Apparel manufacturers turn to cloud based spend management to overcome transient labor-cost advantages of sourcing from low-cost countries

Published November 2014

Sooner or later there will be no low-cost countries left to meet apparel industry's ever changing demands. Adverse publicity about ‘sweat-shop’ labor, changing public opinion, non-availability of labor, and delays are all contributing to this, making apparel manufacturers question whether transient labor-cost advantages are worth the trouble of sourcing from a low-cost country.

apparel manufacturers turn to cloud based spend management Speed-to-market is now the over-riding driver meaning that labor costs are not the only competitive advantage that apparel manufacturers can leverage to make them more successful at winning business. Transformative technologies, developmental strategies, and costing collaborations can all create a basis for comparison and production shifts among countries. Industry leaders are now reporting success in managing and cutting costs and this is transforming the way in which apparel manufacturers think about their cost basis. So, for example, an apparel manufacturer may now decide to source standard items from Asia, use near offshore sourcing e.g. Turkey, for seasonable items, use air shipment to reduce cycle time and source silk from low-cost countries such as India and use local fast response countries such as Spain or Portugal for high-fashion items requiring flexible capacity. Planning production cycles and detailing the designs means that manufacturers can partner with factories that are vertically integrated and choose production facilities based on a range of criteria such as proximity, price or availability. Production partners are guaranteed work and in return will hold materials at no extra cost to the manufacturer. High end brands are less susceptible to price and availability, but value brands and fast fashion brands want short cycle times, with fast and flexible supply chains, an approach that commercial clothing, work-wear and apparel manufacturers also need to embrace in this highly competitive market. For the buyer organization, managing complex category expenditure, such as apparel and work-wear, can be difficult. A cloud based spend management platform can help maintain control over the buying process and protect profit margins by providing visibility and control over this increasingly complex supply chain and helping the procurement department make selections based on innovative production strategies from its tier one suppliers. For the apparel manufacturers, securing a position on an approved suppliers' list opens the door to negotiations for planning average order levels throughout the year. The more integrated the supply chain, the better it is for the buying organization as well as the apparel manufacturer. More efficient use of factory facilities cuts costs, reduces machine starts and stops, and limits use of raw materials such as water and chemicals. Introducing standards for fabric usage cuts costs and is better for the environment in terms of use of water and chemicals in the production. Softer benefits include better publicity and 'tick boxes' for sustainability and conformity to the eco-agenda. Increasing collaboration is a big step change in offsetting higher labor costs. There are further opportunities for pushing efficiency and speeding up improvements to the other end of the supply chain ie better use of raw materials, reducing portfolio complexity and more integration in the supply chain. Lying at the heart of the new collaborative and integrated, but high responsive and flexible supply chain, is a cloud based spend management platform - quick and easy to install, easy to use and a proven system able to deliver additional benefits such as increased conformity and compliance across the organization, all of which aids better management and control of complex category spend of such frequently ordered items such as apparel and work-wear. If you are in the position of managing complex category spend and are interested in finding out more about how a cloud based spend management platform could help you then contact us to see how you can benefit from increased collaboration and efficiency in your supply chain. If you'd like to find out more about Claritum then Book-a-demo and we can chat through your needs and show you the platform.