Supply chains. Have you ever heard so much about supply chains? It's all over the media. Name a publication and there's a story about supply chains and how they're not working like they used to. My goodness, lately all we seem to hear about is the fragility of supply chains and how inadequate they are to meet the needs companies and consumers.
The more I consider the current state of global supply chains, the more I feel that they are a relic from a different time. That's not to say they can't be resuscitated, or reinvented, but I think even the most cynical of us in the industry recognize that it's time for an overhaul. The engine ran admirably over the years, only to have blown a gasket during the pandemic.
It's time for a repair and tuneup. And a reimagining. We have shortages in products, labor, and available shipping capacity. And then we have higher costs incurred by exporting and importing companies. Port delays. Here's a question: how many container ships can be stuffed into the Port of Long Beach? Answer: not as many as you'd like!
Apparel supply chains — The desert of the real
It's not the fault of the shipping lines or sourcing companies. The systems in place prior to pandemic were not built to handle the pressures placed on it by a global calamity. Global supply chains were designed to be smoothly efficient, with maximum cost effectiveness. Such systems were designed to mitigate if not eliminate the friction of global supply and distribution. And they worked well. Until they didn't.
Frankly, there’s a lot of blame to go around, but we need more than blame to right the ship.
Welcome to the desert of the real. Yeah, I borrowed that line from the film "The Matrix." But it resonates with me when I consider the state of global trade. I've heard a lot of people try to put a pretty face on the situation -- only that the reality is unavoidable, "The Matrix" not withstanding.
But behind all of the problems plaguing global supply chains lies poor government policy, trade anxiety, an imbalance between supply and demand, and a lack of coordination that somehow undermines the system itself. It's more than a mess; it's a contagion that questions the fundamentals of open markets. Indeed, markets may be open and free to operate -- until they come crashing down in a heap caused by forces beyond the system's control. Like a pandemic.
There’s nothing like a pandemic to change things
So, these days, we have Covid-19 to thank for exposing the weaknesses of globalization and the assumptions behind the notion of free and open markets. So what can we do about it? For starters, I feel a laissez faire — or leave it to the markets to fix it alone — approach is the worst way of addressing the problem. The world has changed, and along with it the rules of the road.
It's time for greater industrial coordination and -- dare I say it -- greater cooperation amongst governments. Even so, we live in a time of social and political silos, barriers that have only grown since the outset of the pandemic. Cross-border cooperation is about as popular as the pandemic itself.
But here we are staring at a system that's not functioning like it once did and magnifying the effects of decisions made in the public and private sectors pre-pandemic. Two examples come to mind: the decision to build larger, but fewer container ships and Trump-era tariffs. Both have come back to haunt our industry.
Heaps and pipe dreams
Of course, a key question is whether such things can be undone or mitigated over time? In the case of mega-sized container ships, shipping lines saw such ships as a more efficient way of shipping more goods profitably at less cost to its customers. Sensible, right? Only to find that just one of those huge ships jammed up the Suez canal and crippled half the planet's trade in the process. Chalk that up to sensible thinking, I guess.
And then there are Trump's tariffs. Gosh, if there was ever a time for greater cooperation between the U.S. and China it would be now. Yet, having said that, such cooperation is a pipe dream. Relations between the countries couldn't be worse, fraught with suspicion and mistrust. Not great for global trade let alone international relations.
How could we have predicted that Joe Biden would turn out to be a populist on trade: Trump's tariffs on Chinese goods remain in place. He could have dumped them. At the same time, however, who could have foreseen the draconian social and economic policies of Xi Jinping, who may be the most authoritarian leader of China since Mao.
But so much of this began before the pandemic, before the world changed, and have accelerated since. And because of the pandemic, we as an industry have to change or risk being dumped on the slag heap of "could have been's."
A digestif for the industry on apparel supply chains
So, what can be done? Here are some suggestions.
Movement of immigrant labor. Made in USA, for instance, sounds great until it hits home that so many cut-and-sew jobs are filled by immigrants. The needle trade was decimated by globalization years ago. Domestically-made clothing has become popular only that there are few people to fill what jobs remain. Immigration restrictions have only aggravated the problem. Besides, there are plenty of jobs that pay more and avoid factory work conditions. But so many consumers look for American-made clothing — it’s a growing market that needs to find a solution to its labor problem.
Sourcing diversification. This is a biggie. For too long the industry relied on just one or two supplier countries for all of their products. The shipping issues become easier if product can be shipped from points closer to consuming markets. Trucking plays a key role hear. Even so, many trucking jobs go unfilled. So it’s a step in right direction but will take time to implement.
Adjustment of warehousing. Just-in-time delivery, although far from dead, needs fixing. Hence, the recent trend of moving warehousing closer to consuming markets. Indeed, proximity to market has become more important. But to do so, exporters of products will have to restructure their businesses to maintain more inventory, a tall order during challenging economic times.
Reconsider older methods of sourcing. I recently met with a major clothing company about a full-package program. Typically, they would order such production from their office in Asia. But with all of the supply chain difficulties, they wanted to know if there was a U.S. option. I said, yes there was, but their response was “Great! Because we don’t know how to source domestically.” Wow, it goes to show how things have changed. It will require companies to relearn what was retired years ago. It’ll be a process, that’s for sure.
All of these suggestions are just that, suggestions. And this is far from a complete list. But they will require some degree of government and industry coordination to facilitate the free movement of goods and people. Note that for each of my suggestions to improve supply chains, there are problems that need to be solved. The same goes for re-shoring. For the political class, this is hard to do. For the industry, though, it is imperative.
Originally published in just-style.com on October 8, 2021.