Supply Chain Strategies That Can Help Save Lives

This post is based on a talk given at the Fashion Revolution UAE event on April 24th, 2015 in Dubai, UAE.

In the wake of the Rana Plaza tragedy in Bangladesh in 2013, the event was commemorated the following year in 62 countries around the world as part of the global Fashion Revolution movement. The movement aims to bring awareness to bring about a more sustainable, ethical global fashion supply chain, and by using fashion simply as a pretext to bring about a culture of sustainable thinking.

What is Sustainability? (The Three Es)

Most of us tend to confuse sustainability as a purely environmental initiative, often ignoring the wider implications of its true meaning. Instead, sustainability in its truest definition has to do with longevity. Whilst the environment is a crucial factor and not one to be ignored, particularly in the context of fast-fashion, we must also consider both the economic impacts, as well as the ethical impacts of decisions made along the fashion supply chain.

It is in considering the Environment, Economy and Ethics, not as independent entities but as three integral decision-making criteria, that we can begin to move away from the ‘Silo Mentality’ that currently pervades decision-making along the fashion supply chain.

Why don’t consumers know the issues?

It is enlightening to draw a comparison between ‘fast-food’ and ‘fast-fashion’ - both should be consumed soon after being purchased, and if left for too long, tend to quickly go off (although in the case of one particular fast-food vendor, the food may even outlive its fast-fashion counterpart ).

It is interesting that we are so well informed about what we consume, with mandatory labelling of not only the contents of produce but their country of origin. Why then has fashion yet to catch up?

The unfortunate reality is that most consumers are simply unaware of what goes on inside the global fashion supply chain. The Fashion Revolution seeks to remove the veil.

What is 'Supply Chain'?

It would seem that consumers are generally ill-informed about the role of supply chain in the fashion sector. Most assume that supply chain is simply logistics; we can all easily imagine a semi-trailer hurtling down the highway with containers stacked to the brim with neatly folded t-shirts.

However, the global fashion supply chain is so much more than simply shipping, distribution and warehousing. It is, in fact, a highly complex and interconnected global web involving millions of people, in fields as diverse as fashion, product design, engineering, agriculture and finally, logistics.

The cost to produce a simple white t shirt

In a study by NPR's Planet Money, the team aimed to determine how much it costs to produce a simple t shirt, and then to follow that process throughout the world. The stacked chart below indicates the cost breakdown, along with each as a percentage of the total cost:

1. Kickstarter fees ($1.21 - 9.7%)
2. Amazon payment fees ($1.04 - 8.4%)
3. Cotton ($0.60 - 4.8%)
4. Yarn Spinning ($0.40 - 3.2%)
5. Knitting, dyeing, cutting and sewing ($1.00 - 8.1%)
6. Shipping ($0.10 - 0.8%)
7. Tariff ($0.33 - 2.7%)
8. Jockey costs ($2.67 - 21.5%)
9. Graphic Design ($0.12 - 1%)
10. Printing ($0.90 - 7.2%)
11. Order fulfilment ($1.79 - 14.4%)
12. Shipping ($2.26 - 18.2%)

Breaking down the costs

Note: We can safely assume that some of the costs are inflated given the small production run and the inability to leverage economies of scale. However the numbers still give a first-order indication of the relative costs incurred in the process, and for the purposes of this analysis, the relative costs are of much greater interest.

Raw materials

When we consider the raw material costs to produce a t-shirt, we assume it to be a significant fraction of the total cost of the t-shirt. Planet Money determined that the cotton to produce one of their t-shirts cost $0.60 - just shy of 5% of the total cost.

Interestingly, to produce this amount of cotton requires approximately 2,700 litres of water. Our audience members noted that the water would simply be absorbed in the soil. In fact, the use of non-organic cotton requires pesticides, reducing the amount of arable land available to grow cotton. Our audience members were shocked to hear this. 

Most of our audience members, when asked to estimate the raw material costs as well as the amount of water required, were astounded at how wrong their estimates were, agreeing that they lacked fundamental knowledge of one of the core components in the fashion value chain.

Manufacturing costs

Once again, when asked this time to determine the cost of producing a t-shirt, given the many technical steps in the process, our audience members significantly overvalued the actual costs. In the process of knitting, dyeing, cutting and sewing, the t-shirt passes through over 50 separate procedures and through over 50 pairs of hands; each step carefully broken down and sufficiently simply so that any one person along the production chain can be easily replaced. And the total cost to produce?

     1 US dollar.

In comparison, the costs per t-shirt incurred by the supplier, in this case Jockey, were $2.76. It is interesting to note that the cost to manage the production of the t-shirts was almost three times higher than the costs to actually manufacture the t-shirts. This makes sense when we consider the geographic location of the incurred costs, but the finding does lend itself to an important question: are the costs being fairly distributed along the value chain?

A recent International Labour Organisation report on the wages of fashion workers around the world showed that Bangladesh was last on the table, with an average monthly wage of $68. In the study, the ILO concluded that in order to satisfy the most basic housing and calorific requirements of the workers, the average wage should be $108. It bears repeating: the basic calorific requirement refers to the absolute minimum amount of food necessary for a human to function.

In fact, the figure quoted on the graph for Bangladesh was doubled from $34 in August 2013, mere months after the Rana Plaza tragedy occurred. One can only wonder if the timing of the increase was to encourage workers to return to the factories.

Shipping from ‘Bangladesh - US’ versus ‘Last-Mile’ shipping inside continental US

The finished t-shirts made their way from Bangladesh to the US via container ship. The Planet Money team was able to utilise economies of scale here. Packing the t-shirts in bulk for delivery to the US via container ship naturally incurs a lower per-unit cost than at the order fulfilment stage, once the t-shirts reached the Continental US where each t-shirt was separately packed and shipped via post or courier.

It is nevertheless interesting to note the difference in costs occurred between the 12,000 km trip from Bangladesh to the continental US, versus the approximately 5,000 distance across the continental US, as the ‘last-mile’ shipping costs almost one-third (32.6%) of the total cost of the t-shirt, compared with the 0.8% necessary to bring each t-shirt all the way from Bangladesh.

To put things into perspective, the design of the logo on the front of the t-shirt (which was done once), was 20% more expensive per t-shirt than the shipping from Bangladesh to the US. Astounding.

Summary: Fashion houses are pulling on the wrong cost levers

As we revisit the manufacturing costs, we can safely assume that those workers in the manufacturing value chain know their jobs well, and can perform their jobs with a high degree of efficiency. Fashion houses are squeezing costs along the value chain where they can least be afforded. Cheap fashion is certainly not cheap - it’s simply that the true costs are being borne elsewhere along the value chain.

We challenge the senior-level management of any of the fashion houses that outsource production in Bangladesh to attempt to replicate the efficiency and effectiveness of their outsourced workforce on their home soil. Attempting to cut costs in the manufacturing section of the supply chain is firstly futile, and secondly, inhumane. Instead, we urge fashion houses to look instead both upstream and downstream of the manufacturing section of the supply chain, to the costs that are being incurred on their own soil. But most importantly, we urge the fashion houses to look inwards at their own organisations in order to determine ways to reduce costs. 

Where are all the CSOs?

In our organisations, we have Chief Executive Officers, Chief Financial Officers, Chief Technology Officers, what about Chief Sustainability Officers? Why doesn’t sustainability form a part of the decision-making process. Sustainability seems to be viewed as a compromise, a cost-centre, a ‘necessary evil’. This is usually because the impacts from sustainability efforts are not as dramatic, nor as quickly felt.

Decision-making efforts throughout companies are based on a notoriously short-term outlook. It is understandable, given that senior-level managers are held to account by shareholders whose interests are purely monetary, but it becomes an issue when the implications of short-term decisions affect lives, as in the case of the Rana Plaza tragedy.

Companies will no longer have a choice

The truth is that up until now, fashion companies had the choice of choosing to act in a sustainable manner. The reality is that with movements such as Fashion Revolution awakening the collective consumer consciousness, companies will no longer have a choice. Educated, informed consumers will soon be choosing with their wallets, and those companies leading the sustainability charge will be those leading in profitability.

Given this emerging trend, it would be unfair to identify the problems without offering three tangible ways in which companies can act in a more sustainable way, and by doing so, save lives.

Three ways companies can save lives

1. Own the supply chain

Fashion Companies need to reconsider where they sit, and more importantly, how they interact with their neighbours along the supply chain. By looking at the entire value chain holistically, rather than as individual segments, they can see how decision in their own departments impact others along the chain.

2. Outsourcing Production ≠ Outsourcing Responsibility

It is important for fashion houses to note that outsourcing their labour force to a third-party does not mean that they are also outsourcing the responsibility over the welfare of these people. Instead, companies should consider this as an extended branch of their own workforce, deserving of the same compassion bestowed on the workforce on their own soil.

3. There are no Black or White decisions

Companies need to consider the longer-term ramifications of their actions, particularly in the fashion sector. Reducing decisions as good or bad, or financial versus ethical decisions is an oversimplification. Instead, companies need to consider that the space in which they operate can not be simplified into an either/or decision. Instead, leaders need to consider decisions as better or worse. By making a thousand small decisions, each moving a step closer towards a better direction, companies can make changes in their supply chain that can truly save lives.

Epilogue:

The Fashion Revolution UAE 2015 event on the 24th of April 2015 garnered international media coverage, spreading the word and bringing the cause to the attention of the wider public.

For those interested in learning more or furthering the reach of Fashion Revolution UAE via sponsorship, please get in touch.  

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Petar is a consultant and engaging public speaker to corporate, academic and governmental organisations worldwide. With three international careers as an academic, in corporate and as an entrepreneur - on three continents so far, Petar is a passionate speaker on the subjects of innovation and sustainable business, the changing face of higher education, and the role of Millenials in corporate cultures today. He is based in Dubai, UAE and Melbourne, Australia.

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