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How the apparel industry is responding to global challenges

RiskGlobal sourcingConsumer goodsRetailLocal sourcingGlobal RiskLow Cost Country SourcingMarket VolatilityRisk MitigationSupply DisruptionBlog+-
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The apparel industry is one that truly spans the globe. Factories in Asia, the US and Europe produce millions of pieces of clothing every year, which are packaged, shipped and sold in every country.

 

But, that global outlook brings with it some difficult challenges for the procurement team charged with ensuring that goods are made at the right price, are delivered on time and meet the right standards.

 

Those procurement teams need to contend with a great deal of risk from volatility in the currency and commodity markets, to geopolitical unrest and the adherence to ethical standards within the supply chain.

 

2017 is only set to make those challenges more difficult to those functions, but some are already looking at what they can do to minimise the risks associated with the uncertainty of US president Trump and Brexit, which threaten to close established global supply chains.

 

Outside of that, the industry is also having to think carefully about rising labour costs.

 

As part of a plan to try and mitigate these risks, many clothing companies, including the likes of European high-street retailer Zara, have turned their attention to near-sourcing. The company has turned to sourcing its products close to its home market in a bid for greater control over products.

 

This, however, still comes with its challenges with uncertainty surrounding trade once the UK finally leaves the EU.

 

It is a similar story in the US where several US clothing companies have been explored near-sourcing to South America. But, again, the uncertainty that US president Donald Trump has brought with him into office, surrounding the trade agreements between the US and its neighbours have thrown this viability of this into doubt.

 

Indeed, while such firms my be eyeing up their neighbours, the US imports around 97.5% of its clothes from the far east, according to the American Apparel & Footwear Association. That is a situation that will not be changed in a hurry.

 

While some may be looking to near-sourcing, others are looking even closer to home through local sourcing.

 

British retailer ASOS recently announced that, in light of Brexit, it would focus sourcing efforts in the UK sourcing in an effort to protect itself from the fall in the value of the pound.

 

The big concern for ASOS will be around added costs and will have to consider where those costs are absorbed. Passing them on to consumers could see the company lose market share, telling suppliers they have to absorb them could see a breakdown in important relationships, while taking those costs onto its books is not viable over the long-term.

 

Changes are taking place in the apparel industry and procurement will have to ensure that it is at the centre of those business conversations to ensure that it can add its valuable voice to the decisions.

 

This article is a piece of independent writing by a member of Procurement Leaders’ content team.

Sophie Dyer
Posted by Sophie Dyer

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