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A Boat Got Stuck and Other Calamities

A boat blocked the Suez Canal. Global trade ground to a halt. Huh? After all, accidents will happen; that's nothing new. But the Suez Canal disruption had a ripple effect throughout global supply chains. And perhaps that's the point: what to do when the unpredictable disrupts supply chains built on just-in-time predictability?

Specifically, have global supply chains become so focused on just-in-time logistics and improved efficiencies that such commercial avenues become more vulnerable to disruption? It's not just that the volumes of the products have grown exponentially over the years, but now the ships used to carry all the freight have grown in size to a point where one such super-boat can run aground and beach global trade at the same time. Does that make sense?

Efficient limits?

Maybe efficiency has its limits, notably when the basic infrastructure to support such endeavors proves inadequate. What's happens when "just in time?" turns into "take a number and stand in line?" We're faced with the prospect that global supply chains may have become too good at what they do and have created unforeseen problems.

But it's more than just boats. It seems like every day, some new calamity befalls the global garment industry. This is not to say that global supply chains are on the verge of collapse. That would be too strong a statement and not accurate. But the supply chains of old have increasingly become just that: old.

Indeed, the finely orchestrated symphony of supply chain efficiency over the past 30 or so years of the production, delivery, and distribution of apparel is sputtering and may require a tune-up. Or at least recent events seem to suggest that. Of course, extensive global transportation and supply chain logistics would have never occurred in the first place (or at least in the same order of magnitude) were it not for a belief in the benefits of free trade.

But free trade has now morphed into forced labor, broken contracts, disrupted supply chains, a damaged environment, rising nationalism, and growing economic inequality. And we read about it in the newspapers virtually every day, a cacophony of societal change.

Poor motoring

It's almost like global supply chains have operated with a one-speed transmission: a high gear for fast and no low gear for slow. And, of course, there was no reverse gear. But there was an ignition switch that many companies in the developed world chose to turn off last year during the pandemic, with ensuing consequences for so many companies and workers throughout the developing world. In this sense, the system proved brittle -- with effects that we're only beginning to understand today.

A logical question to ask is if globalized distribution makes sense anymore? It's hard to see companies that have built up enormous investments and relationships worldwide simply shuttering and going home. However, it is plausible to see a redistribution of sourcing.

It's not a case that people have forgotten how to manage supply chains, but a series of events have come together in 2021 to create a perfect storm of sorts. A risk manager's worst nightmare. How does one plan around these problems when sourcing companies arranging for production, shipping, and distribution don't actually own these functions? So many brands and retailers rely on other companies to perform these tasks. They outsource everything.

So, how do we make sense of all of this? There are no easy answers. It's challenging -- and expensive -- for brands and retailers to undo the last thirty years overnight. At the same time, manufacturing in so many developed world markets has atrophied over the years. Restarting that is also not an overnight exercise either.

And then there are consumers, as they have become accustomed to cheap clothing. What's more, not every brand can reinvent itself to serve the relatively small premium end of the market, which is already pretty crowded. Hence, as an industry, we're left with the problem of how best to supply the mass market while simultaneously contending with the various issues of global supply chain logistics.

A dilemma for brands

It's a tough spot. And new challenges emerge all the time. For instance, throw in a dose of Chinese nationalism over the Xinjiang cotton forced labor allegations, and so many multinational brands and retailers find themselves with little room to maneuver. The rules of the road have suddenly changed. The choices for brands and retailers vary from bad to worse.

Brand marketing, as a result, is under assault. And a brand without effective marketing is self-defeating. Nevertheless, the realities of Xinjiang remain. Perversely, the ultimate cotton subsidy in agriculture is slave labor; the Chinese government appears to have cornered the market on that -- only there are new allegations that other countries are also engaged in such activities, such as Turkmenistan. Caught in the middle are apparel brands with outsourced supply chains dependent on cotton picked by forced labor.

So what does a brand stand for? Is it just a gimmick to sell products, or does it go deeper than that? For most brands, the latter is more the case than the former. However, when pressured by government authorities or consumers, many brands water down their principles and drop language from their websites and marketing material rejecting forced labor.

Politics aside, in the end, it's the consumer who decides what is bought and what's not. Here's another case in point: in the world of sustainability, as an example, do most consumers really care about how a product is made? Or does fit and price always win out in the end?

This is the essential question for our industry; it always has been, and it always will be. Is worry over sustainability broadly shared by consumers? Or are such concerns really window dressing to gussy up environmentally damaging behavior so that some brands think other brands support sustainable activities when in fact, it really ends up being empty marketing upon closer examination? Is it nothing more than the industry talking to itself?

Regarding consumers, can the same thing be said of forced labor? A western consumer may sound appalled by reports of forced labor, but do they voice their displeasure with their wallets? For sure, some do, but others don't: price and fit matter more than hardships endured by others in faraway places. This places brands in a difficult position.

Consumerism made the beast

It stinks. No getting around that. The Chinese government says Xinjiang is a local issue and butt out of their internal affairs. They drill home the point by saying that if you don't like it, then get out. They don't need you.

In the end, some brands will succumb to Chinese pressures while others won't and will take their chances on the consequences. After all, the spending power of Chinese consumers is the prize for so many foreign brands. Indeed, these consumers may prove to have short memories regarding Xinjiang, but they can also be whipped into a frenzy if deemed necessary by Chinese authorities. It's a hell of a problem.

Beyond that, mindless western consumerism also holds some responsibility for today's troubles. Guess what? Demand for cheap products built the supply chains and global shipping so central to today's industry. But with inexpensive products came the worst of consumerism: indifference, wastefulness, and over-consumption. And today's supply chains are built to feed that animal.

Times of significant change bring about times of great stress

The system is under terrible pressure, while solutions seem elusive. Allegations are slung everywhere. Lies supersede truths, reinforced by social media, and overhyped traditional media fed by increasingly authoritarian government messaging. We live in challenging times.

It may be time for brands and retailers to take a page out of the commodities playbook and learn risk management. You can anticipate supply distractions any more than one can predict a pandemic. It just happens, and you're stuck — often left with limited or poor options.

Everyone is hoping for pent-up demand to explode on the scene once the worst of the pandemic is over. Be careful what you wish for: soaring demand could outstrip available supply setting up higher inflation. Which poses an interesting question: after years of cost-cutting and lower prices, how will a penny-pinching industry respond to rising raw material prices? They will resist it, but eventually, the market will win out. And, then, what will consumers do?

Note: Originally published in on April 19, 2021.


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