Here’s an interesting supply chain problem for you: What do you do when Mother Nature jeopardizes your usual production process?
That may sound a little melodramatic, but it is a relevant question for makers of high-end fashion jeans (Why the California Drought Matters to the Fashion Industry, Wall Street Journal, Apr 10).
The four-year drought in California is hurting more than just farmers. It is also having a significant impact on the fashion industry and spurring changes in how jeans are made and how they should be laundered.
Southern California is estimated to be the world’s largest supplier of so-called premium denim, the $100 to $200-plus-a-pair jeans such as VF Corp.’s 7 for All Mankind, Fast Retailing’s J. Brand and private-equity owned True Religion. Water is a key component in the various steps of the processing and repeated washing with stones, or bleaching and dyeing that create that “distressed” vintage look.
“(The) water issue in fashion in Los Angeles is a big deal,” said John Blank, economic adviser to the California Fashion Association, a trade group. Premium denim “requires water. It is all about that processing. It is the repeated washing to get the premium look. This is what people pay for.”
Southern California produces 75% of the high-end denim in the U.S. that is sold world-wide, Mr. Blank said.
This data from Levi’s highlights the water usage in question.
Unsurprisingly, actually growing cotton and consumers washing their clothes accounts for most of the water usage but steps the jeans maker control (e.g., cut, sew and finish) still uses a large amount of water.
So what can a fashion label do?
It seems like there are several possibilities. First, you can change the product. That is, firms could choose to produce jeans that have undergone fewer wash cycles. There are, of course, some issues with this. Unless firms can convince consumers that the resulting products are both better for the environment and still the ultimate in fashion, it’s a losing strategy. If one firm went this route, it might see it sales plummet if its jeans were seen as less desirable in comparison to others readily available at the mall. Another issue is that fewer washes at the factory might just translate into more washes at home. That is, consumers may just choose to do the finishing themselves to get the right look. Total water consumption then doesn’t fall but a brand’s customers then get a non-uniform product experience.
Another option is to bail on California. If one views the issue as using a lot of water where water is scarce (as opposed to just using a lot of water), brands could decamp to, say, the Carolinas. That would seem a possibility but the article doesn’t actually discuss this option. To some extent producing almost anywhere else in the US would be cheaper than Southern California in terms of land and possibly labor. The fact that So Cal rules in denim suggests that the benefits of being in a local network of like firms matters more than saving a bit on rent.
That leaves an option firms are actually pursuing: Altering the production process while delivering the same outcome.
Blue Creations of California Inc., which does garment washing and dyeing for upscale brands such as Helmut Lang and Frame Denim (which is sold at retailers including Nordstrom Inc.), plans to buy a second “ozone machine” in the next year. The ozone machine uses ozone gas to create that stonewashed and bleached look without using water, said Oscar Quintero, who handles sales and marketing at the company, located 15 miles south of L.A.
Blue Creations currently has one machine and that, according to the article, has cut its water use in half. The economics here are interesting. An ozone machine costs $65,000 and the process adds a buck to the cost of jeans (which recall retail for over a hundred dollars). If a firm is producing even a few thousand pairs of jeans a month, this seems like a manageable transition. That is, a supplier like Blue Creation should be able to strike a deal with its customers to share the cost of moving to a more sustainable production method. (Note that I am assuming here that the end result is essentially the same.) The fact that it hasn’t happened yet suggests that absent something like the current crisis, margins (at least for the supplier) are too slim to support even modest investments.