Managing Risk In The Global Supply ChainSource: New Generation Computing Inc.
Managing the complexities of global fashion supply chains has never been easy – and it’s getting a lot more complicated. Global supply chains face a “perfect storm” of risk factors, according to a recent report from Just-Style, a leading market intelligence and publishing company for the global fashion and apparel industry.
According to the report, “Risk Analysis of the Apparel Supply Chain in 2012,” the perfect storm consists of several major risk factors:
- Volatile materials prices. The fashion industry saw a “violent increase” in the price of cotton in 2010 and 2011. And while cotton prices have stabilized for now, the report notes that the cost of other materials, including wool, has risen, and fashion companies should brace themselves for further price increases in the coming years.
- Widespread wage increases. Another substantial risk factor is the increased cost of labor. Production costs are on the rise due to widespread wage increases, and companies are moving some of their production to lower-cost regions, in order to produce finished goods at the right price and maintain high product quality.
- Skyrocketing shipping costs. The report points out that shipping costs from Shanghai to Rotterdam tripled in just two years. And with continuing fluctuations in oil prices, instability in the Persian Gulf, and environmental concerns over exploration and drilling, shipping costs can only rise further in the coming years.
- Legislative trade initiatives. Uncertainty about the outcome of legislative trade initiatives such as the Trans-Pacific Partnership (TPP) is another cause for concern. Apparel importers and retailers are pushing to remove tariffs and streamline customs procedures in TPP countries, especially Vietnam, and the outcome of the legislative agreement will set the patterns of trade for the next several decades, according to the American Apparel and Footwear Association.
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