Fast Fashion: The Need for Sustainable & Responsible Supply Chains in the Fashion Industry4/30/2021
AuthorAditya Nibhanupudi, RUSCA Blog Committee The fashion industry is one of the largest industries across the entire world. Currently, the global apparel market is valued around 1.5 trillion dollars with projections showing a rise to almost 2.25 trillion dollars by the year 2025. This is a clear indication of the amount of demand for clothing around the world and it’s on the rise. With this comes an immense amount of responsibility for supply chains to be able to support production requirements. Fast fashion is the mass production of clothing to appease a large audience. Therefore, with the industry currently saturated with fast fashion, the main focus has become cost minimization. It is important to understand the dangers of fast fashion and why companies should organize their supply chains in order to sustainably and responsibly source and produce materials. With demand for apparel so high, companies need to work more to meet the requirements. Therefore, one method companies use to alleviate the pressures is to resort to fast fashion. However, this does not mean that it is the right method. Fast fashion often uses “underpaid workers and [foregoes] using clean, innovative materials” (Wess). Companies often rely on labor from countries such as Bangladesh, Indonesia, India, and China to name a few. The reason for this is because they want to lower costs by paying their workers unlivable wages and according to a report by Oxfam, workers are paid less than $1 in hourly wages. Not only is the use of underpaid workers unethical, it also is detrimental to the long term sustainability of the industry. According to an apparel sourcing executive, “there are diminishing returns from the old model of moving continually from one low-cost sourcing country to the next'' (McKinsey & Company). This shows that for the sake of long term sustainability and ethics, companies should invest in research and technologies to improve the production of apparel and to support the workers across their supply chains. Not only will this ensure that supply chains are able to support the growing demand in the future, but it will also benefit the environment and its fight against climate change. A focus on sustainability in the fashion industry has the potential to be very beneficial to the environment and the planet. Currently, many fast fashion brands use cheap materials such as polyester and other synthetic fibers in order to manufacture their products. Unfortunately, the use of such materials can have serious adverse effects on the environment. For example, “polyester clothing items can take up to 200 years to decompose” (Wess). This means that the more clothing we consume, the more that ends up in the landfills, however the twist is, that waste will remain long after we’re gone. This has severe consequences and companies need to look to use more organic materials such as hemp or cotton, and then figure out a return logistics process to reuse the materials after a consumer is done with them. This can be done by providing the market with sustainable clothing and then incentivising consumers to return the garment back once they no longer have a use for it. That way consumers benefit and so do the companies with an alternative sustainable sourcing strategy. Overall, companies have a responsibility to their workers, the planet, and their consumers to provide sustainable and responsibly sourced products. Consumers are increasingly aware of the harmful effects of fast fashion and it is in the industry's best interest to comply. With the proper research, innovation, and leadership, a sustainable future for the fashion industry within reach. Sources: https://futureofsourcing.com/why-sustainable-fashion-is-key-to-supply-chain-sustainability https://whatshemakes.oxfam.org.au/wp-content/uploads/2017/10/Living-Wage-Media-Report_WEB.pdf https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashions%20new%20must%20have%20sustainable%20sourcing%20at%20scale/fashions-new-must-have-sustainable-sourcing-at-scale-vf.pdf https://www.statista.com/topics/5091/apparel-market-worldwide/#:~:text=The%20global%20apparel%20market%20is,the%20rise%20across%20the%20world. AuthorTrupti Valsangikar, RUSCA Blog Committee On March 18, 2021, after a unanimous Senate confirmation, Katherine Tai was sworn in as the new U.S. Trade Representative Ambassador. Tai, the first Asian-American and woman of color to serve as a trade representative, has experience serving as part of the House Ways and Means Committee trade counsel. The Ways and Mean Committee is the chief tax-writing committee for the House of Representatives and during Tai’s tenure, she served as the chief trade lawyer and helped to negotiate trade agreements with Canada and Mexico. During her current term, Tai expects to tackle trade issues between the United States and China, enforcement of deals with Mexico, and increasing supply chain resilience. In regards to the U.S. and China trade relationship, Tai says, “I know firsthand how critically important it is that we have a strategic and coherent plan for holding China accountable to its promises.” (Kapadia). Accountability for China will include fulfilling the trade requirements set out in the Phase 1 deal. Originally negotiated during the Trump administration, the U.S.-China Phase 1 deal included an agreement from China to start resolving issues surrounding American intellectual property theft and technology transfer concerns. The deal also had China set to buy $200 billion of U.S. goods and services over 2020 and 2021. Yet, by the end of 2020, China fell 40% behind the agreed-upon imports. Tai gave no specifics on how she plans on ensuring that China lives up to the Phase 1 deal beyond saying she would use existing enforcement measures (Lawder and Shalal). Tai also plans on addressing issues in a trade deal between the U.S. and Mexico. As a key negotiator in the U.S.-Canada-Mexico trade deal (also known as USMCA) in 2020, congressional Democrats believe that Tai will be well equipped to handle Mexican USMCA violations (Swanson). From Mexican factories breaking labor laws to the Mexican government creating electricity laws that would infringe on USMCA agreements, there are many problems that Tai will have to resolve. Back in the U.S., however, Tai, alongside the rest of the Biden administration, has plans to increase supply chain resiliency following the shortcomings during the COVID-19 pandemic. After President Biden’s order calling for a 100-day U.S. supply chain review, Tai said at her hearing, “Trade policy itself needs to be rethought and reformed with resilience and strategy in mind.” Especially for industries that were hit hard during the pandemic, some supply chain experts think carrying safety stock will be the new norm (Kapadia). With no specifics on how the various trade issues the United States faces will be handled, there is no way of knowing whether or not Tai will fulfill the promises she made during her confirmation hearing. Still, given her previous experience and knowledge, it seems like Katherine Tai will be well equipped to handle China and Mexico, among other issues. Sources: https://www.reuters.com/article/us-usa-biden-ustr/biden-ustr-nominee-tai-vows-to-end-trade-race-to-the-bottom-counter-china-idUSKBN2AP1AX https://www.supplychaindive.com/news/trade-chief-katherine-tai-biden-supply-chain-china-tariff/596019/ https://www.nytimes.com/2020/12/09/business/economy/katherine-tai-us-trade-representative.html AuthorNeha Avadhani, RUSCA Blog Committee The Ever Given, a massive container ship that was stuck horizontally in the Suez Canal, was refloated on March 29th, after six days of blocking traffic (Stevens). Despite the success of freeing the ship and unblocking the canal, experts warn that the repercussions will be felt for weeks to come. The Suez Canal accounts for roughly 12% of global trade, meaning every day the canal was blocked, $9 billion was held up (Stevens). Professor Stephen Flynn, founding director of the Global Resilience Institute at Northeastern University predicts that it will take at least 60 days until impacts are managed and things start to go back to normal (Stevens). Now as traffic is freely moving through the canal, the lasting effects are being felt, like port congestion. Not all ports can handle large container ships, which usually travel to specific ports like Rotterdam where smaller ships can take containers to further destinations. This means smaller ports cannot absorb the excess shock and scheduling issues caused by the Suez Canal blockage. Furthermore, many ships are now not in the right place for their next scheduled journeys. This is made worse for companies that decided to detour their ships around the Cape of Good Hope in South Africa to avoid the Suez Canal, adding a week of travel time. The detour slows the arrival of those containers, delaying when they are emptied and refilled for another destination. This drives up costs, potentially leading to price increases that reach consumers, and also worsens the growing shortage of shipping containers in Asia caused by the COVID-19 buying boom last year. This could mean delays in retailers getting consumer goods like televisions, furniture, and clothes, as well as automobile components and other key parts of assembly lines. William Lee, chief economist at the Milken Institute, says “This is a warning about how vulnerable our supply chains are and how the just-in-time inventory techniques that have been so popular have to be rethought” (Veiga). Unfortunately, a challenge of just-in-time (JIT) systems is that they leave assembly lines halted when necessary parts do not arrive when they are expected. Supply chain issues that lead to the shut down of assembly lines have the most severe impacts, including financial ones. Pawan Joshi, an executive at E2open, says that the financial impacts on downstream production are sizable because, for example, “the delay of an inexpensive but crucial automotive part en route from China can prevent the sale of the entire vehicle in Germany” (Segal). Being aware of the downstream impacts of such delays, staying ahead of them, and/or quickly correcting for them is becoming more and more essential for global companies. The Suez Canal traffic jam highlights the importance of investing in technology to monitor risks in real time. It is no longer enough to just onboard vendors and then do annual assessments on them, companies need data driven, risk based evaluation systems. They also need to make it possible to make changes at any moment due to an unexpected impact on the productivity of a supply chain. Brian Alster, general manager for third party and risk and compliance for Dun & Bradstreet, underscores this, saying “The Suez Canal incident gives us yet another reason for businesses to invest in data and technology to create an agile, geographically dispersed supply chain that can quickly pivot during unexpected events” (Segal). Sources: https://www.cnbc.com/2021/03/29/suez-canal-is-moving-but-the-supply-chain-impact-could-last-months.html https://www.usatoday.com/story/money/2021/03/29/suez-canal-ship-free-but-supply-chain-trade-issues-remain/7049417002/ https://www.forbes.com/sites/edwardsegal/2021/03/31/impact-of-suez-canal-crisis-on-companies-around-the-world-could-last-weeks/?sh=4edba33442d8 AuthorEmily Hsiao, RUSCA Blog Committee Even before the events of this past year unfolded, logistics firms were already putting additional emphasis on the importance of data and analytics. For the last several years, the World Customs Organization’s (WCO) theme on International Customs Day has encouraged customs agencies to look into new technology and data analysis. Gartner even found that between 2016 and 2019, approximately 25 billion dollars were invested into in intelligence and analytics, representing a 50% increase over 3 years (Haurie) As global supply chains were thrown into disarray, access to accurate and real-time data became the crucial factor in adapting to the volatility. In fact, a study conducted by Wakefield Research in March of 2021 found that a staggering 96% of procurement leaders believe that agility is more important than cost savings, and that 199 out of 200 noted that their company would upgrade supplier data and intelligence to achieve this agility (Brown). While stress that COVID put on our global supply chains did expose some of its weaknesses, it also highlighted the strength of firms who have existing data analytics systems or were able to quickly put them into place. Data analytics makes the supply chain system more efficient. It gives companies access to real time supplier information so they can construct more accurate demand forecasts, route optimization, inventory management, and better detect fraud. Firms with a continuous stream of real-time supplier data have been able to predict demand and distribute their supplies. (Torres) For example, when the pandemic hit, CVS teamed up with WorldQuant Predictive (WQP) to find new data sources to plug into its predictive models. As Robert Molnar, the director of predictive retail and consumer packaged goods at WQP noted - “this pandemic served as a catalyst for companies to realize that they need to become a bit more data driven–or in many cases a lot more data driven, because the supply chain suffers greatly if not” (Woodie). Sources: https://www.thomsonreuters.com/en-us/posts/corporates/data-analytics-supply-chain-management https://www.datanami.com/2021/03/29/the-data-proxy-that-let-cvs-see-around-the-covid-corner/ https://www.supplychaindive.com/news/data-and-analytics-gartner-trends-2021/597028/ https://www.supplychaindive.com/news/supplier-data-procurement-agility-survey/597285/ https://www.supplychaindigital.com/procurement/data-will-be-key-stronger-supply-chains-2021 AuthorAditya Nibhanupudi, RUSCA Blog Committee Over the years, supply chain management has been greatly revolutionized with the implementation of new technologies. With the introduction of big data, artificial intelligence, and the Internet of Things, companies have been able to create more efficient processes and leverage data better. However, one of the biggest challenges currently is supporting all of the devices that are connected to the internet. 4G limits the speeds at which large amounts of data is transmitted across networks. However, 5G will serve as the foundation for further development of current systems in place and will enable supply chains to enter a new era of visibility, agility, and automation. Supply chains are becoming increasingly complex with a large network of companies that rely on each other for their business. With that, there comes a need for increased visibility in order to track and monitor what is going on. With 5G, increased speeds and lower latency creates the opportunity to track where inventory is in real-time. This allows critical information such as delivery and shipping times to be more accurate and can improve operational efficiency. For example, “Just-in-time manufacturing can track parts moving to the assembly line in real time compared to simply relying on the scheduled arrival” (Wollenhaupt 2019). The use of 5G enabled devices such as sensors and tracking devices, will drastically improve visibility in industries that ship in high volumes. Ultimately, the ability to gather, store, and monitor larger amounts of data, faster creates a critical advantage in the end-to-end supply chain. In addition to increased visibility, 5G has the potential to increase turnaround times. Current inventory and order management efforts rely heavily on the flow of information. The order process can become slowed down when there is a vast amount of data flowing through and can be further hindered with errors and lag time. However, with 5G, these processes can be optimized. For example, a British online supermarket company attempted to optimize the processes previously discussed. However, they discovered that in order to do so, they would require a network with a “higher bandwidth, speed and latency capabilities…”, and through internal testing, learned that with 5G, they could assemble “a 50-item order list in under 5 minutes, reducing time spent in packaging and processing delivery” (Gautam 2020). This equates to faster turnaround times in order processing and impacts the overall supply chain by optimizing the rate at which critical processes are performed. With the capability of supporting more than one million devices on a 5G network, companies can take advantage of this and invest in automation. For example, 5G can allow for a fully autonomous fleet with real-time data processing in order to improve safety and coordination. In addition, manufacturers and distributors can use robots and other technology in conjunction with 5G networks to fully automate their processes. For example, The Port of Livorno, one of the largest ports in Italy, partnered with 5G provider, Ericsson. They leveraged “unmanned ground vehicles powered by automated remote control via cloud and distributed computing…”, and they were able to increase “productivity for about $2.95 million in annual estimated savings” (Gautam 2020). This shows that automating processes with 5G has major benefits and investing in the technology is highly advantageous. Overall, 5G technology has the potential to revolutionize the way business gets done. Although the technology is still being developed, companies should prepare to develop the infrastructure necessary to integrate the network in order to gain a competitive advantage. Sources: https://www.forbes.com/sites/forbestechcouncil/2020/10/22/how-will-5g-shape-the-next-generation-of-supply-chains/?sh=415e70614211 https://www.supplychaindive.com/news/5g-transform-logistics-supply-chain/565491/ |
EditorRyan Salamante Archives
April 2024
Categories |