Now infamous Covid-19 started making havoc on a global scale from March 2020. Now we all are facing the consequences of it, regardless of the geographical location where we located. Most of the industries got affected including the apparel industry.
Knowing this fact, the apparel industry needs to take a new approach when it comes to pricing. It's not prudent to cover all your past losses from the few new orders coming your way. Knowing that your end customer has a serious disposable income issue, it is important to take a long and hard look at the costing sheet. The best approach is to arm ourselves with as many details as possible.
For example, the below chart shows the cotton price fluctuation over a period of one year. In Jan 2020, it was peaked at $1.73 per KG, but in July, it’s reduced to $1.52 per KG. In April, it was somewhere of $1.40 per KG. Fabric merchandisers have to monitor the cotton or any other fiber price (depending on the fabric type for the products they make) and negotiate the best possible fabric price. Understanding the cotton/polyester yarn price gives you an advantage when negotiating fabric prices. After all, up to 60-70% of the typical item is the fabric price.
A similar approach should be taken when calculating CMT (cut/ make/ trim) price as well. Unless the customers get the most reasonable price, they won't place any orders with you, even if they do, they may reduce the volume. By eliminating waste and introducing lean management concepts, manufacturing costs should be reduced.
It is important to note here, the busiest buyers who are placing orders currently, are the low-cost, high volume buyers such as Walmart, H&M, Primark, Sainsbury's, Tesco, and so on. These buyers have the advantage of being able to sell through their supermarkets or standalone shops. Most shopping malls and high street shops in the USA and Europe are still closed, and people are not particularly brave enough to go shopping in the few designer shops that are open. It is easier to buy a couple of T-shirts, a packet of underwear while buying groceries. No extra shipping fees and even browsing are needed.
The next important area to strengthen and focus on is the lead time. Due to the current uncertainty in the market, most buyers are not working on the same fashion calendars and timelines, they used to work with. Governments pretty much daily change their forecasts as to when they are going to open up their countries, start schools, people to go back to work and so on. Medical expert predicts second wave, third wave, without pinpointing exact dates, so it’s hard for apparel buyers to plan and strategize what to buy and when to buy.
Therefore, most buyers prefer manufacturers who can work with short lead times. Maintaining a stock of fabric which are frequently used by your regular customers and maintaining a greige stock which could be colored quickly will help to secure the orders.
This is a good place to discuss our third point, which is to improve our communication, all across the company. Maintaining regular communication with all your customers and informing them about the steps, your company has taken to give better service to them will help to secure more orders. Also, it is important to have regular communication with your shipping agents, courier services, trim, and accessory suppliers as well as washing plants and printing houses. This will give you the edge as you know what's happening across the supply chain at any given time. Essentially, it will help to give better service to your buyers and build trust. Everyone prefers informed and reliable partners.
Another important area to have improved communication is, between the management and the employees. Keeping them informed about what’s happening in the company and the effort management puts to secure orders, will build confidence among the workforce. Also, this is a good time to educate employees and the management team about the importance of reducing waste and improving productivity in order to stay in business.
Sources –
Now the question is how to rebuild the industry and start manufacturing again.
Mainly there are three areas to focus on.
Mainly there are three areas to focus on.
- Cost of the products
- Flexible lead time
- Communication
Related post: Retail Apocalypse Due to Covid-19
Knowing this fact, the apparel industry needs to take a new approach when it comes to pricing. It's not prudent to cover all your past losses from the few new orders coming your way. Knowing that your end customer has a serious disposable income issue, it is important to take a long and hard look at the costing sheet. The best approach is to arm ourselves with as many details as possible.
For example, the below chart shows the cotton price fluctuation over a period of one year. In Jan 2020, it was peaked at $1.73 per KG, but in July, it’s reduced to $1.52 per KG. In April, it was somewhere of $1.40 per KG. Fabric merchandisers have to monitor the cotton or any other fiber price (depending on the fabric type for the products they make) and negotiate the best possible fabric price. Understanding the cotton/polyester yarn price gives you an advantage when negotiating fabric prices. After all, up to 60-70% of the typical item is the fabric price.
Source – USDA
A similar approach should be taken when calculating CMT (cut/ make/ trim) price as well. Unless the customers get the most reasonable price, they won't place any orders with you, even if they do, they may reduce the volume. By eliminating waste and introducing lean management concepts, manufacturing costs should be reduced.
It is important to note here, the busiest buyers who are placing orders currently, are the low-cost, high volume buyers such as Walmart, H&M, Primark, Sainsbury's, Tesco, and so on. These buyers have the advantage of being able to sell through their supermarkets or standalone shops. Most shopping malls and high street shops in the USA and Europe are still closed, and people are not particularly brave enough to go shopping in the few designer shops that are open. It is easier to buy a couple of T-shirts, a packet of underwear while buying groceries. No extra shipping fees and even browsing are needed.
The next important area to strengthen and focus on is the lead time. Due to the current uncertainty in the market, most buyers are not working on the same fashion calendars and timelines, they used to work with. Governments pretty much daily change their forecasts as to when they are going to open up their countries, start schools, people to go back to work and so on. Medical expert predicts second wave, third wave, without pinpointing exact dates, so it’s hard for apparel buyers to plan and strategize what to buy and when to buy.
Therefore, most buyers prefer manufacturers who can work with short lead times. Maintaining a stock of fabric which are frequently used by your regular customers and maintaining a greige stock which could be colored quickly will help to secure the orders.
This is a good place to discuss our third point, which is to improve our communication, all across the company. Maintaining regular communication with all your customers and informing them about the steps, your company has taken to give better service to them will help to secure more orders. Also, it is important to have regular communication with your shipping agents, courier services, trim, and accessory suppliers as well as washing plants and printing houses. This will give you the edge as you know what's happening across the supply chain at any given time. Essentially, it will help to give better service to your buyers and build trust. Everyone prefers informed and reliable partners.
Another important area to have improved communication is, between the management and the employees. Keeping them informed about what’s happening in the company and the effort management puts to secure orders, will build confidence among the workforce. Also, this is a good time to educate employees and the management team about the importance of reducing waste and improving productivity in order to stay in business.
Sources –
https://emergingtextiles.com/?kF=FREINI
https://www.usda.gov/
https://www.usda.gov/
About the Author:
Dr. Charm Rammandala is the co-founder of IGlobal Sourcing USA LLC based in Boston, USA. He has over two decades of experience in the apparel industry, where he has served in capacities such as Lean Manager and Model himself. He is an expert in rolling out programs in Lean apparel manufacturing and sustainable labour costing. His former positions included being the first Lean Technologist at George Sourcing Services UK, Ltd and VP at Vomax LLC.
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