Fashion factory: Mango brings production closer and reassesses China

In 1970, a young Turkish immigrant named Isak Andic began importing blouses from his home country to Spain, bringing something different to people living under a dictatorship. At 17, he sold them first as a wholesaler in Barcelona, ​​then opened a shop and also sold them from the back of a car he drove across the country. It was the start of a fashion business that, 14 years later, he would call Mango.

Today, Andic’s position as Mango’s sole shareholder has made him one of the richest people in Spain, and his empire has expanded to around 2,600 stores worldwide. He continues to buy clothes from Turkey and 18 other countries. But the pandemic and war in Europe, along with friction between Beijing and the West, are forcing it to rethink its supply chain and China’s central role in its operations.

Toni Ruiz, appointed chief executive of Andic in 2020, said globalization has allowed companies to become “super efficient” at limiting production costs in quiet times. “But at the end of the day, what we realize is that things can change from one moment to the next.”

He recalled the recent shortage of Taiwanese microchips and the European car factories that were paralyzed by the lack of a Ukrainian-made electrical harness. “The whole chain [de suprimentos] is only as strong as its weakest link,” he said.

In the case of Mango, the chain is incredibly complex. The retailer buys its 40-euro sparkly party dresses, 15-euro T-shirts and 100-euro winter coats from 408 suppliers who own about 1,000 factories, three-fifths of them in Asia. Apple, which recently warned of disruptions in supply because of an uprising against the lockdown at a Chinese factory, has 180 direct suppliers.

“What we’re seeing is the extent to which this global outsourcing, developed over many years, can become more local,” said Ruiz. “We are constantly thinking of alternatives.”

Mango already exercises a lot of central control. No product reaches shoppers without first going through its distribution center north of Barcelona, ​​where 75,000 articles per hour travel along a circuit of suspended rails to be sorted into a giant wardrobe measuring 170 meters in length.

But during the pandemic the company has been in a constant struggle, ramping up and down production across Asia as Covid-19 outbreaks waxed and waned in China, Vietnam, Bangladesh and India. Last year, a shortage of container ships left its products stranded far from Europe. “In September, October and November, we were all praying that the weather wouldn’t be bad because we didn’t have warm clothes,” said Ruiz.

There are specific issues in China, where Mango buys from 262 factories, like the Covid-zero policies that Beijing started relaxing this week and strict visa and quarantine rules that put off business travelers. Then there are Beijing’s strained relations with Washington and European powers, which Ruiz singled out, and concerns over potential conflict between China and Taiwan, which he described as “part of everything”.

“In this debate about whether 30 years of globalization will continue or recede, the most important thing for us to follow in detail is the issue of China,” he said. Asked if Mango would reduce the proportion it buys from the country, Ruiz replied: “I would say yes, but we will be very attentive to how things evolve”.

Mango gains some leeway with the fact that it has just six stores in mainland China and consumers contribute little to total sales, which this year will surpass its record 2.4 billion euros (R$13.25 billion) in 2019.

Other brands have already moved more decisively. Levi’s, an American jeans manufacturer, and Dr. Martens, the UK boot maker, have been reducing their purchases in China since before the pandemic.

Another factor forcing companies to reassess their exposure is Xinjiang, says Brian Ehrig, a supply chain expert at consultancy Kearney. Allegations of the use of forced labor at factories in the region have led to laws in the US, UK, Germany and elsewhere that pressure companies to eliminate possible links to the abuse. “What we’re seeing is the path of least resistance is moving production out of China as quickly as possible,” Ehrig said. Mango said it had no suppliers from Xinjiang and did not work directly with any other companies in the region.

The retailer has alternatives to China through a two-way supply chain. Asia is the “long haul” runway, producing staples like T-shirts that typically take six to eight weeks to ship to Spain. The “proximity” lane mainly comprises Turkey and Morocco, where it produces more elegant clothes, all designed at its headquarters in Palau-solità i Plegamans, in the interior of Catalonia (Spain). These products arrive at the distribution center in four to six days, giving Mango the ability to ramp up production quickly to replenish supplies when an item is popular.

Turkey and Morocco play a similar role for Inditex, which owns Zara, and are the obvious places for Mango to expand production closer to home. He also pointed out the potential of Romania, where he uses three factories. Ruiz said Mexico is an option in Central America as he plans to quadruple the number of US stores to 40 by 2024.

Luis Casacuberta, director of Mango’s women’s, children’s and home business, said the company seeks not only flexibility but also “robustness”. Unlike automakers, he said, this doesn’t simply mean having a larger number of available suppliers. “We already have a reasonable level of diversification. What we want is the opposite. How do we build a much stronger foundation?”

The key to this, he said, was finding suppliers who already did a good job making Mango products and were willing to open factories in more than one country. “So the flow of ships from Bangladeshi ports was stopped? Or was there flooding? This allows us to rotate with the same supplier.”

Ruiz has been dealing with unwelcome surprises since day one. He succeeded Andiz, now chairman of Mango, when the pandemic took hold. The first document he signed put several thousand employees on furlough. But if Mango got too obsessed with what could go wrong, he said, “we wouldn’t do anything.”

“The things outside our sphere of influence are huge, but it’s about managing the things that are within our sphere of influence. things.”

Translated by Luiz Roberto M. Gonçalves