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Poor supply chain visibility puts garment supplier into administration

Posted by Peter Needle

20-Aug-2015 09:00:00

The Poor supply chain visibility puts garment suppliers in administrationgarment industry is a fiercely competitive market, and not every company can be a success story. Multiple high street retailers go into administration every year, but what about those companies higher up in the garment supply chain? We’ve take a look at two garment suppliers who have struggled to cope recently, and found that a lack of supply chain visibility was the root cause of their problems. 

Millions stolen from Bangladesh factory 

May Trading UK, garment supplier to popular high street retailers including Topman and Next, went into administration late last year after the co-owners allegedly discovered that millions of dollars had been embezzled from its Bangladesh-based factory. 

The co-owners had been made aware of some suspicious behaviour at the company’s factory in Dhaka, and an audit team was sent in to conduct investigations. It was soon reportedly found that a shareholder and director had defrauded the business of millions of dollars.

The exact sum is unknown, but the theft was severe enough that the company’s bank refused to fund the factory after an arranged sale fell through. This left the owners no choice but to go into administration to conclude the sale. Jason Marchant, one of the company’s co-owners, described the decision as “frustrating.”

He explained: “We have put huge investment into the factory and it was fully compliant for all our major retailers.” Marchant expressed hope that the majority of staff will retain their jobs in the deal, but some redundancies were made.

Last December, it was announced that the European division of global sourcing giant Li & Fung had bought May Trading UK out of administration. The assets include the existing order book, some finished stock and certain IP rights. 

Another one bites the dust 

May Trading UK wasn’t the only garment supplier to enter into administration last year as a result of neglected supply chain management. 

Garment supplier Positive Clothing London went into administration in autumn, after Primark stopped placing orders with the company. Drapers reported that Positive Clothing London had been using a UK factory which failed to pass an inspection by Primark. As a result, the retailer cancelled its contract. 

“They were using the wrong factory and Primark pulled the plug,” an industry source told Drapers. “They owe a lot of money.” 

How garment suppliers can keep track 

It can be difficult to achieve supply chain visibility in the garment industry, but in both these cases, the failure to do so led to financial disaster. 

May Trading UK had failed to notice any acts of embezzlement until being alerted to suspicious behaviour. Having discovered the fraudulent activities, the audit team could do nothing to retrieve the lost money, and little to improve the situation which had immediately driven the company to entering administration. A lack of supply chain visibility had prevented the UK-based company from picking up on problems in its Bangladesh-based factory (repeating the problem that many garment suppliers had following the Rana Plaza collapse last year.) 

Garment suppliers often operate on very tight margins, and Primark had represented a major source of income for Positive Clothing London. The supplier could simply not afford to lose its client, but had failed to measure up to the retailer’s required factory standards. This acts to illustrate how important supply chain visibility can be for a garment supplier – not only to support its own supply chain operations, but also to meet the values of retail clients. 

Thankfully, solutions exists that can help to provide supply chain visibility for garment suppliers and retailers alike. By using Segura’s supply chain visibility solution, companies are able to monitor and inspect secondary sourcing of garment trims and packaging, creating a comprehensive audit trail showing every transaction within the supply chain. Updated in real time, this framework helps garment suppliers and retailers to see exactly where orders are in the production process, and highlights any financial and practical discrepancies. As a result, retailers can rest assured that orders are ethically sourced, and suppliers can sleep easy too.

 

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Topics: supply chain transparency