The Fashion Industry Benchmarking Study reveals that managing forced labor risks and navigating an uncertain U.S. economy are the primary concerns for fashion executives this year. Shipping delays and supply chain disruptions also emerged as significant challenges, with 17% of respondents identifying these as their top business hurdles.
Despite these concerns, approximately 75% of respondents expressed optimism about their sourcing and business outlook over the next five years. This figure marks an improvement from the 69% reported last year. Additionally, 54% anticipate an improvement in their companies’ profit margins in 2024.
Understanding Supply Chains to Mitigate Forced Labor Risks
The study, conducted by the United States Fashion Industry Association and Sheng Lu, a professor at the University of Delaware, also highlighted brands’ efforts to comprehend their supply chains better to mitigate forced labor risks.
Over 90% of respondents are making more efforts to map and understand their supply chains, including the sourcing of fibers and yarn in finished products. Nearly 90% are mapping their entire apparel supply chains from Tier 1 to Tier 3, a significant increase from about 40% in previous years.
Following the implementation of the Uyghur Forced Labor Prevention Act in 2022, over 80% of respondents have intentionally reduced sourcing from high-risk countries. Approximately 75% have banned the use of Chinese cotton in their apparel products.
Exploring New Sourcing Destinations
To further mitigate risk, 45% of respondents are considering sourcing destinations beyond Asia. Interestingly, fewer respondents this year plan to cut apparel sourcing from Asian countries other than China.
For the first time since the survey’s inception, more respondents cited sourcing from India than from Bangladesh. Nearly 60% plan to expand apparel sourcing from India over the next two years. Additionally, 52% aim to increase apparel sourcing from members of the Dominican Republic-Central American Free Trade Agreement in the next two years, up from 40% last year.
Other concerns for fashion executives include managing geopolitics and political instability related to sourcing, protectionist trade policy in the U.S., increasing production and sourcing costs, meeting consumers’ demands, and market competition from e-commerce.
