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Supply chain crisis looms

Fashion retailers and brands are facing a supply chain crisis as the Indian subcontinent grapples with a triple whammy of natural and man-made disasters and political unrest, which threatens to disrupt deliveries and heap further pressure on costs.

The devastating floods in Pakistan, which the UN says have left six million people in need of emergency aid, are estimated to have so far destroyed up to 30% of the country’s cotton crops after 700,000 acres of cropland was submerged.

This has compounded a string of problems in the region, including the closure of the port of Mumbai in India last week and strike action over low wages at factories in Bangladesh.

The result is uncertainty and volatility in terms of deliveries and a forced increase in freight costs to transport stock by different means, including air freight, to the UK.

Vital overland and shipping routes in Pakistan were blocked soon after the floods started on July 31. Meanwhile, a container ship in the busy port of Mumbai shed its load after colliding with a steamer on August 7, bringing the crucial fashion transport hub to a halt. Both events are set against the backdrop of continuing riots at factories in Bangladesh, where between 10% and 20% of factories in the country have been closed while a new minimum wage threshold is thrashed out.

The supply chain disruption could lead to retailers piling into Sri Lanka to pick up the shortfall. But sources said the country’s infrastructure could not cope with extra demand.

Sri Lanka has already become a less attractive sourcing option for UK retailers and brands, with the temporary abolition of its GSP+ preferential trading tariff by the European Union this week, which added about 5.2% to the price of bras and 9.6% to the price of other garments. Previously, UK fashion companies could import clothes from Sri Lanka tax free.

Michael Flanagan, chief executive of sourcing information firm Clothesource, said retailers must spread their supply chains to other areas of the world such as Southeast Asia to offset the risks of such events.

But he added: “These are temporary things. The Indian subcontinent is a good place to trade with.”


The port of Mumbai in India was closed following the collision of the container ship MSC Chitra and the steamer Khalijia 3 on August 7, 8km from the shore of Mumbai.

Eleven days later as Drapers went to press the port was not fully reopened and 100 of the spilled containers and a giant oil slick were still blocking the crucial shipping lanes.

Grant Liddell, retail director at logistics firm Uniserve, said: “For as long as the port is closed it will take two to three times as long to undo the backlog.

“India, Bangladesh and Sri Lanka have traditionally made up the garment manufacturing region, but vessels are skipping India and Pakistan and many people are being forced to air freight at a higher cost just to get product in.”


The Bangladeshi Government is set to increase the minimum wage for workers, after rioting over pay in recent weeks closed up to 20% of factories.

The minimum wage will rise to 3,000 taka (£27) a month in November, up from 1,662 taka (£15.93) but far from the 5,000 taka (£45.90) supported by unions.

Clothesource chief executive Michael Flanagan said while retailers had largely factored in delays to deliveries because of rioting, the long-term picture remained unclear.

“The longer-term problem with Bangladesh is dissatisfaction,” said Flanagan. “In the short term we will have unhappy workers but in November wages will double. Retailers have got to allow for severe disruption. We have no idea what labour will do there when wages rise.”


It is thought the floods in Pakistan, the world’s fourth-largest producer of cotton, have damaged between one million to three million bales of cotton out of an estimated 14 million bale harvest for 2010.

Streetwear brand Fenchurch has two contracts in the country and has already experienced a two-week delay to its orders.

Cliff Holborough, the brand’s production manager, said: “We’ve got to the point where we’re actually making enquiries in Portugal and Turkey, and we’re getting quotes and comparing the higher prices with the risk of not being able to deliver.”

While the problems will have an immediate impact on deliveries, manufacturing in Pakistan faces a longer-term prospect of poor harvests, rising prices and a lack of transport infrastructure.

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