- Companies urged to embrace technology to tackle supply chain challenges
- Of the total respondents, Indian companies made up 17%, with 59% from Asia-Pacific
Serai, an online B2B platform that simplifies global trade, in collaboration with KPMG, has launched a global report – Moving the needle – Threading a sustainable future for apparel. According to the report, sustainability and transparency within the apparel industry have come under the spotlight in recent years due to rising external pressure from consumers and governments. The survey finds that two-thirds (66%) of apparel industry insiders see supply chain transparency as an “extremely important” issue. This number is even higher for Indian companies, at 83%.
About 80% of total respondents aim to implement transparency solutions by 2027.
However, less than 20% of the respondents currently have a comprehensive overview of all stakeholders in their supply chain (visibility) and just 15% are able to fully trace all the materials and components used in a product from their origins through each step of processing and manufacturing (traceability).
Moving the needle – Threading a sustainable future for apparelis an in-depth study into how the apparel industry is responding to calls for adoption of sustainable practices, and launches at an opportune time as the importance of creating a more sustainable apparel industry has been underlined by talks held at the recent COP26 climate conference. The study draws on the findings of a global survey of over 200 senior executives in the apparel industry conducted in August 2021. Respondents represent brands and retailers, suppliers, manufacturers and sourcing agents of varying sizes. The survey’s findings were supplemented by in-depth interviews with executives at more than a dozen market-leading apparel brands, manufacturers, associations and solution providers.
Supply chain transparency is a cornerstone of the apparel industry’s efforts to become more sustainable.
According to the report, three key factors are fuelling the need to uphold transparency.
- Corporate reputation: About 52% of suppliers and 59% of retailers/brands considered enhancing their corporate reputation as the main reason to boost their supply chain transparency.
- Business opportunities: Now more than ever, suppliers are motivated to improve supply chain transparency as part of their business goals, as this may allow them to tap into business opportunities with brands and retailers that are positioning themselves as sustainable or complying with stricter regulations.
- Profitability: Companies are looking to improve operational excellence to lower costs and preserve margins. Research indicates businesses with higher sustainability scores have a lower cost of capital. A sustainable apparel business can expect to have an average uplift in their net profit margin of 1-1.5% for brands and by 1.5-2.5% for suppliers.
Anson Bailey, Head of Consumer & Retail, ASPAC, KPMG China, says: “Walking the talk on sustainability issues is something that apparel companies can no longer afford to ignore. Consumers nowadays have so much more information on the sustainability credentials of products, as well as the companies behind them and their impact on the wider community. The COP26 climate summit has also highlighted the need for the industry to change. Greater transparency means that brands will be held accountable, however it also opens up opportunities to better manage inventories, introduce more agility and achieve greater collaboration across the entire supply chain.”
Currently, the capacity of the apparel industry to ensure supply chain transparency remains low.
Challenges in achieving full transparency across supply chains
The most prevalent barrier holding back the industry from achieving transparency is high initial investment. Difficulties in obtaining and managing data from other companies in the supply chain is another major obstacle. Still, two-thirds of industry respondents (65%) were willing to disclose their supply chain traceability policy. This proportion is much higher for suppliers in North America (80%) and Europe (81%). Suppliers in these regions are at a cost disadvantage to suppliers in Asia Pacific and may use their sustainability credentials to differentiate themselves from lower cost competition.
Companies in India stand out in this regard, with 66% of the Indian respondents already disclosing their supply chain traceability policy.
Against the backdrop of entrenched operating practices, low margins and the high degree of complexity in today’s apparel supply chains, only 14% of companies surveyed have fully automated transparency systems in place for visibility and 13% for traceability. Meanwhile, over half of all the respondents still have manual processes in place for those two components – and the figure is higher for smaller and medium-sized businesses. With the increased demand for information from both consumers and regulators, there is an urgency for the industry to upgrade infrastructure. The adoption of digital technologies will be key to capturing material flows across the supply chain and for the entire network to gain visibility.
Vivek Ramachandran, Chief Executive Officer, Serai, says: “Over 80%of the industry plans to have a transparency solution in place by 2027. However, businesses need to act with a greater sense of urgency. COP26 has reinforced the need for companies to find ways to reduce the environmental impact of their manufacturing. This can only be done through full visibility into their extended supply chains. Thankfully, the technology to help already exists. At Serai, we’ve built a plug-and-play platform that integrates with existing solutions. This means rollout is much quicker, the cost of adoption is much lower and more importantly, it provides a scalable platform that can easily be expanded across use cases to grow alongside the business.”
The report finds that investment in transparency tools will be crucial for apparel companies if they do not want to risk losing a competitive advantage. To move forward, the industry will need to overcome challenges associated with the consistency and quality of data.
