Apparel supply chain is a network of distribution options performing various functions starting from the procurement of raw materials to the transformation into finished products, and its distribution to customers. In olden days, various divisions of the present supply chain like procurement of raw materials, planning, manufacturing, and distribution operated independently. This often resulted in misunderstanding, and conflicts. Goals of marketing were controversial with the manufacturing departments goals and the situation was similar in other divisions as well. This created a need for an integrated plan for the organization as a whole. Thus the apparel supply chain came into existence. This practice vertically integrates all the processes happening in various departments involved in apparel manufacturing.


Apparel Inflation:


Current scenario in the apparel industry is facing an inflation, first seen with such intensity in the recent 15 years. Retail apparel prices are now witnessing a renewed upward pressure after a decade of pervasive deflation. This is the first inflation the apparel industry is witnessing since 1997. Prices of apparels rose in December 2007. The prices of yarns and threads rose by 1.3 percent, greige fabrics by 0.7 percent, industrial textile products by 1.0 percent, and finished fabrics by 0.9 percent. During January 2008, yarns and threads rose by 4.9 percent while greige fabrics by 2.8 percent, industrial textile products by 2.2 percent, and finished fabrics by 2.3 percent. Price of raw materials continues to rise, while the demand for garments is falling gradually due to the soaring prices. This clearly states that the economy is beginning to fade.


Reasons for Inflation:


Weakening value of dollar increases the cost of import price and results in the price inflation of apparels. Most retailers will raise the price of their apparels to sustain their profitability. Retailers remaining reluctant to the price rise will make the bad situation still worse. While retailers increase the prices and thereby their profit margins, it is seldom possible that the consumers will continue to buy apparels despite the rising prices.


Dollar has a frail purchasing power in China. Due to weakening dollar values, countries like China are increasing the price of their exports which pose a threat to countries like US. Industry analysts are of an opinion that the value of apparels entering into US from China is estimated to increase by 10 percent in the coming months, and this would affect the economy of the state drastically. Other countries which import goods from China also have the possibility to get affected. Cost of doing business in China is on an increase. Hence; in an effort to sustain themselves in the market, goods moving out of the country are priced higher; threatening to fuel the inflation.


Consequences of Inflation:


Inflation will result in disruptions in the apparel supply chain, and volatility in the global apparel market. Increase in the price of apparels result in lower garment consumption. Small traders, people with a fixed income, and people from the lower sections of the society like apparel workers would be the worst sufferers. The Consumer Confidence Index which expresses the degree of optimism of the consumer reflecting the current state of a countrys economy states the market situation for apparels is very weak. During February the index was 76.4 and in March it is 64.5. Consumers confidence has fallen to the lowest level as compared with the past 15 years. Consumers choice to curtail the purchase budget of apparels due to the increasing prices in will send the countrys economy to a tailspin.


 

Supermarkets try to retain the same prices for their garments as they are unwilling to lose their customers. Higher prices for branded apparels will lead to the entry of more private garments in the market thus enabling the supermarkets to keep the apparel prices lower, and also acquiring their profit margins. Shares of specialty apparel retailers have also fallen considerably. This will result in the weakening of profits, and small companies moving out of business in the near future.


Overall, the apparel industry is facing a test, a dramatic jump in the product prices from both the retail and supply chain perspectives. Organizations that are able to withstand the change and facilitate remedial measures alone can survive the game. Inflation that is now devouring the consumers income should be restricted by taking proper steps to reprieve the consumers from skyrocketing prices and restore their confidence.


References:


1)    Ganeshan and Harrison, An Introduction to Supply Chain Management, http://lcm.csa.iisc.ernet.in/

2)    http://www.ccpittex.com

3)    http://findarticles.com

4)    http://www.supplychain.cn



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