A domino effect is currently taking place in the apparel manufacturing industry. Early in March, to bend the Covid-19 curve, countries started their lock-down orders and retail stores began closing sores. As soon as apparel brands get wind of orders from health officials to close stores, they started canceling orders with their manufactures. Internal sales projections are lowered and styles with lower margins are canceled. Manufacturers are at the mercy of the decisions made by brands. Previously committed forecasts by brands are now thrown out the window. Nobody knows how long the lock-down is going to take place, or how much sales will decline. Thus, the best approach for brands is to cut, cut, cut orders with manufactures.<\/p>\n
This becomes the trigger which sets off the domino effect. With sudden reduced orders from brands, manufactures are now scrabbling to meet their immediate variable costs. Those with low cash reserves, and greatly reduced future orders, start closing down their factories. Manufactures across South East Asia start laying off thousands of workers per factory. No manufacture know when the orders are coming back, and if they will ever come back. The so called \u201cextended supply chain\u201d in the apparel industry is a noncommittal relationship established between brands and manufactures. When times are good, manufactures know the orders will keep on coming. Hence, they don\u2019t press too hard on the brands for their monetary commitment on the forecasts they place. However, when orders stop then they have no contract to hold the brands accountable to. In the apparel industry, brands have no formal commitment to manufactures on the their forecasted orders. All risk is taken up by manufactures. They hire the workers, pay for the factory and equipment, and hope the orders will come. So when the orders stop, the factories shut down.<\/p>\n
As to Darwin\u2019s theory, the survival of the fittest, only those with a healthy cash reserve will survive this pandemic. Manufactures with multiple factories around the world are scrambling to close shop in locations where it\u2019s no longer profitable. Overseas workers are stuck in foreign countries, and waiting for airline to resume flying to take them home. Job losses will continue to ripple through the apparel world in the coming months. Once the dust settles, who will be left standing?<\/p>\n
If in 2021, a vaccine is available to the public and life returns to normal. Then the challenge will be where to place new orders because so many manufactures have closed down. Brands will be fighting to get back in line to secure capacity and place orders. Manufactures will be scrambling to hire new workers, train them, and pump out orders at the same time. We scrabble to ramp down, and will scramble harder to ramp up. Nothing in apparel is easy, and messy it has always been.<\/p>\n
The challenge for apparel brands after COVID-19 will be where to manufacture their goods. Maybe the lack of available traditional manufacturing capacity around the world will increase the demand for more automation in the production process. Thus, allowing manufacturing work to be done in the developed world that is more capital and less labor intensive. This may be further propelled by the desire of customers for more customized products. I\u2019m looking forward to the day I can use a kiosk and assemble a pair of pant as if I were creating my pizza request. Place my order online and have the machine produce my one-of-a-kind pant in one hour. If I want 5 pockets, who\u2019s there to stop me! Don\u2019t worry sourcing manager, increase the FOB cost because I\u2019m paying for the 5 pockets, and you\u2019re only making one pair so it won\u2019t drive down your target margin for the season.<\/p>\n","protected":false},"excerpt":{"rendered":"
A domino effect is currently taking place in the apparel manufacturing industry. Early in March, to bend the Covid-19 curve, countries started their lock-down orders and retail stores began closing sores. As soon as apparel brands get wind of orders from health officials to close stores, they started canceling orders with their manufactures. Internal sales … Continue reading Where did all the factories go?<\/span>