Early 2011 started with a worry about the supply of cotton. Weather conditions in Asia as well as farmers deciding to cultivate soybeans, corn and other better paying crop lead to significantly lower availability of cotton.
And if the rising price of the raw material has not been enough,
the labor prices too have been seen to rise in Asia, leading to 15%
increases in costs.
Late last year and during the springtime a number of retailers
reported that they would move the costs to their prices. Many also
expected to see drops in profits and for example the Fast Fashion
Giant H&M reported a 30% drop in their net profit in the first
quarter of 2011. We have of course since then seen a
stabilisation in the cotton prices and the anticipation is that in
the end of the year the supply will again slightly exceed the
demand. This is good news to retailers.
What is a retailer to do
Some at least have taken the situation as a possibility rather
than threat. Some retailers have chosen to bring the production
closer to home as labor cost is no longer such an issue. This helps
them to react faster to demand and trends. Others have taken
different approaches to implement technology in order to facilitate
exact orders and better planning. RFID technology offers key
elements to maintaining accurate stock levels as well as monitoring
the supply chain even closer to cut costs.
Some go even beyond. With rising prices, many suffer from
shrinkage and having to make up somewhere for the goods that seem
to vanish somewhere down the line. Hotels, where bed linen and
towels typically leave them with the guests, have now started to
implement RFID for theft proof purposes. Retailer - perhaps now is
the time to do the same in your supply chain?
RFID in hotel bed
Cotton prices high and
H&M hit by cotton