If you work in the apparel industry, then you’ve likely already felt the effect of the strain on our supply chain.
The order that once took two to four days to receive now takes two to four weeks or more...
A “quick” order is no longer quick, and a guaranteed shipping time is impossible to find...
Short orders are being refused, and order minimums are slowly getting larger…
Discounts are suddenly few and far between...
This might feel arbitrary, like the supplier is playing games, but it’s not. There are numerous factors currently influencing shipping times and prices in the apparel industry. These factors may be occurring behind the scenes, but they are having a real-world impact on all of us.
Let’s look at the factors behind the recent apparel supply chain issues we’re all feeling.
The State of the Apparel Market
The apparel supply chain is complex, with multiple links closely influencing each other.
You have the farmers who grow and harvest the cotton. One set of manufacturers making everything from polyester to thread, working alongside the textile manufacturers and the apparel factories. Shipping companies need to get the materials to the factories, then to the suppliers and distributors. Someone else may retrieve the finished product and ship it to the next stop in the supply chain. Often there’s an embossing company or print supplier who adds a logo or design.
We haven’t even gotten to the end user. There are many connected, moving parts behind every polo shirt, jacket, vest, hat or sweatshirt that you purchase. The difficulty inherent in the system is that a problem in one link of the supply chain will have a ripple effect, eventually impacting the end user.
That ripple effect in the apparel supply chain is behind the challenges we’re currently feeling in the apparel market. Even if an issue doesn’t directly impact you, you can feel the effects in price, shipping time, availability and more.
Let’s look at some of the issues.
Rising Cost of Raw Materials
The price of cotton has increased this year, as much as 84% or more, and it’s still rising. Much of this increase can be attributed to a slowdown in production during the pandemic, but the domestic price has also been impacted by on the U.S. ban on Xinjiang cotton due to the abuse of Uighurs in the region. Some estimates on global use of cotton report that cotton from Xinjiang makes up as much as 20% of the global supply. Filling that gap is putting pressure on other suppliers. To counter the ban, China has invested in its domestic cotton market, which has further increased the price of cotton.
Shifting to other materials hasn’t significantly reduced costs. The price of polyester and polyester staple fiber (PSF) has also increased as much as 11.7% in a month. This could be attributed to companies looking for alternatives to cotton and the rising cost of crude oil, which is used to make polyester.
Manufacturers can only absorb so much of an increase in the cost of raw materials before it becomes necessary to pass along the expense to the end user and others in the supply chain.
Shipping Struggles
The overseas shipping network is a tangled mess right now, which is pushing the cost of apparel even higher and wreaking havoc with shipping schedules and overseas delivery estimates.
With shortages of consumer products being felt across the world, more suppliers are looking overseas for goods. Increased purchases mean more products are sitting in ports waiting to be shipped. At the same time, ports across the world have been shut down to contain COVID, sometimes for weeks or longer and sometimes with little warning. In addition, container ship traffic is still struggling to catch up from port closures and shipping lane disruptions from the blockage of the Suez Canal.
Many ports are also experiencing severe backlogs, as the wait times for docking increase. With container ships waiting to dock, shipping schedules are thrown off and it becomes difficult to even estimate when a product will ship.
The result is a massive increase in the cost of shipping cargo, which is pushing the price of goods even higher, as well as difficulty in calculating when new product will arrive or managing inventory. The price of shipping has more than quadrupled since last year, and it shows no signs of slowing down. It’s increased more than 53.5% since the start of May. Logistics experts are scrambling to stay on top of delays and rerouted cargo ships. Shipping experts don’t see any relief until 2022 at the earliest.
The Strain on Domestic Shipping
Logistic issues impacting the cost and availability of apparel don’t stop once a shipment arrives at port.
Global shipping volume has drastically increased, putting a strain on rail shipments as companies look to move their product from the port. Right now, domestic train capacity is at its limit, creating bottlenecks at freight hubs like Chicago. Shipping containers sit at the hubs, waiting for a berth on a train, which is not only costly, but also inefficient. To compensate, railways have had to severely restrict pickup times at railyards.
Domestic truck shipments are also feeling the pressure. There were a record low number of truck drivers at the start of 2020. This is due to both an aging workforce and to difficulty in recruiting and keeping new truckers. Trucking companies aren’t the only ones struggling right now. Less-than-truckload (LTL) carriers like FedEx and parcel delivery services like UPS also have limited capacity and are under pressure to meet increased demand, which means higher costs and longer shipping times.
Rising Costs for Apparel
The exchange rate is also proving to be a challenge for domestic apparel suppliers.
The U.S. dollar is currently weaker against some global currencies, which is increasing the costs for suppliers paying for goods and materials in those countries. While the pandemic and multiple rounds of economic stimulus have led to a weaker dollar, and it is giving a boost to the economy and spurring economic growth, it does lead to higher product costs.
Tariffs, or the Generalized System of Preferences (GSP), is also putting pressure on apparel costs. A tariff program that reduced the cost of some goods produced in the Philippines and Indonesia was allowed to expire at the end of 2020, and it as yet has not been renewed. Hopefully, congressional action will renew the exemption program, but until then this is increasing the cost of some apparel and promotional goods.
The Impact of Supply Chain Strain
As we said at the beginning, the apparel supply chain is closely linked, with numerous moving parts. Disruption at one point of the chain can have an impact at other points.
Right now, apparel manufacturers, suppliers and distributors are challenged by multiple points of disruption. It’s causing problems that we feel in rising costs, slower deliveries and lower supplies.
Protecting Yourself in this Time of Opportunity
There is no magical solution to the supply chain disruption we’re experiencing. No matter your industry, your market or your business, we are all feeling the effects of a global pandemic and a changing workforce.
What we do now can mean the difference between business success and failure. Here are few tips for turning this trouble into opportunity:
- Plan for the disruption: Forecast your needs and requirements and get your orders in early. Just-in-time shipments may have been the goal in the past, but it may not be practical now. If you can forecast needs early and give your suppliers and distributors time, you can mitigate the impact of disruption and stay a step ahead of the market competition.
- Work with your suppliers: Right now, in the face of supply chain disruption, a capable supplier is your best partner. Rather than seeking out the lowest cost option for an order, take a long view and recognize the value a supplier can bring. Discuss your needs with the supplier, rather than making demands. Work through problems with them to find a solution.
- Communicate with your customers: Everyone is feeling the pressure from supply chain disruption right now. Approach your customers, both internal and external, about the problems facing apparel. Be open and honest rather than making promises you may not be able to keep.
Market conditions are challenging right now, but manufacturers and the global supply chain will find balance. The steps you take now can position your business for success, even during these difficult times, and position you for growth in the future.
