Fashion must learn and adopt from outside its own industry
Chainge Capital LLC pioneers transformative approaches within the fashion industry, specialising in Lead Time Optimization to drive sustainability and market growth. Under the leadership of Chairman John S. Thorbeck, in partnership with Professor Emeritus Warren H. Hausman of Stanford University, the firm develops cutting-edge analytics that shape strategic and cultural industry evolution. Fibre2Fashion speaks to John S. Thorbeck, who was part of a panel discussion at the recently concluded 38th IAF World Fashion Convention. During the discussion, his research project titled ‘Under the Banyan Tree: Buyers and Suppliers in Fashion’ was a topic.
Could you give us a brief summary of your project, ‘Under the Banyan Tree: Buyers and Suppliers in Fashion’?
The primary motivation for research was the COVID-19 experience of retail closures and severe impact on global suppliers. Contracts were broken, payments often denied or deferred (or renegotiated), and trust was tested and even broken. Post-COVID, the STTI (Sustainable Terms of Trade Initiative) recognised that purchasing practices were weak between buyers and suppliers. In response, ten Asian nations organised themselves to respond in a pioneering, multi-country collaboration. However, International Trade Centre (ITC) and International Apparel Federation (IAF) leadership observed that purchasing practices, alone, do not solve a longstanding imbalance between buyers and suppliers. Our study of global apparel relationships was designed to evaluate and recommend alternative approaches to equitable value in all tiers of the supply chain.
What was the inspiration behind the project’s title, ‘Under the Banyan Tree’?
The title is a very important signal to the reader. Under the Banyan Tree is Asian symbol for community values so it is a non-Western metaphor and perspective. Most in the West will not immediately grasp its cultural significance. We reference Rabindranath Tagore and Amartya Sen, Nobel laureates whose global insights, inspiration and impact were born in Bengal. Tagore and Sen represent Banyan values of access to science and to the economic significance of women in developing economies. Today, the title prepares the reader of Asian origins for innovation and value. That is, superior value is UPSTREAM and does not depend on lowest costs to be successful. Prof. Ramchandran Jaikumar (Harvard) is also an enormous influence from his systems work in India and elsewhere, as is Prof. Warren H. Hausman (Stanford). The study owes a great deal to their intellectual and economic inspiration for process and data innovation adapted from other industries.
Can you discuss how the partnership between ITC and IAF came to be and what it means for this project?
As mentioned, the origin is post-COVID reconsideration of imbalance in global apparel supply chain, seeking alternatives beyond improvement in purchasing practices. I also believe an explicit goal of the ITC and IAF is to amplify the voice of the global supplier community. We ask specifically: What is fashion’s alternative approach to create value versus over-reliance on lowest cost global sourcing?
How do you envision brands and suppliers sharing risks and rewards in a practical sense?
The place to begin is to recognise the magnitude of benefit measured in financial capital. Apparel is often perceived as a consistently low growth, low profit and low-tech industry. Is that its future? We offer an alternative based on process innovation, data applications and individual case studies across geographies, merchandise categories and sales channels. We offer a supplier-led roadmap to create value in the upstream supply chain for downstream retailers and consumers. This perspective elevates risk over cost, process over location, and sustainability over inventory. It is a perspective for productivity that eliminates excess inventory to unlock capital.
How critical are technology partners in realising the objectives of the project?
AI firms are presented in six case scenarios: new ventures alongside the world’s largest retailers and suppliers. This mix of enterprises is important to the range and credibility of the study across global apparel.
You've introduced the concept of 'Smart Flexibility’ as a new approach to sourcing. Could you explain this in more detail?
‘Smart flexibility’ is a term for supply flexibility, or postponement. It is important to understand this approach to production RISK over cost alone. Apple, Walmart, Toyota and Amazon are built upon process innovation. Process advantage supersedes product advantage.
How does ‘smart flexibility’ differentiate itself from conventional sourcing models?
It is production design to minimise RISK over COST, as measured by capital productivity. This approach applies across all tiers of the supply chain. We describe ‘Shared Risk’ as a business model based in supply chain economics. Here is a quote on page 9 of the preview document: Stanford’s Warren H. Hausman is a pioneer of economic decision-making in short lifecycle goods, such as fashion. He states, “The battlefield of competition has shifted from individual company performance to supply chain performance. Consequently, metrics must be applied to extended supply chain activities versus narrow company or silo-specific measures which inhibit chain-wide improvements.”
What are some data tools that are essential for implementing ‘smart flexibility’?
New technology is migrating upstream to create value, along with investment. We speak of manufacturing as the ‘first mile’, in contrast to the last mile of delivery to the consumer. Data tools based upon supplier risk do NOT exist in the upstream supply chain yet represent large scale opportunity.
The term ‘full supply chain profitability’ has been flagged as a research priority by the STTI. Could you elaborate on what this means in the context of your project?
It is the central finding to put on the table. Profit is a measure and outcome for both buyer and supplier. Capital productivity is the result of process and data innovation referenced as supply flexibility, or postponement. To achieve end-to-end profitability, buyers and suppliers must think past seasonal, transactional contracts to mutual economics over time.
How do you see ‘smart flexibility’ contributing to ‘full supply chain profitability’?
They are directly linked. It is the manufacturer’s roadmap to generate a more productive, profitable supply chain for their customers and themselves. Buyers and suppliers have equal incentives to achieve both.
How does the project address the aspect of sustainability in the fashion industry?
The obstacle to sustainability is scarcity of capital. Therefore, elimination of excess inventory unlocks capital to invest in sustainability. Inventory and sustainability are inseparable issues. Solving the former is opportunity to accelerate the latter. This is important since our study’s impacts are directly linked to the UN’s SDGs for 2030. The goal is to be responsive AND responsible, replacing an inefficient and adversarial system.
What kind of social outcomes are you expecting from this new model?
We are careful not to suggest that contracts are “one size fits all”. We state clearly that process innovation creates capital for greater upstream investment, such as: worker environment (safety), training, wages, benefits (childcare, health) etc. Other areas might be community-based, such as water usage, reduction in chemicals/emissions, and more. Worker lives and communities are a priority of the study, especially for women who account for 80 per cent of workforces.
You gave a preview of your project to the gathering at the 38th IAF World Fashion Convention. What timeline is the ITC in Geneva currently working out for the official release of the project?
We are currently awaiting final approvals with expectations of events and briefings with the IAF and ITC. But I am hopeful for the official release to be sometime in January 2024.
What kind of impact do you hope this project will have on the fashion industry globally?
The goal is transition of a fashion system, not specific to one country versus another. A key finding is that process and data innovation is far, far more important than location. That means ‘lowest cost’ is NOT the only approach to financial and customer success. Shared Risk + Shared Value + Shared Purpose = an integrated formula for industry change.
You mentioned learning from other sectors like automotive and electronics. What are some lessons that the fashion industry could adopt from these industries?
I ask a question: Why cannot Apparel be more like Apple? In electronics, supply chains are agile across geographies based on design for RISK over cost (postponement). In autos, Toyota’s JIT innovations and culture transformed global competition. The full study emphasises that fashion must learn and adopt from outside its own industry. Fashion insularity is an obstacle to its transformation.
Published on: 02/11/2023
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
