A Stitch in Time: Sewing up the Garment Supply Chain

November 21, 2019 | Supply Chain Strategy

As sustainability becomes a major concern for companies around the world, the garment industry — which generates 92 million tons of solid waste every year¹ — can no longer be overlooked for the negative environmental impact of its highly-fragmented supply chain. While industry leaders are redoubling their efforts to increase the visibility of the entire garment supply chain, small and mid-sized companies operate in a supply chain that’s far too massive and distant for them to manage. This leaves retailers and consumers uninformed about how raw materials are sourced, how garments are manufactured and who are the primary suppliers running the factories.

Digitally Transforming the Garment Supply Chain

The primary focus for the garment industry is shifting toward addressing the absence of standardization in sourcing while devising means to maintain a traceable and transparent supply chain. About 73% of used garments either end up in landfills or are incinerated². This is a consequence of a disconnect between suppliers, manufacturers and consumers, which leads to disparities between the type of garment supplied and the type demanded by the customer. Short fashion cycles and highly volatile demand also make tracking production difficult and leads to wastage throughout the supply chain.

Brands are thus investing in digitization and mapping real-time data to handle scenarios that require quick reaction times. Furthermore, efforts are underway to develop demand-led models based on consumer insights, which should help fashion brands cut down on over-production. However, this shift toward digitization is only seen with major brands that can bear the required technology spend. Meanwhile, smaller players are still far from being able to digitally capture and leverage consumer insights.

Big Brands Pave the Way for Sustainable Procurement

The three biggest challenges in procuring sustainable material are availability, cost and quality. In order to incorporate and scale a sustainable procurement process, brands require a substantial amount of capital expenditure, in addition to skill, capability and integration that extends across departments, from design to sourcing. Currently, only major brands have announced green initiatives on a large scale.

H&M announced that it has already reached 95% sustainable supply and will transition to 100% sustainable cotton by 2020³. The company is addressing the challenge by working backward in the supply chain, allowing customers to reach out to the brand first with used clothes — which can be from any brand and in any condition — to create a completely recycled clothing line. Such reverse logistics gets customers involved with the brand and gives them a sense of association with the brand’s green initiatives. Another global brand, Adidas, is ramping up its initiative to use only recycled polyester in its shoes by 2024.

Sustainable Sourcing: Short-Term Investments for a Long-Term Solution

Sustainable sourcing would involve extra initial costs, but these are offset by the long-term benefits of reducing waste and minimizing unsold merchandise. One approach being implemented by brands such as Zara and Bershka involves sourcing smaller batches of material at the start of the season to gauge customer popularity before deciding on production volumes. Brands are also implementing demand-based merchandise using digital marketing tools and AI to make their supply chain agile and flexible.

Nearshoring is emerging as a process to further enable sustainability by minimizing complexity in the supply chain. The global fashion cycle shortens every season, with fads that previously lasted six months going out of style in six weeks. Brands are increasingly working with garment manufacturers in locations closer to their consumer-base to cut down on lead times and to counter rising labor costs in traditional outsourcing destinations. For instance, brands from the United States now prefer Mexico as a garment manufacturing hub rather than China.

With More Sustainability Comes More Transparency

Modern customers want to make informed decisions about their purchases. More than ever, shoppers want to understand the risks posed by a product and avoid making purchases that would adversely impact the environment. While modern garments merely mention the name of the country where the product originated, sustainable brands are aiming for a greater level of transparency. By investing in RFID and blockchain technology, brands are finding new ways to maintain internal and external transparency and traceability for their supply chains. In the future, one can expect brands will share their list of suppliers with customers, while also informing them about the ecological footprint of the product.

Brands are reducing the number of suppliers they work with in an effort to consolidate their operations, making their supply chain simple and more efficient, with quicker production. The social and sustainability scores of suppliers are now being seen by brands as one of the key differentiating factors on deciding partnerships, leading manufacturers to refine their own sustainability practices.

Conclusion

The transformation of the garment supply chain can only be brought about by making sustainable sourcing an integral part of a company’s culture. Incentivizing sustainable behavior at a global level across the garment industry will foster systemic change. For a brand to call itself sustainable, it needs to redesign corporate culture, create accountability and foster cross-functional collaboration. Addressing all these changes may appear to be far-fetched because of the industry’s highly-fragmented nature, but thoughtful product development, co-investment and long-term planning, along with robust measurement and management of performance, can help the garment industry move effectively toward its green goals and toward achieving sustainable supply chain.

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