The study was based on a survey of 64 sourcing executives from vertical apparel retailers, hybrid wholesalers, and sportswear companies, with a total sourcing volume of $100 billion. Below are the key findings of the report:
- More sourcing executives now focus on process improvements in their companies, such as sustainability and transparency (56% of respondents), digitalization of sourcing process and related areas (45% of respondents), consolidation of supplier base (42% of respondents), end-to-end process efficiency (41% of respondents) than shifting sourcing countries (20% of respondents). Related, as cost gaps between sourcing destinations are narrowing, apparel companies are shifting from minimizing the price of supply to a focus on customer-centric, agile product development to meet customer demand. Digitalization, such as intelligent sourcing, is one of the most promising areas.
- Affected by the on-going U.S.-China tariff war, two-thirds of surveyed companies expect their overall sourcing cost to increase in the years ahead, including 37.5% expecting a 2-4% increase and 25% expecting 1-2% increase. However, only 3.1% of respondents expect a significant cost increase (>4%).
- Echoing the findings of other recent studies, respondents plan to source relatively less from China through 2025. Bangladesh, Vietnam, Myanmar, and Ethiopia are among the top alternative sourcing destinations. Meanwhile, more companies are considering near-sourcing. The biggest challenge, however, is limited fabric production capacity, NOT higher wages.
- Sustainable apparel sourcing is regarded as a must—70% of EU companies and 35% of North American companies surveyed say “responsible and sustainable sourcing was on the CEO agenda.” Top challenges to achieve sustainable apparel sourcing include “no common, objective industry standard on sustainable sourcing”, “consumers lack a clear picture of what sustainable fashion is all about”, “mixed influence of the sourcing function in company-wide sustainability strategy.” Further, more companies prioritize environmental-sustainability initiatives (issues such as sustainable material, recycled material, traceability, and packing) than social sustainability initiatives (issues such as) fair on living wage and decent work). Additionally, respondents hold competing views on whether sustainability will increase sourcing costs overall. Around 58% of respondents see additional costs for sustainable sourcing between 1% and 5%.
- Sustainability will play an increasingly important role in how apparel companies select their suppliers. Some surveyed apparel brands and retailers say they have upgraded their supplier ratings over the last couple of years, moving away from viewing sustainability simply as a compliance-based hygiene factor and instead embracing criteria that are more sophisticated.
- There is also a need to shift from the transactional-based, season-by-season and the low-commitment relationship between apparel companies and their vendors to strategic partnerships between the two. Around 73% of respondents plan to consolidate their supplier base by at least 5% over the next few years. Related, apparel companies increasingly empower suppliers for self-auditing with tools like the Higg Index.
Statistics from the Public Radio International (PRI) show that garment workers in many parts of the world earn much less than the national average. Of the twenty-one countries investigated by PRI, the monthly wage for garment workers range widely from $1,864 (USA) to $194 (Sri Lanka).
However, a higher wage level in absolute term does not necessarily mean a more decent pay. For example, while garment workers in the US apparently earn much more than their peers in other parts of the world, the wage level nevertheless was only 51 percent of the U.S. national average wage. Likewise, while garment workers in Honduras earn only $650 each month, this amount was approximately 107 percent of the national average wage in the country.
For more information about the wage level for garment workers around the world, please explore the Fair-fashion Quiz created by PRI.
Video Discussion Questions:
#1 Why do you agree or disagree with the video that automation will post a significant challenge to garment workers in developing countries such as Bangladesh? How should policymakers react to the challenges?
#2 Can automation be a permanent solution to the social responsibility problem in the garment industry?
#3 In your view, how will automation affect the big landscape of apparel sourcing and the patterns of world textile and apparel trade?
#4 Why or why not do you anticipate a sizable return of apparel manufacturing to the United States if apparel production can be largely automated?
Additional reading: The robots are coming for garment workers. (WSJ, 2018)
Please feel free to share your views and join our online discussion!
This video is a great reminder of the impact of our fashion apparel industry, in particular through trade and sourcing. One key learning objective of FASH455 is to help students get aware of those critical global agendas that are highly relevant to the textile and apparel sector.
Discussion Question: After watching the video, do you have any new thoughts about how you can contribute to the building of a better world as a FASH major?
The 2018 U.S. Fashion Industry Benchmarking Study is now available.
The report can be downloaded from HERE
Key Findings of the study:
I. Business environment and outlook in the U.S. Fashion Industry
- Overall, respondents remain optimistic about the five-year outlook for the U.S. fashion industry. “Market competition in the United States” is ranked the top business challenge this year, which, for the first time since 2014, exceeds the concerns about “increasing production or sourcing cost.”
II. Sourcing practices in the U.S. fashion industry
- U.S. fashion companies are more actively seeking alternatives to “Made in China” in 2016, but China’s position as the No.1 sourcing destination seems unlikely to change anytime soon. Meanwhile, sourcing from Vietnam and Bangladesh may continue to grow over the next two years, but at a slower pace.
- U.S. fashion companies continue to expand their global reach and maintain truly global supply chains. Respondents’ sourcing bases continue to expand, and more countries are considered potential sourcing destinations. However, some companies plan to consolidate their sourcing bases in the next two years to strengthen key supplier relationships and improve efficiency.
- Today, ethical sourcing and sustainability are given more weight in U.S. fashion companies’ sourcing decisions. Respondents also see unmet compliance (factory, social and/or environmental) standards as the top supply chain risk.
III. Trade policy and the U.S. fashion industry
- Overall, U.S. fashion companies are very excited about the conclusion of the Trans-Pacific Partnership (TPP) negotiations and they look forward to exploring the benefits after TPP’s implementation.
- Thanks to the 10-year extension of the African Growth and Opportunity Act (AGOA), U.S. fashion companies have shown more interest in sourcing from the region. In particular, most respondents see the “third-country fabric” provision a critical necessity for their company to source in the AGOA region.
- Free trade agreements (FTAs) and trade preference programs remain underutilized in 2016 and several FTAs, including NAFTA and CAFTA-DR, are utilized even less than in previous years. U.S. fashion companies also call for further removal of trade barriers, including restrictive rules of origin and remaining high tariffs.
The benchmarking study was conducted between March 2016 and April 2016 based on a survey of 30 executives from leading U.S. fashion and apparel brands, retailers, importers, and wholesalers. In terms of business size, 92 percent of respondents report having more than 500 employees in their companies, while 84 percent of respondents report having more than 1,000 employees, suggesting that the findings well reflect the views of the most influential players in the U.S. fashion industry.
For the benchmarking studies in 2014 and 2015, please visit: https://www.usfashionindustry.com/resources/industry-benchmarking-study