Whether a result of a newly intense emphasis on compliance or the pressures exerted on the supply chain by the rise of fast fashion, the business of apparel sourcing is undergoing a radical reinvention. In an effort to better understand today how sourcing will be transformed tomorrow, the Sourcing Journal had a searching discussion with Roger Mayerson, Director of Business Solutions for New Generation Computing (NGC), a leading software solutions provider for apparel and fashion companies.
Mayerson’s expertise has been cultivated from forty years of industry experience in manufacturing, wholesale and retail. He served as Chief Industrial Engineer at Garan, Inc.; President of Valley Apparel; Corporate Vice President of Sourcing and Product Development at Target Corp.; Vice President of Product Services at Kohl’s Department Stores; and Vice President of Product Development and Strategic Sourcing at Casual Male Retail Group. In his current position, Mayerson helps NGC’s customers develop strategies to reduce lead times, maximize margins and improve efficiencies.
We began by asking Mayerson about the issue of social compliance, an umbrella concept that includes within it human rights, health and safety, fair wages, record keeping and monitoring, and ethical behavior. Environmental compliance alone is an expansive category covering sustainability, energy, water and natural resources, factory efficiency and chemical agents and raw materials. Mayerson quickly noted that the fates of sourcing and compliance have unfurled in tandem, with revisions to one influencing the other in turn. He said, “Sourcing and compliance both have changed and grown together and, in some ways, that means they’re developed into independent issues. Compliance offices are not always inside sourcing offices anymore.”
The central topic of the costs of sourcing, Mayerson opined, is muddled by the nature of the expenses incurred. “Costs are always passed up the food chain. And there are so many associated, directly or indirectly, with the demands of compliance: personnel costs, the renovation of physical infrastructure, the costs of compensating structural engineers–all these are difficult to determine precisely or in advance.”
Also, the task of accomplishing compliance is complicated by a proliferation of disparate requirements–there are so many competing certification agencies, NGOs and standards that it’s impossible to simply apply a one-size-fits-all approach. Each major retailer or brand now tends to have its own customized requirements, further muddying already unclear waters.
Nevertheless, for all its challenges, social compliance could also become a wellspring of opportunity. Mayerson explained, “If a retailer took compliance seriously, and sold their commitment within a marketing campaign, a liability could be transformed into a positive advantage. Patagonia did this with their environmental commitment and proudly advertises it. They can even charge more because if it.” Problematically, very few brands see the promise nestled within the explosion of interest in compliance. “So few retailers are approaching this issue strategically,” he said. “They’re mostly running in fear. At NGC, we see great opportunity all across the compliance spectrum–it could be a win-win situation. This is the vision NGC has, so we are investing significant R&D to further develop the capabilities of our compliance software.”
Mayerson discussed the progress, or lack thereof, in Bangladesh since the tragic collapse of the Rana Plaza buildings that claimed more than 1,100 lives. His perspective is laced with misgivings about the beleaguered nation’s prospects for future reform. “I haven’t been there in a year but I used to do a good deal of business there. You have to remember that this is a third world country, and an immature government still doesn’t have much leverage with individual manufacturers. So there are two opposing accords that detail compliance standards from outside parties: one is European-driven and is binding, and the other is driven by U.S. retailers but isn’t binding. Ultimately, it’s up to each retailer to decide how to proceed.”
Deep infrastructural inadequacies and a shortage of funding are also significant hurdles to progress. “Even the education level is sorely lacking–Bangladesh simply lacks the basic literacy levels necessary for the speedy implementation of improvements. Even supervisory level employees suffer from literacy problems. This is nation that experiences massive poverty. And, of course, there’s a serious problem with mandating safety standards for factories–fire exits and emergency signage, for example.”
Mayerson compared Bangladesh’s halting march toward reform to Costa Rica’s comparatively impressive progress based on his experience there. “The government in Costa Rica understood, as did the stakeholders there, that real progress needs deep cultural and social shifts and that meant an overhaul of their public educational system. Nothing like that sort of reform is underway right now in Bangladesh.” NGC’s holistic approach to compliance considers a diverse basket of interdependent variables: “For us, communication is key. We have a strong collaborative engine that organizes data, integrates multiple calendars and handles the complex details of supply chain management. We have the cutting-edge technology that allows us to seamlessly incorporate all these parts into one, consolidated strategy.”
The Sourcing Journal also asked Mayerson his thoughts about the forthcoming impact of new free trade agreements on compliance, especially the Trans-Pacific Partnership (TPP), which many see as the most significant multilateral trade negotiation in history. Mayerson was pessimistic about the potential effects on the landscape of compliance, counting the absence of any serious discussion on the issue as a missed opportunity. “There’s some discussion of environmental issues with the TPP talks but there doesn’t seem to be any serious enforcement mechanisms attached, at least to the best of my knowledge. Whoever is driving this bus you know they’re not committed advocates of social compliance. And it’s not hard to understand the omission–look at the difficulty everyone has had coming up with a workable set of protocols for just one country–Bangladesh. Now add another eleven. It’s incredibly complex.”
Given the rapidly increasing costs of business in China and the political discord that plagues regional competitors like Bangladesh and Cambodia, what nations qualify as viable sourcing alternatives on the horizon? Mayerson immediately identified Indonesia. “They’re politically stable, have a well-built infrastructure, a huge population and have managed to avoid a lot of the problems other predominantly Muslim countries have grappled with.” Just as quickly, he dismissed both Haiti and Burma as serious candidates, at least in the short-term, on the basis of their overall economic immaturity. Africa, however, piqued Mayerson’s interest: “I’ve done a lot of business in Kenya. Africa has great opportunity. The issue turns on the renewal of the AGOA, which is set to expire soon. Without the long-term expectation of duty free access, it’s hard to attract major investment capital.”