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REVERSE RESOURCES STUDY REVEALS A HIDDEN BUSINESS OPPORTUNITY IN FASHION SUPPLY CHAINS

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H&M Foundation Global Change Award winner Reverse Resources demonstrates a major unexplored business opportunity for growth within fashion industry by digitalizing leftover data from garment factories.

A report published by Reverse Resources shows that garment manufacturers producing textiles and clothes for many of the world’s major fashion brands are spilling an average of 25% of resources through fabric and garment production. In some cases, the volume was as high as 47%[1], much higher than usually perceived by brands. However, as the report explains, it is not a waste problem of factories, nor a problem about lack of brand responsibility. Such inefficiency is caused by a systemic conflict of business interests and lack of data and transparency in between the stakeholders of the global supply chains. Thus, the emerging era of circular economy along with digitalisation and transparency trends can unlock a major business opportunity for both brands and factories.

Currently, existing linear pricing schemes adopted by brands are unwittingly providing an incentive to factories to not share comprehensive and accurate data about leftovers. These pricing schemes ‘build in’ an extra margin for factories to sell leftovers into local aftermarkets. What remains unsold is incinerated or dumped, contributing towards both environmental and economic inefficiency problems.

However, improvements in supply chain transparency and traceability could unlocka huge opportunity forgrowth within the industry. Along with their software solution, Reverse Resources suggests three measures which can create a win-win business case.

  • Adapting the pricing scheme so that factories would have an economic incentive to share their leftover information.
  • Introducing different business cases to increase the value of leftovers for factories, such as remanufacturing – integrating bigger leftover fabrics and fabric pieces back into the same production or increased efficiency of recycling.
  • Using that information to build systems of transparency and traceability that rely on clear business case for suppliers.
Image: Photo taken on a trip to Dhaka2016, the sorting of leftovers after garment production.

Image: Photo taken on a trip to Dhaka2016, the sorting of leftovers after garment production.

Re manufacturing provides an opportunity to re balance the pricing system by developing a viable model for leftovers, which is linked with the prices of virgin fabrics, instead of the current market prices of leftovers. In the report, Reverse Resources illustrates how the model could help increase the market value earned from leftovers by the factories three-to-four times, while simultaneously lowering the FOB price of partially re manufactured garments.[2]The approach would also reduce the use of new fabrics in production by a total of three per cent via the integration of leftover fabrics in production. The model was validated by a pilot at factories in Bangladesh, the trials are ongoing to test the scalability of the concept on mass scale.

Image: Photo of an official dumping site of 14 factories next to an Export

Image: Photo of an official dumping site of 14 factories next to an Export

Reverse Resources research indicates that in Bangladesh alone, leftovers available from the country’s garment producing factories are worth approximately 1.6 billion garments if different reuse, re manufacturing and recycling methods were applied over the time. This would result in a total market value of 4 billion USD in Bangladesh alone. Re manufacturing could be applied to circa 25% of large leftover materials (c. 18” plus), potentially growing earnings for the factories by 3-5 times from their leftovers. Similarly, same applies to other garment producing countries.

Ann Runnel, founder of Reverse Resources says: “Better data from factories would facilitate virtual traceability of resources and enable digital interconnections across the supply chains. These are crucial for meeting the goals of a circular economy by decoupling economic growth from environmental impacts by resource effectiveness. Material circulation of production leftovers is already established, but it is by default inefficient,corrupt, costly for end-users and out of the control of the stakeholders in the core supply chains.”

Keith James, Delivery Manager of Sustainable Clothing Action Plan (SCAP) at WRAP: “The figures presented are of a similar magnitude to WRAP estimates.  This report is an important insight into an underexplored area.  We hope that it will prove valuable in tackling this issue.”

Ria Kearney, Senior Consultant at Made-By: “The innovative and comprehensive approach Reverse Resources is taking is an essential part of moving the sector towards true circularity and which presents many opportunities for the apparel sector, at every stage of the value chain”.

Dr Curie Park, Lead researcher at Centre for Industrial Sustainability at University of Cambridge: “RR certainly lays the critical stepping stone toward Sustainable Manufacturing and Internet of Things, which are two of the main keywords of the Digitalisation: the 4th Industrial Revolution. It is thrilling to watch how RR will help tackling the intractable inefficiency problem of the fashion industry by enabling transparent communication to optimise the material flow globally.”

The white paper is available for download at http://reverseresources.net/about/white-paper

The ‘Creating a Digitally Enhanced Circular Economy’ report is a culmination of 18 months’ research by Reverse Resources, which used a €150,000 Global Change Award grant from the non-profit H&M Foundation to examine the feasibility for a software-based solution to address the pre-consumer leftover problem.

Reverse Resources is developing a software for garment factories and their buyers to enable remanufacturing and create visibility of resources available from production. In parallel, its goal is to build a fabric database from factories, which is a key building block for virtual traceability of fabrics through their different life-cycles. The company is currently running a pilot project with 4 major suppliers in Dhaka, getting backup support by H&M. More information can be found at www.reverseresources.net

The annual Global Change Award is one of the world’s leading challenges for early stage innovation, and the largest initiative of its kind in the fashion industry. It recognises game changing ideas that can make the entire fashion industry circular and help protect our planet and living conditions. The Global Change Award catalyses early innovations that can accelerate the shift from a linear to a circular fashion industry. Neither the H&M Foundation nor the company H&M take any equity or intellectual property rights in the innovations. Reverse Resources was one of five projects selected from 2700 early stage innovations from 120 countries to receive an award.

 

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