Speakers, from left (standing): Adrian Elliott, Coats Plc; Lorna Ward, PwC Consulting; Professor Tony Hines, Manchester Metropolitan University; Dr Julie King, ASBCI event chairman and head of fashion, University of Northampton; Peter Nunn, Mishcon de Reya; Vicky Brock, Clear Returns; Laura Hawkesford, Marks & Spencer; Kevin Townend, Advanced Supply Chain; Jamie Murray Wells, Google UK; (seated): Leonie Barrie, just-style.com; Jeremy Opperer, Intertek.

Speakers, from left (standing): Adrian Elliott, Coats Plc; Lorna Ward, PwC Consulting; Professor Tony Hines, Manchester Metropolitan University; Dr Julie King, ASBCI event chairman and head of fashion, University of Northampton; Peter Nunn, Mishcon de Reya; Vicky Brock, Clear Returns; Laura Hawkesford, Marks & Spencer; Kevin Townend, Advanced Supply Chain; Jamie Murray Wells, Google UK; (seated): Leonie Barrie, just-style.com; Jeremy Opperer, Intertek.

Faced with an increasingly complex sourcing environment, more volatility and less predictable consumer demand, retailers and brands are having to navigate higher levels of risk in their apparel supply chains. But finding the right solution is a complex trade-off between high risk, low cost and value.  

While retailers typically focus on four areas to manage their supply costs - location, suppliers, costs and technology - "you also have to consider risk, complexity, quality and value," according to Lorna Ward, director of retail and consumer products at PwC Consulting. The difficulty, she adds, "is choosing which are the right levers for your business."

Speaking earlier this month at 'Fashion's New Frontiers - What's Next?' conference organised by the Association of Suppliers to the British Clothing Industry (ASBCI), she explains that when it comes to deciding where in the world to source from "you cannot concentrate on cost alone," with the role of sourcing teams becoming ever more important in assessing the level of risk posed by different countries.

"They need to be economists and they need to understand politics, and they need to be able to have the ability to look at these two years out. Where do you need new suppliers and where should you be opening up new countries? Should you be one of the first in a new country or should you allow someone else to go in first and follow behind?

"What we do know about locations is that you need to be flexible and you need to be able to move quickly and make big decisions rapidly; you need strong planning skills to forecast where you're going in the future."

Managing risk, be it political risk, ethical risk and technical risk (quality) "should create a healthy tension around your buying, sourcing, ethical and technical teams to get the right solution for your brand," Ward believes.

Another issue intrinsic to sourcing location is that of lead times, with retailers taking decisions as late as possible in the season and then moving goods as quickly as possible through the supply chain.

"We want to have multiple drops, we're moving to multiple seasons, we've got extended ranges to cope with through the growth of online exclusives and through our international markets, and we want the ability to be able to make just-in-time decisions about what product we want and what volumes."

There is a growing trend for dual sourcing, with initial volumes coming out of the Far East and followed up with a near-shore location for replenishment. "We're also seeing retailers/brands fill a gap in their range by quickly getting a product out using a near-shore location and then if there's enough time in the season, follow up with volumes from the Far East. But it takes a lot of management."

Another way to manage risk is to compare suppliers against core product categories. For example, one supplier delivering 46% of blouses is over-exposure. Likewise, building strategic partnerships with key factories, fabric mills, trim or component suppliers can boost innovation, capacity management, and drive down costs.

And open-book costing helps provide visibility that "enables you to make decisions around when is the right time to start buying bulk fabric and help reduce costs."

Another tool to help increase efficiency is product lifecycle management (PLM) technology. "When you go through the number of critical paths you've now got to manage, the amount of tech specs, designs and sketches, increased number of ranges and the increased frequency of drops, the pressures on costs, lead times, stock management - a tool to help you manage all of that starts to look quite attractive.

"We live in a connected world therefore we need to work in a connected way. Technology can help encourage a seamless flow of communication, trust and transparency, thus reducing the possibility of unforeseen costly risks."

Sourcing trends and destinations
Delving deeper into sourcing trends, Adrian Elliott, president of apparel & footwear at Coats Plc, notes: "We're in a changing world, with fast-developing Asian economies, cost inflation, the growth of new global fashion brands. We'll see a huge rise in the use of digital technologies and the internet."

One of the biggest impacts, he believes, will come from the evolution of the Asia Pacific region from a production base to the world's largest consumer market. "What we consider to be the factories of the world today will actually become the consumers of the world, and many production bases will start producing for their home markets. This has a lot of implications, and it's already happening in China."

That said, rumours of the demise of China are "greatly exaggerated" given that 40-45% of world production still comes from the country. "Coastal China is relatively expensive, but China is huge, it's very integrated with great skills and capabilities. We do not see China disappearing from the supply chain, in fact probably quite the opposite as the Chinese market grows."

While "there are not many places left to move production," some sourcing "hotspots" include South East and South Asia, although Elliott sees "no real evidence yet of real volume in Southern Africa." But a bigger mix of Asian and near-market sourcing (North Africa and Central & Eastern Europe for Western Europe, and Central America for the US) will become more commonplace.

Also on the map, "we're seeing quite a lot in Pakistan for US brands, and Central China as businesses move away from coastal China, but transport costs are very high." He also backs Myanmar as "a dead cert" with the potential to export $5-10bn over the next 10 years.

Other trends include "significant consolidation and integration across the supply chain for increased speed to market," coupled with "process improvement, more lean programmes, more industrial engineering" to enhance productivity, "especially as production moves back in this direction."

A proactive approach to managing risk
Being innovative "inherently involves risk, it means doing something no-one else has done before," explains Jeremy Opperer, European technical operations director for product intelligence at Intertek. But if you are proactive and look for opportunities to manage risk and identify where the negative outcomes may be, this can be very positive."

Managing risks in the supply chain involves "looking at the processes behind a product" in order to identify where there could potentially be risk, assessing the risk (can it be designed out of the product?), and communicating any issues to the whole supply chain.

Information and data that can be used to identify risk can include feedback from customers who bought (or returned) a product, online product reviews, returns forms, fashion blogs and social media, actively tracking regulatory activity, looking at competitor and industry feedback, and following marketplace trends.

"Feedback can be fed directly into the concept phase, design phase, quality and safety management."

This information also needs to be fed back to suppliers "to help align your own teams and your supply base so you're all working in the right direction. You want to consider safety and quality issues as early as possible, and you also want to bring in your suppliers as early as possible; it's all about having a relationship and a partnership with your suppliers, and working with them early on to develop protocols, specifications, test certificates, quality assurance."

This dialogue and feedback will ultimately help identify weak or critical points in the supply chain. "You need to have trust in your supply chain, and trust that they will know how to do the right things - but you need to have a system in place to verify this," Opperer adds.

Agile logistics
"Change is coming and the industry must move with the times," explains Kevin Townend, non-executive director at Advanced Supply Chain and a 35-year veteran in fashion logistics.

He believes the key to avoiding an operational nightmare is for companies to "be prepared, expect the unexpected." He adds the fashion industry has to "grasp opportunities, but these opportunities are changing continuously. You don't know where your competitors are going to come from."

Citing the example of a warehouse fire at Primark in 2005, which destroyed GBP175m (US$280m) worth of stock in six minutes, a logistical nightmare was averted after a disaster recovery plan managed to divert 100 containers of stock daily to its stores via sea.

"The plan was based on being agile and assessing all possible risks, learning from other companies and by preparing for the unexpected," Townend said.

Another opportunity he sees is to "bring manufacturing back to the UK. We've got the skills, [but] I believe the government should be doing more to support the industry, more investment in academia, universities. Associations need to lobby the government and put the case for the clothing industry."

Navigating icebergs
There's a trade-off between high risk, low cost and value, agrees Professor Tony Hines, chair of marketing at Manchester Metropolitan University, whose research into the hidden costs in global clothing supply chains suggests "cost structure is a moving target and it's moving all the time."

His 'Iceberg Theory of Cost Comparison' shows that while there are perceived savings with off-shore sourcing, it also involves a number of hidden costs such as inventory storage, handling, movement, management time, plant visits, correction costs, lost sales, lost flexibility, and response time.

"First costs shouldn't be the first choice; that's the point of the Iceberg, look beyond first costs in your business," he told delegates. "You can manage your supply chain or you can leave it to chance. If you'd known about these hidden costs upfront would you have sourced from this supplier or what would you have done to mitigate this risk?"

Click on the following links to see what else was discussed at 'Fashion's New Frontiers - What's Next?'