Author: HQTS Group Ltd,one of Asia’s oldest and largest quality control and supply chain providers. HQTS has over 25 years of experience in quality assurance and is ready to help businesses build strong and meaningful supplier relationships across Asia. Its multiple service locations across the world’s major manufacturing regions serve as one-stop shops for clients’ inspection needs, including factory audits, production monitoring, pre-shipment and sorting inspections, and everything in between.
Most of the world’s centers of textile and readymade garment (RMG) production have been affected in one way or another by the coronavirus outbreak. This, in addition to other market challenges, have led many businesses to seek alternative sourcing partners. This article outlines current sourcing trends in the fashion industry and discusses the role third party inspectors can bring to building strong relationships with suppliers.
The global fashion industry has been significantly impacted by recent global trends and challenges, including the recent coronavirus outbreak. Current disruptions in the global supply chain are causing many companies to reconsider their suppliers as they struggle to keep up with their production demands. This requires forging new relationships with new and existing suppliers, which can always be a challenge. In this article, we lay out current trends in textile and apparel sourcing, as well as tips and insights into working with new suppliers and third party quality service providers.
The Current Situation
Many of the world’s largest apparel brands have been significantly impacted by the coronavirus outbreak. This is due to both limited production capacity, as well as depressed consumer demand in China. In their list of companies most impacted by the coronavirus outbreak, Credit Suisse notes that some could see a 3-5% reduction in earnings per share next quarter if current trends continue, with an overall 1-2% reduction for the year. This, coupled with fallout from the US-China trade war has companies of all sizes seeking to mitigate costs by reconsidering their supply chains.
All of this points to a significant shift in the global textile and apparel industry. This will require businesses of all sizes to be both flexible and agile as they adjust to the current global market.
Sourcing from Alternative Markets
The effect of the current coronavirus outbreak on the supply chains of industries around the world cannot be understated; however, it is not the only thing affecting global sourcing trends. Chinese production is steadily moving away textile and apparel production in favor of more high tech products. While China remains the world’s largest textile and garment exporter, emerging markets such as Vietnam, Bangladesh, India, Indonesia, and Cambodia have become important players in the global fashion industry. This trend is likely to continue as companies seek regions with large labor pools and low production costs.
While finding new suppliers can ultimately benefit your business, there are also a number of risks involved, especially with emerging markets. Generally speaking, these include:
Lack of experience
Many of suppliers in emerging markets are at the very early stages developing their production processes, management techniques, regulatory certification and compliance, and quality systems. Because many suppliers also tend to be small to mid-sized companies, they often have limited resources for improvement.
Suppliers who are inexperienced in dealing with the international market may also lack the ability to communicate effectively in English, which can result in a lot of miscommunication.
Ethics and the Rule of Law
The legal and ethical standards followed in your home country oftentimes do not apply in the developing world. Whether it is a simple lack of transparency to rampant corruption and outright fraud, these issues can arise frequently and it is best to be prepared. You should be aware that many of these countries have a limited rule of law and that legal your recourse could be limited as a result. Overcoming these challenges takes a strong understanding of local business practices that is difficult to acquire from abroad.
Worker loyalty is often low, and workers move between factories in search of more money or better working conditions. They are usually unwilling to discuss their job dissatisfaction with outsiders and prefer to leave or even engage in strike actions. This creates problems with transparency when performing supplier audits and evaluations.
Many suppliers work from home offices while many factories are small and lacking in supply chain resources and capabilities that one would find in more developed countries such as China.
The unavailability of advanced machinery and technical staff to operate more complicated systems also impedes growth and contributes to a failure to meet global quality standards. An inability to meet production timelines often leads to over-reliance on subcontracting, which further lowers quality and transparency in production.
A lack of local resources frequently requires factories to source a high percentage of their materials and components from other countries – especially China. This results in a more complex supply chain leading to longer lead times, supply uncertainty and quality degradation. Finally, while many of these countries have invested heavily in infrastructure in recent years, they are still far behind the developed world and this can cause further disruptions.
Forging new Supplier Relationships
One of the most important trends in global business today is supply chain collaboration. This is where businesses seek to work with their suppliers over the long term to continuously improve quality, plan for demand, and cut costs by reducing waste. To do this requires excellent communication, which can be difficult when dealing with cultural and geographical distances.
Trust is the most important element in the buyer-supplier dynamic, but the nature of today’s globalized world makes achieving this more of a challenge. While buyers once only had to travel short distances to meet suppliers in their home country, they must now increasingly forge these relationships with people who are oceans away and may not even speak the same language. A third party quality provider helps to close this gap by listening to and understanding your needs while communicating them to suppliers in their own language, thereby ensuring standards are met and goals are clearly communicated.
While exploring new opportunities with suppliers can be daunting, the most important thing is to be prepared for the challenges. While we recommend working with a local third party provider, it is important to conduct careful research to ensure they have the necessary local experience and technical ability to communicate your needs with suppliers.
- Find a company that has experience dealing with your specific requirements
- Be sure the provider is accredited and certified for the services they offer
- Find a provider with substantial insight and extensive experience in the local business environment
The Role of a Third Party Quality Provider
Philip B. Crosby, a pioneer in quality assurance, used the analogy of a car to describe quality assurance in manufacturing: while management serves as the driver, Quality Assurance is the owner’s manual that describes every detail or the car and how it should operate. Quality Control serves as the car’s measurement features on the dashboard that indicate fuel levels, speed, etc.: these allow you to see how everything is running. Finally, quality management is the vehicle’s guiding philosophy, the style by which the vehicle is driven by management. While it is ultimately management that puts their foot on the accelerator and drives the vehicle, a third party quality provider will work with management to inform them about best practices, make sure your guiding philosophy is implemented, and ensure the entire process runs smoothly.
Whether dealing with a new supplier, or working with an existing one, a third party quality provider will serve as a crucial link that ensures you get exactly what you want out of the relationship. To expand on Crosby’s analogy: their role is everything from your car’s monitoring system that tells you when you need to go in for service, to the service technicians themselves. They are the vital link between you and your supplier that ensures your business has everything it needs to thrive in today’s global business climate.
The most important services a third party provider should offer include:
- Sourcing and supply chain support, translation services, factory visits, and project management
- Production monitoring to ensure quality systems are in place and followed
- Evaluating and recommending suppliers based on your product requirements
- Compliance audits to ensure compliance with regulatory, social and product
- The full range of quality control services including inspections and testing