Q&A with Stanley Szeto: The Future of Apparel Sourcing and Manufacturing

August 25, 2020

On August 4th, we heard from leaders in the apparel industry about the conditions faced due to Covid-19. In our webinar, we brought together Vivek Ramachandran, CEO of Serai, Peter Warner, Global Sourcing (Ex-Nike, Gap, Kohl's) and Advisor at Allbirds and Stanley Szeto, Executive Chairman at Lever Style. Check out our blog post here to watch the full video and read the event summary!

Following the webinar, we interviewed Stanley Szeto to answer some audience questions that we couldn’t get to during the event:

Q: Covid has accelerated a shift towards smaller volume orders from brands. How can manufacturers geared towards volume production become smarter to address this shift, while balancing this with their existing mass customers?

A: I think the first thing that they have to do is to acknowledge that this trend will continue. A lot of people still latch onto the conventional thinking that big orders make money, whereas small orders’ higher margins aren’t meaningful enough to cover the overhead. If anything, these orders slow you down.

The first step these factories that are accustomed to big orders need to take is to change their mindset. This is the world, it’s going to be high mix, low volume, ‘how are we going to adjust to it?’ It’s not a question of whether, but how. Once you’ve accepted that this is the new world and you want to survive and live in it, then you make the next step. Working on production lines, reducing the manual input in the order fulfilment process, there are lots of things you can do; however, the first step is changing their mindset.

Q: How important do you consider modular manufacturing and design capabilities in setting Lever Style apart from other manufacturers?

A: I believe that these are very important, but it's about having the holistic infrastructure to do high mix, low volume orders. What happens on the factory floor with modular manufacturing systems is only a part of it. It’s one of the key parts but by no means the only part. The entire company, from order taking and design to shipping and logistics, needs to adjust the way it works to cater to this high mix, low volume reality. Design is something that sets us apart. In the apparel industry, there are two types of design - fashion design and technical design. A lot of our clients are very high-end brands and they have their fashion design point of view, whether a garment is a certain colour, how a lapel looks… that is mostly our clients’ purview. However, they rely on us for technical design. We come up with the pattern, the development, make sure it fits nicely, and it drapes well. A lot of that is in the know-how and not just having measurements that match up to a specs sheet. That is an area we have invested a lot of effort and people into and we hope sets us apart and allows us to make better products than our competitors.

Q: How big a role will technology play in changing the apparel industry over the coming years? Which types of technology solutions would you recommend manufacturers to invest in as they look to digitise their business?

A: Even though a lot of us may feel that technology has changed our industry a lot, it actually hasn't changed all that much relative to other industries. I entered this industry 20 years ago; of course, we didn’t have sophisticated ERP systems and we just started to use email at the time. Now there is social media, it is easier to get in touch with people, and you can take pictures on the go and share them instantaneously if there is a QC problem, but this is still just child’s play. We haven't gotten into real digitisation, such as using AI or data. The adoption of technology is going to accelerate because we are actually quite behind. For manufacturers, the easiest place to start is ‘how do you manage all the data?’ through ERP or PLM systems. And now given COVID, a lot of our clients don’t want to use physical samples. How can we use 3D or digital samples to replace physical samples?  Once we get that going, I believe everyone will love it because it saves money and, most importantly, it saves time. Shipping physical samples back and forth between Asia and, say, New York is a waste of time. If this process can be done within a matter of days, if not hours, brands in the US can make their design decisions much much later, which means they can be much closer to market and the chances of ordering or designing something wrong goes down drastically. It’s therefore also one of the more obvious digitalisation tools that manufacturers should adopt at this time.

Q: What can manufacturers do to show consumers & brands that they are employing more ethical supply chain processes?

A: There are obviously a lot of these certifications and audits that we can do. But at the end of the day, good companies want to work with good companies. Ethical ones will seek out other ethical ones to work with. So by association, if you are working with people who are ethical and environmentally conscious, chances are you can work with them because they have done the vetting. I personally think that all these audits and certifications are to a certain extent a waste of time and money. These resources are better spent towards making better products and becoming more efficient. It’s sort of like how do you know if this person is a good guy? Because my friend who works with them is someone I trust. It's old school but it works quite well. Instead of having everyone take some kind of test that measures how ethical you are. Being ethical is just good business. You attract the right customers, business partners and the right staff. And you feel better about doing business. I think that as economies mature, companies will head towards being ethical anyway, whether or not you have all these audits and tests. They may not be the main push behind it.

Q: How has COVID 19 impacted your thinking about shifting production to Southeast Asian countries?

A: I think it is less about COVID-19 and more about the trade war and geopolitical uncertainties. In the last 18 months, the US-China trade war grew into a larger standoff that none of us could have imagined. And as a result, we as a company have been moving production from China mostly to Vietnam, but also to Cambodia, Indonesia, and India in recent years. Because we don’t have factory assets, it is much easier for us to move production around. We are much more versatile that way, and we designed our whole business model in order to be as flexible and versatile for our customers as possible. So in the last 18 months, while a lot of people have been struggling with China's trade war and tariffs, we have largely dodged the bullet. Going forward, whether it is a pandemic that shuts down a country, or suddenly President Trump saying I don’t like the Cambodian military government so we’re going to do an embargo, there could be all sorts of different trade restrictions. We, Lever Style, are relatively well-positioned to navigate around those. As the world changes more quickly than before, and things become less predictable, the only thing we can do is try to be more versatile and change with the times. Nobody has a crystal ball.

Q: Is the trend towards near-shoring likely to affect Asian manufacturers?

A: I personally don't think that near-shoring will be as big a deal as people make it out to be. There will certainly be some of it. But, a lot of times, environmental impact aside, you can always just put something on an aeroplane and cut out the shipping lead time. It will be quicker to air something from China to the US than to truck it from Mexico. Of course, that has an environmental aspect to it for which you have to weigh the pros and cons and it’s difficult. If you're just talking about lead time and being close to the market, you can make something in Asia and it won’t take any longer than making it in your backyard. There may be some near-shoring for various reasons, but I don’t think it’s going to be the bulk of manufacturing. Plus there isn't that much capacity in Mexico. Building apparel capacity takes time. It’s not just buying machines because it’s so labour intensive and the skill requirements are so high. It takes time to train up these workers. China started apparel manufacturing 30 years ago and it took them decades, even with that large labour pool, to build up that capacity and capability. In the 90s, Chinese apparel was considered cheap and of low quality. But now they have become the most equipped manufacturers, the best quality outside of say France or Italy. That took decades, not just years or months. For US brands to say we want to source from Mexico and Peru and Central America, it just isn’t realistic to do it at scale at the moment.