It's Friday note

Welcome to the first installment of Fashion Friday!  In Fashion Friday, we focus on supply chain issues that impact an industry we follow in our personal lives as well as our professional lives.

Fashion is an industry in which supply chain visibility is increasingly important.  Supply chain visibility means the ability to know and understand what is happening all the way down the supply chain.  Increased supply chain visibility helps companies react sensibly to unplanned events, ensures the supply of needed parts, and avoids unwittingly supporting practices in the supply chain that violate the company’s principles.

If you’ve noticed that you own more clothes today than you did ten years ago, you’re probably right.  According to industry statistics, consumers buy significantly more clothes now than they did in the 1950’s, the 1980’s, and even ten years ago.  Part of the reason for this is the rise of fast fashion, first popularized by European brands such as Zara and Benetton.  In contrast to the traditional fashion industry, fast fashion employs factories in low wage countries, turns out more seasons per year, and responds quickly to fashion fads.

Overwhelmed by too many clothes

Before fast fashion, the fashion industry knew a lot more about what its supply chains were doing.  But because at least half of fast fashion purchases now come from low wage countries, retailers rarely learning about the local labor conditions.  Sometimes, this leads to tragic results, like the recent report about deplorable labor conditions at the Chinese factories that make Uniqlo skinny jeans.

The fashion industry’s lack of supply chain visibility is a problem that many in the industry have already taken measures to correct.  But it is also becoming less tolerated by western governments.  New laws requiring greater supply chain visibility will impact fashion.

California, of course, is at the forefront of all this. The California Transparency in Supply Chains Act (into force in 2012) requires companies doing business in California to disclose all efforts they are making to ensure that their supply chains do not use human trafficking or slavery.  The required disclosures include compliance programs, internal accountability measures, supplier auditing, and employee training.  While the California law does not require companies to end these labor practices, the theory is that disclosure will raise awareness and cause public pressure to end them.

Another measure that has been proposed but not yet implemented is the U.S. Business Supply Chain Transparency on Trafficking and Slavery Act.  This bill was first introduced in Congress in 2011 and re-introduced in 2014, and likely we have not seen the end of it.  Intended to operate like the Dodd-Frank rules requiring disclosure of conflict minerals, the federal Act requires publicly listed companies to disclose in their SEC reports efforts they have made to eradicate human trafficking in their supply chains – much like the California law.

Construction worker afraid of news

So how do fashion companies put better visibility and accountability into their supply chains?

The key is to make visibility and disclosure a requirement in all supplier agreements.  Anything buyers want to know about, they should compel supplier disclosure.  Otherwise it won’t happen.

The same holds true for any practices that companies want to encourage or discourage in their supply chain.  Companies should craft the corporate social responsibility policies that they want their supply chain to adhere to – and then require compliance with those policies in their supplier agreements.  Supply chain agreements should also include the right to audit suppliers to ensure compliance.  Companies can also require suppliers to ensure compliance from their suppliers – and on down the chain.

Nike is an example that shows that companies can change.  Criticized for using factories with poor labor conditions, in 1998, Nike announced that it was changing the way it did business.  In 2005, Nike became an industry leader by publishing a complete list of its factory suppliers and a report detailing the labor conditions in its factories.  Since 2005, Nike routinely examines its supply chain and publicizes its audit data.   Go Nike!

Workers giving thumbs up