Uncertainty can impact every aspect of the supply chain

Uncertainty can impact every aspect of the supply chain

Uncertainty might sound like a rather nebulous concern for international clothing brands considering their sourcing, but it can be a very tough problem that undermines operational efficiency up and downstream.

It is an especially large challenge for brands who are venturing out to source apparel from emerging sources such as sub-Saharan Africa or Myanmar among others, Dr Patrick J Conway, department chair of economics at the University of North Carolina, told just-style.

"When you move into a country newly involved in apparel product [as opposed to established markets like China and Bangladesh] with not much history of successful production, with no reliable power supply and poor infrastructure, you are taking a chance there," stresses Dr Conway, who authored the 2010 World Bank report 'Incentives, Exports and International Competitiveness in Sub-Saharan Africa: Lessons from the Apparel Industry'. Crucially, this uncertainty can impact every aspect of the supply chain including response time. 

Perhaps, having a "mix of China and other new production destinations" to source apparel could help fight uncertainly, Dr Conway suggests. Spreading sourcing across countries could help in the event one country fails to deliver or, if rules in one production country change, production can be moved to another country, he says. 

Dr Conway's opinion is backed by a separate report from Dr Sheng Lu, assistant professor of the department of textiles, fashion merchandising and design at the University of Rhode Island, also in the US. "US fashion companies are not moving away from China but are actively seeking supplementary sourcing destinations," says Dr Lu in his 'US Fashion Industry Benchmarking Study', published in June 2015.

It was based on replies from brands asked how their China sourcing volumes or value from will change in the next two years: 43% said there would be no change; another 47% expected sourcing value or volumes to decrease to a slight degree; while only 7% said they expect to significantly decrease sourcing from China, according to the report. 

Logistical challenges

In seeking alternatives, brands are turning to countries such as Kenya or Myanmar where they hope to benefit from a cheap labour pool. Which is all well and good – but logistical challenges most certainly await.

Kenya's Export Promotion Council's newly appointed chairman and former chairman of the African Cotton and Textile Industries Federation, Jaswinder Bedi, told just-style that "logistics and speed to market" are among key challenges in sourcing from sub-Saharan Africa. However he was quick to add that the region is well poised to overcome these difficulties.

A lack of raw materials is another challenge in emerging markets like Kenya, according to consultants McKinsey & Co's April 2015 'Sourcing in a volatile world: The East Africa opportunity' report. Although Kenya specialises in supplying high-volume bulk basics of good quality, the lack of a local upstream industry is an issue, the report says. This has made companies rely on fabric imports from China and 70% of chief purchasing officers interviewed in the report say the lack of upstream industry is posing a "high to very high challenge".

Upstream industry

This issue can deter some brands from sourcing in such countries. And, if they do, Canada-based Source My Garment, a consulting firm specialising in ethical fashion and working with a number of small-and-medium-size factories based in India, would understand.

The firm's executive manufacturing consultant Adila Cokar agrees that the absence of an upstream industry can be one of the biggest challenges in an emerging sourcing location. As a result, her company has chosen to work with factories in India where home-grown organic cotton is used in production. "Lots of my clients are looking for better quality" and the fact that India has its own supply of organic cotton makes our job easy, Cokar notes.

Notwithstanding such challenges, new sourcing destinations will continue to expand production capacity, even if this growth is slower than brands would wish.

"Garment sourcing from sub-Saharan Africa is going to increase from 0.3% to 2.8% by 2020," according to the McKinsey & Co report and Bedi agrees that "global retailers are looking to re-organise their supply chains with east Africa featuring as a supply chain partner." A "vertically integrated industry is needed for the region," for it to realise the potential of this demand, he stresses.

Dr Conway suggests that an insurance scheme sponsored at the national government level in sourcing countries would help brands deal with challenges in emerging sourcing locations.

"It could be done by a country or a group of countries – and for example if one country in a group fails to deliver, production can be done in another country within the group, helping to reduce uncertainty in emerging garment sourcing locations," Dr Conway explains. He argues that Asian countries are already doing it at private level but it would be "better to have a state-sponsored insurance for emerging garment sourcing destinations." 

Sustainable pricing

Of course, other risks with emerging locations include reputational issues such as sustainability, ethical sourcing and safety.

Dr Mark Anner, an associate professor on labour and employment relations at the Penn State University and director of the Centre for Global Worker's Rights, told just-style: "The question to ask when considering sourcing from locations such as east Africa and Myanmar is: 'Do the prevailing wages cover worker living expenses?' If prevailing wages do not cover living expenses, one might expect problems such as high absenteeism due to health problems related to poor nutrition and labour unrest," he says adding: "These would be risks to consider.

"Also, countries that compete with prevailing wages that are much lower than living wages might also have buildings that are not up to international standards, because monthly building costs are also a part of operating costs."

Therefore, Dr Anner says pricing practices should also cover the cost of safe buildings. "I think recent experiences in countries like Bangladesh and discussions at the International Labour Organization on 'decent work in global supply chains' indicate that brands need to think more carefully about sustainable pricing and sourcing practices" especially in emerging global sourcing destinations. 

To read other articles in our briefing on 'Reducing risk in the apparel supply chain,' click on the links below:

Reducing risk – Why preparation is key when switching suppliers

Reducing risk – How detailed planning helps avoid disruptions

Reducing risk – How software can help supply chain visibility