This has been a year of reflection for a lot of industries. Across the board, different sectors are re-evaluating how they trade, how they source, how much of their scale is sustainable, and where they are most exposed to risk.
Fashion has had to weigh up all these considerations and more. Retail channels have shifted, physical premises have been shuttered, and both brands and retailers have found that their supply chains were more fragile and risk-prone than they realised.
But while COVID itself is the direct cause of the sudden change in retail’s downstream dynamics, a lot of the risk in the offshore sourcing model of apparel production had been present for years, and just uncovered by the pandemic.
This is why we have been tracking changes in the industry’s sourcing patterns over the first half of this year. Between Q1 and Q2 we have seen a substantial shift in business operations across the apparel and textile sectors – one that suggests that both the pre-existing conditions and the immediate disruption of coronavirus could have a long-term effect. Assuming those industries resist the temptation to go back to normal.
After the initial lockdowns were eased this summer, we have seen activity rates on the Sqetch platform rise. After analysing the data further, we could see that the disruption in the global supply chains that had characterised the first few months of this year had prompted brands to re-architect their supply chains to source closer to home.
The reasons for this seem fairly clear: local suppliers can ship prototypes, samples, and finished products faster than suppliers on another continent; and closer collaborative relationships and resource-sharing arrangements can be established with partners who share the same time zone.
In the first half of 2020, the search for viable local suppliers has turned into something very much like a gold rush. Rather than relying on the long-established model of producing in China, India, or Bangladesh, brands were trying to forge new relationships that could sidestep the industry’s incessant push for speed and price, and instead thrive on mutual growth.
To put those claims into context: in January of this year, nearly 72% of sourcing projects commissioned via the Sqetch platform, which specialises in connecting brands with specialised local manufacturers, were made by brands in Europe, and that rose to 80% in June. In the first half of this year, our top customers were brands in the UK, USA, and Germany, and our most popular manufacturers were in Portugal, Germany, and The Netherlands. Portugese manufacturers saw an increase in order numbers of close to 50% in the same period.
Looking at this pattern more qualitatively: we know that there has been a big increase in the number of short run enquiries made through our platform, indicating that brand customers were favouring suppliers who had the right level of flexibility, automation, and added-value services like logistics to deliver closer to an on-demand model. This trend towards lower minimum order quantities existed prior to COVID, but the pandemic has seen smaller and smaller orders being placed by brands, and more agile suppliers stepping up to fulfil that requirement.
This is, of course, a far more sustainable model according to all the major metrics; worker rights are protected in Europe, carbon costs are cut by reduced shipping, and overall industry waste can be slashed by shifting from a model defined by overproduction to one that’s more agile, responsive, and attuned to actual market needs.
But what happens in a crisis does not necessarily turn into lasting change. So should we expect to see this near-shoring trend last into 2021 and beyond, or is it destined to run its course when the pandemic eventually ends?
The most important thing we need to consider is that, while a lot of brands and a lot of overseas suppliers have invested heavily in technology, most of those relationships have not reached the stage where they could be defined as truly collaborative and agile. They rely on volume, scale, and predictable patterns to be profitable. For SME and even larger brands to work with smaller, more specialised manufacturers on much shorter production runs, more comprehensive digital and commercial infrastructure needs to be put in place.
What might that infrastructure look like? Pre-ordering platforms such as Crowdlify, order pre-financing tools like Fundlify and Lectra’s Fashion on Demand service give us some clue, and they can help us to define the requirement for interconnectivity, data sharing, and accessibility for different stakeholders.
Building that infrastructure, though, will not be a small investment. So what are the incentives for brands to carry on sourcing closer to home once the immediate threat of disruption disappears, and how will this impact overseas suppliers?
The first complication is a humanitarian one. By producing in countries where they are confident in enforceable labour standards and where production can be reliably monitored and controlled, brands can be more confident in their sustainability credentials. But at the same time, it will not be a desirable outcome to shift production of every style and every collection to nearshore models – not least because the garment production industry sustains the economies of many sourcing destinations. So while automation and nearshoring can power on-demand production, a mass shift would leave huge numbers of underpaid workers around the world without a lifeline. The only long-term solution is for the same kind of relationships to be established with suppliers the world over, but this is a complicated prospect in a world without international travel.
The second complication is technical. The last six months have shown that brands are willing to digitise their sourcing processes and to look at alternative approaches to production, but digital processes are a prerequisite for making that change last. Whether they are direct to consumer brands that are agile enough to explore outside the box of traditional manufacturing, or large retailers whose sourcing options in Asia are looking precarious, the appetite for change is there, but so is the inertia.
This year has seen the world disrupted in a way that none of us have ever experienced, which is clearly a catalyst for change, but that change is being stacked against the long-running offshore production model – an industry that’s been running for three decades, and that’s made up of more than 1 million manufacturers, all competing on speed, and cutting price however they can.
I do not claim to be able to predict what will happen from here, but I can say with confidence that consumer demand for better products, ethical and environmental regulations, and the broader adoption of digital ways of working are creating a world where the existing sourcing paradigm has a shelf-life.
Solutions like sqetch are designed to make the transition to what’s next as seamless as possible, and in that role we’ve spent a lot of this year thinking about how the upheavals of the last six months can be translated into change for good. The data used to inform this article is part of a wider report we’ve generated, so if you are interested in exploring a different kind of production, you can request the full report here and get our free whitepaper on sustainable transformation here.
About the sponsor: Finding the right supplier is complicated. Sqetch makes it easy. We connect fashion brands to manufacturers and suppliers with our B2B sourcing platform with +25k member businesses providing comprehensive matchmaking and procurement software that allows all stakeholders to collaborate securely and sustainably creating transparent supply chains. Sign up free.
The complimentary Sqetch Agency services curates and organises a range of innovation platforms including hackathons, exhibitions, conferences and think tanks, to catalyse the digital and sustainable transformation of the fashion and textiles industry. Our consulting services and e-learning tools support fashion brands and manufacturers to professionalize and transform their businesses in the digital age.