OF FAILING TO INNOVATE

QUALITY, I NSPE CTORI O

RE PORT

COMPLIANCE

& THE COST

OF FAILING TO INNOVATE THE WAYS IN WHICH APPAREL COMPANIES ARE PROGRESSING TOWARD FASTER, MORE TRANSPARENT, BETTER CONNECTED SOLUTIONS—AND THE CONSEQUENCES FOR THOSE THAT AREN’T.

"LOOK BEYOND BUZZWORDS"

- Carlos Moncayo Inspectorio CEO

The quality and compliance platform powered by artificial intelligence. Through the use of robotic automation, artificial intelligence, and network dynamics, we are building an autonomous platform that connects key stakeholders, eliminates the need of manual interventions, and empowers organizations to focus on value-adding activities. We are the only platform that leverages artificial intelligence for assignment optimizations, manufacturer risk scoring and defect prediction. Even if combined, no other solutions in the marketplace can stand up to our robust feature set for quality control and compliance verification.

LET US SHOW YOU HOW WWW.INSPECTORIO.COM

INSPECTORIO REPORT 3

QUALITY AND TRANSPARENCY: FROM SUPPLY CHAINS TO SUPPLY NETWORKS

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earing or reading about exponential technologies is something we do on a daily basis. Conversations about social networks and the sharing economy with the “Uber effect” are no longer novel. Millions have read books, attended seminars and conferences, and some have even done consulting in the field. However, with everything that has been said, how much has been applied to supply chain management? It is hard to believe that almost the entire industry of quality verification and inspections continues to use archaic tools that include digital cameras, paper, clipboards and pencils. Negligence levels, unreported defects, and even poor practices are rampant due to a lack of traceability and visualization in the inspection process. Our company, Inspectorio, was one of the first to digitalize inspection management through a mobile app. These practices launched a revolution that will reach all industries that seek true transparency and visibility in the verification process. The world demands greater efficiency not only during the inspection process, but also the creation of corporate networks and ecosystems that can communicate and share information through the use of a single software suite, a single language and a single network. Similar to what happened in the 80s when word processors were introduced, opening the doors to creating an operating system that, through the internet, has morphed into a

collaborative management and communication system, it is time to create a platform where buyers, producers and manufacturers (and in the future, even the consumers) can share the results and findings of product quality inspections and factory audits. Technology, collaboration and empowerment are the answers to real transparency. Not only do the new generations of consumers demand more knowledge as to where, how and who manufactured or produced the product that they are using or consuming, but current consumers need more information to fulfill their desire of making fair, responsible and even ethical purchases. Anyone who is not interested in collaborating and sharing information needs to stop talking about transparency. We need stakeholders who are more committed, capable of adopting new technologies and able to think and act within open, inclusive, and visible networks. With Inspectorio we have created the first SaaS quality control and provider verification platform that brings all of these standards together. We believe that by interconnecting through work, brands and retailers around the world can indeed be transparent with their consumers. All for one and one for all? Could this premise be applied to technology and networking in the world of quality inspections? At Inspectorio, we firmly believe that it is possible, and we are actively working toward our goal. Let´s move from the supply chain to a supply network. —Fernando Moncayo Castillo, co-founder & managing director, Inspectorio

TABLE OF CONTENTS 3 INTRODUCTION 4 COMPLIANCE 6 LABELING 8 IMPERFECT 10 A COMMITMENT TO CHANGE 13 DAYS MEAN DOLLARS FOR COMPLIANCE TOO 16 TARGET IS IMPROVING ITS PRODUCT QUALITY - BUT IT’S NOT DOING IT ALONE 18

HOW RANA PLAZA PUSHED BANGLADESH TO BECOME A WORLD LEADER - AND HOW YOU HELPED

20 TRANSPARENCY 23 NETWORK EFFECT

INSPECTORIO REPORT | COMPLIANCE 5

EUROPEAN COMMISSION GETS MORE SERIOUS ABOUT PROTECTING CONSUMERS FROM HAZARDOUS CHEMICALS The chemical makeup of an apparel product has the potential to be harmful to human health, and the European Commission (EC) is taking further steps to protect its consumers from such hazardous substances. Under the European Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), the European Union’s legislative framework for chemicals, the EC proposed to minimize the exposure to 33 chemicals that are carcinogenic, mutagenic or toxic for reproduction (CMR) found in some clothing, footwear and textile products. In a REACH committee vote in April, the majority of European Union countries supported the proposal. Most restrictive substances are found in the production process or added to products to provide specific characteristics like fabric crease resistance and shrink resistance. The proposal would restrict or ban garments, footwear and textiles containing the listed

BLUESIGN ADDS LEATHER COMPONENT TO ITS CHEMICAL COMPLIANCE Footwear designers, manufacturers and brands have a new resource designed to allow the industry to take a more responsible approach to design and production. The sustainable textiles solutions provider, Bluesign Technologies, in collaboration with leading chemical supplier Stahl, has extended its Bluesign Bluefinder for leather chemistry, in a move to help the industry identify and select inputs that are safer for people and the environment. Established in 2002, the Bluesign Bluefinder is an online safe chemical product list for the leather and textile industries. The list’s search engine contains data on more than 10,000 Bluesign certified chemical products. To certify chemicals for Bluesign Bluefinder, chemical companies must undergo a Bluesign assessment that includes an onsite inspection and a corrective action plan to fulfill Bluesign’s manufacturing facility criteria. Once chemical companies implement the steps suggested by Bluesign and fully comply with Bluesign’s regulations, they are then eligible to have their chemical products registered under the list. —GS

substances from the European Union market. Products made in the European Union or imported into the European Union are covered by the proposal, and if they contain any of the restricted substances, businesses will not be allowed to sell them to consumers there. According to the EU, consumers can be exposed to these hazardous chemicals through inhalation, unintentional ingestion of dust released from textile fibers and skin contact. In addition, small children are also at risk, since they could swallow products containing these harmful substances. The proposal will become applicable in the next 24 months after undergoing analysis by the European Parliament and EC, and will be published in the EU’s Official Journal, a document containing the region’s daily legislative actions. In March, the EU introduced an innovation observatory for shared ideas on textile sustainability, designed to minimize the region’s industrial pollution problems.—Genevieve Scarano

OEKO-TEX EXPANDS COMPLIANCE REGULATIONS FOR 2018 Oeko-Tex has stepped up consumer protection and sustainability in the textile supply chain with a new range of compliance regulations. The independent certification authority updated the existing guidelines of its product portfolio that, after a three-month transition period, came into effect on April 1 for Oeko-Tex’s certification systems. Cooperation with compliance initiatives, the continuous exchange of experience with industry stakeholders and the monitoring of legal regulations shaped the updated standards, which are designed to enable textile companies worldwide to opt for more sustainable sourcing and production practices. Detox to Zero by Oeko-Tex Detox to Zero, which allows textile manufacturers to evaluate their chemical management systems and wastewater quality through independent verification, was integrated into STeP by OEKO-TEX.

Eco Passport by Oeko-Tex The process, which had been two levels, now has a third level, which is comprised of an onsite check of compliance. The additional level is optional until 2019 when it becomes mandatory. With the third level, the Zero Discharge of Hazardous Chemicals (ZDHC)—a universal program that seeks to omit the use of hazardous chemicals in product supply chains—now accepts Eco Passport as an indicator of conformity with its textile production Manufacturing Restricted Substances List. Companies can have their products certified by the ZDHC Chemical Gateway and Eco Passport, since both standards ensure chemical suppliers’ products are sustainable enough for textile production. Leather Standard by Oeko-Tex New testing regulations will take place for Oeko-Tex’s Leather Standard. Bisphenol A, the aromatic amine aniline and additional alkylphenols (pentyl- and heptylphenol) are now

included in the leather standard. Made in Green by Oeko-Tex Minimum requirements for the Made in Green product label were changed. Now, products must pass a laboratory certification and test based on the Standard 100 by Oeko-Tex’s criteria, in addition to proving that production conditions in participating factories are in line with STeP by Oeko-Tex’s environmental and socially responsible regulations. Additionally, if Made in Green is marketed on consumer textile products, at least 85 percent of the weight of a single piece of textile must be supplied by STeP by Oeko-Tex certified production facilities. Standard 100 by Oeko-Tex Oeko Tex has integrated organic cotton product testing for genetically modified organisms (GMOs) into Standard 100 to prove if genetic engineering has been applied. —GS

INSPECTORIO REPORT | LABELING 7

CONNECTICUT FOLLOWS CALIFORNIA’S PROPOSED ACTION ON POLYESTER APPAREL POLLUTION

ZDHC ADDS BLUESIGN, GREENSCREEN AS NEWLY ACCEPTED CERTIFICATION STANDARDS The ZDHC Foundation, which is working toward zero discharge of hazardous chemicals in the apparel, footwear, leather and textile value chains, has added Bluesign and CPA’s GreenScreen to its certification standards. By adding Bluesign to its standards, chemical suppliers can now use Bluesignissued certificates to demonstrate that their chemical products conform with ZDHC’s MRSL Level 3 environmental regulations. “For many years, we have seen the industry try to resolve complex issues, sometimes in isolation. We are proud the approach that Bluesign brought to the market 18 years ago will support the ZDHC initiative of convergence of chemical management in our industry,” Jill Dumain, CEO of Bluesign Technologies, said. “This initiative also provides a clear value and understanding of the possibilities when the industry works together towards the common good.” As a chemical compliance leader, Bluesign uses a scientific chemical assessment to a

evaluate the potential hazards of 20,000 chemical formulations in its comprehensive positive list. The chemicals that make the cut are compiled into the Bluesign Bluefinder, an online safe chemical product list for the leather and textile industries. Bluesign has also flagged more than 600 products based on the industry’s Manufacturing Restricted Substances Lists (MRSL) and Restricted Substance Lists (RSL). Similar to its relationship with Bluesign, ZDHC has added GreenScreen as a standard, enabling GreenScreen-approved textile chemical products to align with ZDHC Manufacturing Restricted Substances List’s (MRSLs) Level 1. CPA, an organization that delivers strategic solutions for green chemicals and other environmentally preferable products, aims to reduce the negative footprint of chemicals. CPA introduced the GreenScreen Certified Standard for Textile Chemicals to allow formulators to communicate steps

they are taking to help downstream partners regulate risks related to chemicals and foster more sustainable manufacturing processes. The GreenScreen for Safer Chemicals is an internationally recognized chemical hazard assessment tool that uses a benchmarking scoring system to identify safe and hazardous chemicals. GreenScreen List Translator is an automated screening tool that alerts companies about chemicals of concern, by analyzing information from more than 40 global chemical hazard lists developed by various NGOs and other intergovernmental agencies. As a project of CPA, the Chemical Footprint Project aims to transform global chemical use by measuring and sharing data about safer chemicals progress. The ZDHC Foundation is working toward zero discharge of hazardous chemicals with the goal of protecting the planet and its people. ZDHC works in collaboration with 24 signatory brands, 53 value chain affiliates and 15 associates. —GS

Microfiber pollution has been a popular topic in the last year, and legislation that would help curb the problem is gaining traction across the United States. A bill is pending in California that would require a warning label on polyester clothing, alerting consumers that washing polyester contributes to microfiber pollution, and now the Connecticut legislature has taken up the issue. A bill posted to the State Senate calendar, after it passed out of a joint committee, aims to “establish a consumer awareness, education and clothing labeling program that is intended to reduce the amount of microfiber plastic in the state’s waterways.” If passed, the bill would order the Commissioner of Energy and Environmental Protection, in consultation with the Commissioner of Consumer Protection, to convene a working group to develop a consumer awareness and education program “concerning the presence of synthetic microfibers in clothing.” The program would include information explaining to consumers how microfibers

are shed from clothing and dispersed in the state’s waterways, what best practices would be to eliminate and reduce the disbursement of those microfibers, plus information on apparel industry efforts to reduce or eliminate microfibers in clothing. The working group would include a representative from the Sustainable Apparel Coalition, the American Apparel & Footwear Association, the American Apparel & Producer’s Network, Fashion Group International, National Retail Federation, the Council of Fashion Designers of America and Fashion Business Inc. Similarly, a California bill, now before the Assembly Committee on Natural Resources, would require all clothing made from fabric that is more than 50 percent polyester to bear a conspicuous label warning that the garment sheds plastic microfibers when machine washed and recommending the item be hand washed. If the bill passes, the sale or offering for sale of clothing without this label would be prohibited as of Jan. 1, 2020. —Arthur Friedman

SPORTING GOODS GETS A NEW TOOL FOR GLOBAL LABELING REQUIREMENTS Apparel, textile and sporting goods companies will soon have access to a new one-stop global labeling database for their products. The World Federation of the Sporting Goods Industry (WFSGI) collaborated with Compliance & Risks, a global regulatory solutions provider, to introduce the WFSGI Compliance Labelling Requirements (CLR) Database. Companies like Under Armour, Asics and VF Corp., have already signed up for the tool set to launch in July, providing global information on labeling requirements for the apparel, textile and sporting goods industries, and other related sectors with similar compliance issues. “We are all facing the same challenge of dealing with a blurry jungle of worldwide labeling information that demands considerable time, energy and cost for our industry,” said Robbert de Kock, WFSGI president and CEO. “This unique online tool provided by Compliance & Risks will substantially facilitate and revolutionize the daily business life for companies.” Product categories covered under the tool include apparel, footwear, textiles, consumer electronics (wearables) and sporting equipment. With the tool, companies could take preventative measures against product recalls, stop ships and other potentially branddamaging dilemmas. The tool leverages C2P, Compliance & Risks’ knowledge management platform, which enables users to track the progress of their compliance obligations. On the CSR database, users can search and report on up-to-date labeling requirements by country, receive alerts on new and proposed labeling regulations and standards, and access information on existing legislation changes. Additional benefits of the database include free access to subject matter experts, seamless reporting and early warning signals of future regulatory changes. —GS

IMPERFECT INSPECTORIO REPORT 9

QUALITY ISSUES STILL PLAGUE THE APPAREL AND FOOTWEAR INDUSTRIES BUT INNOVATIONS IN DESIGN AND PRODUCTION COULD TURN THINGS AROUND.

CALETHA CRAWFORD

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he industry’s dependence on decades-old processes open it up to a variety of issues that threaten time, money and reputations. When it comes to quality in particular, Brian Ehrig, managing director of Accenture Strategy, characterizes the potential hazards as “significant, numerous and pretty wide spread.” To Ehrig’s way of thinking, automation is paving the way toward making each step faster, clearer and more precise. Here, Ehrig discusses how a more seasonless approach to deliveries might alleviate some quality issues, why it doesn’t necessarily cost more to work with better factories and how e-commerce is putting even more pressure on performance. SJ: What makes the apparel and footwear industries particularly vulnerable to quality issues? BE: For the most part with apparel and footwear, it’s a highly manual process even still. There’s very little automation so it’s mostly hand or hand-and-machine made so there are a lot of touches along the process and many opportunities for things to go wrong. It starts from the beginning. The tech specs, they’re still not great solutions. Unless you’re a larger company, you’re starting from

scratch each season in terms of specing out how the product should be made so it ends up being trial and error through prototype or commercialization. [Companies are] recreating the wheel often when they don’t need to. Also, there are frequent changes to the specs as it goes through the development cycle and many rounds of prototypes to get to a final one. There are multiple places along the production process where you can evaluate how [things are] going. The ultimate measure of whether your quality program is good or not is how many defects you’re finding in your finished goods when they get to the U.S. If more than 1 percent is defective in your distribution center, you have a problem upstream. SJ: Most companies aren’t vertical so they’re working with independent factories, which opens them up to a variety of things, including subcontracting. How does that further impact quality? BE: Subcontracting is a huge issue and most brands on paper don’t allow for it. In our experience, most of the reason for use of subcontracting has to do with poor planning on the part of the brands. Most brands have two or four peaks depending on if they’re on a two or four-season calendar, so all the volume that’s needed for the year is made

in short periods of time and factories don’t have enough people to manage that. The companies that are able to plan out the flow of their products and create more of a balanced 12 months of the year flow have less subcontracting issues than those that have these peaks. It’s very hard to vet the quality of those subcontractors. It’s hard enough to vet your manufacturer tier let alone the tier beneath them. Beside the quality risk, the other big risk there is CSR. That’s one of the biggest reasons that you can’t allow for it. SJ: Looking at how brands are operating today, has controlling quality become easier or more challenging? BE: Given the state of retail right now, everyone is looking to innovate. Innovating on materials is a good example and because of new channels of distribution as well like direct to consumer and e-commerce, it’s added a greater number of styles and colors and that’s more complexity to manage within a factory. The average volume of a style is smaller than it used to be because there are more colors and materials, etc. If you’re only going to make the typical minimum for shoes, which is 1,500 pairs, versus 30,000, you’re not going to be as good and efficient on making the 1,500 because of the human factor.

SJ: What are the costs associated with quality issues? Are companies underestimating what a lack of true QC is doing to the bottom line? BE: In terms of judging the performance of a factory, we look at what’s called first-pass quality, meaning the first time you make a unit of something, what percentage were done perfectly and what percentage needed to run back through. We typically see 10 to 20 percent of products have a quality issue on a first pass so that means they have to be evaluated, determined if it has to be repaired and either run back through the line or additional volume needs to be run back through and that definitely slows down the whole process and costs a lot of money. And when you look at apparel and footwear, roughly 50 to 60 percent of the cost of the product is in materials and you have labor on top of that so you’re not talking about an insignificant cost here. SJ: But like with everything else, there’s a cost associated with investing in quality. How can you convince your clients that this is an area worth improving on? BE: I was working with a privately-held shoe company that was looking to grow and we did some consumer research for them to understand how consumers perceive their brands, and quality came up as a core issue

around a specific segment of their line. We traced it back to not having good specifications for their products and realizing they were in the wrong factories that weren’t capable of making quality at the level that they wanted to have. What was interesting is they were in these factories because they were going after cost but when we brought them to A-class factories, the hypothesis was they’d have to give up 3 to 5 points of margin to get into those factories but we saved them an equivalent type of margin because of the improved quality, because their labor was better and they had less material waste. Companies are typically trading off cost versus quality and you don’t have to give up high quality to get good cost if you’re focused on establishing a deeper relationship with your factory partner to take out waste in the process. SJ: What role can technology play in improving the quality issues? BE: Most of our clients are very focused right now on establishing digital product creation as a core, and by virtue of digital you take out some of the opportunities for human error and better translate requirements. So instead of sending a PDF for a tech pack and it would be nice to have 3D designs that we’re sharing with suppliers to take out a lot of the guesswork. Another part of it is a huge push toward smart

manufacturing and increasing the automation capability of the factory and taking out the human factor. SJ: These advances come with investments. Are retailers and brands willing to take on some of this burden or are they looking for factories to invest while also pinching them for lower costs? BE: In the last couple of years especially, the major brands have recognized that they have to take over developing the intellectual property in this area because the factories don’t have the same kind of R&D budget and capabilities as the brands do. The biggest companies have formed their own advanced or specialized manufacturing groups to develop these technologies because they can’t be reliant on the factory partners to do that. It’s a competitive advantage for anyone who can achieve that because we’re going to an age of everything being unique and personalized so the first one to market that is successful in doing it will have a significant competitive advantage.


HOW THE INDUSTRY IS OPENING ITSELF UP TO GREATER ENVIRONMENTAL AND SOCIAL TRANSPARENCY. ARTHUR FRIEDMAN

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he apparel and textile supply chain has never had more tools to exhibit transparency in the way raw materials are procured and products are manufactured, but its takes a commitment to put it into practice and not succumb to competitive urges or cost concerns. A comprehensive cadre of third-party inspection programs and providers now exists to serve the industry, and an array of certifications have been established to show the progress companies have made and display them to customers. Luis Antonio Aspillaga, CEO of World Textile Sourcing, said, “As the industry evolves, consumers are more concerned about ethical manufacturing and visibility into the supply chain. As retailers strive to create best-in-class sourcing matrixes, they are increasing the rigor around social compliance.” Aspillaga said as a manufacturer, World Textile Sourcing takes pride in providing transparency into its facilities and process. “We openly share each facility within the supply chain with our clients,” he said. “We are continually evaluating our factories and evaluating their performance. Our quality assurance team is in the facilities regularly monitoring the business.” Casey Strauch, U.S. marketing manager for Hohenstein, one of two founding members of the Oeko-Tex Association and leading provider of testing and research services said, “To enable transparency and the opportunity for retail-consumer communication, a company needs commitment to strong supply chain partnerships, agreements to maintain or increase business based on certifications or positive actions towards communicating sustainability. This commitment encourages companies to make the necessary investments.”

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assess the human and environmental hazards associated with chemical formulations used in the textile industry. NSF is also working on building systems to manage these certificates and audits, and make them more transparent, available and usable to the industry. “These brands largely adopt these preferred practices for improved social and environmental impacts and outcomes,” he said. “That’s what they’re doing with organic cotton. That’s why they’re doing Fair Trade. That’s why they’re doing Bluesign. The traceability and transparency systems are essential to helping those brands ensure that what they are buying and investing in are really happening.” Oeko-Tex enables transparency in a few ways, Strauch noted. All Oeko-Tex certifications carry a unique certificate number that can be validated online. Within the Standard 100 certification, Oeko-Tex enables companies to assure their customers that, no matter the material supplier, as long as the final product carries the certification label, the whole product meets the requirements.

AS THE INDUSTRY EVOLVES, CONSUMERS ARE MORE CONCERNED ABOUT ETHICAL MANUFACTURING AND VISIBILITY INTO THE SUPPLY CHAIN.

industry, as a result of consequences incurred if companies don’t have the proper policies. “I would argue that supply chain transparency is prioritized over sustainability due to mitigating risk on behalf of the retailer,” he said. “The definition of sustainability is still being defined and based on costing pressures is not as concrete of a concept. Social compliance and country regulations are more defined and measurable.” Wilson noted that NSF was recently approved as a third-party assessor for two sustainability-focused programs that verify the use of hazardous chemicals throughout much of the textile supply chain. The first assessment, the Zero Discharge of Hazardous Chemicals Manufacturing Restricted Substances List, screens for hazardous chemicals used in the processing and manufacturing of textiles. The second assessment, the ToxFMD Screened Chemistry Program incorporates additional reviews that

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A COMMITMENT TO CHANGE

“Clear Expectations” Strauch said as a third-party, independent certifier, Oeko-Tex develops and maintains standards for chemicals, products and processes that increase and validate sustainability efforts across the supply chain. “Since the standards are applied consistently across the globe, their use enables clear expectations for manufacturers and communication to users of the certifications and labels, including manufacturing partners and retail consumers,” she said. Jeff Wilson, senior business development manager for sustainability at NSF International, a global public health and safety organization, said, “Our sustainability division is working in apparel and footwear and home textile to drive great traceability and transparency in those sectors. My role–through our standards that we develop, through the auditing we do for our own standards and with third-party standards such as Textile Exchange’s… is to build a strong portfolio of services for materials and chemistry.” Aspilliga feels supply chain transparency has made important strides throughout the

With the Made in Green product label, companies also have the ability to share their supply chain and their progress against the STeP (Sustainable Textile Production) benchmark of all supply chain partners. Made in Green also enables brands and retailers to customize the information they share, from a minimum of facility type and country to full disclosure manufacturing partner names and addresses. “Making Working Conditions a Priority” Brands are also working to improve transparency in working conditions and their overall supply chain. Part of this push comes from internal corporate social responsibility goals of the companies, and part comes from pressure from human and labor rights groups. Aiming for transparency, Primark recently joined a growing group of companies to publish a global supplier list, with information about suppliers’ factories in the 31 countries from which Primark sources product now

available on its website. Details include factory names, addresses, number of workers and even gender split of the workforce. “For a number of years, we’ve been working closely with industry partners sharing information about where Primark products are made,” a company spokesperson said. “This has included for example, details of our suppliers, their factories, as well as our supply chain practices. Partners have extended from bodies such as the Ethical Trading Initiative, to organizations monitoring industry standards, notably the International Labor Organization’s Better Work program.” Earlier this year, 70,000 consumers signed a petition urging major brands, including Walmart, Primark, Armani, Forever 21 and Urban Outfitters, to share the factories that manufacture their garments and make transparency part of their New Year’s resolutions. The petition follows the #GoTransparent campaign—an initiative led by the Clean Clothes Campaign, the Human Rights Watch and the Labor Rights Forum that specifically targeted the five brands for not publicly disclosing details of their supply chains. Primark included a map with factories that have produced products for at least one year and have become an established supplier. During the first year, a factory has to demonstrate that it can consistently work to Primark’s ethical standards, as well as meet its commercial requirements in areas such as quality and timely delivery. “Primark has not published details of its suppliers’ factories up to now, as we regarded this information as giving us commercial advantage,” the spokesperson said. “However, with 98 percent of the factories making products for Primark also manufacturing for other brands, and with a number of those retailers now publishing details of their sourcing, we have taken the decision to share our information.” The Brazilian office of the C&A Foundation, Instituto C&A, in February launched a “call for proposals” to find innovative initiatives to bring about systematic changes in working conditions in Brazil’s fashion industry. As consumers become increasingly aware of the conditions in which fashion is made, the demands for greater transparency has increased, C&A said. Instituto C&A said a complex maze of production units, subcontracted factories and sourcing agents has emerged across numerous countries, including Brazil. Multiple stages


between material sourcing, production and retail make the apparel supply chain opaque and leads to a complex international apparel industry where monitoring and tracing is challenging at all tiers of production from cotton fields to retail outlets. “We are looking for innovative ways to improve working conditions in the fashion industry in Brazil,” Giuliana Ortega, executive director of Instituto C&A, said. “Transparency can contribute a great deal by disseminating reliable and publicly accessible information and by encouraging accountability, making working conditions a priority in the sector.” “Moving the Needle” The concept and practice of transparency in compliance throughout the supply chain is evolving, the experts noted. For his part, Aspillaga said, “Retailers are investing the resources for their production leaders to visit the factories and see firsthand where they are doing business, utilizing third parties such as Intertek or SGS to conduct formal audits and following up and holding their factories accountable to corrective action plans.” Strauch said, “The tools exist through thirdparty certifications around more sustainable production and testing for harmful substances. While a company may decide not to share every member or detail of their proprietary supply chain, they have the option to assure customers that products are made to verifiable, third-party standards.” The purpose and goals of NSF’s program and services, Wilson said, are driven by the knowledge that “it needs to get better. There needs to be a significant improvement in education for all stakeholders, an understanding of how it all moves from raw material to spinner to the weaver and the knitter to the dye house to the manufacturer and out to market.” “We at NSF should own that, we should be taking the leadership in helping to demystifying this,” Wilson continued. “We can also be better in making our auditing more efficient and more affordable.” He also made the point that the industry, through a plethora of organizations working together, “is moving the needle.” At the same time, he said, “companies need to be making bold investments” toward greater supply chain transparency.

DAYS MEAN DOLLARS FOR COMPLIANCE TOO TIME IS MONEY AND A DIGITIZED AUDIT AND COMPLIANCE PROCESS COULD CUT COSTS FROM THE SUPPLY CHAIN

TARA DONALDSON

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or many in the industry, the audit and compliance process has proved a bigger pain point than even price, at times. But if traditional processes could transition into more digitized versions of their former selves sooner than later, the potential for improved efficiency and speed to market may be manifold. The timeline for doing a traditional audit has typically gone something like this: an auditor comes to the factory, conducts interviews with employees, checks the books, and all the while—if they’re not using a techsavvy system—writes a slew of notes. Some of those notes may be completed on the spot, others may be finished up some days later as the auditor files the report. From there, the report may go to the auditor’s boss, maybe even another pertinent person, before being passed on to the buyer. Once in the buyer’s hand, the report may be kept in a Word document or Excel file after they fish it from

their emails. “Usually the audit happens in a day or two days—sometimes three days for certain buyers, certain brands, and then the write-up of the audit itself could take a few weeks using the old system,” said Nate Herman, senior vice president of supply chain for the American Apparel & Footwear Association. What comes next could take another couple of weeks, as the buyer analyzes the report, shares it back and forth via emails with Excel files attached and makes determinations about next steps. “And that’s just for one factory and one audit.” A digitized compliance process could arguably help companies avoid the lion’s share of that back and forth. “Where technology would make a big difference is in how they share the files between the factories and the buyers,” Herman said. “There’s now certain apps where the auditor goes in using an app where all the information is shared, they take pictures, it

immediately goes into a bigger database as they’re typing notes directly into the platform. That obviously saves a lot of time because then the reports are done right away and the reviews are a lot easier because everyone is working from the same platform.” On the buyer’s side, these forward-facing apps ease the process of reviewing and sharing audit results to determine corrective action plans. “You’re cutting the time either by a half or two-thirds because so much of the time is just transferring the files or waiting for someone to check their emails and review,” Herman said. “That could go from a couple weeks using the old model to less than a week.” Agreeing that a digitized compliance process could help cut down development timelines, particularly for areas that are scientifically measurable, like wastewater emissions, Worldwide Responsible Accredited Production (WRAP) president and CEO Avedis


OLD SCHOOL VS. NEW SCHOOL Here, Inspectorio estimates the average amount of time its clients are able to cut out of their quality inspections process by switching from traditional, manual steps to the company’s digital platform. Overall, when pen, paper, Excel and Word give way to real-time updates, Inpsectorio says the timeline can be reduced by up to 40 percent.

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-15% Seferian said the social compliance experts are transitioning to a more digitally-savvy internal platform designed to speed up the audit and reporting process. With it, Seferian said audit and inspection reports can be directly updated to the database, which avoids navigating employees’ vacation days or otherwise delayed completion of reports. “That step now becomes faster and doesn’t need as much human intervention, which is ultimately where a lot of that time gets lost,” Seferian said. “I would submit that for the back end, I would think a third to half the time might be saved.” Though the technology is there for more digitized compliance and inspections, adoption

-30% still trails and manufacturers still feel the pain of audit fatigue. For Juan Zighelboim, president of TexOps, an innovation-embracing active apparel manufacturer in El Salvador, the compliance and audit process has been a sore spot in the supply chain. “The compliance discourse has taken a life of its own and has become a significant burden to most, if not all producers,” Zighelboim said. The core problem, he explained, has much to do with brands’ legal advisors. “To ‘check the box,’ they prefer each client perform their own audit, even though the protocols are identical and sometimes even using the same exact third-party auditors. This of course leads to what we call audit fatigue,”

Zighelboim said. “We have six clients and we have to prepare to go through six audits per year, covering the same thing over and over. All of that management time wasted could be used to better our manufacturing process. The brands could use those resources to train factories to be more self-reliant.” TexOps still operates under the traditional inspections and audit process, and hasn’t yet digitized its compliance inspections. “Audits usually go from two to four business days. This trend is up from one to two days a few years ago. There is also time invested pre and post audits,” Zighelboim said. “If by digitizing, clients would be OK with using one platform for all, this could represent a substantial savings of management time.”

The problem—and the reason some manufacturers haven’t gotten on board with one digitized inspections platform or the other—is that it still comes down to what brands demand for their quality and compliance. “Before digitizing can be effective, there must be consensus from the factory client to share the digital information and results,” Zighelboim explained. “Digitizing the process will serve more like a centralized repository with capability to store documents and permits unique to each participating factory. I guess you could also have a list of requirements and a way to monitor by KPI.” More than solely focusing on digitizing the process, however, Zighelboim says stakeholders in the supply chain must stop

thinking of themselves in isolation. “The digitizing would be good, but the sharing of audits amongst brands and retailers would be even greater, if they are digitized or not. An Adidas audit, for example, should be good enough for Nike and others to use and vice versa, irrespective of being digitized or not.” That problem of my-audit-is-better-thanyours has plagued the entire apparel industry, and as Robert Sinclair, president of supply chain solutions at Li & Fung, explained at the Sourcing Journal Summit in Hong Kong in May, the notion is an outmoded one. “When the unfortunate instance of Rana Plaza happened…the only good thing that came out of that was the Accord and Alliance, which was really the first examples of our

industry rallying together to come up with at least a formalized standard way of assessing and auditing,” Sinclair explained. “It’s been very frustrating and unfortunate for our industry that we’ve not been able to replicate either the Alliance model or the Accord model beyond Bangladesh because the solution is staring us in the face. I think it really is going to take the C-suite level of all the brands and retailers to come together and agree that as an industry, we need standardization. The auto industry has done it, the electronics industry has done it— why can’t we.”


TARGET IS IMPROVING ITS PRODUCT QUALITY— BUT IT’S NOT DOING IT ALONE THE RETAILER TAPS INSPECTORIO TO BRING TRANSPARENCY AND SPEED TO ITS SUPPLY CHAIN CALETHA CRAWFORD

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n October, Target announced it would conduct factory inspections in a new way—one that allows for more speed, better quality and greater transparency. The retailer has teamed up with technology start-up Inspectorio, which has rolled out its quality control and supplier compliance verification platform to 50 of Target’s vendors across Vietnam, Cambodia and Thailand. The implementation will encompass more than 100 factories, representing nearly a quarter of Target’s apparel and accessories business. “We think Inspectorio’s platform brings an innovative technology solution to a process that has traditionally been manual,” said Irene Quarshie, Target’s vice president of product quality and responsible sourcing. “Additionally, we think this work is bigger than inspections: It’s about unlocking the ability for real-time transparency and real-time decision making within Target’s supply chain.” By automating the process, Inspectorio promises to sidestep the unnecessary delays that often plague the inspection process. On the other hand, the current system, which requires factories and retailers to manually transcribe notes and communicate via a slew of back-and-forth emails, only serves to undermine speed to market efforts. “It’s costly, and it requires a lot of time,” said Inspectorio CEO Carlos Moncayo, regarding the industry’s current inspection process.

“Based on the data that we have seen, we can shorten the time by 50 percent. The normal time that it would take for an inspection report to be generated, a corrective action plan to be triggered and then the communication back and forth to get an action plan on average would take six to seven days. With our system, in worst case it would be down to three days.” Beyond speed, Inspectorio promises transparency, allowing retailers like Target to have an accurate accounting of inspections as they’re taking place. Quarshie believes Inspectorio “will help us greatly improve the consistency and quality of the products we offer, making it really clear where and how they’re made—that’s something guests care a lot about and have come to expect from Target.” Quarshie added, using this new tool furthers the retailer’s commitment to responsible sourcing and products. Target has joined a growing list of retailers that publish the standards for its vendors and suppliers as well as a list of the factories it works with around the world. On the quality front, Moncayo said the Inspectorio platform will help Target not only identify issues as they occur, but allow the retailer to diagnose the cause so the same problems don’t continue to plague the supply chain. With issues tracked via pen and paper, it’s difficult for stakeholders to analyze them and

uncover their underlying causes—let alone affect changes that might resolve them once and for all. The reality is most factories lack the tools needed to diagnose systemic problems. Instead they apply Band-Aids to issues as they occur— and re-occur, as is often the case. “The problem with quality inspections is the activities are taking place but they are isolated,” Moncayo said. “There’s no full action plan that allows buyers and sellers to collaborate and ensure that the key issues identified in every inspection are treated more as symptoms than the root cause. Retailers are continuously addressing or firefighting the problems but they’re not able to address them in a sustainable way.” It’s apparel’s version of whack-a-mole, an exhausting and futile game. Inspectorio hopes to change the rules with its digitized inspection platform by centralizing all inspection and error reports. In this way, the software makes it easier for retailers to share data across the supply chain in real time and identify patterns in their findings. In addition to tracking issues, it creates a corrective action plan that must be addressed. “Through the follow up, you ensure that the issues that are identified in one inspection don’t appear in the next one, and you can monitor how the problem was been resolved over time,” Moncayo said.

Not only does Inspectorio provide a bigpicture view of what’s happening for a particular brand or retailer, it also pools data across suppliers and predicts potential problem areas. This attribute is of particular interest to Target, which recently teamed up with Inspectorio to use its quality control and supplier compliance verification platform in 100 factories in Vietnam, Cambodia and Thailand. “So much of the industry is focused on remediation which tends to be reactive. The platform allows us to be predictive and more proactive,” Quarshie said. “It gets smarter as more data gets input so whether it’s Target or another retailer, as more data gets included in the platform, connections are able to be made in a very anonymous way between retailer A and B to give us greater insight and allows us to be more proactive, which is always a good thing.” Armed with this level of detail about each of its factories, Target can better identify those that are best in class with an eye toward one day being able to turn more of the quality control responsibilities over to them. “It helps us shift away from trying to inspect in quality, which quite frankly I think so much of the retail quality assurance continues to do is focus on inspecting in quality, [to] shifting to is designing in quality,” Quarshie said. “And so if we’re not spending the time double checking and walking hand in hand on the factory floor, we can spend more time up front in the product development phase designing in quality.” The relationship between Target and Inspectorio began when the three brothers who founded the company, Carlos, plus Fernando as chief of sales and marketing and Luis as chief of operations, applied to the company’s inaugural Target + Techstars Retail Accelerator program. The trio, who knew the pain points associated with production firsthand, had run an apparel sourcing firm. “Through that company, we learned the challenges of managing quality control in multiple locations,” Moncayo said, adding the search for a technological solution began there. The exposure with Target gave them a new perspective on large-scale operations. “It’s been a mutually beneficial relationship, where we both learned a lot,” Moncayo said.

ROOM FOR IMPROVEMENT It’s clear from the results of the 2018 edition of “The State of Quality Inspections in the Global Supply Chain” report that the quality control process is one that many companies are actively working to overhaul. Pushed by consumer demands, pricing concerns and speed to market goals, the industry is recognizing that it’s time for a change.

6.8 / 10 The results when survey respondents were asked to rank their companies’ current quality control procedures

Respondents identified the quality inspection areas that need the most innovation

55%

CORRECTIVE ACTION PLANS

50%

TRANSPARENCY

45%

DATA SHARING INSPECTION PERFORMANCE

35%

INSPECTOR EFFICIENCIES

35%

INSPECTION TRACEABILITY

35%

DATA ANALYSIS

46%


HOW RANA PLAZA PUSHED BANGLADESH TO BECOME A WORLD LEADER—AND HOW YOU HELPED THE APPAREL INDUSTRY TURNED TRAGEDY INTO LASTING TRANSFORMATION BY WORKING TOGETHER MIKE FLANAGAN, CEO, CLOTHESOURCE

Those consortia offered long-term commitment and financial support: they also imposed almost identical standards of safety protection on Bangladeshi factories —almost all still locally owned. Though political activists criticized the details, cooperation between unions and importers was remarkable, with unions now able to appeal over factory owners’ heads to buyers, who did indeed fire unsatisfactory factories. Activists raised frequent, and usually wellfounded, worries about building standards and the pace of factory upgrading. But industrial safety improved almost immediately. Like roads, no building is ever 100 percent safe; what really matters is having safety rules that are always enforced. The consortia made it clear almost from the start that broken safety rules meant no more orders, though workers would be compensated. Locked fire doors, smoking near flammable material, workers not instantly evacuated if danger was suspected? Termination. In the subsequent five years, at most a dozen accidental deaths in clothing factories.

confronted the government and the BGMEA. Who blinked first? The charges were dropped, the dismissed workers reinstated, and employers agreed to stop union harassment and forget about any further charges. It didn’t all stop immediately, of course. But a watershed had been crossed. • State terrorism—In spite of intensive pressure from unions, industry associations, and the country’s trading partners, there had still been no progress in bringing the killers of Aminul Islam to justice.

Summary

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2017

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ive years ago, the Rana Plaza catastrophe made Bangladesh notorious. We all know how our industry became a pariah as well. Today, thanks to the way our industry reacted to the catastrophe, Bangladesh has become a beacon for how poor countries can pull themselves out of poverty, and, in the process, transform human rights and gender equality—all through clothing exports to the West. By 2013, Bangladesh had become—with almost no foreign investment—the world’s largest clothing exporter after China. Millions of jobs had been created in the Bangladesh clothing industry. Its GDP had grown nine-fold since 1971. Bangladesh’s achievements weren’t only economic: in 2010, the country received a UN Millennium Development Goals Award for its remarkable decline in infant mortality and was beating other very poor countries in its

battle against extreme poverty and hunger, educational improvement and advances in gender equality But there were serious black spots: • Wages—At 3,000 taka ($38) a month, the minimum wage was almost the lowest on earth • Worker safety—at Clothesource, we were logging between 60 and 80 deaths a year in clothing factory accidents: the highest we could find recorded anywhere • Pervading violence—Political disputes were settled—or often not—in riots between the two parties who’d controlled the country almost since its birth, killing dozens. That’s how disputes were handled in the clothing industry too. • The government systematically intimidated garment workers—Most notoriously: in 2012, the government’s

intelligence agency had brutally murdered garment union organiser Aminul Islam

April 24, 2013 To everyone’s horror—but almost no-one’s surprise—at least 1,500 people were killed when the multi-story Rana Plaza clothing factory complex collapsed: the worst recorded peacetime industrial accident we can find anywhere, ever. Many were surprised, though, how quickly European and American clothing importers reacted. Political activists had been pushing a factory safety proposal for years. Within weeks of the collapse, co-operating with Western and Bangladeshi unions, importers finally adopted a modified version. Around 300 companies (including the unions’ bete noir, Walmart) quickly signed up to separate consortia in the U.S. and Europe.

By the end of 2017, Bangladesh’s clothing exports to the EU were two-thirds China’s—and six times Turkey’s. Four million people now worked in clothing factories, with almost as many again working in businesses depending on those factories. Bangladesh’s GDP per head was now $1,400, more than twice Haiti’s. And Haiti was getting nine times as much foreign aid per head. The gains were almost entirely the result of its clothing industry. But progress on the other problems was patchy. • Wages—Bangladesh’s minimum wage was still just $64 a month. • Union harassment—In 2016, the government’s neurosis about “subversion” meant workers were threatened with sedition charges (carrying a sentence of life imprisonment) if they told visiting U.S. politicians the truth about working conditions in factories. As the crackdown on union activities worsened, at least 1,500 workers were dismissed, and 38 union leaders and workers were arrested on unsubstantiated charges after a largely peaceful protest in December 2016. The importers put their feet down. Threatening to boycott a BGMEA “summit” planned to publicize the country, they

On April 8, the first indicted Aminul Islam murderer—known to the police as an Intelligence agent—was convicted and sentenced. More suspects remain, and it is possible no others may ever be convicted. By contrast in neighbouring Pakistan, charges were being dropped against a politician known to have ordered a 2012 arson attack on a Karachi clothing factory in which 252 workers were killed. Violence and injustice persist, but there is now evidence of respect for the rule of law and for freedom of unions unimaginable even 18 months ago and a far wider acknowledgement of the role of women.

FROM ASHES TO ACTION: INDUSTRY- WIDE COLLABORATION HAS IMPROVED WORKER SAFETY, FREEDOM & GENERAL WELL- BEING

The past month On March 15, a UN committee announced that Bangladesh could graduate from its Least Developed Country (LDC) category. The category was invented, like Bangladesh itself, in 1971. It includes the 47 most desperately poor countries on earth. Only five have graduated, all either tiny or with natural resources like diamonds or oil. When Bangladesh’s 163 million people do leave, a third of the world’s LDC population will no longer be categorised as desperately poor, arguably the fastest escape from deep poverty anywhere, ever including 18th/19thcentury Britain, and 20th century China. On April 5, the U.S.-based Workers’ Solidarity Centre said “despite obstructions from factory owners, registered unions in Bangladesh have grown fivefold since 2013.” The Centre estimates that half the new unions are led by women. On April 7, 12 union members were granted bail on charges including attempted murder after an alleged violent attack on a factory. A year and a half earlier, they’d have gone straight to jail for a peaceful march.

Since Rana Plaza, Bangladesh has made immense strides. Most, incidentally, the result of virtuous circles made possible by the forced collaboration of Bangladeshi manufacturers, Western buyers, multinational unions and tens (or maybe hundreds) of thousands of brave Bangladeshi protesters and whistle-blowers. It was helped by interventions from Western politicians, but made possible by thousands of actions by hundreds of individual Bangladeshis. And it was publicized by hundreds of writers, sometimes encouraging Bangladeshis, sometimes infuriating them. Real friends of Bangladesh will see the past five years as a horrible event spurning real progress in prosperity, human development, improved rights and gender equality. The important thing today is to salute the huge strides Bangladeshis have made since that awful day when, with specialist equipment unable to get to Rana Plaza, thousands started digging their neighbors out of the rubble with their bare hands. As a result, it was chosen last week as the place to trial an ETI project where garment suppliers publicly appraise their buyers. Clothing suppliers freely telling their clients what they think of them? That would be earth shattering even in Sweden or California. To continue this progress, Americans should buy Bangladeshi. For shoppers, Bangladesh is cheaper than Vietnam. Or China. For President Trump, Bangladesh isn’t China. Every garment bought from Bangladesh is one more poke in the eye for the Chinese. And, it is a great way of rubbishing Obama. For political activists, you DO want poor people to be better off. Don’t you? —Excerpted from an op/ed that originally ran in Sourcing Journal on April 24, 2018

INSPECTORIO REPORT | TRANSPARENCY 21

KINGPINS TRANSFORMERS MAKES A CASE FOR GREATER TRANSPARENCY IN DENIM THE DENIM CONFERENCE CALLED ON THE INDUSTRY TO COLLABORATE FOR CHANGE

REPORT: THE APPAREL INDUSTRY STILL HAS A LONG WAY TO GO ON TRANSPARENCY FASHION REVOLUTION’S 2018 LIST REVEALS FASHION’S BIGGEST WINNERS AND LOSERS

ANGELA VELASQUEZ

ANGELA VELASQUEZ

Everything but the secret sauce If you ask ZDHC Foundation implementation director Dr. Christina Raab, transparency is evolving but it’s still a challenge further down the supply chain and at large scale. Most of what companies do these days is still rooted in what’s legally required. A new transparent framework for consumer information should be built on safer chemistry and take the entire supply chain’s sustainability performance into account, according to Raab. And it should be both easy to understand and to use. While the supply chain may gripe about how consumers only care about style and

price, Miguel Sanchez, Archroma global head of business development for denim and casual wear, pointed out that it’s the only information readily available in stores. “The end consumer doesn’t know what else is important. For as long as the garment in the shop is just the garment and price, there is very little push to change that,” Sanchez said. “We have to make sustainability something as important as the other two parameters.” Transparency—the experience Though some manufacturers may not be on board, others err on the more positive side of what transparency can bring. “There is hope around transparency,”

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Midyette said. Bringing partners to the source has been an option many companies have turned to for driving transparency. Cellulosic fiber manufacturer Lenzing has been known for inviting partners to its Austrian headquarters to experience its process, and likewise, Italian denim mill Candiani wants the industry to experience the “greenest mill in the blue” world for themselves. The mill will hold its first open mill day in October 2018 for the industry. “It’s for anybody who is interested, anybody who wants to see hands on what we do,” Alberto Candiani, co-owner and global manager of Candiani Denim, said.

NOBODY GOES TO THE STORE SAYING ‘I WANT TO BUY THE MOST POLLUTING THING IN THE STORE TODAY.’ PEOPLE WILL BUY WHATEVER IS AVAILABLE TO THEM.

Buxton Midyette, Supima vice president of marketing and promotions, said. Supima has always invited brands to its harvest each year to see firsthand how 500 family farms make the sustainable, high quality cotton, but the invites went begging 12 to 15 years ago. “And then funny things started to happen around five years ago,” he said. “People started saying yes and they started coming.” Along with Brooks Brothers, Land’s End and Banana Republic, “radical transparency” brand Everlane recently visited Supima’s harvest and brought its social media team out to share the experience on Instagram. “They’re really taking that story to the consumer,”

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hough it may still be unclear just how much information consumers need about their jeans, what is clear is that they’re keen on transparency— and leaders from the global supply chain speaking at the one-day Kingpins Transformers conference in Amsterdam in April, are working on best practices for delivering it. Stefano Aldighieri, Arvind creative director and an attendee at the event, said consumers may want a garment that’s ethical and sustainable, but when they get to the store, price is top of mind. Manufacturers, he said, will have to set the standard if they want consumers to follow. “Eventually people will decide that’s what they want because basically they will have no choice. Whatever they buy is going to be more sustainable and [greener] whether they like it or not,” Aldighieri said. “Nobody goes to the store saying, ‘I want to buy the most polluting thing in the store today,’ much like they don’t say they want to buy the greenest thing in the store. People will buy whatever is available to them,” he said.

One big idea As with previous Kingpins Transformers, the session concluded with a call for collaboration and shared knowledge, which Ben Tomkins, Oritain business development manager, said is key. “It’s quite easy for people to sit here and pitch their own ideas, own technologies, own applications, but unless you’re actually joining them to find the best solutions, I don’t feel it working,” he said. Though brands and retailers may still have diverging and competing programs, there’s a belief that creating a streamlined set of common guidelines can be achieved.

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didas and Reebok are helping to write the playbook for transparency in the fashion industry. The performance apparel and footwear brands topped Fashion Revolution’s Fashion Transparency Index 2018, which reviews and ranks how much information 150 of the biggest global fashion companies publish about their social and environmental policies, practices and impacts. Brands were scored on five factors: policy and commitments, governance, traceability, supplier assessment and remediation and spotlight issues, which look at living wages, unionization and recycling among other topics. For a second consecutive year, Adidas and Reebok achieved the highest score of 144.5 out of 250 points, followed by Puma, H&M, Esprit, Banana Republic, Gap, Old Navy, C&A and Marks & Spencer. The top ranked brands, according to the index, disclose all social and environmental goals, policies and procedures, remediation processes, address spotlight issues and will be publishing detailed supplier lists that include manufacturers and processing facilities. Online retailer Asos and denim-focused brands like Levi’s Strauss & Co., Wrangler, G-Star and Pull & Bear ranked on the index’s second tier. The index noted that Asos is the only brand on the list publishing where they source raw materials, with 90 percent of its fibers from major suppliers like Lenzing and Aditya Birla. However, Fashion Revolution found that even the highest scoring brands on the list still have a long way to go towards being transparent. The average score brands achieved was 52 out of 250 points, 21 percent of the total possible points. None of the companies on the list scored above 60 percent and just 10

brands scored higher than 50 percent. At the bottom of the index, Jessica Simpson, Desigual, Nine West and Barney’s New York were highlighted for disclosing “next to nothing,” while Dior, Heilan Home and s.Oliver scored 0 because the companies disclose nothing at all. Carry Somers, Fashion Revolution cofounder, said, “Those brands who know how to use the tools of transparency to navigate a new course, will be the ones who will survive. These are the companies who are able to spot any unauthorised suppliers being used to make their products; the ones who are managing and mitigating risks that might lead to human rights and environmental abuses; the ones who are protecting their brand’s reputation.” On the upside, Fashion Revolution found that 16 brands are disclosing “significantly” more, including The North Face, Wrangler, Esprit, Primark, Loft, New Balance and Lululemon. Denim brands were among the highest scoring companies for traceability—the area that Fashion Revolution has seen the most improvement since last year’s report. G-Star and Gap Inc. scored comparatively well because they disclose supplier lists that include detailed information Moving forward, Fashion Revolution urges brands and retailers to take immediate steps to disclose their supplier lists in searchable formats, improve their sustainability and CSR communications, publish direct contact details for their CSR departments and to answer customers’ questions and requests on social media with specific supplier information. “We think it might be interesting for brands and retailers to see how they compare to each other in terms of public disclosure of supply chain information and social and environmental policies,” the report stated.


NETWORK EFFECT

THIS NEW PLATFORM SETS OUT TO MAP CELLULOSIC SUPPLY CHAIN

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ith traceability top of mind for supply chains, Control Union Certifications has developed its Connected platform to map supply chains all the way back to raw materials. Connected, an open platform that allows companies to trace a product’s journey back from finished garment to the fiber source, allows users to acquire a range of key data, from material flows to compliance. “We all know how complex textile supply chains are and how difficult it is to have their full and continuous visibility,” Franco Costantini, senior manager for supply chain services at Control Union, said. “This is a great achievement, particularly considering that the platform was only launched in September 2017. It is a clear sign of commitment by the industry at large, to transparency and responsible sourcing.” The system includes traceability features for man-made wood fiber cellulosic materials

such as viscose, rayon, modal and lyocell. This comes in response to the more than 100 brands looking to meet their CanopyStyle initiative commitments, which include not sourcing from ancient and endangered forests. Connected incorporates compliance targets that pull in the results from environmental nonprofit CanopyStyle’s verification audits and “Hot Button” producer rankings. Connected allows retailers, brand owners and producers to map their supply chains, track materials, monitor compliance efforts and gain access to a variety of supply chain data, from transaction volumes to order lead times. Several fiber suppliers, including Lenzing Group, Aditya Birla and ENKA International GmbH & Co., have joined Connected. Each producer in the platform is linked to its suppliers or to its clients, and can receive and submit orders and shipments via the platform. Every user also has access to local support centers managed by Control Union in all

producing regions. “Partnering for systemic change is a key focus area of Lenzing’s sustainability strategy called ‘Naturally Positive.’ Lenzing believes that collaboration and transparency are a prerequisite for improving the sustainability of the textile industry,” said Robert van de Kerkhof, chief commercial officer of Lenzing Group. “Therefore Lenzing contributes to the Connected platform to ensure transparency of its fibers and their raw materials’ sustainable origins.” The platform is expected to help brands reach their traceability and sustainability goals, while producers of raw materials like fibers, can use the platform to drive and monitor the uptake of their sustainable products. “Connected has addressed an important need of traceability across the value chain by introducing a system bridge from fiber to retail,” said Manohar Samuel, president of marketing at Birla Cellulose. —AF

OEKO-TEX LAUNCHES ORGANIC COTTON TESTING TECHNOLOGY

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ew testing from Oeko-Tex will help companies throughout the global supply chain more easily test their organic cotton products for genetically modified organisms (GMOs), a molecular-level indicator of whether cotton products actually meet a fundamental definition of organic. Organic cotton products seeking Standard 100 by Oeko-Tex certification will be required to undergo GMO testing. Standard 100 by OekoTex is a worldwide independent testing and certification system for raw, semi-finished and finished textile products at all processing levels, as well as accessory materials used. The tests for harmful substances cover legally banned and controlled substances, chemicals known to be harmful to the health, but not yet legally controlled and parameters for health protection. GMO testing is optional for other

products. Currently, the GMO testing technology is limited to cotton. “We learned in our ‘The Key To Confidence’ study that consumers who buy eco-friendly clothing and home textiles are likely to verify claims,” Georg Dieners, Oeko-Tex general secretary, said. “The new GMO testing gives manufacturers and marketers confidence that their organic cotton products meet regulatory and consumer expectations with regard to GMOs, as well as the independent, traceable documentation to prove it.” With the new test, samples are analyzed using reverse transcription-polymerase chain reaction (RT-PCR) technology that can identify known genetically modified materials at a limit of 0.1%, and Oeko-Tex said test results clearly indicate whether these GMOs are detected. The popularity of organic cotton has grown substantially in recent years as have consumers’

concerns about the environment and harmful substances in the products they buy. As a result, this has increased the purchasing of organic textiles and with it that extra investment, an expectation that the organic products they buy are genuine and verifiable. Today, roughly 70 percent of cotton globally is genetically altered, according to Oeko-Tex. Some forms of cotton have been engineered to be herbicide-resistant, while others have been infused with an insecticide to kill pests. These cotton DNA modifications have proponents, but producers and consumers of organic cotton reject them and place greater value on the environmental, social and product safety paybacks that they perceive organic cotton offers, Oeko-Tex added. —AF

HOW INSPECTORIO IS USING SILENT COLLABORATION TO DEVELOP AI CAPABILITIES TO IMPROVE QUALITY INSPECTIONS AND COMPLIANCE. CALETHA CRAWFORD

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hile automation is upending much of the apparel industry, there are parts of the supply chain that remain stubbornly outdated—chief among them is the quality inspection process. Here, pencils and paper are the most common tools, and email and Excel are often as contemporary as the technology gets. Inspectorio has launched to change that. The company, which was founded by sourcing veterans, got its start through the Target + Techstars Retail Accelerator program. That opportunity eventually lead the retail giant to roll out the quality control and supplier compliance verification platform to 100 factories in Vietnam, Cambodia and Thailand, touching nearly a quarter of its apparel and accessories business. Here, co-founder and managing director David Klein explains how the company is using the same technologies that are transforming other parts of the supply chain to enable actual speed to market, unlock greater transparency and foster better collaboration. SJ: While the rest of the industry is automating—from robots that sew to drones that drop packages at your door—the inspection process has been largely stagnant. How is Inspectorio working to put these tasks on par with all of these other innovations? DK: Inspectorio is a quality and compliance platform for the industry 4.0. We automate the whole process from the PO to building a process of executing inspection, reporting, analytics, corrective action plans and leveraging machine learning and AI to have deeper predictions, task automizations and make smarter business decisions.

SJ: Why is the industry finally starting to turn its attention to quality inspections now? DK: We’re entering a new stage of global sourcing. It’s not a race to find the next country to source. It’s a race to get more transparency. It’s a race for more efficiency and predictability. And the factory and vendor relations have already matured. That means that processes and approaches need to change. With that change that we’re seeing today, the new standard is self-inspections. Inspectorio facilitates that and accelerates that process. And with self-inspections comes the questions of accuracy, comes the questions of when do we need to have our next inspection. We don’t believe it should be people with Excel and calculators giving you that answer—it’s algorithms. We leverage AI to predict these high risk areas. SJ: How do the Inspectorio innovations translate into tangible benefits? DK: Today for clients that are using Inspectorio, we see efficiencies of up to 40 percent reduction in time of pre-shipment inspections. That means you can catch a preshipping window up to three to four days earlier. You can have your goods in stores even a week earlier. And efficiencies aren’t just related to time. We see a lot of efficiencies in your budget in that you’re using third party inspections a lot less because you’re using less inspections. We’re seeing efficiencies in the management of your quality team because you’re not focused on non-value added activities like booking, scheduling, etc. And in supply chain data management. Instead of having to depend on your own data silos, waiting sometimes three or four days for information, you have the information at your fingertips.

SJ: You mentioned data and AI, which are two big buzzwords right now. How do they apply to this part of the supply chain? DK: When you have a platform, you have a lot of different actors—factories, vendors, brands and retailers and inspection companies—that are all generating data in the same space. Thanks to this silent collaboration, the factory’s historical data you know the defects [that] occur but we can recommend other defects you’re likely to find based on the defects at other factories that have the same profile and product categories. We’re leveraging that information in the same way as when you use Netflix and they recommend what to watch based on what other people watch. The other application is on the corrective action. So when you have defects that are common within factories, they have to come up with the root causes. When you have a lot of data and you’re looking at those corrective actions that fix those root causes, through best practices you can start becoming quicker. We can tell the factories these are the corrective actions that will solve your root causes quicker. How? Based on data. SJ: What’s next for Inspectorio? DK: With regards to transparency and sustainability, we’re building a very powerful responsibility and sustainability platform involving key players in the industry that is going to go live by the end of the year. And what we see the industry pushing for is greater transparency, and today we’re gathering that information through these assessments done over a period of time. We have a prototype of beacons so you can have real-time data [about things like] electricity consumption, temperature, humidity, etc.

The “Quality, Compliance & The Cost of Failing to Innovate” report was created exclusively for Inspectorio by Sourcing Journal Media, featuring a compendium of the most noteworthy stories published by the media company during the first half of 2018 as well as original reporting on related topics.