One Fashion Manufacturer’s Guide to Building Global Supply Chain Resilience

Being the head of South Asia’s largest apparel maker arguably presents Suren Fernando a exclusive vantage place from which to observe the latest ups and downs of worldwide source chains, acquiring used the earlier two years of his prolonged job at MAS Holdings as chief government. The textile and attire company and exporter was founded far more than 30 yrs back in Sri Lanka, a region that has suffered extreme financial hardship in 2022, with inflation functioning as substantial as 70 {a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} and chronic shortages in all the things from gasoline to foodstuff, triggering political turmoil. It’s most likely no shock then that global possibility mitigation is major of head for the govt of the style and design-to-delivery organization whose functions stretch throughout 53 manufacturing services in 17 nations around the world, with approximately 115,000 staff members.

Fernando believes that 1 of the keys to the achievement of the loved ones-owned, organization-to-business firm, which he expects to history earnings of $2.4 billion in 2022, is its prolonged-lasting partnerships with a selection of international brand names, from Victoria’s Magic formula to Nike. One more key is its capability to embrace the evolution of provide chain products over time, from the conventional singular concentration on cost optimisation to today’s emphasis on creating power and resilience, be it through vertical integration, nearshoring or pushing the boundaries of on-demand manufacturing. Finally, Fernando claimed, not the very least for the reason that “as a maker, you are only as strong as your source chain.”

BoF: Due to the fact the pandemic, the vogue field has felt the acute issues of what comes about when provide chains split down. What has this meant for best-in-class source chains?

Suren Fernando: Historically, provide chains — at the very least in our market — had been organised mostly for value optimisation, looking at in which you can source diverse components, at the most affordable attainable selling price and pinpointing the nation that’s heading to assemble products at the least expensive producing price. That model worked quite well for a lot of yrs. It did set makers like us underneath force to be value-aggressive, but the product essentially worked.

Over the previous two years, with this degree of churn that we see in the external natural environment, the dynamics have altered significantly, and specified matters that we took for granted have been questioned or even broken down. At the very same time, you are dealing with new problems, and new options. Now the crucial concept that comes out of all of this is: how do you deal with your self far more properly for hazard? And, thus, agility and resilience participate in this kind of a pivotal function in this regard.

BoF: At a useful amount, what does handling chance — and developing more agility and resilience — indicate for MAS and your consumers?

SF: A number of years ago, MAS was predominantly providing everything out of Sri Lanka. Now, we have a substantially broader manufacturing and sourcing footprint. Our biggest manufacturing foundation is nonetheless in Sri Lanka, but we have a significant existence now in Indonesia, Vietnam, Bangladesh, India, Jordan, Kenya and Haiti, as nicely as a benefit-included provider and a trading procedure above in North Carolina in the US.

Our geographic growth commonly begins by doing work with one particular or two “anchor” prospects, to recognize what they want strategically, what they could see in a distinct area. For example, if it is Indonesia, it may be to take edge of the availability of labour, and it has turn out to be an interesting sourcing desired destination if you are supplying to nations around the world these kinds of as Japan or Australia, in which they have preferential obligation agreements. So it could be pushed by obligation, velocity or proximity to market place, or as right before, price advantages.

BoF: Wherever will nearshoring suit into this? As numerous vogue executives previously have an understanding of, it is a single matter to want to adjust their companies’ global footprints and bring offer chains nearer to their key markets it is yet another to in fact be ready to do it.

SF: Nearshoring is unquestionably on the radar of our shoppers, but now for a bit various factors than before, and it carries its own threats. When nearshoring in the beginning became a major topic 6 or seven many years back — even if it was just conversations happening at a incredibly strategic degree — the benefit unlock was apparent to [MAS] prospects, for two good reasons: velocity — for example, simply because it introduced them nearer to marketplaces — and expenses — for the reason that, for case in point, it might have introduced sure preferential trade agreements. In these submit-pandemic moments, shoppers have also realised the worth of nearshoring as a form of possibility mitigation.

But firms [looking to move supply chains closer to key markets] frequently underestimate the distinctions concerning [markets] what is in a single locale [cannot be easily] replicated in a further — items like compliance criteria, be it environmental or social schooling specialized abilities, or support levels are not the exact same, and so on. So like I stated, more than the previous number of years, we’ve been equipped to navigate most of these problems to organise ourselves otherwise.

When we [at MAS] embarked on a nearshoring method, we realised that there have been sure limitations in executing it — particularly the sourcing of uncooked materials, the suitable talent and the technical abilities to established up manufacturing operations weren’t normally available. Above the previous pair of yrs, we have been ready to tackle these worries to a specific degree [by building on-the-ground capabilities]. We now have a considerably superior knowing of the sourcing abilities out there in specific areas, and neighborhood issues.

When we established up at first, we often have a reasonably significant core workforce or a tag crew that will go out from Sri Lanka to set up the manufacturing facility, we send specific individuals who have complex experience and understanding about top quality, production approaches and so on. Our system has been to above-source from Sri Lanka at the start out to make guaranteed that we set it up appropriate, and then above a period of time, period out the Sri Lankans and acquire on extra local talent. Depending on the nation, it might take more time. For case in point, in Haiti [where MAS has been since 2017], we even now experienced to control with a rather big total of Sri Lankans mainly because the specialized awareness and expertise that is offered in the place are pretty minimal.

But like I mentioned, when you address a sure problem or a danger aspect [when nearshoring], it also exposes you to particular other issues that you have to regulate. Possessing explained that, our practical experience in the Americas has been great thus considerably.

BoF: A further massive subject matter in publish-pandemic trend is on-demand from customers producing, which claims a way ahead in terms of tighter inventory management. How has this played out for companies like MAS?

SF: On-demand will take two sorts, which have distinctive dynamics. For specific clients, we have what we get in touch with “speed models” or “read and respond versions,” wherever the customer — frequently a more substantial a person — may well set out a restricted selection with certain colours or styles, and depending on [how it] performs in the industry, the purchaser will spot a abide by-up invest in buy and they would want it at much shorter lead moments.

Then you have the more personalised or customised merchandise that we make on demand from customers. We have experimented with numerous versions of this, even creating products and solutions customised for a certain purchaser. We have had some degree of achievements, but I would not say it is really taken off.

What we are looking at now is on-demand, for instance, with a T-shirt, exactly where we would mail the “blanks” from Sri Lanka and then have a printing facility onshore to make that customisation or personalisation and offer the shopper from that area. We have a great deal of practical experience in dealing with our core business enterprise in on-demand, but on the personalisation and customisation section of it, we have the products in spot, but it’s been slow for clients to adopt.

BoF: MAS is all about vertical integration. How do you feel the definition of vertical integration will evolve in 2023?

SF: For MAS, vertical integration, or verticality as we call it now, has always been significant, We had been the pioneers in creating that provide chain functionality [in Sri Lanka]. Verticality is all about mitigating threat and providing speed, agility and price positive aspects to the purchaser.

At present, in Sri Lanka, we source 50 per cent to 60 percent of uncooked resources from within just the island. We are in a position to resource our have lace, our own bra cups, our own elastics, and so on, and even some of the add-ons that go into building garments. It is often been an important piece for us, since as brands, you are as robust as your source chain.

Possessing the source chain located very near to you and most likely having a higher deal of influence around it definitely aid us to browse and respond and react to client requests that a lot more rapidly.

BoF: Sustainability has a purpose to perform in supply chains right now too. How do you prioritise discussions at MAS all over sustainability?

SF: We introduced what we connect with our “Plan for Change” … and have set ourselves 12 crucial targets to make guaranteed that we obtain our ESG objectives in the future a few a long time. For example, if you seem at product … we strive to crank out 50 percent of our earnings as a result of goods that have some sustainability aspect by 2025. We are in all probability shut to 20 per cent currently, so we have a very intense focus on to go for. Currently being a business enterprise-to-company maker, we have to do it in near partnership with our shoppers. This has been on our agenda for lots of years, but sometimes actually pushing the agenda with buyers can be difficult simply because although you have conversations on sustainable items, you also have discussions on cost. But particularly above the last two decades, we have observed nearly all our strategic prospects make sustainability a priority and that is really assisted us to acquire a great deal of traction. So it is in their curiosity and in our desire to make absolutely sure that we are attain these ambitions jointly.

We are also mindful that in the very around potential and perhaps as shortly as upcoming 12 months, there will be far more regulation coming into enjoy. Shoppers are pre-empting this and operating carefully with us to make excellent progress just before it turns into necessary and enforced.

BoF: Have faith in involving producers and models eroded in the course of the pandemic. What will be critical aspects in 2023 to make absolutely sure that even as instances get rough, have faith in continues to be on both equally sides?

SF: One particular posture of power that we at MAS have is 20- or even 30-calendar year relationships with most of our bigger prospects, so there is a level of have faith in that has turn out to be mutually satisfying.

We have not been as shut to the clients as we ended up earlier, due to the pandemic and the limits of journey.

As a supplier, we’ve often lived by our values, particularly superior requirements of compliance and governance and the right way of thinking to function with these prospects with obvious strains of accountability. Accountability goes way outside of making sure that the goods are manufactured suitable and made perfectly, particularly in conditions of the superior criteria of compliance and ethical expectations that we exercise in the enterprise, and we have manufactured them incredibly transparent to our buyers. Our door is constantly open up for any purchaser to appear and see the expectations and the techniques that we have internally in our enterprise.

BoF: You have just finished two several years as CEO of the entire company — getting been CEO of a major MAS division before that. As you start off your 3rd year, what is keeping you awake at night?

SF: One [challenge] principally has to do with the softening market disorders, with quantity hunting very poor for the reason that of stock circumstances [due to companies with large amounts of stock on their hands] and consumers are struggling with specific pressures on pricing. We see this continuing probably for quarter 1, quarter two of up coming yr.

Another is attracting, building and retaining expertise. … It is a world wide phenomenon with talent. Individuals transfer employment and some even never want to continue on the way that they labored prior to the pandemic. So actually taking care of expertise becomes a significant piece for me and the senior workforce.

This interview has been edited and condensed.

This post first appeared in The State of Trend 2023, an in-depth report on the worldwide manner market, co-printed by BoF and McKinsey & Business.