Interview with Luis Gonzaga

Luis Gonzaga
Senior Vice President - Head of Global Supply
Esprit

Like most brands, Esprit is watching Myanmar and Ethiopia closely

Germany based fashion brand Esprit has a number of tips to offer when it comes to sourcing. In an interview with Fibre2Fashion.com, Luis Gonzaga, Senior Vice President – Head of Global Supply at Esprit details out the sourcing activities in the company and other related information.

What are the top five points that a vendor or manufacturer must keep in mind to ensure that he is eligible to become the sourcing vendor for a brand?

To become eligible, a supplier should cover the following aspects: Full compliance with all social requirements; High level of quality measured in two different aspects; AQL (Average Quality Level) – manufacture quality level; RSL (Restrictive Substances List) – control of restricted substances; Participate in the key sustainability initiatives at Esprit; Ensure all the commercial requirements same as an adequate value for money and capacity levels; Approach with a fashion input. Most of the aspects listed above are made part of ‘Esprit Minimum Requirements’. Esprit has strict and solid requirements which represent standards of our social compliance, quality and sustainability areas, ensuring full compliance and sometimes going beyond the legal requirements.

Going beyond givens like quality, what are the three critical attributes that a consignment must not falter on?

Beyond quality, vendors must meet our expectations regarding sustainability and social compliance. To clearly define these expectations, Esprit participates in organisations like Zero Discharge, Better Cotton Initiative, Responsible Down Standard, Canopy. These groups, as well as some others in which Esprit is active, cover both legal requirements and requirements that Esprit would seek to fulfil beyond legal minimums. In addition to legal requirements, which include RSLs of all markets where we sell products including REACH standards, we also have our own quality standards. The Esprit Material Quality Requirements, which include different criteria like colour fastness to washing, light, pilling, twisting and shrinkage. Esprit standards also prohibit things like the use of angora wool (live, plucked down) and sand blasting of denim. To ensure high standards, Esprit co-operates with certified and selected laboratories to guarantee that our requirements are consistently met. Esprit seeks to assure that making our products meet local law and international (ILO) standards. We embed our work in this area within the context of a number of multi-stakeholder organisations, including the BSCI, ILO Better Work and the Bangladesh Accord on Building and Fire Safety. To guarantee on-time performance, Esprit works in close contact with vendors, supported by vigorous capacity planning, to avoid production glitches that could cause delays. Meeting such a wide range of criteria requires working closely with partners on an on-going basis. The relationships that support this work do not just happen – we work hard to build them.

What are the top five points – from factory floor to final packaging and dispatch – that a vendor must not falter on?

Visibility, security - social compliance or sustainability, technical capabilities, quality - AQL or RSL, commitment – on-time performance We from Esprit always need to know where our productions are going to take place, to make sure that the circumstances at the point of fabrication come along to our requirements. We’re especially concerned that suppliers pay attention to security aspects (relating to employees and facility), observe all legal requirements and follow our sustainability norms to protect the environment. Technical aspects must also be considered, meaning that the quality of yarn or fabric coming from the mill has to correspond to confirmed prototype, and that the technical execution and production must be the same as the confirmed prototype. Quality and testing standards need to meet Esprit’s expectations. All garments must pass quality inspection and legally required laboratory tests, as well as our brand standards (for example: colour fastness, pilling, forbidden substances, measurements, etc) and finishing processes like washing, ironing and hang tags or labelling requirements, etc. Another essential factor is the commitment of suppliers to fulfil all agreements and assure on time performance regarding production and delivery as required in the purchase order.

What is the ideal lead time that you look for in a minimum of 1000 pieces?

The production lead depends on many factors – same as the product class and specifications – like the order volume, availability of materials or capacity slot in the point of fabrication. The supplier structure has a huge influence on production lead times, as well. Whether the factory is vertical, the vendor size and other factors matter a great deal. Other key considerations are season garment specifications, and the availability of fabrics, all of which could extend the lead time as well. Considering all of these aspects, we can determine under assumption of simple requirements not extraordinary complex manufacture or finishing techniques and availability of materials and production capacity: - Circular Knit - Short leadtime – easy to supply in short leadtime – 30 to 40 days - Flat Knit - Long leadtime – easy to supply in short leadtime – 50 to 60 days - Denim - Long leadtime – easy difficulty to supply in short leadtime – 50 to 60 days - Woven - Long leadtime – mid difficulty to supply in short leadtime – 50 to 60 days

What is the ideal payment terms and cycle that you look at when deciding on a vendor?

Whether we talk about two parties, ideal should fit for two of them. Obviously suppliers will require availability of financial resources at lowest difficulty, the sooner the better. L/C at sight would be, most probable, the preferable payment terms for them. The buying part will require, most of all, security in the payment process and minimise the impact for company cash flow. TT/90 days after delivery, is most probably the right one in this case. We consider that the vendor base is key in this regards. To work in an environment of trust and confidence, we found Open Account as the right compromise in the parties, for every time it is possible.

Do you use the same vendor for different market requirements? How does it work?

Yes. Our aim is to ensure that all suppliers meet the Esprit Minimum Requirements, so that the goods we produce are delivered to all markets where we sell the product.

Any scheme or policy within your company that encourages a new but promising vendor to become your ‘preferred’ supplier?

Esprit is currently revamping its vendor score-card to better capture all relevant areas of vendor performance. The vendor score-cards, to which Esprit and the supplier will both have access, is going to capture the vendor performance, regarding on-time delivery, social compliance profile of their POFs, quality and claims in order to challenge the performance of the supplier and focus attention on areas of excellence, as well as areas that need improvement. On top of meeting our ‘minimum requirements’ as mentioned before, suppliers also need to have a good partnership attitude. Esprit demands a professional handling of the orders. If R&D is available, it will also help from the product side to sustain co-operation. The vendor needs to be proactive in finding solutions and respecting all agreed conditions. Preferred suppliers need to have a certain business volume and reasonable and consistent price value, as well as a good overall performance.

What are the emerging sourcing markets?

The last couple of years have seen significant changes in sourcing patterns as China became more expensive and new production countries rose in prominence. Much of the shift to South and Southeast Asia, as well as back to Europe and Turkey, has not represented the emergence of new sourcing markets since these countries had already been significant producers for some time. What has changed is the volume and type of product that has begun to be made in these places. Going forward, Esprit, like most brands, is watching Myanmar and Ethiopia closely to see how they will grow. Further, there are additional places in Africa that could prove interesting. The apparel industry is as flexible as it is volatile. However, it is hard to guess where the industry is going until it actually begins to move.

What are the top three challenges that you face in ensuring a sustainable supply chain with minimum carbon footprint?

The key challenge we face operating in a sustainable way is that, although Esprit is a large brand, we are quite small as a percentage of the global apparel business. As a result, working alone we lack the leverage to bring about the kind of sustainable change that our industry needs. To face this challenge, we rely on relationships with our industry peers through a number of multi-stakeholder organisations to extend our reach and maximise our impact. Key among these are the Roadmap to Zero Discharge of Hazardous Chemicals, through which Esprit joins together with most other major brands to engage our supplier factories and the chemical industry in eliminating eleven classes of toxic chemicals from the global apparel supply chain by 2020. We have also joined the Better Cotton Initiative (BCI) to reduce the environmental impact of cotton that we use, as well as Canopy, an initiative to make sure that wood from which our viscose is made is not taken from ancient or endangered forests. These organisations, in addition to AFIRM for product and chemical safety, the BSCI and Better Work for social compliance, and the Responsible Wool and Down Standards for animal treatment, allow Esprit to magnify our voice and accomplish sustainability goals that we could never achieve working on our own. The trend towards producing close to market can also reduce a company's carbon footprint, and Esprit is also shifting production closer to our markets than in the past. But it is important to remember that the majority of a garment’s environmental impact occurs post sale – as the customer wears and launders it and, ultimately, throws it away. Esprit is developing a number of garment recycling programmes, and we feel that good quality garments that last and do not need to be replaced as often are a key part of this effort. A good deal of a garment’s sustainability must be designed. For this reason, Esprit has started to use the Higg Index of the Sustainable Apparel Coalition to look at sustainability throughout our supply chain, and also at how we develop our product line in order to make sure that environmental sustainability is built in as much as possible while also assuring that we make garments that our customers love. In short, ensuring that our supply chain is as sustainable as possible requires overcoming a number of challenges. The first challenge is our size in proportion to the global apparel trade. We overcome that by banding together with other players in the market. The groups in which Esprit participates allow us to minimise the environmental impacts of our materials and production processes. Finally, we must critically scrutinise our internal operations and processes to make sure that our requirements and ways of doing things avoid doing more environmental harm than necessary.

There is a lot of talk about making the consumer aware of how clothes that he or she wears come through a sustainable supply chain, and therefore the price it commands. Any steps / thought process to highlight this at the brand-consumer interface level, either through labeling or other marketing/communication activities? If yes, kindly share. If no, do you think such a step will help in a cleaner and greener supply chain in the years ahead?

Since a number of years, supply chain has become more and more transparent. Consumers today have access to more information about where their clothes are made, and under what conditions, than ever before. But the amount of information demanded continues to increase faster than new information becoming available. The idea of consumer-facing labels certifying various aspects of social and environmental sustainability is receiving a good deal of attention, but the problem of assuring credibility hampers the wider development of concept. The range of sustainability issues of concern is also quite broad, which raises questions about how much information and how many hang-tags can practically be attached to a single garment. These questions will be resolved over time, and consumer-facing labels will likely be the norm in the future, but the time for them has not quite arrived. It will be exciting to watch as this concept matures and takes hold. For the moment, brands are increasing the amount of information available through other means, including their web sites and various kinds of public reporting. The information is far from consistent between companies, and ranges from a frank discussion of serious challenges to highly stylized public relations documents, but more and more such information is available for consumers who wish to see it. The trend is clear, and it challenges companies to explore new ways of communicating with their consumers.

Published on: 23/06/2016

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.