Lot Traceability in the Fashion Industry
Spinning up a Digital Thread to Help Brands Achieve Supply Chain Resiliency, Compliance and Sustainability
Let’s journey back to late 2019 and early 2020. Under the umbrella of Sustainability, key players in the global fashion industry were talking about implementing lot traceability technologies, but in general the timelines were somewhat “comfortable.” There was no compelling event on the horizon. That would change.
At that point, “Sustainable” was largely a marketing term, and many fashion brands were using it haphazardly and irresponsibly. It reached the apex of the hype-cycle and consumers were naturally growing skeptical and cynical of its promotion without verification. Worried about alienating customers, many brand owners took new interest in traceability to understand the environmental impact of facilities, partners, and materials used.
The onslaught of COVID put pressure on many supply chains, including fashion. It forced the adoption and acceleration of eCommerce and spurred new ways of looking at stores as multi-purpose assets. In addition, COVID revealed the need for increased downstream fortification as sources — from growers to spinners to mills — became less reliable. The industry recognized the need for a digital thread connecting all members of the value chain, and lot traceability would be an important component.
Then came the moment of stark clarity, interestingly enough in numerical form: 406-3. (No, that’s not the score of the Georgia Tech football team’s historic victory over Cumberland College. Coach John Heisman’s Engineers eked out a victory in that game by a score of 222-0.)
The other shoe dropped in September 2020 when, by a vote of 406-3, the United States House of Representatives passed H.R. 6210 — the Uyghur Forced Labor Prevention Act. As currently drafted, the bill will block the import of any goods into the U.S. that cannot prove the merchandise is free of material and labor inputs originating in China’s Xinjiang region (XUAR).
Chinese cotton is extremely important to the fashion industry. As much as 85% of the cotton used in the industry is from the XUAR. In the US, 24% of all imports of cotton textile and apparel come from China. While the bill and related Withhold Release Orders did not go as far as banning all cotton and yarn products from China into the United States, it puts the industry on notice that cotton and other products from this region are becoming controversial due to human rights concerns. In other words, more action could come.
As the bill wound its way through House committees in the spring and summer, some apparel brands decided to hedge their bets and began to cut ties with companies that source materials from the region. In July, Patagonia said it would end sourcing from Xinjiang, and two months later, H&M Group confirmed plans to sever ties over the next year with a mill associated with a textile producer linked to Uyghur abuses.
But it was the September 22nd vote that grabbed everyone’s attention, in part because the bill imposes a guilty until proven innocent burden for importers. Complying will force the fashion industry to adopt sophisticated lot trace technologies.
Unlocking this level of verification will require a greater level of traceability than fashion is accustomed to. This is an early morning wake-up call. Most companies only deal with their Tier 1 vendors, because that’s where they have the relationship. The finished garment company sells to one of the retailers in the U.S., and that retailer has really no relationship with the fabric mill. They might have nominated that fabric, but they really have no idea where the yarns are coming from, much less even where the cotton is coming from.”
Thus, thanks to COVID and geopolitics, the industry now recognizes the growing importance of a resilient supply chain. Mapping and strengthening the supply network is one thing; but businesses now must take a more important step—completely eliminating and replacing XUAR-based fabric sources.
In the wake of these growing concerns, we launched in December 2020 a digital supply-chain traceability solution giving brand owners and retailers the tools to document the chain of custody from component origin to importer of record. With this solution, users can trace the chain of custody through all tiers in the supply chain in one digital thread while storing and managing all supporting documents related to every transaction between supply-chain trading partners.
The digital thread compiles and organizes a chronological record of importer of record back through the finished goods factory, fabric mill, yarn supplier, and cotton source. Transactions are validated at every tier using PO’s, invoices and packing lists. All these documents are rolled up to a certificate of compliance with complete chain of custody. This comprehensive genealogy is sent electronically for all shipments arriving in the US. This is what United States Customs and Border Protection will examine to determine compliance with relevant rules and regulations.
Outside of the potential legal issues arising for apparel companies, traceability will be key in meeting consumer demands. While supply chain professionals in the fashion industry knew that a sophisticated lot traceability solution would be critical for backing up sustainability claims, no one predicted that the path would include a pandemic and aggressive state-versus-state government action. Coming full circle, brands now have compliance tools that also help them prove to jaded customers that environmental and social responsibility programs are in place and supported by tangible evidence.