Strategy & Leadership

Re-threading supply chains in the lifestyle industry

January 19, 2021

Global

Re-threading supply chains in the lifestyle industry

January 19, 2021

Global
Candice de Monts-Petit

Manager

Candice is a manager within Economist Impact's Policy & Insights division in EMEA. Prior to joining the Economist Group in 2018, she was the editor of IR Magazine, the global publication dedicated to investor relations professionals. She had an early career working in finance and investor relations in the natural resources sector in Moscow, Paris and London. Candice holds an MSc in Business Management from Université Paris Dauphine, an MA in Political Science (Post-Soviet studies) from Institut d'Etudes Politiques de Paris and a degree in Chinese Studies from Université Paris Diderot.

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Find out the main challenges affecting global supply chains, and what this might mean for the future of industries. This report focuses on the lifestyle industry, which spans clothing, footwear, textiles, luxury and toys.

Supply chains in the lifestyle sector (which includes clothing, footwear, textiles, luxury and toys) were already under pressure prior to the 2019 coronavirus pandemic. Environmental sustainability, labour standards and technology adoption were among the internal challenges facing companies, but external headwinds were also complicating factors. Globalisation has been under threat, facing challenges in the form of the US-China trade war, Brexit, rising economic nationalism, and the crisis of the multilateral trade regime and the World Trade Organisation (WTO) itself.

While the pandemic has hit the lifestyle industry especially hard, mapping on to critical production and consumer markets like China and Italy, it should also be a spur for much-needed reforms. The Economist Intelligence Unit, sponsored by Maersk, surveyed 450 supply-chain executives and interviewed a range of experts to garner their views and opinions on the future of supply chains in their industries. Our key findings include:

  • The pandemic exposed existing supplychain risks. After decades of focus on “justin-time” delivery and lowest landed cost, the lifestyle sector, especially the clothing, garments and footwear industries, has quickly realised its supply-chain rigidities. Nearly 40% of respondents source from just one country (outside their own), the survey found; in comparison, just 9% of fast-moving consumer goods companies do the same. This single-country reliance is prompting a shift towards “multi-sourcing” and greater flexibility.
  • Supply-chain executives are focusing on resilience—and they are using the latest technology to help. Lifestyle sector respondents were the least likely of the three sectors surveyed to rate their supply chain as “flexible”, and introducing new technology is a resilience-building measure for 39%, the largest grouping. They are betting on new tools from blockchain and satellite technology to cloud computing and collaborative digital platforms to foster resilience-building flexibility. Software startups are helping the industry to leverage e-commerce, 3D printing and advanced supply chain analytics. 
  • Brands need to collaborate more effectively with supply-chain partners. Upholding labour standards, ensuring product traceability and managing environmental impact all require high levels of communication and engagement throughout the supply chain. Our survey shows that improving collaboration with supply-chain partners was the second most frequently cited strategic objective, voted for by 26% of respondents, compared with a survey average of 20%. However, the pandemic has seen many brands enact force majeure contract cancellations with negative impacts on suppliers. Such moves, combined with ongoing supply-chain governance breakdowns, indicate a gap between objectives and hard realities.
  • Slow fashion, “re-commerce”, fewer seasonal cycles and more use of digital communication are creating a more sustainable status quo. Fashion, garments and footwear producers have long faced criticism for their negative environmental impact and poor labour standards, but evidence shows that progress is at hand. The pandemic has driven the rise of the second-hand and the so-called shift to thrift. Brands have reflected on the desirability of constantly refreshing seasonal ranges. Chief sustainability officers have more influence on supply-chain strategies compared with those working in other industries in our survey; however, with a mere 3% of respondents describing them as having a “strong influence”, there is clearly further to go. 

 

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