Supply Chain
Apparel Industry Hit by Supply Chain Issues Heading into the Busy Holiday and Spring Shopping Seasons
- Apparel retailers are having to adjust their expectations and habits so that they get their orders on time. Raw materials that manufacturers need to produce sewn products are in great demand. We have never faced anything like this before.
- The apparel industry is facing major supply issues that are impacting the retail business.
- The impact of the lost production combined with long delivery times means that retail inventories will be impacted more during the first three months of 2022 than the current quarter.
- Global supply and demand: It is the first lesson you learn in business class – the more people need something and the harder it is to get, the more it costs. Due to several factors, including ongoing issues related to COVID-19, the price of goods and raw materials is going up. As a result, the cost of clothing in the U.S. has already increased 5 % in the last year.
- The price of cotton: Specific to the apparel industry, the global demand for cotton is expected to exceed the supply in 2021, which means the price of cotton is rising.
- Dark factories: Production of Nike athletic shoes and apparel was hit hard by closures of contract manufacturing facilities in Vietnam and Indonesia. In Vietnam, 80% of the company’s footwear factories and half of the apparel factories remain closed by government orders. Ho Chi Minh city was under a strict social distancing policy with a three-phase reopening that won’t allow full activities until January 15. Some factories are operating under a “3-in-1” policy that allows factories to operate as long as employees work, eat, and sleep in one location, but government approvals are difficult to obtain and many workers are upset about being isolated from their families.
- Transportation costs and labor shortages: Freight transportation delays, primarily associated with port and rail congestion, as well as labor shortages. Nearly 80% of all goods are transported via the sea – and the apparel industry is no exception. A shortage of containers, ships, and dock workers has caused the price of ocean freights to skyrocket. Recent labor shortages in the U.S. have caused additional issues with the supply chain. From truck drivers to factory workers, these shortages are impacting the price of goods and the speed at which they are being delivered. And there is no end in sight. Transit times in Europe and other regions have also deteriorated. Transit times from Asia have doubled to 80 days because of the blockages in ocean shipping.
- COVID-19: The COVID pandemic froze shipping networks for three months last year and when economies sprang back to life, many containers were out of rotation and not in places with the greatest demand. Companies ramped up orders to recover depleted inventories as consumer demand took off, putting more cargo in the system than ocean carriers could handle. COVID health restrictions have limited the longshore, warehouse, rail, and trucking workforces, resulting in huge backlogs at container terminals and delays in unloading vessels. A series of disruptions, such as a six-day vessel blockage of the Suez Canal or port closures in China due to positive COVID tests or typhoons, have exacerbated delays because there is no slack in the system to absorb them.