Blog: Leonie BarrieWeak merchandise margins blamed on sourcing woes

Leonie Barrie | 20 June 2016

A lack of speed in the apparel supply chain is being blamed for weaker merchandise margins, with significant structural changes needed to create a more consistent, faster and efficient sourcing model.

The diagnosis comes from analysts who believe the fashion retail industry requires improved execution out of design and sourcing functions, as inventory is turning too slowly and design processes and lead times are too long.

An ambitious plan is underway to try to double apparel exports and production in Honduras, as part of a new $3.4bn investment to transform the country into Central America's largest synthetics and value-added sportswear supplier.

But challenges include training, financing and energy issues – although Grupo Elcatex is hoping to tackle this with a new biomass power plant that will supply electricity to its San Pedro Sula facility and third-party manufacturers.

Republican presidential front-runner Donald Trump has threatened to slap steep tariffs on US imports from China should he be elected. A closer look suggests Chinese exporters would be battered not beaten, and such a policy would simply accelerate the move out of China that is already underway.

Japanese international trading house Marubeni Corp has teamed up with US based consultants to help the Angolan government with long-term plans to restore its clothing and textile sector.

Cotton spinning could also be about to enjoy a revival in the UK with the imminent opening of a new mill in the north of England, which claims to be the most modern in the world and will spin the highest quality yarns for high-end apparel.

Increasing requirements by apparel brands and retailers for specialist quality assurance, compliance and supply chain security services are fuelling the strong double-digit growth of Omega Compliance, a standalone subsidiary of sourcing specialist William E Connor & Associates Ltd. The company’s managing director tells just-style why its momentum on responsible sourcing shows no sign of slowing down.

But businesses sourcing cotton from many of the world's largest producing countries still face significant risk of association with child labour – and a new map highlights where the biggest challenges lie.

The challenge of child labour is also one of the issues facing buyers and investors looking to Myanmar in search of new sourcing opportunities.

Final results of a multi-year study into the health of Cambodian garment workers has found that the incidence of anaemia – which can lead to chronic fatigue and low productivity – not only remains higher than in the population at large but is also on the rise.

Cambodia's Ministry of Labor is also understood to have instructed employers and unions in the country's garment and footwear sector to begin preparations for the next round of minimum wage talks.

And in other news, the Accord on Fire and Building Safety in Bangladesh is calling for faster remediation following four factory fires; US yarn maker Unifi Inc is to expand its Repreve recycled polyester to Sri Lanka; and a report highlights long-term shifts in China’s apparel and textile exports to the US.

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