Bruce Philip Rockowitz
Group President & CEO Li & Fung
Can we start the conversation with the changing sourcing trends in the textile and apparel sector?
Everything today is about speed. It’s the "Zara effect" of bringing fashion to the consumer very quickly by using a lot of analytics and being able to move quickly on development and sourcing. You give the consumer what they want at the moment they want it and you minimise mark-downs sales. The past was about longer lead times. It was more "push" type of manufacturing as opposed to the "pull" type of manufacturing we see today, the “pull” being what the customer wants. That's the major change.
We're also seeing the "Bangladesh effect", which is a change in mindset of retailers and, to some extent, consumers, after the tragedies in apparel factories there during the past year. Instead of being concerned about only price and quality, people are also concerned about the process of how their goods are made, including the safety and treatment of workers.
While the US is still recovering from the greatest recession of 2008, the EU economy is still going through the crisis. Did it make any change in the supply pattern of global textile and clothing sector?
It certainly did. The consumer has been impaired over the past five years. When you focus on the US, no previous recession had such an impact on the consumer. The American consumer all but died and stopped spending. People wondered, after 2008, if this was the new normal. It caused retailers to be much more focused - limiting inventory, buying later, buying smaller, buying right. So, on the one hand the 2008 recession was catastrophic – with huge unemployment and loss of wealth – on the other hand it has made the supply chain and retailers more efficient.
Now, we're seeing signs that the US consumer is not dead. While things haven't recovered to where they were, there is dramatic improvement. Old spending habits are coming back. Europe got hurt a little later than the US and will recover later. What is permanent is the emphasis on speed to market, smaller orders and minimising mark-down sales. There's less margin for error and less wastage in the whole supply chain.
Which are the new markets the textile and garment suppliers worldwide are currently focusing on?
I would say that it's still Asia focused. The key markets include China, Indonesia, Vietnam, India, Bangladesh, Turkey and Central America. The focus is not just on price, it's on the total cost which now includes compliance. And while that is becoming a bigger piece of the total cost, compliance doesn’t necessarily have to cost more. If you do things properly from the beginning – getting the “hardware” of infrastructure and factory buildings right – it costs the same. It’s retro-fitting that is difficult and costly. Newer sourcing markets such as Cambodia and Myanmar have a chance to get their industry hardware right from scratch and to leapfrog other countries, just as China did 30 years ago.
Besides economic crisis, increasing production cost and the recent incidents in Bangladesh have also played a vital role in the changing patterns of sourcing. Do you agree? Could you kindly elaborate the reasons?
No, I don’t agree, because Bangladesh remains vitally important to the global apparel industry. The tragedies have, in fact, led to concerted international efforts to help Bangladesh upgrade and transform its apparel industry which supports millions of workers and is lifting economic prospects for the whole country. To do anything less would be unconscionable and Li & Fung is proud to be playing a significant role in this effort.
You have once said 'We make our best effort to weed out bad factories, but we do not always succeed’. What is the role of sourcing firms in ensuring safety in textile and clothing units?
What I always say is that we inspect the factories we work with but still things can happen, regardless of our diligence, especially in less-developed countries. We probably have the longest history of any sourcing company and with a very big focus on compliance for the past 20 years. When we do recognise a bad factory that is unwilling to address issues over safety and treatment of workers, our response is immediate – we won’t continue to work with them. That is to preserve our integrity as well as that of customers.
I believe that a sourcing firm’s role is to find the best factories and work with them over time to improve their compliance and their quality so they are much better suited for marketing and selling to the Western world.
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