Apparelsupply chain is a network of distribution options performing various functionsstarting from the procurement of raw materials to the transformation intofinished products, and its distribution to customers. In olden days, variousdivisions of the present supply chain like procurement of raw materials,planning, manufacturing, and distribution operated independently. This oftenresulted in misunderstanding, and conflicts. Goals of marketing werecontroversial with the manufacturing departments goals and the situation wassimilar in other divisions as well. This created a need for an integrated planfor the organization as a whole. Thus the apparel supply chain came into existence.This practice vertically integrates all the processes happening in variousdepartments involved in apparel manufacturing.
ApparelInflation:
Currentscenario in the apparel industry is facing an inflation, first seen with suchintensity in the recent 15 years. Retail apparel prices are now witnessing arenewed upward pressure after a decade of pervasive deflation. This is thefirst inflation the apparel industry is witnessing since 1997. Prices ofapparels rose in December 2007. The prices of yarns and threads rose by 1.3percent, greige fabrics by 0.7 percent, industrial textile products by 1.0percent, and finished fabrics by 0.9 percent. During January 2008, yarns andthreads rose by 4.9 percent while greige fabrics by 2.8 percent, industrialtextile products by 2.2 percent, and finished fabrics by 2.3 percent. Price ofraw materials continues to rise, while the demand for garments is fallinggradually due to the soaring prices. This clearly states that the economy is beginningto fade.
Reasonsfor Inflation:
Weakeningvalue of dollar increases the cost of import price and results in the priceinflation of apparels. Most retailers will raise the price of their apparels tosustain their profitability. Retailers remaining reluctant to the price risewill make the bad situation still worse. While retailers increase the pricesand thereby their profit margins, it is seldom possible that the consumers willcontinue to buy apparels despite the rising prices.
Dollarhas a frail purchasing power in China. Due to weakening dollar values,countries like China are increasing the price of their exports which pose athreat to countries like US. Industry analysts are of an opinion that the valueof apparels entering into US from China is estimated to increase by 10 percentin the coming months, and this would affect the economy of the statedrastically. Other countries which import goods from China also have thepossibility 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 outof the country are priced higher; threatening to fuel the inflation.
Consequencesof Inflation:
Inflationwill result in disruptions in the apparel supply chain, and volatility in theglobal apparel market. Increase in the price of apparels result in lower garmentconsumption. Small traders, people with a fixed income, and people from thelower sections of the society like apparel workers would be the worstsufferers. The Consumer Confidence Index which expresses the degree of optimismof the consumer reflecting the current state of a countrys economy states themarket situation for apparels is very weak. During February the index was 76.4and in March it is 64.5. Consumers confidence has fallen to the lowest levelas compared with the past 15 years. Consumers choice to curtail the purchasebudget of apparels due to the increasing prices in will send the countryseconomy 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/
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