Question & Answer: Background Clothing sales have risen dramatically in recent years, thanks to several trends that appear likely to contin…..

Background Clothing sales have risen dramatically in recent years, thanks to several trends that appear likely to continue. It was reported that the global demand for clothing looks set to increase significantly over the coming decade as millions of people in developing countries enter the middle class and spend more on apparel. It also seems the demand for fast fashion will only continue to grow (Remy et al. 2016). This is further supported by a new research from Kurt Salmon, part of Accenture Strategy, one in eight younger consumers (18 to 24 year olds) shopping every week and buying a fashion item at least once a fortnight (Accenture 2017). Clothing production doubled from 2000 to 2014, and the number of garments purchased each year by the average consumer increased by 60 percent. Fast fashion has been a particularly hot segment and a source of enviable growth for some clothing companies (Remy et al. 2016). The process of making a piece of clothing involves multiple suppliers across the supply chain in the following processes including: farmers who grow the raw materials; ginners receive cotton from multiple growers and sell to the global market through traders; spinners use cotton from a variety of origins to produce yarn and fabric mills produce cloth. The manufacturing process begins which involves cutting, sewing, trimming, embroidery, orienting, and washing. Next, the manufacturers ship the garments wholesale to the brand that placed the orders who distributes garments globally to retail and online stores (Human Rights Watch 2017). At the end of its life, the apparel/garments may either be recycled or discarded and go to landfill. The manufacturing usually involves multiple suppliers in a very complex supply chain, which reduces transparency and visibility along the complex value chain. Brands therefore are not aware of what happen at their suppliers’ business along the supply chain. Brands also do not typically deal directly with all those suppliers, and many do not bother to dig deep into their supply chains (Gunther 2016). On the other hand, consumers are, attracted by the low cost and constantly update product ranges with new styles and designs. Consumers are buying these clothes much more often and in greater quantities, but often wearing them only a handful of times before discarding them. This fast-fashion industry and ecosystem consumes large amounts of natural resources in the production, which ultimately accelerating carbon emissions and global warming. The industry has also been linked to a number of cases of worker abuses in countries producing the garments. The workers were underpaid and exposed to unsafe and poor workplace conditions, particularly when handling materials like cotton and leather that require extensive processing (Remy et al. 2016). One example is the disaster at Rana Plaza, which is one of the deadliest accidents in the fashion industry happened on 24th April 2013. (The Economist 4th May 2013). Over 1,130 people were killed and 2,500 more were injured when the Rana Plaza factory complex collapsed in Dhaka, Bangladesh. It was reported that people crushed under those eight floors were working for dozens of familiar multinational brands and retailers. It is ‘one of the many negligent accidents that plague the garment industry’ (Fashion Revolution CIC 2015, p.4). 2 Assignment Tasks Assume you are a newly appointed accountant in a local fashion company -RTXM Clothing Company (RTXM) – based in Melbourne, Australia. This is a private family business with 20 shareholders. Currently, the company has seven different departments, include Accounting and Finance, R&D (product design and development), Salesand Marketing, Human Resources, Information Technology, Distribution and Logistics, and Merchandising, with a total of 130 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company’s profit, and all the other employees receive the fixed salary package. The company pays taxes to Australia Taxation Office (ATO) on a regular basis. Originally, the business offered only t-shirts and jeans. As the business was trying to join the growing fast fashion industry, it expanded its product lines to include dress, trousers, shorts, hoodies & sweats, socks, shoes, and bags. The objective was to provide a wide selection of product lines in order to reach more fashion conscious consumers. A characteristic of them market is consumers are mainly attracted by low price, and frequent new styles and designs, so the company also seeks to find the suppliers with low prices. The business has retail stores in the major city across Australia and online store. Since the company expanded its product line, managers from different departments found the number of complaints received from customers have tripled. Most complaints are related to the product quality (products are either defective or damaged), items consistently out of stock, online shopping experience (delivery of wrong items and long response time to emails), and in-store experience (lack of attention from sales representatives), and some customers have posted complaints on RTXM social media. In order to enhance the overall performance, the company is considering using a range of key performance indicators in managing its performance. This is to ensure that the company keeps track of its performance and to achieve the objectives they set for the identified issues. In addition, the CEO and senior management decide to find new suppliers to improve the product quality, however, they encountered a dilemma. On the one hand, they found a supplier in Bangladesh, Super Cheap who can provide a large range of products to fit in their business expansion plan with a competitive price and all products can be supplied in a short time frame. However, after a careful investigation into this company’s background, they found this supplier has a major issue with labor conditions throughout their supply chains, including the use of child labor, low wages, and health and safety hazards, and long working hours. In terms of the environmental aspect, Super Cheap consumes a few thousand litres of water to produce a cotton t-shirt and over ten-thousand litres to produce a pair of jeans, and wastewater discharge into the local river, and it did not take any action to solve this issue. The polluted water is no longer fit for drinking or laundry, fishes no longer exist in this river, and local residences complain that their homes are flooded by dirty water. On the other hand, RTXM has another potential supplier, called Green Fashion, who only provides limited product range with a higher price, and products can be supplied in a reasonable time frame. However, Green Fashion takes account of sustainability and makes it as part of their business, and their sustainability agenda has been presented on its website, 3 including fashion designs that is kind to the environment, they also ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met. The CEO and management of RTXM learnt that Green Fashion has very similar values and sustainability agenda. RTXM considers sustainability as part of the business. It is reported on their websites that the company wants to rethink fashion designs so that they are kind to the environment, to ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met.

3. The CEO believes the company was attractive because of its previous low price strategy but has also noticed unprecedented awareness from customers on the company’s social responsibilities. The CEO approaches you to discuss the selection of supplier, which supplier is better for company’s strategic development. Provide an explanation to the CEO with reference to the potential costs and benefits of working with both Super Cheap and Green Fashion.

Expert Answer

 

Answer: As per me , GREEN FASHION is better supplier for the company’s strategic development.

The following is an explanation with reference to the potential costs and benefits of working with both Super Cheap and Green Fashion-

  • Super Cheap can provide large range of products in a short time frame. However , the major disadvantage with this company is that it does not treat its employees properly, there is child labour, long working hours.
  • Also Super Cheap company is not environment friendly, it discharges its waste in the river which is now polluted and not fit for any use. This shows that although the company is providing good range of products but the costs incurred by it are very high.
  • In short term it may seem that its prices are cheap but in the long run actually it will cost high due to the environmental damages it causes.
  • On the other hand Green Fashion provides limited product range with a higher price and supplies products in a reasonable time frame.
  • However, Green Fashion takes account of sustainability and is kind to the environment, they also ethically source materials and labour, promote work-life balance and provide incentives to their local and outsourcing partners and their employees if their targets are met.
  • This shows that although the price of Green Fashion is little higher but it follows all the ethical concerns and sees to it that nature is not at loss.
  • Ultimately in the long run the consumers will prefer more products from Green Fashion rather than Super Cheap because of their ethical practices.

Also, RTXM Clothing company is majorly facing issues from customers who are not satisfied with their services. So if they approach to Green Fashion as their supplier then it will turn out to be strategically benefecial for the company. The customers today are aware about the environmental safety and the company’s social responsibility.

So, by selecting Green Fashion as its supplier, the customers of RTXM will be more satisfied with the quality and sustainability and thus it will help improve the customer base and result in the growth of the company.

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