Monday 11 April 2016

Breaking The Chain

The global supply chain. If there's one motor for the fast profit-driven ride that fast fashion has undertaken, it's the ability to source, manufacture and import goods from anywhere on the planet. Cheap labour and material have driven down prices (and, many would argue, quality) to the point where clothing is often now viewed as a 'buy, wear once and bin' convenience item.

But the global supply chain is a hugely complex beast, and it has its weak spots. The British Standards Institution (BSI) have just released their annual report which lists the threats and problems that give high street giants a multi-billion dollar headache every year. It makes for a fascinating read.

Take piracy. BSI estimates that over $22bn of losses last year were due to cargo theft. A new wrinkle is the massive growth in South Africa and China of raids on cargo trucks, easy pickings for the dandy highwayman. This type of vehicular crime was up 30% on last year, and is set to rise further as more naughty chaps get in on the road games.

Global warming and natural disasters are also a big problem for stretched supply chains. Weather disruptions from storms caused by El NiƱa have caused breaks in the chain totalling $33bn. This is before we start factoring in the potential losses from crop destruction that led to a strong showing from many global fashion brands at last year's big climate summit in Paris.

When you look at events on a global scale, you see how everything is connected. Terrorism and the refugee crisis all have impacts on the efficient movement of goods across the planet. Road, sea and rail links can become blocked, and terrorist events go after everything–transport hubs being a prime target, of course.

There are more subtle sources at play, too. The shift of manufacturing to South-East Asia and a general slowing in demand is hitting the Chinese labour market. The result? An uptick in industrial action, slowdowns and stoppages. Factory strikes in China were up nearly 60% last year, as owners struggled to pay their employees. The BSI also notes that even if things improve, strikes are still likely, as emboldened workers become less tolerant of abuses from their employers. These days, garment and footwear workers have access to tips on better jobs with improved pay and conditions thanks to mobile technology. The Chinese workforce is more likely than ever to vote with their feet if they find their management isn't up to scratch. It's just another example of how the most unexpected of influences can have huge effects on a global trade.

Our View: Global fashion is a multi-billion dollar industry, and it's clear there's a ton of money to be made–and lost. Business models depend more and more on just-in-time delivery, and factories and farms that play nicely with spreadsheets and carefully-modelled computer predictions. As we've seen, the world has a way of taking that idea and merrily stamping on its toes.

You can read the whole BSI report here.


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