Economics Society

Fashion Supply Chains: It’s Time to Change the Model Once and For All

A NY Times article yesterday once again she light on the systemic problems across the supply chains that produce most of the world’s clothing. The article, by Jim Yardley, notes that almost a year after the horrors of the Rana Plaza disaster, the industry has done little to address the real risks that are endemic to the value chain that puts a never-ending parade of fashion into the hands of the world’s consumers.


As Yardley notes:

For global brands and retailers, Rana Plaza has forced a reckoning over how to reconcile the mismatched pieces in their supply chains. Technology and investment are transforming the upper end of the industry, enabling Mango and other brands to increase sales, manage global inventories with pinpoint precision and introduce new clothes faster than ever — all as consumers now expect to see new things every time they visit a store.

But these brands depend on factories in developing countries like Bangladesh, where wages are very low and the pressure to work faster and cheaper has spawned familiar problems: unsafe buildings, substandard work conditions and repeated wage and labor violations. Consumers know little about these factories, even as global brands promise that their clothes are made in safe environments.

It would be normal for a person to ask why the industry has not really addressed the conditions that created Rana Plaza. After all, if a thousand employees died at an automobile or food factory, the CEO’s of these companies would instantly take action. What is it about the fashion business that stops this reaction from taking place?

On the consumer side, it’s a simple unwillingness to understand the model that puts cheap clothes on the shelf. The sample people who would be horrified to learn that near-slaves had built their car or harvested their food, seem perfectly content to let the poorest of the poor stitch their t-shirts or sneakers. The greater irony is that so much of fashion is disposable: meant to be worn one season and then tossed into the garbage or sent to charity bins that are drowning in too many old clothes anyway. (Only a small part of clothing given away to charities is actually ever worn again. Most of it is sold for recycling or exported to poor nations.)

On the producer side, its an issue of economics. I have personally talked about this topic with fashion and finance executives in Europe and Asia and everyone agrees that the industry model itself is the main culprit. The brands are willing to pay a little more for clothing made in better, more high-tech environments, but they are not willing to make the capital investments these changes require since they do not own the production assets. The best factory owners say they are willing to make the investments but if they do they will lose out to those who do not, since the brands chose producers on price for the most part. So it’s a mixture of game theory and catch-22, and the results is that no one moves unless the other guy does too. In the meantime, the needless risks continue to grow, and an industry that should have changed years ago continues to operate a model that is both antiquated, socially irresponsible and in many cases criminally negligent.

This could all change if the major brands and producers agreed to a different set of economics for buying and making clothing and footwear. Rana Plaza did not have to happen, and when it happens again the brands and producers will have no one to blame but themselves.

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