Have You Done All These Measures To Disrupt The Global Fashion Supply Chain?

At the beginning of this month, due to the end of the Spring Festival holidays due to the outbreak of the new coronavirus, Chinese enterprises started the resumption plan, and the brand Lafayette 148 New York factory in Shantou, Guangdong is no exception.

But after a week, the production capacity of the factory that produces high-grade women's clothing has not yet fully recovered, and some workers are still on the way back to the Spring Festival. Lafayette 148 New York chief executive Deirdre Quinn said workers who had returned to work also needed to wear masks and body temperature every day. She expects the brand spring series will be postponed for two weeks.

"We are dealing with a slight delay in delivery time. But we were lucky that many companies failed to produce their spring series. " Quinn said.

According to the statistics of WHO (WHO), as of press release, more than 77000 confirmed cases of new crown pneumonia have been reported nationwide, and more than 2500 cases have died. The epidemic, which started in Wuhan, Hubei, has spread to the whole country and 31 other countries. At least 150 million people are banned from travelling in China, and Chinese citizens are facing more and more restrictions.

The impact of the epidemic on the economy has just begun to show. Sales of Ralph Lauren, Burberry and other brands are expected to decline sharply. World Trade Organization data show that China's clothing production accounts for more than 30% of the world's total, but at present, international brands and retailers have not talked much about the negative impact of garment production in the coming months.

Lafayette 148 New York is not the only brand that feels difficult to raise output. Brand and supplier must consider the safety and health of employees when making plans. Even if the factory starts, the shipping companies and Airborne Inc will have less transportation capacity, and it is also a challenge to ship the goods out of China. Although some retailers have issued a shortage warning, it is difficult for them to predict what goods and when they will be out of stock.

Jonathan Gold, vice president of supply chain and customs policy at National Retail Federation, said: "many companies are still assessing the impact of the epidemic. Companies are constantly communicating with overseas suppliers and transport providers to understand the specific downtime.

When the new coronavirus is raging, retailers can take some measures to maintain supply chain operation. Here is an action plan recommended by BoF:

Ensure daily reports of manufacturers and logistics providers.

Before making any contingency plan, we should first understand the local situation. At present, Hubei, China, which is most seriously affected by epidemics, is still in a state of blockade. Other Chinese cities have implemented separate quarantine measures. Absences vary widely in different regions.

Therefore, the brand needs to communicate closely with suppliers, understand the production delay in advance, strive for time, arrange delivery more quickly, and minimize the impact of delivery delay on Wholesale partners and customers.

Brian Bourke, vice president of Seko marketing, a global logistics and storage company, said: "the worst thing is that your communication is missing, and you are making decisions under the panic. If you can't understand the latest situation every day, you have to ask the supplier to report it every day.

Clearly understand the available transport plan.

Direct consumer oriented knitted sweater brand Naked Cashmere is mainly a sweater produced by a Hangzhou factory. Although Hangzhou is far away from Wuhan, it has reported more than 160 confirmed cases of new crown pneumonia (as at the end of the press release). At present, the products sold in the spring of Naked Cashmere have been sent to the US warehouse, but if the factory fails to resume normal operation in March and April, the manufacture of the brand autumn products will be affected.

Naked Cashmere parent 360 Sweater CEO Bruce Gifford said the company was preparing for this. "It's hard to say whether the supply chain will break down, but we will extend the production schedule a little longer in the plan," he said.

Gifford said that if there is a delay in delivery, the company plans to increase the proportion of goods to air. At present, 60% of the 360 Sweater products are transported across the Pacific Ocean for about a month, while the remaining 40% goods are transported by air for only two days.

It is advisable to book in advance. Under the influence of epidemic prevention measures and travel restrictions, the aviation services outside China are severely limited. UPS United (Parcel Service) has reduced the number of flights to China, and the number of commercial flights carrying passengers has also decreased. Bourke said that some airline freight increased by 300%. With the increase of factory output, the backlog of goods may soon appear.

"The first thing that businesses need to do is talk to transport companies and ask them what they can offer," Bourke said. "Otherwise, even if the goods are ready, there will not be enough ships to transport. Enterprises need to know when to prepare everything so as to reserve capacity ahead of time.

Speeding up the speed of shipping is another feasible option. Some flights shorten the voyage from Shanghai to Losangeles to 12 days. In addition, goods can also be transported to other ports in Asia or the Middle East before being transferred to air freight.

Strengthening customer service and ensuring openness and transparency

Customers and retail partners need to know when there will be delays. In the crisis, enterprises should actively contact consumers before a large number of complaints appear.

"You need to be very transparent and very specific about your return to work," Bourke said. "Doing so can ease people's concerns and doubts."

Enterprises should not be too passive. They can voluntarily inform the customers of the problems they are facing at present, and provide compensation when necessary, such as rebates or preferential discounts for subsequent shopping.

If possible, change the factory production.

After the United States threatened to impose tariffs on clothing and accessories made in China last year, many retailers have been looking for manufacturing locations outside China, such as Bangladesh and Vietnam. The outbreak is likely to accelerate the plans of other enterprises to find other manufacturing areas.

Gold said: "the deployment of large retailers may be more flexible than that of small retailers, but it also depends on the type of products they produce. Now perhaps we should look for other sources of supply."

When the latest tariff plan was announced, the decision of La Fei Yi continued to leave manufacturing in China, but now the brand is also considering the possibility of expanding production channels.

"For safety reasons, we may increase some production channels in the future," Quinn said.

According to the US Department of commerce data, imports of Vietnam and Kampuchea increased by 11% last year. Enterprises can find new suppliers or ask colleagues through online activities and trade shows. In addition, enterprises can also consider local manufacturing. Although the cost of local manufacturing may be higher, the delivery time is more flexible, which is more conducive to making wise inventory management decisions.

Forecast sales volume and adjust production plan

Retailers that rely heavily on Chinese consumers may face greater risks. Because of the decline in sales caused by the new coronavirus, coupled with the retail impact of the protests in Hongkong, international brands may lose a lot of revenue this year. These enterprises must adjust their inventory accordingly to prevent more losses at the end of the season.

Lafayette 148 New York has 9% sales from mainland China and 9 stores (2 of which are still open, but no sales are recorded). Therefore, the brand has stopped producing products originally planned for sale in China. Kering also suspended its business in China, postponed the opening of new stores and advertising.

But fundamentally, retailers can only focus on the situation and take corresponding measures according to the situation. Gifford of Naked Cashmere believes that brands can only hope for the best and prepare for the worst.

"The biggest risk is not the supply chain, but the whole world economy," he said. "There may be a decline in overall demand in the clothing industry, or a new coronavirus may cause a recession."

Quinn advises practitioners to relax.

"My suggestion is simple," she said. "The clothing industry and people must stick to it. After all, people are dying of new coronavirus every day." 　　

Translation: Panda translation agency Qian Gongyi