Risk Analysis Of The Apparel Supply Chain In 2012

The supply chain has recently faced a perfect storm. This storm was composed of three cost elements:

• A violent increase in the price of cotton, hitting US$1 per lb in late 2010
• Considerable direct labour wage increases in low cost countries such as Sri Lanka and Bangladesh, allied to inflationary wage increases in manufacturing giants, such as India and China
• A tripling in the cost of shipping a container from Shanghai to Rotterdam, from below US$1,000 in late 2008, to over US$3,000 in late 2010

It's easy to refer to examples like these, and reasonably easy to understand that they must have serious effects on the supply price (the retailer’s buy cost) of apparel. But it is not so obvious to calculate the effect that these changes have (as every supply chain purchase contract will have a different set of variables) and there are quite a few variables.

In this first-edition report, just-style has created six supply chain cost models to illustrate the differences between the supply price from different countries and the effect of changes to those cost elements. These cost models allow you to see what effects certain scenarios have on a typical supply chain. The scenarios include:

Using local materials
A doubling in fibre prices
A doubling in wages
A trebling in shipping
A combination of all, the ""perfect storm""

This report considers what is happening and is likely to happen in the apparel supply chain in the areas of:

Cost
Risk (incl. risk assessment and “what if” scenarios)
Time
Responsibility
Environment
Finance

The cost models have been created to explain the effect on the final retail price of manufacturing in different parts of the world.

A risk analysis has been made up of sourcing from different parts of the world.

The impact of time and the supply chain critical path are all considered and modelled.

The argument for responsible sourcing is measured against both cost and concern for the environment, with examples of recent practices.

The effect on both the buyer and the supplier of different ways of financing the supply chain is explored.

This report is an essential resource for anyone involved in:

Managing supply chains
Sourcing apparel garments and materials
Managing business costs in the apparel industry
Analysing and forecasting risk scenarios and trends in their business