• Japanese
  • Korean
  • Chinese
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Risk analysis of the apparel supply chain in 2012

The supply chain has recently faced a perfect storm. This storm was composed of three cost elements:

  • A violent increase in the price of cotton, hitting US$1 per lb in late 2010
  • Considerable direct labour wage increases in low cost countries such as Sri Lanka and Bangladesh, allied to inflationary wage increases in manufacturing giants, such as India and China
  • A tripling in the cost of shipping a container from Shanghai to Rotterdam, from below US$1,000 in late 2008, to over US$3,000 in late 2010
  • It's easy to refer to examples like these, and reasonably easy to understand that they must have serious effects on the supply price (the retailer's buy cost) of apparel. But it is not so obvious to calculate the effect that these changes have (as every supply chain purchase contract will have a different set of variables) and there are quite a few variables.

In this first-edition report, just-style has created six supply chain cost models to illustrate the differences between the supply price from different countries and the effect of changes to those cost elements. These cost models allow you to see what effects certain scenarios have on a typical supply chain.

The scenarios include:

  • Using local materials
  • A doubling in fibre prices
  • A doubling in wages
  • A trebling in shipping
  • A combination of all, the “perfect storm”

This report considers what is happening and is likely to happen in the apparel supply chain in the areas of:

  • Cost
  • Risk (incl. risk assessment and “what if” scenarios)
  • Time
  • Responsibility
  • Environment
  • Finance

The cost models have been created to explain the effect on the final retail price of manufacturing in different parts of the world.

A risk analysis has been made up of sourcing from different parts of the world.

The impact of time and the supply chain critical path are all considered and modelled.

The argument for responsible sourcing is measured against both cost and concern for the environment, with examples of recent practices.

The effect on both the buyer and the supplier of different ways of financing the supply chain is explored.

This report is an essential resource for anyone involved in:

  • Managing supply chains
  • Sourcing apparel garments and materials
  • Managing business costs in the apparel industry
  • Analysing and forecasting risk scenarios and trends in their business

Table of Contents

Chapter 1 - Costs of sourcing

  • Introduction
  • Base cases
  • Using local materials
  • Perfect storm cost increases, fibre
  • Perfect storm cost increases, direct labour
  • Perfect storm cost increases, shipping
  • Perfect storm cost increases, triple whammy
  • More recent developments

Chapter 2 - The issue of time in the supply chain

  • The supply chain
  • The original argument of cost and time
  • Quick response
  • Electronic data interchange (EDI)
  • The product life cycle, manufacturing, shipping and distribution
  • The product life cycle, product development
  • The fast fashion product life cycle
  • The Zara time model

Chapter 3 - Risks in the supply chain

  • The nature of apparel supply chain risks
  • Cultural and linguistic risks
  • Climatic risks
  • Political and economic risks, the Arab Spring revolutions
  • Political and economic risks, the Indian sub-continent
  • Political and economic risks, Africa
  • Risk analysis model

Chapter 4 - Balancing cost, time and risk

  • The balanced supply chain
  • Over emphasis on cost alone
  • Collaborative supply chains
  • Bringing it back home

Chapter 5 - Corporate social responsibility and the environment

  • Good behaviour
  • Political influences
  • Examples from industry
  • Scare stories about ethics and the environment
  • Water
  • Marks & Spencer
  • The Centre for Sustainable Fashion (CSF)

Chapter 6 - Supply chain finance

  • The timing of the supply chain, critical path for both garments and finance
  • Supply chain finance
  • Prime revenue for Hanesbrands
  • Sainsbury's
  • Conclusion

List of tables

  • Table 1: Supply chain cost models: Base case
  • Table 2: Supply chain cost models: Local materials
  • Table 3: Supply chain cost models: Fibre doubles
  • Table 4: Supply chain cost models: Wages double
  • Table 5: Supply chain cost models: Shipping trebles
  • Table 6: Supply chain cost models: Triple whammy
  • Table 7: Risk analysis of all world sourcing regions
  • Table 8: Letter of credit cash flow, supply chain model 2
  • Table 9: Letter of credit cash flow, supply chain model

List of figures

  • Figure 1: The supply chain - producer to consumer
  • Figure 2: Far East sourcing for Europe, (the manufacturing, shipping and distribution cycle)
  • Figure 3: Far East sourcing for Europe (the product development cycle)
  • Figure 4: Far East sourcing for Europe (the product development cycle)
  • Figure 5: The Egg-Timer and the Kite
  • Figure 6: Corporate Social Responsibility (CSR)
  • Figure 7: The supply chain, critical path for both garments and finance
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