The global coronavirus pandemic is sure to bring lasting change to the apparel and textile supply chain, Sourcing Journal president and founder Edward Hertzman said Wednesday in a fireside chat with Apparel & Textile Sourcing (ATS) CEO Jason Prescott at the ATS virtual trade show.
Starting at the retail and consumer end of the supply chain, Hertzman said he doesn’t see a true recovery until 2022, followed by strong growth in 2023 and 2024.
“Getting supply and demand right is a riddle we can’t fix,” Hertzman said. “It’s the focus on volume and growth that brings about a glut of merchandise and inventory problems that cut into the bottom line.”
The answer, he said, is a model that some companies have taken up, which is to “stop chasing the cheapest needle,” spend a little bit more, buy less inventory, have fewer units in the store and rely on quick replenishment of fast-selling goods. While this might work well for a privately held company, the Wall Street pressures on volume often forbid such a strategy, even though it could improve margins and profitability.
Prescott asked about the issue of brands and retailers cancelling orders and not paying factories and vendors due to the steep falloff in demand when the pandemic hit.
“I think the way a lot of brands and retailers handled this was wrong,” Hertzman said.
Companies nixing orders or asking for extended payment terms is quite different than negotiating a compromise and sharing the burden with the factory, he said.
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“You have to find a workable solution,” Hertzman said. “The mentality set of ‘I’m the last man in the lifeboat’ is the wrong mindset because if you put your vendors out of business, who’s going to make the goods for you…down the road? There is going to be consolidation of factories, but the way to solve this problem is there has to be better communication. Trust needs to be restored.”
Prescott said the buyer is always at an advantage and there are some initiatives such as Better Buying that are trying to standardize the purchase order process to give more transparency.
“The brands and retailers have to think about the social responsibility and what the impact will be,” Hertzman said. “The new generation of consumers that buy with their values wants to align with brands that have that same value proposition. If your brand is not doing the right thing, you’re going to lose in the long term. You really have to be cognizant of how you’re treating your workers.”
Prescott said one negative aspect of Covid has been closed borders and lack of travel that has challenged transparency and compliance efforts. Hertzman has been surprised to see sustainability initiatives “still going full steam ahead.” This includes raw materials, as well as traceability and transparency.
“Human rights and social responsibility are going to become equally important,” he said.
In that regard, Hertzman decried the subjugation of the Uyghurs in China’s Xinjiang region, but said it shouldn’t be forgotten that human rights violations exist all around the world.
As for trade in a new Biden administration, Hertzman echoed the consensus of pundits that the president-elect will likely continue to be tough on China but in a more global way, and that he isn’t likely to immediately seek new trade deals and instead give support to Made in America programs.