Rethinking the Supply Chain of Mango For a More Sustainable Future YSJ

RETHINKING THE SUPPLY CHAIN OF MANGO FOR A MORE SUSTAINABLE FUTURE MANGO FASHION GROUP X BUSINESS CONSULTANT Milena Jakubonyte 210104439

And

CONTRIBUTOR Francesca Gibson

At

BMM5006M Sourcing, Supply Chain, Ethics and Distribution

23/24

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TABLE OF CONTENTS Executive Summary.................................................................................................. 3 Introduction .............................................................................................................. 4 Rationale ................................................................................................................... 6 2.1 Core Customer ...................................................................................................................... 6 2.2 Current Supply Chain Model ............................................................................................... 8 2.3 Current Supply Chain Management ................................................................................... 9 Sourcing and Manufacturing.................................................................................................. 9 Distribution ........................................................................................................................... 11 Ethics ..................................................................................................................................... 13 2.4 Case Study: Zara................................................................................................................. 15 2.5 Customer centricity ............................................................................................................ 17

Recommendations ................................................................................................... 20 3.1 Facilities .............................................................................................................................. 20 3.2 Product Volumes and Upcycling ........................................................................................ 21 3.3 Circularity ........................................................................................................................... 23 3.4 What Could the Future Hold..?.......................................................................................... 24

Appendices .............................................................................................................. 25 Bibliography ............................................................................................................ 26

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EXECUTIVE SUMMARY

Sustainability in the industry of fast fashion has been a topic of discussion for many decades. As there are more and more visible consequences of neglected corporate social and environmental responsibility, consumers are emerging with new standards and expectations from retailers. Supply chain management can be extremely difficult and hard to trace, especially with global retailers, such as Mango. And with the demand for transparency continuously increasing, retailers find themselves dedicating significant amounts of finances towards delivering a responsible supply chain. Social issues such as modern slavery, child labour, unfair wages, and environmental issues such as carbon and greenhouse gas emissions – all are expected to be communicated in an honest manner. This report will overview Mango’s current supply chain management strategies and explore Mango’s transparency in regards to its supply chain. It will then rationalise changes in the company’s supply chain management and model using Zara’s supply chain as a case study and suggest recommendations.

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INTRODUCTION The purpose of this report is to rethink the supply chain of Mango in regards to its ethics for the planet, people and product. A supply chain is defined as process of production and distribution of a product, from the manufacturer to the consumer (Mentzer et al., 2001). It encompasses 4 tiers, which are: raw material mining/harvesting (tier 4), processing of such materials into yarn (tier 3), fabric production (tier 2), and final garment production/assembly (tier 1).

Management of supply chains is a crucial part of any business – efficient and well strategised supply chain management saves costs and time, resulting in an efficient business and satisfied customers. This also includes management of logistics, distribution and inventory (Londrigan and Jenkins, 2018).

‘The fashion industry [...] contributes to around 10% of global greenhouse gas emissions due to its long supply chains and energy intensive production’ -United Nations, 2018.

Water and energy consumption needed for growing crops, harvesting, transportation and processing. As well as greenhouse gas emissions that are produced by the global industry that doesn’t rest. Supply chains and their management in the fashion industry are known to be damaging to the environment, and sometimes exploitative due to substantial manhours needed to fulfil great volumes of product in a short period of time. This knowledge is seen as controversial in the modern-day society, where there is demand for societal wellbeing, environmental damage reversal and economic equality (Mander, 2014). This means that consumers are shifting away from unethical businesses, as corporate social and environmental Page | 4

responsibility becomes more and more of a social norm. This is forcing many fashion brands to rethink their supply chains and come up with ways to improve it, in order to become a lasting and successful brand in the industry.

This report will review Mango’s current supply chain, rationalise a shift in the supply chain management of Mango, and make recommendations for the business in the future.

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RATIONALE 2.1 Core Customer Mango’s primary customer has been identified as a 20–35-year-old female with an interest in fashion trends (Tovar, 2022) (see appendix 1). Similarly, consumers of that age, who shop in fashion retail, are found to have strong values surrounding ethics in business practices. See Figures 1 & 2 – majority of consumers in the UK alone are willing to switch retailers, and stick to more transparent and ethical ones.

Figure 1

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This shows that Mango’s consumer is very likely to fit the profile of a strongvalued young adults, with interest in fashion and knowledgeable about fashion industry impact on the environment. This is hugely helpful to Mango, as it informs business

Figure 2

strategy and immediately offers business failure prevention incentives. For example, if Mango were to ignore sustainable development of the business and continue to manufacture using exploitative tactics, Mango’s customer would likely shift away from the brand onto a brand of similar personality (e.g Zara, H&M), who would offer similar product and price, with an addition of corporate social responsibility. Therefore, due to the competitive market, and readily available data on Mango’s core customer, and current consumer behaviour trends (Fig. 1 & 2), the business shall (if not already) invest into a more sustainable supply chain management strategy.

Examples of elements consumers might seek for in an environmentally and socially responsible brand:

 Recyclable Packaging  Equal Pay – No Pay Gap  Diversity-ran company  Charity Support

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2.2 Current Supply Chain Model

Figure 3

Although Mango has not publicly explained their supply chain model and strategies, the nature of any fast-fashion brand is to buy, produce and sell.

The inconsideration for post-purchase use and disposal of a product, suggests that Mango has adapted a common supply chain model which is linear. This report will base Mango’s current supply chain model on Hines’ linear supply chain model (2013) (Fig. 3) (see appendix 2). Hines (2013) describes this supply chain model can result in ‘silos mentality’ if each organisational section (purchasing; production; marketing etc) are working separately, rather than as a team. This can result in miscommunication, inequal efforts, and cost inefficiency. This can also contribute to improper disposals of their product, as the model does not include consideration for the product lifecycle – this is up to the retailer and their self-implemented practices.

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2.3 Current Supply Chain Management SOURCING AND MANUFACTURING Mango has upkept its promise to publish the list of its Tier 1, 2 and 3 suppliers (Mango Fashion Group, 2023). The list shows factories being mainly based in China, Turkey, Bangladesh and South Korea. Some of the South Asian countries are known to have inexpensive labour, meaning there is high chances of exploitation, due to weak laws and social norms (Walkfree, 2024).

For example, the tragedy at Rana Plaza building collapse in Bangladesh was to blame on a governmental body in Bangladesh, due to an unauthorised expansion and building on an unstable terrain (CleanClothes.org, 2023).

Mango has been linked to contributing to the tragedy, however there was never any response or compensation to the victims by the business, resulting in consumer protests demanding to ‘pay up’. This shows that local authorities, social norms and local economy can result in exploitation and/or incidents at Page | 9

the factories, which can also be out of control of the retailer. This knowledge can be used as awareness of unacceptable factory practices and how the retailer's choice to continue to do business with exploitative suppliers affects the business image and reputation. Furthermore, Mango has listed 2400 suppliers, and there have been no known disasters of this kind since.

When it comes to energy consumption, Mango is clear on its objectives. For example, the company aims to:

• Reduce carbon emissions by 100% by 2050 • Reduce water consumption by 25% by 2030 • Incorporate regenerative cotton in selected garments in 2024 collection (Mango Fashion Group, 2024).

While having objectives as a company is said to improve employee motivation and brand image (Wheeler et al., 2006), it may be difficult for consumers to comprehend the scale of change needed. For example, if Mango’s water consumption is reduced by 25%, but millions cubic meters are still required to produce a clothing line, Mango’s environmental impact is reduced only slightly. So generally, Mango’s sustainable practices are not necessarily impactful on the fashion industry, but they are evident efforts to win the modern consumer who is concerned for the environment. For Mango to be impactful on the fashion industry, other retailers must follow and contribute same amounts of effort, for it to count towards the wellbeing of the planet. This is hoped to be done thorough consumers making conscious choices to shop at retailers such as Mango, in order for other retailers to shift their practices.

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DISTRIBUTION Mango has published a short introduction into their headquarters and logistics centre (both located in Spain). Logistics centre being a ‘few kilometres away’ from the port and airport of Barcelona (indicating that sea, land and air methods of transportation are being used) (Mango Fashion Group, 2024). Its list of Tier 1, 2 and 3 suppliers revealed that approximately 50% of factories to be in proximity and 50% to be distant (to/from logistics centre). This suggests that significant amounts of time and cost are spent on transporting materials between the factories and to the logistics centre.

Whether the methods of transport use renewable energy, such as electricity fuelled vehicles, is unknown.

Additionally, manufactured goods are packaged in eco-friendly materials. Their online orders are shipped in cardboard boxes, wrapped in paper, and in-store carrier bags are also made from recycled paper. This aligns with the values of their customer – as they receive online orders, the physical touch of the cardboard packaging can contribute to the image of a sustainable and environmentally responsible brand.

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ETHICS Mango displays strong values of intolerance towards modern slavery, forced labour and excessive damage to the environment. This is done via Compliance Documents, which include Animal Welfare Policy, Code of ethics, Code of Conduct, Complaints Channel, leather policy and many more (Mango Fashion Group, 2024).

These documents are easily accessible by the public on Mango’s website and show efforts to commit to corporate social and environmental responsibility. While the transparency of their supply chain is evident, there has been no conversation around how Mango ensures their factory workers are not in forced/abusive labour.

While they have implemented Code of Conduct with their suppliers, that means no guarantee to the eyes of the consumer. For example, Mango’s annual Modern Slavery Statement (2023) states internal and external unannounced audits take place regularly at the manufacturers, however no scores or auditor notes are visible to the consumer. Since documents relating corporate responsibility are available to the consumer, only those with active interest in the matter would put effort into accessing them. And with no concrete evidence of ethical practices being fulfilled, it can make the consumer question the credibility of the statements. As Mango has a list of its Tier 1, 2 and 3 suppliers, some with useful description and area of expertise of Page | 13

the manufacturer, perhaps it is appropriate to include pictures of the factories and their facilities. To support statements of responsibility and ethical behaviour, consumers should visibly see and assess the workers’ condition of health, conditions of the workplace and available facilities (e.g restrooms and medical). Afterall, the manufacturers also have a brand image, even as a B2B organisation.

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2.4 Case Study: Zara

Figure 4

Zara’s supply chain management has been named as innovative and ultrafast (Figure 4). Firstly, it is important to note Zara’s business model is based on trend-following, meaning their products are designed based on current trends (the business avoids risks involved with being the ‘trend-setter’). About half of Zara’s products are produced in-house and other half are from affiliated suppliers in proximity (Xuejie et al., 2019). This means that European stores can receive new stock in minimal time and is able to supply the demand for the current trends efficiently. Additionally, Zara aims to turnaround stock every two weeks, compared to an average of 2-3 months of its competitors (Mhugos, 2020), this means that volumes of each design are significantly lower and with quick shop turnarounds, customers are more inclined to visit shops and purchase Zara branded garments more often, since there is limited availability. Zara’s highly automated distribution centre, which is connected to Zara-owned factories via underground links, is able to control inventory levels easily, avoiding excess costs on production and inventory holding. Orders are placed and manufacturing takes places whenever and as long as it is needed. This makes Zara’s supply chain ultrafast, low transport costs and low design costs.

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However, Xuejie et al. (2019), who’s researched Zara’s supply chain model, states the retailer is product-centric and allows product quality to be reduced. While the ‘limited availability’ element and the trendy design is appealing to the customer, over time Zara’s products can be seen as shortlasting and cheap with unreliable quality (although this can be overturned by marketing campaigns). Nevertheless, as Zara’s products are mainly produced in Europe (where there are strong laws against modern slavery, fair pay, etc.), this sets Zara apart from other fast fashion retailers that turn to extremely cheap labour in South and East Asia. This means that the chances of social and environmental issues involved with supply chains, such as modern slavery, are lowered significantly.

Figure 5

As a contrast, a linear supply chain model based on Hines (2013) theory can be seen as more customer centric. This model implies that design and production stage start after there has been signals of demand of a particular product. Zara’s example relies on already existing products and ‘copy and paste’ approach. While Hines’ (2013) theory is more customer centric, that means there are risks involved in the production and delivery process. Risks Page | 16

can include wrongly read signals resulting in unwanted/unpopular product, long waiting times for the product to reach the shelves, an unexpected trend emerging that can overshadow the product in production. In case of experiencing such risks, there would be higher inventory levels, having to markdown the product which lowers profit margins, and the brand could be seen as ‘last season’, ‘slow to catch-up' etc. However, while Zara’s supply chain model is highly efficient and keeps the customer interested long-term, it is financially unfeasible for most existing retailers. To implement such practice, retailers risk on losing customers, profits, and current supplier relationships, as supply chain disruptions would be unavoidable.

2.5 Customer centricity Customer centric supply chain means being focused on customer demands in every step of the supply chain process (Mahoney and Dauer, 2021). For example, customers today are seeking for transparent and honest brands, even those that are low on the sustainability scale (trend of Flawsome marketing and communication) - 66% of Millennials and 79% of Gen Z say they believe retailers aren’t honest enough about their impact on the environment (Webb, 2021).

‘FLAWSOME – The awesomeness of being honest, including about one’s flaws.’

- Mason et al., 2015, p. 92.

European eyewear brand Ace & Tate published a blog post addressing its failures in ensuring a sustainable and responsible supply chain. The brand admitted to disregarding social impact and having no code of conduct in place to protect supply chain workers (Webb, 2021). The result: increased customer trust and low-pressure environment for the retailer. However, while it Page | 17

could be a psychological marketing tactic, to gain publicity and sympathy of consumers, it still shows efforts for positive change, whether it’s in the interest of the environment or increased sales.

This shows customers seek brands that have implemented sustainability in their supply chains, and even those who have not, but are openly working on it. At the same time, there is demand for fast delivery of trendy product, while ensuring there is consideration for the people and planet. So in order to create a customer centric supply chain, a retailer is advised to invest in responsibly sourced materials, appropriate working conditions for supply chain workers, minimal environmental impact of transportation, and minimise distribution distances to ensure timely delivery of products.

‘you should aim to build a culture of customercentered innovation, not customer-led innovation’ - Mason et al., 2015, p. 61 ’As everyone from Henry Ford to Steve Jobs knew, turning to customers for insights about their future desires is limiting at best, and can be downright misleading’ - Mason et al., 2015, p. 61.

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According to Mason et al. (2015), it is easy for businesses to get side-tracked if they are consumer demand-led. As consumers are everchanging and new trends emerge often, brand is at risk of losing brand identity and own values if they supply every demand. Mason et al. (2015) states watching businesses first, and consumers second, is a secret alternative practice to a customer centered innovation. This could apply to improving Mango’s supply chain management, hence the case study of Zara.

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RECOMMENDATIONS Based on section 2.0 Rationale, Mango is suggested the following alternatives to its current practices for a more sustainable future: •

Relocate suppliers.

•

End-of-use product management.

•

Lower volumes = speedier supply chain.

3.1 Facilities Drawback Dickson et al. (2009) states that one on the corporate strategies for environmental responsibility is investment in facilities and operations. This includes renewable energy ran facilities, as well as methods of logistics to/from those facilities. Mango operates 2500+ stores across 5 continents (Figure 5) and has approximately 2400 suppliers (~50% of which are distant), this slows down the supply chain process and distribution times. For example, if a garment is Page | 20

produced in a Tier 1 factory in Bangladesh, and is intended to be sold in a store in Northern America, the garment has to travel to the distribution centre in Barcelona, to then be shipped to Northern America. A batch of products have to travel long distances increasing cost of logistics and possibly carbon emissions produced.

Remedy Brian Barry from F. Curtins Barry & Company, a B2B supply chain consultant company, suggests the idea of multiple distribution centers (Barry, ND.) What this means for Mango is that distribution center in Southern Asia, alongside the current one in Barcelona (based on Figure 5) would allow swift logistics when reaching stores in Africa and Asia. For example, garments produced in Bangladesh and could be sent to a DC in India and shipped to stores in UAE, saving time, therefore saving cost. This is also an opportunity to implement more of 0% carbon emissions methods of transport (e.g. electric vehicles).

Brian Barry emphasises the risks of committing to additional distribution centre – operation and inventory analysis is crucial in order for it to be cost-effective.

See Figure 6 for a proposed logistics map. As Mango operates globally, stock intended for Asian and African markets can be distributed more effectively from supplier to store. In addition, Cassidy (2022) identifies supply chain localisation as a 2023 supply chain trend. According to the source, the ‘global supply chain is too long’ and dependency on it involves too many risks that would result in huge losses. Being in control of localised places with shorter times of distribution lowers the chances of the chain breaking down.

3.2 Product Volumes and Upcycling Drawback Currently Mango offers thousands of products in each category of womenswear, the scroll through the website can be endless. In addition, Page | 21

Mango’s online outlet website also holds vast amounts of product. While having variety has its benefits on an e-commerce platform, this number of products can also be seen as excessive and feed into the ‘ultra-fast fashion' brand image.

Remedy Dickson et al. (2009) suggest upcycling existing products into new ones. This means Mango’s excess inventory (for example, Mango Outlet goods) could be redesigned into new products with up to date trendy styles. This would require the design team to revisit products of the past that have not been sold, ship the product to manufacturers in proximity and have them redesigned, and marketed as ‘upcycled’ and ‘sustainable’. This could result in additional sales, without having to place new orders on new products and having to go through supply chain Tiers 4-1.

As Mango evidently has excess stock that is being sold at a significant markdown, perhaps it could be suggested that future clothing collections have a reduced number of products. This would potentially lower the cost of each collection, lower chances of unsold stock, produce less waste, meaning lowered impact on the environment (Thorbeck, 2022). This could ultimately lead to a speedier supply chain and potentially allowing to reduce number of suppliers.

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3.3 Circularity Drawback As well as repurposing old marked-down stock as a brand-new sustainable collection, promoting end-of-life product management contributes to a more circular supply chain model. According to Harvard Business Review (2021) circular supply chains are more sustainable due to increased waste management. As mentioned in section 2.2, a linear supply chain model relies on the consumer and/or self-implemented practices to manage the lifecycle of a product. This means that product lifecycle is an optional element to consider for retailers, whereas a circular supply chain model integrates the concept, which makes it unavoidable and more sustainable. In case of Mango, the company has partnered up with I:CO, a textile and clothing waste management company. Now Mango offers clothing recycling points in selected locations, where clothing is either donated or upcycled in exchange for Mango loyalty points (Bell, 2022). However, while this contributes to the circular supply chain, there is not enough awareness. As Mango, continuously promotes over-consumption with thousands of products available at any given time, the website does not promote the options for recycling or donating old clothing.

Remedy Implement recycling points at every store, company and franchise-owned. It could encourage loyal customers of Mango to bring in old clothing to donate in exchange for loyalty points. At the same time encouraging new customers to sign up for the loyalty program, to receive loyalty points for donations, rather than donating them elsewhere for free. This increases Mango awareness within consumers, and improves brand image as a brand that cares for upcycling and circular product lifecycle. Together with reduced amounts of produced stock, Mango would lessen their impact on

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the environment by lowering energy needed to produce their product, shorter distribution distances and repurposing donating clothing.

3.4 What Could the Future Hold..?

Considering the financial commitments needed to alternate a global supply chain, there are various areas of improvement towards a sustainable future.

For example, switching to sustainable raw materials (locally grown?), investing into own factories based near locations of trade, using renewable energy for all of the supply chain operations and many more.

To conclude, Mango’s transparency on its supply chain is evident, but could be improved. As mentioned in section 2.3.1, Mango is clear on its ideal and corporate gaols, but does not publicise its current and present energy uses, carbon footprint, whether the materials are sustainable or not. Based on this, Mango can be perceived as ‘transparent just enough’, as the company does not speak of the ‘ugly’ side of its supply chain process. Mango displays sustainable initiatives, vast variety of trendy product, to appeal to the modern consumer, without betting on 100% transparency, in order to survive in the highly competitive and ever-changing industry of ultra-fast fashion.

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APPENDICES

1.

2.

2.

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BIBLIOGRAPHY Barry, B. (ND) The Dangers of Choosing to Go Multi DC and How to Mitigate the Risks. Available at: https://www.fcbco.com/blog/the-dangers-of-multi-dc-and-howto-mitigate-therisks#:~:text=Companies%20consider%20opening%20a%20second,DCs%20must %20also%20be%20considered. (Accessed: 28 January 2024).

Bell, V. (2022) ‘Mango partners with circular services provider’, Drapers, 26 April. Available at: https://www.drapersonline.com/news/mango-partners-withcircular-service-provider-ico (Accessed: 28 January 2024).

Cassidy, F. (2022) ‘2023 Trends – rethinking the supply chain’s weakest links’, Raconteur, 14 December 2022. Available at: https://www.raconteur.net/supplychain/2023-trends-supply-chain-risks (Accessed: 28 January 2024).

CleanClothes.org (2013) Rana Plaza. Available at: https://cleanclothes.org/campaigns/past/rana-plaza (Accessed: 23 January 2024).

Dickson, M. A., Loker, S. and Eckman, M. (2009) Social Responsibility in the Global Apparel Industry. 1st Edition. London: Fairchild Publications.

Hines, T. (2013) Supply Chain Strategies: Demand Driven and Customer Focused. 2nd Edition. London and New York: Routledge. https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainableconsumer.html Mahoney, K. and Dauer, R. (2021) Consumer connectivity: Creating customer-centric supply chains. Available at: https://www2.deloitte.com/us/en/pages/operations/articles/customer-centric-supplychain-data.html (Accessed: 28 January 2024).

Mander, J. ed., (2014) The case against the global economy: and for a turn towards localization. Routledge: Earthscan.

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Mango Fashion Group (2023) Modern slavery statement 2023. Available at: https://www.mangofashiongroup.com/documents/20122/95072/Modern+Slavery+Stateme nt+2023.pdf/a0800e4d-28f0-5ab6-3250-1f96b47c1c16?t=1688111400276 (Accessed: 25 January 2024).

Mango Fashion Group (2024) Committed to Planet. Available at: https://www.mangofashiongroup.com/en/commitment-to-the-planet (Accessed: 25 January 2024).

Mango Fashion Group (2024) Our Facilities. Available at: https://www.mangofashiongroup.com/en/ourfacilities#:~:text=The%20heart%20of%20Mango's%20logistics,kilometres%20fro m%20the%20group's%20headquarters (Accessed: 23 January 2024).

Mason, H., Mattin, D., Luthy, M. and Dumitrescu, D. (2015) Trend Driven Innovation.

Hoboken, New Jersey: John Wiley & Sons, Inc. Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D. and Zacharia, Z. G. (2001) ‘Defining supply chain management’, Journal of Business logistics, 22 (2), pp. 1-25. Doi: 10.1002/j.2158-1592.2001.tb00001.x Mhugos (2020) ‘Zara Clothing Company Supply Chain’, SCM Globe, 4 January. Available at: https://www.scmglobe.com/zara-clothing-company-supply-chain/ (Accessed: 27 January 2024).

Thorbeck, J. (2022) ‘How to Fix Fashion’s Supply Chain? Begin With Culture’, Business of Fashion, 18 March. Available at: https://www.businessoffashion.com/opinions/retail/how-to-fix-fashions-supplychain-begin-with-culture/ (Accessed: 28 January 2024).

Tovar, D. (2022) What is Mango’s Marketing Strategy?. Available at: https://www.blucactus.uk/what-is-mangos-marketing-strategy/ (Accessed: 23 January 2024).

United Nations (2018) ‘UN Helps Fashion Industry Shift to Low Carbon’, United Nations, 6 September. Available at: https://unfccc.int/news/un-helps-fashion-industry-shift-to-lowcarbon (Accessed: 27 January 2024).

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Webb, B. (2021) ‘Brutal honesty: the new look sustainable marketing’, Vogue Business, 23 September. Available at: https://www.voguebusiness.com/sustainability/brutal-honesty-the-new-looksustainable-marketing-ace-and-tate (Accessed: 28 January 2024).

Wheeler, A. R., Richey, R. G., Tokkman, M. and Sablynski, C. J. (2006) ‘Retaining employees for service competency: The role of corporate brand identity’, Journal of Brand Management, 14, pp. 96-113. Doi: 10.1057/palgrave.bm.2550062.

Xuejie, C., Qiao, C. and GuangHao, Z. (2019) ‘Research on Innovation supply chain Management in Fast Fashion Industry – A Comparative analysis of ZARA and H&M’, Advances in Social Science, Education and Humanities Research, 344, pp. 7-16. Doi: 10.2991/icecsd-19.2019.2.

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