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How Peru’s Verticality Minimizes Commercial and Compliance Risks

Fashion’s tendency toward globalized production is leaving firms exposed to financial and social responsibility risks.

The long-lead manufacturing model that is prevalent with offshoring means that companies end up holding more safety stock. If these goods don’t sell, retailers may resort to deep discounting to make room for new products, shrinking margins in the process.

Situated closer to the United States, Peru offers an alternative. Through a combination of location, technology and vertically integrated manufacturing, Peru-based factories can offer quick turns. During a conversation with Sourcing Journal president Edward Hertzman, Luis Antonio Aspillaga, CEO of World Textile Sourcing (WTS), and Rizal Bragagnini, executive director of the Peru Textiles Exporters Association, explained how the country’s independent supply chain leads to greater adaptability for clients.

Peru is not reliant on components and materials from other countries. Within a small geographic radius in the country, there are cotton fields as well as factories for spinning, knitting, dyeing and cut and sew production.

“Our nearshoring proposition is speed to market in six to eight weeks,” said Bragagnini. “This means lower stocks on hand and lower financial and commercial risks. So, in this sense, Peru is offering agility, but without sacrificing our quality and customer service.” Other factors that are critical to achieving shorter lead times are digital collaboration and delegation, such as using 3D design tools or giving factories the power to approve lab dips.

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In an example of quick turn in action, at the beginning of November, WTS received a call from a client who wanted to update an existing style with a Christmas motif. With all steps of production happening within Peru, the product was in the customer’s store by the first week of December.

“Nobody wants to talk about stock; it’s a dirty word,” said Aspillaga. “Everybody wants to buy the necessary amount of goods that they’re going to sell. Peru is not the cheapest country in the world, but we can compare as one of the fastest countries in the world because of our verticality.”

During the pandemic, vertically integrated manufacturing turned from an operational benefit to a lifeline. For instance, Aspillaga mentioned that other countries in Latin America had to close their borders due to Covid-19 and could not move fabrics from one country to the other. However, Peru’s factories could keep working since everything was available within its country.

“Peru has been vertical by tradition; it’s not something that happened overnight,” said Aspillaga. “And our supply chain, even though we were hit hard by Covid, as most of our neighbors in many countries in the world, the factories didn’t stop.”

The geographic proximity between tiers of the supply chain also gives companies more visibility into worker treatment. As opposed to relying on certificates or other documents, it is easier for brands to physically see social responsibility in action for themselves. “I can assure that no client is going to be concerned that we don’t follow proper rules with the workers and the environment,” said Aspillaga.

As the Peru Textiles brand repositions itself to focus on quality and sustainability, companies under the umbrella are being held to high standards. In addition to commitments for ethical labor, producers need to address energy, water, carbon emissions and production.

“Every company that wants to use the Peru Textiles brand—which is open to small and big companies—they have to commit to ensure the quality, while moving forward in these five sustainability pillars,” said Bragagnini. “Depending on the challenges, we will have different plans, but we want to do it transparently, and with a lot of accountability.”

Click the image above to watch the video to learn more about how Peru Textiles manufacturers can deliver more speed to market and reduce risks.