The garment manufacturing industry faces a complex landscape of supply chain challenges. As we move forward into 2024, garment manufacturers continue to grapple with heightened pressures due to global economic shifts, sustainability demands, and rapid technological advancements.
Garment manufacturing supply chains are intricate networks involving machine manufacturers, raw material suppliers, manufacturers, logistics providers, and retailers. Effective management of these supply chains is essential to ensure timely production, cost-efficiency, and product quality. However, the industry faces numerous challenges that could disrupt these processes.
Major Supply Chain Challenges in 2024
1. Economic Uncertainty: The unpredictable economic and political situation remains a significant challenge. According to a McKinsey survey, 73 percent of chief procurement officers expect consumer volatility, especially due to COVID-19, to be a top challenge affecting supplier relationships in the textile and garment industry over the next five years. Garment factories, which operated at full capacity in 2021, had to reduce their production and have been operating at 30 to 40 percent below capacity in 2023. Manufacturing experts foresee possible improvements for factories by the third quarter of 2024.
2. Cost and Margin Pressures: Reducing costs is critical for 2024, with price and margin pressures being key challenges. Consumer volatility has led to significant disruptions for apparel suppliers and garment manufacturers, resulting in declines in factory utilization, widespread layoffs, and delayed investments. The “bullwhip effect,” stemming from pandemic disruptions, led to late product arrivals and overcompensated stock orders. Post-pandemic inflation and economic uncertainty in the latter half of 2022 made consumers more cautious, resulting in billions of dollars in unsold goods and many orders for the 2023 season being reduced or canceled. Smaller garment manufacturers were the most affected, with about 30 percent of garment factories in countries like Pakistan, Sri Lanka, and Vietnam closing.
3. Sustainability Pressures: Environmental and sustainability consciousness is a top global consumer trend, putting pressure on the textile and garment industry. Consumers pay more attention to environmental, social, and governance (ESG) issues, leading to changes in production practices. New international laws aim to reduce pollution and enforce stricter manufacturing practices. For example, the United States banned goods from Xinjiang, China, due to forced labor concerns, and Norway and Germany passed laws holding companies responsible for human rights abuses in their supply chains.
4. Rising Costs: Inflation, increasing labor costs, higher raw material prices, and transportation expenses are significantly reducing profit margins for garment manufacturers. Technological integrations are necessary but costly. Manufacturers must invest in IoT, Artificial Intelligence, and blockchain technologies to stay relevant. Consumers demand speed and customization, driven by personalized products and fast fashion, requiring flexible and responsive supply chains.
5. Labor Shortages: The aging workforce and labor shortages impact production capacity and quality. In Vietnam, competition for qualified labor intensifies, with suppliers to Apple, Lego, and the automotive industry attracting former textile workers. Production timelines in garment manufacturing are now longer due to the need to hire and train new employees.
Overcoming the Supply Chain Challenges
1. Supplier Diversification: Developing a varied supplier base across different regions can help reduce the risks linked to regional disruptions. Establishing strategic partnerships with crucial suppliers, including tier two, three, and four partners, can offer the supplier the funds to invest in operational and sustainable enhancements within its facilities.
2. Sustainability Initiatives: It is crucial to implement sustainable practices throughout the supply chain, from raw material sourcing to manufacturing and distribution. This also includes using renewable energy, reducing waste through recycling/upcycling, and adopting eco-friendly materials. Additionally, investing in new technologies can help improve sustainable practices along the garment production line and the enhanced transparency ensures compliance with sustainability standards.
3. Cost Management: Optimizing operational efficiency and reducing costs through automation and lean manufacturing practices is essential. Investing in automation technologies and advanced manufacturing machinery and systems can help achieve this. Additionally, waste can be minimized and efficiency improved.
4. Adoption of Digital Technologies: Integrating digital technologies enhances supply chain visibility, efficiency, and responsiveness. IoT devices for real-time tracking, data analytics and forecasting, blockchain for secure transactions, and AI for improving garment production efficiency and productivity are key strategies. Digital transformation is seen as essential to meet customer expectations, increase sales, improve efficiency, and capture new business opportunities. Companies focus on the digitalization of garment manufacturing and end-to-end supply chains to remain competitive in the ever-changing landscape of the textile and garment industry.
5. Agile Manufacturing: Flexible garment manufacturing processes that can quickly adapt to changes in demand and customization requirements are crucial. One main solution is the adoption of modular production lines that can be reconfigured easily. Other solutions include using digital design and prototyping tools to speed up product development.
6. Workforce Development: Investing in workforce training and development programs can address labor shortages. This includes partnering with educational institutions for training programs, offering apprenticeships, and providing ongoing education and skill development opportunities for employees.
7. Enhanced Collaboration: Encouraging cooperation among supply chain stakeholders to enhance communication and coordination is an optimal strategic step. For example, leveraging digital platforms for real-time collaboration, forming joint ventures, and engaging in industry consortia to exchange best practices and resources can lead to major positive impacts. The enhanced transparency and communication among all stakeholders in the supply chain improves information-sharing and joint demand forecasting. According to a survey by McKinsey, 70 percent of chief procurement officers believe that improving demand transparency with suppliers through systems and processes can be very helpful when dealing with market uncertainties.
Recent Case Studies of the Industry
1. H&M: The Swedish clothing company H&M has diversified its supplier base to garment manufacturers from different regions, reducing dependency on a single market. This strategy has helped to company to mitigate the risks associated with regional disruptions and therefore maintain a stable supply chain.
2. Nike: The American athletic footwear and apparel company Nike has adopted sustainable practices across its supply chain, promising to reduce its environmental footprint. This includes using recycled materials and renewable energy. The strategy has improved Nike’s brand image, complying with regulations, and also reduced production costs in the long term.
3. Zara: The Spanish fast-fashion retailer implemented agile manufacturing techniques, including modular production lines and digital design tools, to be able to respond to changing fashion trends quickly. This has helped the company to stay on a competitive edge in the fashion industry.
Conclusion
The garment manufacturing industry is and will face numerous supply chain challenges in 2024 and in the upcoming years. By strategically adopting several solutions, garment manufacturers can overcome these challenges and thrive in the textile and garment industry. This will help factories to improve their efficiency and reliance, and will also support them in meeting the evolving industry demands, standards, and regulations.
In the year ahead, brands and manufacturers should place a bigger emphasis on making their supply chains more resilient to mitigate future risks. Digital transformation, transparency, enhanced collaborations with different stakeholders, and agile manufacturing will aid in navigating through the supply challenges. If you want to partner with an industry expert in the textile and garment industry to overcome these challenges, contact us now. OSHIMA is a longstanding industry player with experience of over five decades. Collaborating with international brands, global partners and clients, we bring in the missing expertise your garment factory may need to stay competitive.
