Blog/News

Review: “Supply Chain Transparency”

Sadie Keljikian, Express Trade Capital
Recently, ‘supply chain transparency‘ has become a paramount issue for the American consumer. Manufacturers, as well as some “fast-fashion” retailers, are shifting sourcing strategies to insure that their products are made according to certain environmental and ethical standards.  Many speculate that this trend began with reports of sweatshop labor in Southeast Asia in the early 1990’s, when companies like Nike were criticized for underpaying factory workers abroad. Soon thereafter the public began to realize that nearly every large-scale retailer had similar problems related to supply chain activities.

Although increased public knowledge of these issues has improved matters, there are still areas in which we, as consumers, are completely left in the dark. Bloomberg reports that the latest difficulty in supply chain transparency involves conflict minerals. Around the turn of the millennium, western society became aware of the horrific conditions surrounding De Beers diamonds, which were mined by slaves and sold by armed rebels. What many of us didn’t realize was that other minerals used by companies like Apple Inc. and General Motors Co., among many others have equally problematic histories.

Since the 2010 Dodd-Frank Act, US-listed companies have been required to investigate supply chains involving tin, tantalum, tungsten, and gold. This is due to similar problems that existed in the diamond mining industry, most notably mining revenue funding militia groups in the Democratic Republic of the Congo, as well as surrounding countries. Because manufacturers of electronics and gasoline require a number of minerals from different geographical location, keeping track of these aspects of their supply chain gets very complicated. The difficulty is compounded by the fact that, according to the United Nations Security Council, rebel militia are still profiting illegally.

In the 2015 reports filed over the last several months, however, companies seem to be making a more concerted effort to thoroughly investigate their supply chains and squash any illegal activity. Chris Bayer, an independent academic with Development International, a non-profit, says “[c]ompanies that…are looking at this as a litmus test for their suppliers are going to be seen as leaders. It’s not just about conflict minerals. We’re looking at how much command and control you have over your supply chain.”

Some companies, however, lack internal mechanisms necessary to investigate their supply chains as thoroughly as is needed. Nearly half of companies that filed 2015 conflict materials reports had all four materials in their supply chain, according to Bayer. About 10% of conflict material filers (over 100) said or implied that their products are conflict free, but only 19 of them underwent an audit for claims on their products.

The issue of criminal activity in the global supply chain is a complicated one, but hopefully, consumers better equipped to detect and minimize the ethical issues that arise in international sourcing and manufacturing.

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Texworld USA Celebrates First Decade

Sadie Keljikian, Express Trade Capital

This month, Texworld USA celebrated its tenth anniversary at this year’s installment of the fabric sourcing trade show. The event was held July 12th-14th at the Javits Center. “We’ve been working really hard on diversity and feel we’ve made headway,” said Jennifer Bacon, Show Director. Indeed, this year’s Texworld show featured over 485 exhibitors from 15 countries, including Japan, Lebanon, Indonesia and Colombia, as well as a new pavilion from the Korean Textile Trade Association. The Lenzing Innovations pavilion returned to the show, featuring 25 exhibitors.

Ms. Bacon’s mention of diversity goes beyond cultural variation, as the show has expanded its repertoire to include styles Among the new additions to the show were categories like faux fur, jacquard, and shirting resources. The show still, however, maintains concentration on denim, activewear and a growing functional-apparel section.

Design Knit exhibited at the show for the tenth time, according to marketing and product-development manager Pat Tabassi. “We come here because we want to reach our client base and keep that connection,” said Tabassi on involvement in the trade show. She also mentioned exciting new trends in knitwear, including unusual patterns and textures for the fall.

The show most notably emphasized sustainability, with exhibitions from companies like California-based SG Knits and Texollini. The eco-friendly brands presented new yarns that limit waste, garments made from recycled materials, and dyes that don’t waste water. Said Texollini Director of Merchandising, Sherry Wood: “We’re one of the two vertical mills left on the West Coast…sustainability is very important to us. People are looking for more organic and recycled fabrics. Activewear and swimwear brands are using recycled nylon and polyester, and we use Repreve [recycled-fiber yarns].” Texollini was awarded with “Best in Sustainability Practices” by show organizers Messe Frankfurt.

Sales manager for Laguna Fabrics Matin Roshan agreed that eco-friendly practices and transparency in manufacturing have become extremely important to consumers. “We have a niche of customers only buying eco-friendly, sustainable fabrics from us. I get one email per week asking ‘Is your dye toxic?’ ‘Is it eco-friendly?’ They want total transparency.”

Texworld USA will return, along with its partner show, Apparel Sourcing USA, will return to the Javits Center in January for the Winter 2017 edition.

 

Express to Partake in Philadelphia Fashion Panel

David Estrakh, Senior Vice President

Express Trade Capital, Inc. (ETC) is a founding sponsor of the theBrooklynfashionincubator (“BFI“– #thebrooklynfashionincubator) at Berkeley College, one of five fashion incubators spearheaded by Macy’s. In its inaugural year, BFI chose four candidates and provided them with access to work-space, supplies, and advice from leading experts in all facets of the fashion business, including sourcing, production, marketing, e-commerce, and finance. The businesses range from African-inspired designs to clothing for infants and toddlers. ETC specializes in financing apparel businesses through programs including, but not limited to, factoring, purchase order funding, letters of credit, and asset-based lending. ETC’s participation with BFI is part of a larger effort to give back to the fashion community through education, funding, and outreach, in addition to its daily commitment to provide quality service at the most competitive market rates for designers and small businesses.

As the incubator’s sponsor and leading expert on finance, ETC will participate in a seminar on financing for the apparel industry hosted by Philadelphia Fashion Incubator (PFI), on Wednesday, July 13, 2016. Like BFI, the Philadelphia Fashion incubator selects promising designers to partake in a twelve-month residency as the 2016 Designers-in-Residence (DIR) where they attend business workshops with industry leaders to help build their brands, sustain their businesses, and obtain resources to help them break into the fashion marketplace.

ETC’s participation in the seminar is an extension of its role as financial advisor and educator to BFI and PFI. The role of educator is especially important because finance is too often neglected by designers who are understandably focused on design, manufacturing, sales, and general operations. Express’ goal is to educate participants about various lending options so they can most efficiently manage their production growth. Too often new businesses struggle to balance mounting production and operating costs with current cash flow projections. The purpose of the seminar is to help clarify some common misconceptions so that participants can avoid pitfalls of obtaining improper financing.

For designers who manufacture goods to fulfill customer purchase orders, purchase order funding is targeted to solve precisely this issue and the cost is usually three to ten times cheaper than other non-bank options that many designers obtain. For designers who sell on open terms, factoring is a cheap and efficient option that usually combines collections, insurance, and lending into a single, seamless service that also improves operations and makes them more transparent.

Cost is not the only concern when considering lending options. Do you have to leave collateral? Are personal guarantees necessary? Is it a good idea to give a lender access to your bank account? Do you want a partner who can help you navigate the pitfalls inherent in the apparel industry? Is it better to borrow funds or to raise capital by selling equity?

These are the questions ETC helps designers answer and they are important because the answers may make the difference between a business that thrives and one that fails.

ETC is proud to give back to the fashion community by educating designers and serving as a yet another BFI and PFI resource that designers may use to reach their fullest potential. We are honored to serve in this capacity and look forward to growing together.

David Estrakh has an extensive background in international financial transactions and advises large multinational clients from a wide-range of industries including commodities, textiles, furniture, foodstuffs, and consumer goods. As an executive at Express Trade Capital, David is involved in operationsand legal matters, as well as business development, consulting, and management.  You can visit Express Trade Capital at its website www.expresstradecapital.com or you can contact David via email david@expresstradecapital.com. 

 

Philadelphia Incubator Flyer - July 2016_revised

 

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East Africa’s Used Clothing Ban

Sadie Keljikian, Express Trade Capital

Clothing donations may be banned in East Africa in the next few years.

Recently, it has become clear that clothing donations sent to Africa from the US or Europe may actually be hurting local manufacturers. The manufacturing industry in East Africa has gained a head of steam in the last few years, recovering from the massive hit factories took during the debt crisis in the 1980s and ’90s. With technological advances and a rapidly growing workforce, a local supply chain could be an important step for the region’s developing economy. Progress, however, has been so remarkable that given the right circumstances and leadership, the East African manufacturing district could compete with Southeast Asia in quantities exported to Europe and the US. This progress is being dampened, however, because clothing donations from the US and Europe are sent to East Africa in massive quantities and sold for very little money in local markets. The prices are so low, in fact, that domestic manufacturers cannot compete.

While clothing donations are obviously given with the best of intentions, they are sent to East Africa in such staggering quantities that the donated garments make up nearly 80% of the clothing sold in markets. Of course, impoverished people from Kenya, Uganda and surrounding countries want to spend as little as possible on clothing, but the region’s economic future depends largely on employment and economic stimulation provided by the manufacturing companies. As a result, donations actually keep the local economy from improving and blocks progress in East African manufacturing development. The effect has been so devastating, in fact, that Kenya alone has gone from a manufacturing workforce of approximately 500,000 people to only about 20,000 workers today.

In response to the continuous stunting of the local manufacturing industry, officials are considering a ban on charitable clothing donations in Burundi, Kenya, Rwanda, Tanzania, and Uganda.

New clothing will still be imported to supplement locally fabricated goods, but hordes of used clothing will no longer trample the potential of East African manufactured garments, should the ban go forward as planned.

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Express Trade Sponsors Brooklyn Fashion Incubator

The Brooklyn Fashion Incubator (BFI) at Berkeley College will hold a ‘Grand Opening & Ribbon Cutting Ceremony’ on March 8, 2016 at 5:30 PM.

Ashley Orlando, Assistant Vice President, will attend and present at the ceremony on behalf of Express Trade Capital, Inc., which is one of the BFI’s proud sponsors.

Additional information below:

Brooklyn Fashion Incubator Welcome Event

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Unmade Makes its Mark

Sadie Keljikian, Express Trade Capital

Unmade, a London startup, has a unique approach to sustainable, high-end knitwear. The company — as the name indicates — allows customers to customize colors and pattern arrangements before the garment is manufactured. Founded in 2013, the company has already received significant support from investors and consumers alike. The firm’s big-name backers include Connect Ventures, Felix Capital, and Jose Neves (CEO of Farfetch).

Each piece is specifically tailored to the customer’s exact specifications. This results in a method that involves almost no waste, leaving minimal off-cuts and no surplus merchandise.

Frédéric Court, Founder of Felix Capital said in a recent Forbes article “[Unmade] is a formidable enabler for creative talent to design and produce knitted garments that just couldn’t be created before, mainly because of supply chain and design technology limitations.”

Pieces are manufactured using the same type of industrial knitting machine that is used to mass-produced garments, meaning that the knitwear is high quality, but not nearly as expensive as a typical custom made garment. Each piece is created using recently developed software, called Knyttan, which automates the production process.

The plan is to eventually establish production facilities internationally, making the process even simpler by limiting shipping distances to allow customers to create their custom garments and receive them faster. If the investors involved with Unmade are as confident as they appear, we may see Unmade expand beyond its London home into the U.S. soon.

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American Apparel’s Rehab

Sadie Keljikian, Express Trade Capital

It’s been a complicated year for American Apparel.

Founder and former CEO Dov Charney was fired following an internal misconduct investigation involving sexual harassment, defamation of a colleague and misuse of funds back in December of 2014. Since then, the company’s resilience has been repeatedly tested by Charney’s character, internal issues and declining sales.

American Apparel (“AA”) posted consecutive annual losses since 2010 (long before Charney was fired) and filed for Chapter 11 bankruptcy protection in October. During the company’s time under Chapter 11, new CEO Paula Schneider faced an insurrection of employees who were loyal to Charney and felt that new management was not living up to the standards that had been set in AA’s Los Angeles manufacturing facilities. Schneider responded with a memo asking staff “not to be influenced by unfounded personal attacks.”

Since his (very public) removal from the company, Charney has made numerous attempts to win or buy his way back to corporate control. He filed a $30 million dollar defamation case against the hedge fund controlling the company last spring, further depleting AA’s resources.

More recently, Charney and his allied investors from Hagan Capital Group and Silver Creek Capital offered to buy American Apparel in a $300 million bid last month, but were rejected in favor of one that gave control to the company’s debtors.

Schneider has attempted to rebuild the brand since she took over last year and is confident, despite recently mounting difficulties, that the company has a bright future. A Delaware Bankruptcy Court judge approved the new reorganization plan and rejected Charney’s bid, allowing AA to exit Chapter 11 and begin to rebuild without Charney. Schneider says she is relieved to be in a position that will allow stabilization of the company. She plans to address and improve e-commerce operation, the wholesale business, and other “foundational” concerns. In a recent interview, Schneider said of the upcoming changes, “These aren’t sexy things. It’s making sure a size 6 is a size 6 in every pair of bottoms.”

Although American Apparel has had a rough go of it for the last five years, with Charney truly gone and the company refocusing on limiting overtime and creating a consistent product, it’s looking like the brand might finally be out of the woods.

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Gap Goes Green

Sadie Keljikian, Express Trade Capital

As a result of the recent Paris Climate Talks, Gap Inc. announced that it will reduce its absolute greenhouse emissions by 50% by the end of 2020. The White House said of the gathering that “[t]oday, more than 190 countries came together to adopt the most ambitious climate change agreement in history.”

Though the ultimate extent of the agreement’s impact is still undecided, the Climate Talk’s proposals singled out the apparel industry as a particular industry of concern. In terms of manufacturing, the participants were particularly concerned about the wasted and polluted water, toxic chemicals in dyes, and massive quantities of landfill produced by more disposable clothing in recent years.  Moreover, the industry relies on significant power usage and packaging in manufacturing and delivering its goods.

In response, Gap Inc., owner of Gap as well as Banana Republic, Old Navy, Athleta and Intermix, issued a report mandating halving emissions over the next five years. Representatives from the company claim that the reductions will be made throughout all of its subsidiaries, meaning that retail stores and factories alike will be revamped with a more conscientious model.

A significant part of the changes to take place will be measures to save electricity in the retail locations owned by the company, of which there are more than 3,000. Gap Inc. plans to replace light bulbs with more efficient LED lights, use smart thermostats, turn off unnecessary lights at night and use an industry shipment program to limit fuel wastage.

With a large portion of these improvements coming from energy usage, Melissa Fifield, senior director of sustainable innovation at Gap Inc. says: “The beautiful thing about energy savings, unlike some other areas, is it’s very directly tied to cost, and as the cost of energy goes up, there’s an incentive in the business to save that energy as well.”

Gap also plans to divert 80% of the waste from its domestic facilities away from landfills by recycling clothing materials as well as boxes, hangers, and plastic packaging used to ship merchandise.

But Gap isn’t stopping with environmental responsibility. Shoppers have shifted their focus away from cheap goods and have begun to gravitate toward companies with more ethical practices. Consumers consider whether factory employees worked under fair and safe conditions. Gap says they also plan on making a more concerted effort to manage the safety and well-being of factory employees abroad as they enact their new, kinder model.

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Cambodian Factory Pactics Breaks the Mold

Sadie Keljikian, Express Trade Capital

Dutch factory owner Piet Holten, president of Pactics, a manufacturing company in Cambodia, is creating a modern, conscientious model for manufacturing companies in Southeast Asia.

Cambodia has the second highest number of non-government organizations (NGOs) which aim to stimulate local employment by supporting workshops that make goods for tourists. Unfortunately, Holten says the “NGOs are trying hard to do good. They have a good heart, but in the end the effect is minimal.”

Pactics manufactures soft cases and microfiber cleaning cloths for glasses, sunglasses and goggles. Their clients include several high-end brands including Oakley, Rayban, and Tiffany. Contrary to the unfortunate standard of manufacturing in Southeast Asia, Pactics places a high-emphasis on employee well-being as well as the environment.

The naturally lit, wheelchair accessible factory derives 40% of its power from solar panels. Power is supplemented with a backup generator, which runs on biofuels. Rainwater is collected and used for plumbing purposes and there is a purification plant for drinking water on site. The workforce, which is mainly young women, receives a daily subsidized lunch, four months of paid maternity leave, health insurance and accident insurance. The facility also contains a daycare with rooms for nursing mothers and a first-aid room with a staff nurse.

Interestingly, Pactics pays its employees based on productivity, a practice which has allowed factories to pay their employees as little as possible historically. However, Pactics staff not only have a minimum guaranteed income of $125 a month, far more than the national average of $1,000 a year, but they also receive 44 days of paid vacation per year. The business also offers genuine upward mobility, with training programs that not only address basic things like machinery operation, but also relations within the workplace, sexual harassment education and prevention (Pactics has a very strict policy against harassment), and hygienic use of restrooms.

Pactics also contributes $50 per year toward each employee’s education and pays for half the cost of a crash helmet for each. The crash helmet is a necessary safety accessory for the workforce, as they commute primarily via motorized scooter in a country notorious for its highly dangerous traffic.

Creating an efficient and happy workforce means that employees are more likely to stay and improve, allowing the factory to run better and the staff to become better acquainted with this type of work. With the factory running smoothly, Holten says his next mission is to convey the importance of responsible business management to his clients, in hopes that they will make more active choices to support ethically run factories.

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