Using Financial Data from Corporate Annual Reports to Better Understand the Apparel Supply Chain
By Abby Mayer, Research Associate, Supply Chain Insights LLC
Where and How to Operate?
Over the course of the last decade, apparel manufacturers have chased a lower cost of labor around the world. We have seen manufacturing move from in-country production to China, India and Bangladesh as companies chased lower production costs. The expiration of a quota system in 2005—limiting fabric and cloth imports to large Western markets—as well as ongoing WTO regulations and negotiations has gradually shifted the apparel landscape, but not stymied the trend of offshoring and outsourcing the labor intensive portions of the apparel industry.
American Apparel, Inc., however, has continued to source and manufacture in-country, while others in the peer group built longer supply chains overseas to reduce cost structures. Selected quotations from recent American Apparel, Inc. annual reports indicate some of the advantages enjoyed due to the unique structure of the business.
The industry has to face the fact that not only have they been unable to improve operating margin, they have also not been able to meet their own commitments on “Fair Labor” as outlined in their Corporate Social Responsibility (CSR) documents. Recent news fills the papers. For example, on April 24, 2013 a garment factory in Savar, Bangladesh collapsed. As of May 1, the death toll had topped 400 people and is projected to climb over 1,000.2 Multiple factories were housed in the eight-story Rana Plaza where over 3,000 individuals were at work at the time of the incident. Despite the orders of factory inspectors who ordered immediate evacuation after discovering significant cracks in the building’s structure, factory workers were expected to report to work on the fateful day. Clothes labels found in the rubble include Benneton, Mango, Joe Fresh, Primark & C&A.3 Now, two weeks after the building’s collapse, the toll sits at 900.