Blog: Hannah AbdullaAre low-labour rate countries being victimised by their customers?

Hannah Abdulla | 30 September 2019

There is a common belief that low-labour-rate countries are forever being victimised by their customers, who force the factories to accept unacceptably low FOB (free on board) prices. An analysis from just-style suggests this has never made sense, less so now than ever before.

Continuing with the sourcing theme, US clothing brands and retailers mulling a sourcing switch to Vietnam to avoid the ongoing tariff war with China need to sharpen up – because doing business with Vietnamese trading partners is very different from working with Chinese suppliers. Also, Vietnam's garment-makers have been worrying that a draft revised Labour Code will reduce their competitiveness – but four months after the draft was published there remains a strong chance it will never be enshrined into law.

In neighbouring Cambodia, the garment industry has had a long run of good growth – but could this come to an end pending reviews by the EU and US into the country's access to key trade benefits?

In India, a five-year intervention campaign to protect workers, including those employed in the clothing and textiles industry, has been effective in reducing modern slavery, suggests a new report.

And while the fashion industry recognises the need to move toward a more sustainable model – from sourcing to finished product – it's often a difficult balancing act to embrace these issues and still deliver efficiency and profit. Industry executives suggest that starting small, setting realistic goals, shared experiences and creative solutions are all part of the shift.

A coalition of over 200 investors is calling on companies to pay closer attention to their supply chains and play their part in stopping the destruction of the Amazon.

Global specialty retailer American Eagle Outfitters (AEO) has unveiled a series of new sustainability goals, including a plan to be carbon neutral by 2030 and a 30% reduction of water usage in its jeans production by 2023 while French luxury goods group Kering is to offset its annual Greenhouse Gas (GHG) emissions from 2018 as part of a bid to make the entire group carbon neutral within its own operations and across the entire supply chain. And Japanese sportswear firm Asics has revealed plans to reduce carbon emissions in the dyeing process of its footwear insoles by 45% from 2020 as part of its new climate targets.

On the technology front, clothing companies can reap rich rewards from using a product lifecycle management (PLM) system, with faster time-to-market one of the clearest advantages of using these tools. And major advances in the software's capabilities now make it the core data hub that brings together planning, design, sourcing, production, logistics and replenishment.

VF Corp has targeted double-digit earnings growth through to 2024 and outlined a new strategic plan that will see the apparel giant distort investments to Asia, prioritise digital, and optimise its portfolio with a focus on its biggest brands.

On the retail front, Marks & Spencer has confirmed the departure of its head of supply chain for clothing and home, Gordon Mowat, as it continues to look to return the division to profitable growth while value fashion retailer Primark has confirmed plans it is planning to grow its presence in the US and that it will look at closer locations to source from for the US market. And the board of the John Lewis Partnership is reported to be preparing a restructuring drive that will bring its two retail chains closer together, resulting in potential job losses.

In other news, online retailer Boohoo has posted a 43% jump in first-half sales to GBP564.9m (US$702.1m) at a time when many UK retailers are battling slow-to-no sales growth and US sportswear retailer Nike Inc has reported a 25% jump in first-quarter profits to US$1.4bn driven by strong revenue growth.

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