With an annual growth rate of 4.5 percent as estimated by McKinsey in 2019, the fashion industry is constantly evolving giving the majority of its credit to the well-run supply chain. From retailers to manufacturers, apparel supply chains crisscross the globe in a race to outfit customers with the latest styles and beat the competition on supplying the latest trends. The industry is undergoing a drastic change due to global sourcing and as the industry is labor-intensive, so the countries endowed with abundant and economical labor has a promising future for its nourished growth.
The recent China’s outbreak of Coronavirus has the fashion industry scrambling. As for the global luxury fashion industries which rely heavily on China’s vast production and consumption power, things were already slowing down due to the US-China trade war. But the advent of the virus has aggravated the situation further disrupting the supply chain.
Bearing the Brunt of COVID-19
Chinese economy which accounts for one-third of the world’s apparel production is threatening fashion brands about whether Chinese factories will be able to handle both spring-summer and autumn-winter collection. The former will be delayed leading to the cancellation of orders while the latter may face a rise in prices.
Five Chinese designers have canceled fashion shows scheduled for Paris Fashion Week in the following weeks, and Chanel and Prada postponed separate events planned for May in China
The Just-in-time inventory management which offers flexibility to the manufacturing units thereby reducing wastage is most sought-after model. Due to the outbreak of corona, the inefficiencies of this model is exposed and the companies are worried whether they will be able to meet the demand and can cope with this pandemic.
Baffled Bangladesh Over Supply Crisis
To fulfill orders, many Bangladeshi factories are looking for alternatives beyond China for raw materials and other product intermediaries. This can lead to a surge in prices in the seller’s market as the supply of such materials is being squeezed globally. This could potentially increase the cost of apparel being produced by Bangladesh (although whether brands will accept this increase is another question).
Wedding Bells to be Delayed
The wedding industry is also feeling the impact of the Corona outbreak. The Enhanced Bridal Boutique owner Angela Jordan said that all the materials used to manufacture dresses come from China. But the outbreak there has slowed down labor and closed factories delaying dresses for up to 6 weeks. This could even delay marriages for months.
Reviewing Supply Chain Continuity Plans
Brands with multiple manufacturing bases are better equipped to weather the situation by temporarily reallocating some orders to other regions. The brands are diversifying their supplies and have shifted their supplier base.
Fast-fashion operators such as H&M and Inditex’s Zara usually have a diverse supply base located in North Africa, Turkey, Morocco, and Portugal and their ability to shift volumes from one supplier to another provide insulation against the disruption in China. The shipments of mass clothing from China to the US and UK have fallen by about 3.5 percent.
Luxury goods groups have activated contingency plans that include closing stores and offices in China, scaling back product launches and advertising, and clamping down on staff expenses globally. Some have instituted hiring freezes. There are many workplaces and stores in China still shut, there is a gloomy mood that does not lend itself to conspicuous consumption. Major brands are relocating inventories in other parts of the world.
Various small suppliers and retailers who don’t have established networks and huge production capacities are worst hits. We need better industry infrastructure, and more investment into supply chains, in order to become more self-sufficient and better placed to take on large and complex orders. The whole apparel industry has been caught out by the coronavirus, but we cannot say we were not warned and we must all now recognize that we have become dangerously dependent on China. The economic repercussions of the coronavirus reveal the dangers of allowing one country to have a near-monopoly on global manufacturing. We know the menace inherited in that. Diversification of supplies and rebuilding domestic manufacturing is not just a question of jobs, its a question of safety.