Unpredictability and Disruption in Fashion Supply Chains | PVH, Moose Knuckles | PI Apparel

Excellent. I am Danielle Azoulay. I'm thrilled to be here with you today. We have a great panel planned. We're going to talk about the most interesting supply chain things that you're going to learn a lot of things about. I'm very excited. I teach at Columbia University as part of the Sustainability Master's Program. So again, really excited to be here with you all. I thought we could start with an intro and we could just go down the— Do you don't have a microphone? You do have a microphone. Down the row and introduce yourselves to the audience. So, Tara, will you take it away? Yes.

Hi, do I have to turn this on?

No, good. You are, good.

So, hi everyone, my name is Tara St. James. I am the senior director of sustainability for an outerwear brand called Moose Knuckles based in Montreal, Canada. In my past life, In a past life, so I run all of our sustainability strategy roadmap work, including social, environmental, and other. And in a past life, I've run supply chain and sourcing and production, but I'm coming at this conversation today specifically with a sustainability lens because oftentimes there's a lot of overlap between sustainability and supply chain issues, and oftentimes there's tension. So we'll see where this conversation goes within those two scopes.

Very good.

My, my name is Drew Whitman. I'm a VP of Supply Planning and Operations. Most recently I've been with PVH, but I come with multi-industry experience coming from Safilo, which is an Italian eyewear company, and also from a CPG group with Nestlé. My main focus is making sure operations run smoothly and making sure that the people have the right tool for the job. That is very difficult in such a this kind of environment. My main focus is making sure that the people, processes, and systems all come together for efficient operations. And of course, in supply chain, you get all the speed bumps that you have to manage through.

Hello, I'm Sonya Chapman, and I am an associate professor at the Fashion Institute of Technology in the Department of International Trade and Marketing in the Baker School of Business. And I also have a 40-year career in international transportation and customs compliance. I'm a licensed customs broker, so my focus in this panel will be on those types of supply chain disruptions.

Thank you. Hi everyone, my name is Jill Schwartz. Thank you, PI, for having me here, allowing me to share my unique experience. I am the VP for sourcing and product development at a children's wear company based in New York. We have total focus on kids on the field, at home, and in school. So I'm very happy to be here to share some of the sourcing excitement that I have learned and acquired over the last 3 decades at LT Apparel Group.

Thank you. So the title of this panel is Expecting the Unexpected: Navigating Unpredictability and Disruption in Fashion Supply Chains. So with that, I want to know from each of you, what is one of your biggest concerns as it relates to your supply chain today? We could just go— yeah, we could keep it going. We want to keep it conversational. Feel free to build off each other, jump in.

I mean, the biggest one for me is climate change. I think there's no surprise in that answer. And we're seeing it twofold, one with obvious disruptions with flooding in the facilities with regards to transportation, but also because our product is made for very cold Canadian winters, we're seeing less of a demand for that kind of technical product. So it's not only disrupting our supply chain, but also our commercial offering. Yeah, so there we are.

Yeah, I mean, for me, part of the problems is fashion-specific, and the fact that a lot of the big planning systems software are not really adapted to fashion, which of course is made to order, and you don't have a sales history in order to predict what you're going to buy or sell in the future. And that kind of gives a fundamental hindrance to planning, and without the planning, it's very hard to execute properly. So that kind of gap is where I think is very specific to the fashion industry, where it's just not a good solution that's there, and that really is a hindrance to managing any of the disruptions that we inevitably will get.

So I have two main concerns, and I have a question for the audience by a show of hands. How many of you remember the transportation debacle of '21 into '22? Okay, everyone has a 3-month horror story about their goods trying to get from China. So for me, the first concern that I have is that that will be forgotten. Because infrastructure does not develop overnight. We can't change it very quickly. Response to it, usually once you figure out an alternative, all of your competitors figure it out as well, and those become logjam points as well. So I think that it's important for us to continue on improving analyzing data to understand and hopefully some level of predictability when we can expect to see those items. The other issue that stands forward is how many of you are concerned about forced labor in your supply chains? Okay, big one, right? So one of the things that we're seeing is that legislation is actively driving sourcing changes through the supply chain, and that's also very difficult to respond to. So I have a concern about, you know, that forced labor issue moving beyond where it is now and further impacting our industry.

So LT Apparel really, I think, is quite unique in the industry in that we are importer, manufacturer, we are retailer as well, and we have e-platform. We also work directly with school. The brand that I look after is actually school uniform. So contrary to the concerns that many of you may have in terms of supply chain disruption, I actually feel quite comfortable with the mix of supply base that I have. It took a village to house the kids. We are outfitting the future. The challenge that I face is feeding the production line of my strategic vendor partners. My challenge is with the accuracy of planning and forecasting. I go out, plan out the production, part of— sorry for regressing, but French Toast Uniform, we set out to democratize the cost of uniform. So we work very hard to give the family price value. Therefore, we know, and those in industry know, that in order for the factory to make money is to make the same product day in, day out, consistently. That's how we bring the value to the family. So when I plan out a program, bring the best value, oftentimes I'm disappointed by the forecast that's given. So when planning things, the delta of 15% is a wonderful difference. Our factory partner expecting 100% accuracy. So how do I bridge the gap of 15%? Some of the raw material has been positioned, the line has been planned. What to do? That's my biggest challenge today.

Mm-hmm. Sonia, you brought up something that I want to dig a little bit deeper on. And I think it leads— and also, actually, Tara, you know, we are in a place right now where we have— actually, Jill as well— we have volatile consumer demand. And that might be for different reasons and different motivations. Maybe it's price-driven. Maybe it's because of— Consumer preferences are changing and adapting to need different types of garments due to a changing environment. Perhaps it's a greater awareness around some forced labor issues or things like that. So how do we sort of work backwards to take these, to make sure that our supply chain is as resilient as possible in the face of volatility, in the face of volatile consumer demand and an evolving world that we're in. Can you all talk me through sort of your approach and how you would— how you think about these things? You're on the spot.

On the spot. Okay. Well, from a transportation planning point of view, I think one of the things that most of your international traffic departments learned was that they had to do a very quick study on understanding all the transition points and, you know, different options for shipping and different ports for shipping. And what they found out fairly quickly is that once you move outside of the major, you know, arteries, you have a lot of difficulty. So I— one of the things that I experienced during that time was reaching out for more data, and I found a company that was called Sea Intelligence, which actually, I believe, with the marriage of AI, ultimately will provide a different level of information. But this was really to access those types of information services that can— that track 12,000 shipments in a month, uh, that look at, you know, what are the volumes leaving out of ports, so you could get a better idea of could you move things around. Uh, I think also the other thing that came out of it that was actually a positive thing was that because prices were so high, we were all working really hard to optimize our shipping. And so from a sustainability standpoint, I think we learned to pack and ship much better. And I think that that is something that will move on and stay with us because, you know, even better than that lovely term cost neutral that we all like to hear about sustainability, um, a cost savings is something that we can all leap on and, and jump into. Um, and so we found things that Things that we did before were more like optimizing packaging for shipping in containers. Things that we jumped into were things like when we had a program that was a fabric that didn't wrinkle very well, we vacuum-packed it. And, you know, we were shipping millions of units of an item that we literally vacuum-packed down and saved 1/3 of the space. Moved to save hundreds of container movements. And at the time that translated into millions. So I think that we have to keep thinking more in that mindset where we're struggling through this and to keep thinking of the worst case scenario so that we can keep improving on that.

It's a good point. It's where operational efficiencies, cost efficiencies actually, meet sustainability efficiencies. And those are, from my perspective, such a win-win situation. Jill, did you want to jump in?

Yes, and having really developed your China Plus One option, and I think that having your raw material on close proximity to where the garment production is taking place is going to help you in the long run. So during COVID As you know from what I shared with you earlier, I look after uniform, and 40% of the uniform purchase is polo. And because we have developed our vendor relationship in Egypt for 10 years and having nearly 95% of the raw material, that's BOM, that's required in Egypt, we were able to weather COVID without a hit. And I could share the same story in the other location. So you need to constantly develop it. Yes, it may be costly when you're starting out. Like, there was some twill fabric that we couldn't get from China because there simply isn't vessel coming in. They're moving more precious cargo than my fabric. So what do you do? We use local fabric. Now, we have them develop always, but we just never really use them because they were more expensive. And they're not necessarily equal quality, but you will get there. So having a China+1 initiative is very important.

Drew, did you— Tara, did you have something you wanted to— No, no, no, no. No? I was going to ask Drew, you know, you've been a part of such interesting projects from a— supply chain versatility perspective, building capacities in new evolving countries and markets. And can you talk a little bit about sort of how the project you worked with PVH on in Ethiopia, did that help to ensure some kind of supply chain resilience? Or was the hypothesis or hope, was that like you could bring that in from the beginning and sort of have a little bit more control and stability over an evolving— or amidst volatility.

Yeah, I mean, PVH had a strategy to enter Ethiopia. And there was a big effort to develop the— from partnering with the government and with the trade barriers, or most favored trade status. There's a lot of hope there. And it was ripe for the right project, with low availability of cotton, low electricity cost, high labor availability, and that trade status. It's part of the overall strategy, just like Jill had said about +1, is partnering with companies that have an international footprint that aren't just in one. And I think it is part of that strategy, and not every time the plus one works out, it's still very worthwhile for flexing that muscle of setting something up new, 'cause you always have to invest in the future for resilience. I think I'm repeating exactly all the features that you have just said, so that you can, you know, some of them will pan out very well and you could leverage. So, I mean, PVH left China in terms of cutting and sewing a long time ago, and trying to get the mills out of there, and, you know, and did not end up just going to Vietnam or India, but also Indonesia, and looking at Guatemala, and looking at Mexico, and trying to develop those. And it's a bumpy road, but you have to make the investment. And Ethiopia ultimately was very difficult because of the economic situation changed, the social situation changed. And, you know, it's still worthwhile because it's, I think it gives other opportunities. And even if PVH, let's say, pulls out, there's still a legacy of talent and infrastructure that can be leveraged. And maybe it might be different than the original thought, the original ambition, but it's still, I think, very worthwhile ultimately. They're good, fulfilling projects, but even if not every one of them works out to what was expected, you never know. It's like planning. You have a forecast, you're always going to be wrong. It's just how wrong. Hopefully just a little.

Yeah, yeah. Sonya, did you want to jump in with something?

What I did— what we're really talking about here is portfolio diversification, right? And we were talking before we we actually got on stage, and one of the things I'd like to ask here is how many of you came into your careers after 2005? So a lot of you don't remember quota, and while I would never advocate for returning to the days of quota, what it did do was force diversification. All of our companies used to work in many, many more locations. China only had 6% of the apparel market. When quota integrated, it boomed up to 40% of the apparel market. Now we're going back to a broader diversification. And so I think we have to think about, I don't think we want what quota produced, which was people going to places like Saipan and, you know, to produce goods. Because there was nowhere else to get them. But I do think that we have to think even beyond a +1. We have to think about a broader supply chain and having more options so that we're not pigeonholed into one source or option.

Go ahead, I just wanted to say that. Yeah, I agree. So I did start my career pre-quota, so I understand that, and it was a—

Can you tell us what, for those who came after 2005, what quota is? Can you?

Okay, so quota, for all intents, for the apparel industry was each country, once it reached a certain threshold of imports into the United States, the United States would start what they called a bilateral negotiation, and they would establish limits with that country on how much they could export to us and we could import from them. And they were absolute quotas, and once the quotas closed, you could not You cannot bring in any more. And then each year you would be allowed a little bit of growth, but we did have things where companies, all countries overissued their quotas because sometimes in that 15% slide of what was being produced, they wanted to get every quota dollar that they could, but some companies would not ship all the quota that they held, so they would overissue it, and then there would be overshipments the quota would close and you'd have to wait till the quota opened. And it was very disruptive and it was a very tough way to do business.

[Speaker:CHLOË] And I think from what I've seen personally, because I've held pretty much every single job in the fashion industry, I've been working in this industry for 25 years, except for logistics. So I work very closely with logistics now. But I think what that did and what we are seeing is a commodification of manufacturing, and so we're treating our partners, our manufacturers, not as partners but as competitors. And we push them, and we look for ways to essentially exploit the way that they work, rather than work with them as partnerships. And this is where— and feel free to disagree with me— but this is where I've seen a challenge, because it creates a tension and a distrust between the brands who are trying to work with them, and then the vendors themselves, and I think it works both ways. From what I can tell. And in order to do my job properly, we really need that collaboration and that open sharing of information with everyone in the value chain, not just that tier 1 partner, but all the way back to the farm, if we can have it. And so I'm not seeing that because of the way that the world has evolved in the last— not even since 2005, since well past 2005. Well, earlier than 2005, we're no longer looking for partnerships. And that while I agree that diversifying the value chain is important for risk management, it works against my personal criteria within the industry. And so that tension is where there's a place of discomfort that really needs to be alleviated.

Is there a happy medium though, where you can have a diverse supply chain but not have turnover, right? When I was working in fashion, I was shocked by the amount of turnover year to year, season to season. We don't constantly need to be finding new suppliers all the time, onboarding, and it just makes, from a sustainability and social human rights perspective, things so much more challenging versus what you're talking about, which is like, Andrew, what you're talking about, investing in the suppliers, really building that long-term relation, those long-term relationships. Providing stability not just to your supply chain, but to their businesses, also provides stability to your business too, right? And we're just not chasing the lowest labor cost, right, or the lowest cost generally. But yeah, I see you, Jill, wanting to jump in. Go ahead.

So this is where, again, I'm privileged to say that our experience is so unique in that we're a manufacturer. So when you're saying as a competitor, We come from an entirely different angle because we have our factory. We also help build factories. So as a company, we built our first factory in Bangladesh in 1984. We had the first investment in Vietnam, foreign investment manufacturing, 1989. So we have groomed and grow with factory for over 50 years. We help, we teach them manufacturing. They flourish and go on to work with brands, and we continue doing it. We also have vendor partner that stay with us since I joined the company. I've been with the company almost 30 years, so they're truly partners. We weather the storm together. So the topic for this get-together is how do you expect, how do you navigate the expected and the unexpected in sourcing. And I really think for me is the agility that you formulate together with your partners because that is how you— how hand— you know, so I was thinking, how do I explain this to you in terms of the partnership? Can you pick up a pen with one finger? Cannot. You need at least two, right? And a solid pick would be 3. And that's how I see my partnership. My supply chain is not tier 1, it's not tier 2. We are a unique company in that we have transparency throughout. We negotiate the bill material down to the denizen string, down to per grosser button. So every single one of the supplier that we work with is a partner. And that was true since I joined, it's still true today. And, you know, I could talk for hours.

I love that. I mean, that's a dream approach, right? Drew, were you about to say something?

Yeah, I mean, a good relationship is a surrogate for efficiency. It's a good relationship, you build trust, and then you don't have to verify so much. The relationship yields, you know, predictability, a mutual understanding of what you need, and that leads to better execution on time at the agreed-upon cost. The commoditization, which is what Taro is talking about, leads to low cost, and that's about it. And then usually it's low cost at the expense of efficiency. Somebody didn't, you know, price it. They were pricing it to try to get the contract, but then don't get the date. It's really the enemy of efficiency. So yeah.

And transparency. I mean, like, to build that trust relationship, I don't think— at least when I was in fashion, I never expected the suppliers to be perfect. Human rights issues will pop up, right? Or social compliance, environmental compliance. You want to have that long-term trusting relationship. So they can bring it to you proactively instead of you finding it out in a crisis moment. And I think, you know, building those long-term relationships is really critical to your point, right? Yeah.

But I think that happy medium that you asked about can only really exist in a slower fashion cycle. The cycle has become so fast that we're constantly chasing trends, and that in some cases requires new factories. So you are looking for new factories because the current sort of ecosystem of family of factories that you have maybe can't satisfy these new trends that you're chasing, you know, for the 52-week cycle that we have of deliveries, which we don't have. I'm not speaking on behalf of Moose at this point, but the reality is the industry has that.

I think that's a challenge for the fashion industry because of the fast turnover. What I think is from a supply chain point of view, we have to take things— it's almost opposite from the product development point of view— is focus on the core, the predictable. There is always— you're not turning— I don't know of any company that turns over the entire portfolio. There's always some basics that you have to keep that kind of keep the brand identity. And then you kind of play at the fringes. And all of the attention is usually at the fringes. But if we can build upon that core, recognize it as what's the core, you know, maybe minor changes and such, but you can build the relationships with that and then build the volatility on top of it. And that happy medium should be a combination of both. We can't have everything brand new every time, but we have to have stuff that's brand new. So find something in the middle in terms of both product, uh, relationships with vendors, and, uh, you know, and even cost. So it's almost like a middle ground for everything. But the communication has to kind of talk to both sides, and all the oxygen usually gets taken out of the, you know, the bright and shiny stuff.

How are we on time, Francesca? Do we need to move to Q&A? Okay, so we'll do— we were talking a little bit a little bit about in the pre— when we were just chatting outside, you know, switching to more like on-demand manufacturing. Can you talk a little bit about sort of like the innovations, the challenges, the innovations that meet maybe the consumer demand on one side, but might also be more challenging on the supply chain side as well, or maybe not. Yeah.

So I'm a huge fan of on-demand manufacturing. I've been keeping an eye on it for several years. And just like any new technology in a space, it's become— it's very slow to be adopted and developed. But I'll speak to one company that I visited a couple of months ago called Unspun in San Francisco. And they are— they have— they came out twofold. So the first— their first offering was a kind of body scanning device that would allow a customer customer to be scanned for the right size jeans, uh, so fit. And I think we've all discovered that nobody really likes to have their body scanned. Um, the industry has sort of come to that conclusion, myself included. The technology works well, and they've— they actually launched, um, a collaboration with Pangaia, so you can go check it out and still, you know, get the, the True Fit jeans from them. But their actual technology offering, which they've now built, is a Essentially, it's a circular loom for weaving in the round, similar to a circular knitting machine. It looks kind of similar if you've seen any of those, but it's weaving a whole garment, so a jean or a pant or anything that's tubular, essentially, in only under 10 minutes. So it can weave a whole jean in under 10 minutes, which is fascinating if you've ever seen you know, denim, a denim mill weaving fabric, that's very fast. And then there's some assembly required, but much less. So no cutting, no sewing, no requirement for fabric. All of this hypothetically in my brain as a manufacturer is fascinating. And there's the ability to kind of customize. And I'm not selling Unspun, by the way. I just am very fascinated by their technology. And I think that that is not going to be a, solution for all things, but that kind of thinking differently and being able to service a customer one at a time has its limitations, but also has its benefits from a demand perspective. So I'd like to see more of that. And we've had on, you know, we've had custom-fit knitwear and 3D knitwear for a really long time. And so there's limitations with regards to design. So you really need, again, going back to the word collaboration, you need your designers to be involved, your product developers, the fiber and yarn people to be really on board with this all the way through to sales and marketing. It can't be operated in a silo, because otherwise you just don't get the solution that you want. You get something sort of, you know, like a dissolved solution, or you get something that's not kind of excellent for anybody, because nobody's had their hands in it. So this, like, silo is really what I have seen to be the biggest burden in the industry.

That's great. Thank you. I think with that, let's turn it over to questions. We've got about 10 minutes left. Any burning questions?

I want to know what you guys think about on-demand and just-in-time.

Oh.

Well, I'll tell you right off, it's a logistics nightmare. Definitely, there is— There's no efficiency in it. You know, it's highly polluting unless it's at the level of, I think we're all, anyone who reads Sourcing Journal has heard about the de minimis provision, which is, that's the direct-to-consumer bypass, which is really wonderful if you're not a brand. And, you know, but also very risky for the consumer. And that kind of selling that happens at that level where we're talking that really, really low-cost mass market, that can be consolidated and shipped in an efficient way. The only thing is that there's a bypass of a lot of regulation on that that protects the consumer. For a company or a retailer to try and go to on-demand, I just don't see it as our efficiencies are from scale. So I see it as very, very difficult unless you have that big of a market that you're working on an on-demand basis in such a high volume that it's really workable that you could get to filling containers.

Sonia, what consumer regulations do you think are the biggest risks for on-demand in terms of you were saying, in bypassing consumer protections?

Okay, so particularly in children's, where it can be chemical lead content, especially in, you know, more of the fake leather type of goods that you would see. First of all, I think every regulation gets bypassed from, you know, mandatory labeling, which hurts nobody except you don't have the information that you want about your product. But what I'm really concerned about is flammability standards and harmful chemical content and lead content, things that would impact the consumer that way.

So we'd have duties and taxes as well, which won't get away for too long at scale.

Seems like we'd have to address the consumer protection issues more upstream at the yarn stage versus the final product stage. Really interesting to think about. Jill, did you have something to—

I was trying to think. I think the on-demand can only somewhat be executed if it stays within the confines of limited choice. You already have your fabric. You already have your trim so that all the regulation, all the test has already pre-done. They're literally— it's like a restaurant. The vegetables already been chopped up, and all the ingredients there. They already passed inspection. Inspection, and now you just need to assemble, waiting to be assembled. And obviously, you know, perishable, you need to make sure they're still good, yada yada yada.

It's a good metaphor. Yeah, yeah. Any questions on the Slido? No? We'll just keep chatting, I guess. Great. Is there anything else that you all wanted to— oh, we do have Thoughts on the growth of brands like SHEIN and Temu? I have thoughts, but what are your thoughts from a sustainability room? I have thoughts. Go ahead.

I have a lot of thoughts. Well, first of all, SHEIN and Temu— now there's SHEINu.

Right. It's great.

Really, to me, they're interchangeable. Interchangeable. So, um, first of all, they are most likely to be the largest violators. Uh, the price point— I think we all know that there has to be forced labor involved. You cannot get to that price point. And my feelings about companies like that is that we should have a regulatory requirement that they must post bonds or have some type of assets accessible within the US so that there is some protection for those who might make future claims against the companies.

Yeah. Tara, do you have any feelings? Sorry to put you on the spot.

I'm not speaking on behalf of Moose Knuckles anymore as a sustainability— so I read the other day that SHEIN puts out 2,000 to 5,000 new styles every day on their website. Website. That I can't even reconcile that number in my brain.

My brain can't either.

What that looks like. And granted, what I've heard is it's not a large quantity of each of those styles, but it still boggles my mind. So the number of regulations or accountability, it doesn't matter. I think that that is just irresponsible as far as putting out demand for a product that no one will have any kind of accountability towards. And I say no one, I mean like the end consumer who is going to look at it as disposable as like a paper towel. Yeah, that's terrifying. That's the damage. So I don't know that the regulations will have any kind of benefit there.

No, and I don't know how You would think that we've evolved from that mindset of just, you know, price above everything, but I guess it's very challenging. I saw this alarming graph where it was like H&M, Zara, like all these like fast fashion brands that we've been so historically critical of, especially in sustainability and social responsibility, responsibility. And then, like, their sales next to Shein, it's just eclipsed. I mean, it's, it's just eclipsed. Um, okay, what happens when brands push factories to set up in a region and then pull out? Who should be responsible for the costs associated? True, that's right, professor and me.

Yeah, well, you know, it's usually on those things, it's a collaboration, and it's an investment that has risk, and there are auxiliary costs which, you know, that comes with failure, and all participants need to be, I guess, held accountable. I mean, Promises need to be fulfilled. That's all there is to it. And so it's structuring the right promise to be fulfilled and then, you know, keep the promises.

Keep the promise. Given the— God, I need my reading glasses. Given the ongoing discussions about balancing low-cost efficiencies and compliance, can you share insights on how your organization approaches this challenge. So, how do you balance costs of compliance and low-cost efficiency, but also I'll throw sustainability in there as well, you know, as we think about sort of this evolving world that we're existing in. There's a lot of— as sourcing experts, There's just so many different things that you have to balance. So how do you do that?

I think what's at base is a level playing field where everybody, you know, I mean, regulations and government, I guess, protections should be equal for everybody, and that's what creates the level playing field so that nobody has an advantage. If you've got companies that go around that or find some loopholes, they get a competitive advantage, and that that does hurt the, the companies. And so unless you have, you know, an equal playing field, you're going to have unequal performance. So to me, that's what's, that's what's required.

Well, and that's what, um, I think that's really going back to the Shein question, like, really clearly just hit the nail on the head of what is so frustrating about that is, is exploiting loopholes that have been established to put a floor in place, you know, for the industry in terms of protections But okay, from a customs and duties perspective, what are your opinions of US-based— again, sorry, US-based companies leveraging 3PLs in countries like Mexico and Canada to bypass higher duty rates? Maybe, Sonja, you would be— you have some insights on this, I imagine.

Well, my opinion is, is is that if you're competing against Shein and Temu, then that's something that you have to do. And what our government has not done is we have, you know, trade zones that you can bring goods into, but it's the original entry that they look at. So you can't take advantage of that direct-to-consumer. It comes against the original, the initial entry that went in. And it actually damages US business in that way. So that really does have to be fixed to allow US companies to use US resources within, you know, the foreign trade zones that we have. And until that happens, the only option that companies and brands have to get that same duty advantage that is, freely offered to other companies is to use these 3PLs that are located outside the US.

Yeah, I mean, if the 3PLs are located outside the US and it just enables a cheaper way to do business, I don't personally see anything wrong with that. And maybe I'm missing sort of, I guess we're avoiding duties and taxes, which is A bummer.

Well, you know, there— there— as somebody who's worked on the customs side for this long, there— there is a whole scheme of the way that we have set up our tariff and our customs regulations that have given people like me a career trying to work around how to minimize those duty payments. And in all fairness, textiles and apparel represent 40% of of the collections that are taken by the US government, you know, in customs duties. So we have a reason to target, you know, action to reduce that cost for our companies.

Yeah, thank you. Should we do the last question? Yeah, okay, last question. Nearshore can be costly. Do brands— literally cannot see anything. Okay. Do brands like to accept the cost of charge and still thrive for nearshore, or the cost is the most important factor?

I would say that the value of nearshore is time. And so if, if the, the brand can achieve value from a shorter time frame, then it's worth the investment. If being, you know, one, you know, one or two months closer to the customer in terms of the demand, if you can monetize that, then it's great. If you can't, well, then you're more of a low and slow model and it's less of value.

I think we are at time, but hope you had a lovely time and see you next time or something.