmental footprint of their whole supply chain and products, either being pushed by regulations or not. Clothing manufacturers in Asia know they have to raise their games when it comes to sustainability if they want to keep supplying products to their clients in Europe and in the United States. In the future, I will not be surprised to see environmental credentials be a major criterion for retailers when choosing their suppliers.

just-style: What is the future of supply chain technology in fashion?

Sandra Smith: The fashion industry can certainly make big improvements when it comes to quality and process controls. Again, improving quality through the supply chain will help retailers and manufacturers increase their margins by increasing productivity, reducing operational inefficiencies and product returns.

At Bureau Veritas, through our new Mill Improvement Programme, we are helping retailers and brands improve efficiency in their whole supply chain by helping mills to put good process controls in place.

Additionally Bureau Veritas is also starting to better utilise a variety of new IT platforms to increasingly provide customers with the kind of supply chain intelligence services that will help them to comply with ever-changing regulation and also to enable them to make more effective sourcing decisions.

just-style: When it comes to sourcing, is proximity becoming more of a priority due to higher transport costs?

Sandra Smith: In my opinion, the most important criteria for me, when it comes to sourcing, are the capacities of a producing country to deliver quality products and on-time.

However, as the issue of climate change and the environmental impact of transport and shipping are growing, the sourcing proximity will become a bigger issue in the near future. Finally, sourcing products in neighbouring countries can be interesting for companies looking at reducing their lead-time.

just-style: Which emerging retail markets are retailers looking at closest?

Sandra Smith: Many European and American retailers are now entering the Chinese domestic market. Indeed, China continues to experience rapid consumer consumption growth with some estimates putting the China clothing retail market at over US$100bn by 2013.

However, with complex and rapidly changing regulations and standards, entering the Chinese textile market can be a challenge.

Safety and quality standards in China (eg GB standards) vary from the EU or US standards and some retailers might find it difficult to adapt their quality assurance programmes. Complying with Chinese standards is not an option though: recently, the Chinese government has been randomly selecting products from shelves to perform testing to check for compliance. Non-compliance could result in very expensive fines.

Some fashion retailers are also trying to enter the Indian market and we have recently seen retailers opening 'trial shops'. With 1.1bn inhabitants, it's easy to understand that someone sees big opportunities in this market. It’s definitely a trend to follow.