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Look at these Parts of Your Business Before You Move Out of China

You can’t improve what you don’t measure, and you certainly can’t measure what you weren’t aware of in the first place.

As the apparel and footwear industries face unprecedented upheaval stemming from tariff and trade uncertainty, many companies find themselves studying their operations to determine if they should move out of China to … somewhere else.

But oftentimes there are limited ideal options, and even when one is identified, implementing such moves means even more upheaval, resulting in delays, problems and costs that might be wholly unnecessary. Rather than starting over from scratch elsewhere, brands and manufacturers may be drastically underestimating the savings they can achieve by tightening up their operations right where they are.

Unfortunately, in order to know how much time, energy and waste can be reduced, companies must have a deep knowledge of how much they’re spending now and why. This visibility into their businesses is where many firms struggle, effectively tying their hands right from the start.

One of the most significant challenges in obtaining this clarity is not being able to predict what the future holds, said Praveen Kishorepuria, managing director in the retail practice at Accenture Strategy. “When suppliers begin to think about their capacity planning or production planning, one thing that they are always hungry for is having more of a forecast or more of a schedule for a year or two out that helps them to plan their labor plan,” he said.

This forecasting can be hampered by fashion’s constant change and its seasonal production cycles, Kishorepuria acknowledged. But while style and trends can change, volume still often remains the same, he said, with forecasting allowing the factories to better manage and even cut their labor costs.

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Companies must also consider the various types of material waste they’re creating. From an apparel and footwear standpoint, this can often be traced back to an overabundance of unnecessary product samples and/or by inefficient manufacturing processes.

Perhaps surprising to no one, poor communication is frequently a significant—and preventable—contributor to this lack of awareness around operations. As founder of Eon Group Holdings and the Global Connect Fashion Initiative, Natasha Franck works with brands on establishing digital identities for products in order to create end-to-end business intelligence and transparency that helps them connect their front and back ends and move to a more efficient demand chain.

Franck said she regularly sees companies using such rudimentary tools as instant messaging and email to determine where a product was made and whether that factory has a specific certification.

“We see massive amounts of inefficiency, in terms of managing product data and communicating that product data within a company,” she noted.

This essential need for proper communication to maintain efficiency extends all the way down to the factory floor.

“In the footwear business, the greatest opportunity for reducing materials waste is likely to be through factory worker education,” Jim Biolos, president of FarylRobin, said. “Materials waste—and increased product cost—is often a result of poor planning for the pattern-cutting of materials used on the shoes and/or a line worker’s inability to work effectively with the materials they are using.

“The result is either a lot of unnecessarily wasted materials or the additional time, cost and materials needed to rework a poorly fabricated shoe,” Biolos added.

And the repercussions continue beyond added material costs. For one thing, the time surrounding shoe reworks means more labor hours, said Biolos, as well as a drag on a company’s ability to respond to retail clients.

“Having a ‘culture’ of working with wasteful processes also can become a financial burden over the long-term as bad habits become more and more ingrained into a company’s processes,” he said.

“We actively try to promote a commitment towards reducing waste in our system,” Biolos added. “It has bottom-line implications, but, we think, people feel better about their work when they see less of their efforts wasted. And with a mindset of continuous improvement, we increase our ability to create a system where the retailer, the factory and our organization all win.”

And, of course, this waste extends into environmental concerns, with wasted materials taking a toll on sustainability goals. To address both of these concerns, ACL Footwear’s All Black brand has implemented waste-reduction techniques that have proved to be not only greener but also more fashionable, said Martin Rose, an agent and distributor of the brand.

Many of its footwear styles have straight-cut designs with no overlapping seams and few side seams, said Rose, which results in decreased material waste, labor costs and production times.

While progress has been made—with technology advancing it at exponential speeds—most agree there’s still dramatic room for improvement.

“More factories need to take waste control seriously,” Rose said. “Greater efforts are needed to reuse waste and make what was unusable now usable. We use recycled leather outer soles on fashionable pumps and flats and microfiber linings in sneakers as two examples of again trying to reduce waste in the environment—and offer positive steps to improving cost process—because these types of environmentally friendly options are actually less costly than new materials.”

Biolos agreed, noting that current quality control practices are resulting in a tremendous amount of inefficiency. “Quality control has become a complex set of policing activities,” he said. “We oversee our agents’ work. Our retailers oversee the factory’s work. And the whole system of quality has been focused on the back end—after the shoe has been completed.”

“If more factories were committed to continuous improvement, and if we could put more of our quality efforts toward the front end of the production system, the whole system could reduce its waste and quality control costs significantly,” he concluded.

Accenture’s Kishorepuria agrees that operations have to be viewed more holistically. “When you talk about reducing inefficiency, I think one has to look at more end-to-end,” he said. “People always tend to think that, ‘Oh, I can focus on the manufacturing processes. We can get some automation and we can reduce it.’ But we’ve got to keep in mind that what you manufacture is an outcome of what decisions are made upstream.”

This means that such considerations as the number of styles, number of samples, amount of testing, minimum order quantities and capacity planning all play significant roles in efficiency, he said.

“I think people tend to forget that there are [decisions] that you make very upstream in the processes that are not necessarily sourcing decisions [or] merchandising planning decisions. So when people think about reducing costs, manufacturing [ends up being] a very small component. Fabric for apparel makes 70 percent of the cost, but yet companies don’t have total understanding of how much fabric [they’re buying],” he said.

The good news, according to Kishorepuria, is that companies that take the time to untangle their various costs on an end-to-end basis and examine just where their own inefficiencies lie can reap reduced product or category costs. (One caveat: The changes made must be maintainable and not just one-time fixes.)

“Anywhere between 3 to 6 percent is very reasonable when companies begin to unbundle the overall cost and not just kind of look at manufacturing production,” he said. “You’ve got to look at fabric. You’ve got to look at all the upstream decisions … that companies need to change [to] have an impact downstream.”

Other considerations like country of origin and distribution flow are also levers that can be played with.

“There’s no silver bullet,” he added. “All these changes have to work in harmonization.”