Risk analysis of the apparel supply chain in 2012
LATEST EDITION
Report description
The supply chain has recently faced a perfect storm. This storm was composed of three cost elements:
- A violent increase in the price of cotton, hitting US$1 per lb in late 2010
- Considerable direct labour wage increases in low cost countries such as Sri Lanka and Bangladesh, allied to inflationary wage increases in manufacturing giants, such as India and China
- A tripling in the cost of shipping a container from Shanghai to Rotterdam, from below US$1,000 in late 2008, to over US$3,000 in late 2010
It's easy to refer to examples like these, and reasonably easy to understand that they must have serious effects on the supply price (the retailer’s buy cost) of apparel. But it is not so obvious to calculate the effect that these changes have (as every supply chain purchase contract will have a different set of variables) and there are quite a few variables.
In this first-edition report, just-style has created six supply chain cost models to illustrate the differences between the supply price from different countries and the effect of changes to those cost elements. These cost models allow you to see what effects certain scenarios have on a typical supply chain. The scenarios include:
- Using local materials
- A doubling in fibre prices
- A doubling in wages
- A trebling in shipping
- A combination of all, the "perfect storm"
This report considers what is happening and is likely to happen in the apparel supply chain in the areas of:
- Cost
- Risk (incl. risk assessment and “what if” scenarios)
- Time
- Responsibility
- Environment
- Finance
The cost models have been created to explain the effect on the final retail price of manufacturing in different parts of the world.
A risk analysis has been made up of sourcing from different parts of the world.
The impact of time and the supply chain critical path are all considered and modelled.
The argument for responsible sourcing is measured against both cost and concern for the environment, with examples of recent practices.
The effect on both the buyer and the supplier of different ways of financing the supply chain is explored.
This report is an essential resource for anyone involved in:
- Managing supply chains
- Sourcing apparel garments and materials
- Managing business costs in the apparel industry
- Analysing and forecasting risk scenarios and trends in their business
Table of contents
Introduction
Base cases
Using local materials
Perfect storm cost increases, fibre
Perfect storm cost increases, direct labour
Perfect storm cost increases, shipping
Perfect storm cost increases, triple whammy
More recent developments
Chapter 2 The issue of time in the supply chain
The supply chain
The original argument of cost and time
Quick response
Electronic data interchange (EDI)
The product life cycle, manufacturing, shipping and distribution
The product life cycle, product development
The fast fashion product life cycle
The Zara time model
Chapter 3 Risks in the supply chain
The nature of apparel supply chain risks
Cultural and linguistic risks
Climatic risks
Political and economic risks, the Arab Spring revolutions
Political and economic risks, the Indian sub-continent
Political and economic risks, Africa
Risk analysis model
Chapter 4 Balancing cost, time and risk
The balanced supply chain
Over emphasis on cost alone
Collaborative supply chains
Bringing it back home
Chapter 5 Corporate social responsibility and the environment
Good behaviour
Political influences
Examples from industry
Scare stories about ethics and the environment
Water
Marks & Spencer
The Centre for Sustainable Fashion (CSF)
Chapter 6 Supply chain finance
The timing of the supply chain, critical path for both garments and finance
Supply chain finance
Prime revenue for Hanesbrands
Sainsbury’s
Conclusion
List of tables
Table 1: Supply chain cost models: Base case
Table 2: Supply chain cost models: Local materials
Table 3: Supply chain cost models: Fibre doubles
Table 4: Supply chain cost models: Wages double
Table 5: Supply chain cost models: Shipping trebles
Table 6: Supply chain cost models: Triple whammy
Table 7: Risk analysis of all world sourcing regions
Table 8: Letter of credit cash flow, supply chain model 2
Table 9: Letter of credit cash flow, supply chain model
List of figures
Figure 1: The supply chain – producer to consumer
Figure 2: Far East sourcing for Europe, (the manufacturing, shipping and distribution cycle)
Figure 3: Far East sourcing for Europe (the product development cycle)
Figure 4: Far East sourcing for Europe (the product development cycle)
Figure 5: The Egg-Timer and the Kite
Figure 6: Corporate Social Responsibility (CSR)
Figure 7: The supply chain, critical path for both garments and finance
Related research categories
By sector: Apparel and clothing
Get connected:
The just-style office is currently: Closed
Office opening hours
Mon-Thursdays 9:00am-5:30pm
Fridays 9:00am-4:30pm
The office is closed during weekends.
Current time at just-style headquarters: 9:13pm (Sunday, 19 May 2013)
Need help? Contact the research team
