There is a lot of wisdom in this Chinese saying: 一分 錢 一 分 貨 (yī fēn qián yī fēn huò). Literally translated it means “one cent gives you one cent's worth of merchandise,” but what it really means is “you get what you pay for.” Recently, I had an opportunity to participate in a panel at the Sourcing at MAGIC Show where Bill McRaith (Chief Supply Chain Officer, PVH Corp.), Mary Cally (Vice President, Manufacturing and Sourcing, Kahn Lucas), and I discussed how brands and retailers are exploring how they can improve, change and implement innovations in their supply chains to work toward an affordable yet more accountable fashion industry.
Low-cost fashion and apparel production across the globe comes at a price to the environment and the people who work in the factories. If we are focused only on the cheap price, then ultimately we will pay the price in many different ways…. We will get what we pay for.
Where did it start?
Who is responsible for “chasing the cheapest?” It’s hard to say who actually started the cycle, whether it was brands/retailers, consumers, or suppliers/factories. Corporations are competitive and margin driven; yet people have come to expect cheaper products. While costs continue to increase, retail price points are staying the same, making it all the more difficult to be competitive and profitable.
Buyers from brands and retailers are part of the problem, demanding cheaper prices and faster delivery, while making last minute changes; often design, sourcing and compliance teams are not adequately communicating internally. Consumers are part of the problem, saying they want goods produced in safe factories that treat and pay their workers well, but in actual practice, they are not willing to pay more for what they buy. Factories/suppliers are part of the problem because they often are unwilling to lose positions, so they take orders even when they do not have the capacity. In such conditions the “right” price may be achieved, but something has to give. Corners are cut, and quality (e.g., less expensive fabric, reduced ornamentation and stitching), safety (e.g., structural integrity, electrical wiring issues, and compliance (e.g., long work hours, illegal subcontracting) are sacrificed.
Fifteen years ago the primary factors that buyers focused on when sourcing from factories and other suppliers were price, quality, and lead time. Today, those same three factors are important, but increasingly buyers have begun to acknowledge that social compliance cannot be overlooked. Within the near-term (3-5 years) ensuring that suppliers are socially compliant will be recognized as a necessity when making sourcing decisions. Today, we also are seeing a number of buyers pursuing vendor partnerships, efficiency improvements, and environmental compliance, and in the near-term more and more buyers will come to view longer-term, more collaborative sourcing relationships with their suppliers as imperative. Helping factories implement more efficient manufacturing practices and more fully abiding by environmental regulations also will be required.
Continuing labor and input cost escalation, particularly in Asia, will make these factors all the more imperative. Risk assessments also will grow in importance, due to multiple concerns regarding transparency, traceability, and accountability, as emphasized by demands from NGO’s, consumers, and governments. Brands and retailers also will be looking to source from fewer suppliers to maximize impact, as well as to ease development costs with fashion sensitive buyers. Cost management will be the new norm due to rising labor, material, and energy input costs.
Buyers already are demanding increased transparency in supply chains, evidenced by recent events on the safety side (i.e., Bangladesh) and the creation of the Alliance and Accord. They also are seeking increased engagement with facilities in training, particularly with regard to health and safety issues. Increased movement to attain sustainability in the supply chain is occurring and will intensify. For example: remediation efforts with buyers and facilities, collaboration with trusted partners (e.g., facilities, NGO’s, government players), and investments in technology to drive data collection and analysis of KPIs (key performance indicators).
Sourcing for an Accountable Future
一 分 錢 兩 分 貨 (Yī fēn qián liǎng fēn huò). Literally translated this saying means “one cent gives you two cent's worth of merchandise,” but what this saying actually means is “high quality at a great price.” If design, sourcing and compliance people within corporations are on the same page about expectations and communicating about what is feasible; if buyers are partnering/collaborating more with factories through extended relationships; and if consumers can learn the need for adjusting both their price expectations and purchasing practices, “high quality” actually may be achieved at a great, affordable price in safe and sustainably-run factories.