When it comes to ensuring fair wages and safe conditions in garment factories, there is an element that doesn’t get talked about nearly enough.
And that is the power imbalance between big fashion brands and the suppliers they source from that puts nearly all of the financial risk onto the manufacturers.
And if we want to really address things like exploited labor, excessive overtime, inhumane wages, poor safety conditions, this is something that we absolutely cannot leave out of the conversation.
So, we’re talking about it.
In this episode, we’re going to get a glimpse into the world of a manufacturer that works with small, mission driven fashion brands.
I will be talking with Arjen Laan, the CEO of Pactics, a sustainability-minded manufacturing company focused on building longer-term partnerships with conscious brands instead of short-terms sales.
And Arjen is sharing his perspectives, from a supplier side of things, on audits, certifications, and even compliance legislation.
He’s also talking about the power imbalances between brands and suppliers (particularly, big brands), as well as the imbalance of financial risk and how that leads to a lot of the poor conditions we see at factories today, and the differences between working with smaller brands versus larger companies.
There’s a lot of great insights in this episode that gave me some really important food for thought when it comes to how we can really build a better future for fashion.
Tune in to this episode of the Conscious Style Podcast below, or on your favorite podcast app
Read the Transcript From This Interview:
What makes Pactics different is always a bit difficult to say that about the company you work for of course.
But I think there’s a few things that sets us a little bit apart and it is that we are a relatively small company. So we have 5-600 employees, while, most manufacturers have 1000s, or more 2000, 3000. So we have a little bit of more of a human scale in that sense.
We also don’t have a headquarters, the headquarters is actually in the factory, you could say. So that means that all the services we provide are on one location. What you see often is that manufacturers have multiple factories and then head over somewhere in Singapore or Hong Kong or whatever.
And that there is a kind of a distinct between the operations and where the dishes are made. And as we are in the factory as well, we can very quickly act and assess the situation and, and make sure that we do the right thing for our customer.
And we try to set an environment that is really nice for people to work in. So it’s very clean, it’s open. There is natural lights, there’s natural ventilation. We have a daycare, we have literacy classes, we provide a good meal for our workers. So we try to make the total work circumstances as good as possible.
Yeah. And reading about Pactics on your website, something that I found really interesting was that Pactics formerly worked with some of the biggest luxury brands in the world. But today, you’re actually more focused on working with smaller, mission-driven brands.
So can you speak about why Pactics decided to make this shift and what the difference is that you’ve found working with bigger brands versus smaller brands?
Yeah, we started… So basically, Pactics originally need was depending basically on one company that has lots of licenses from big brands. And that creates an enormous dependency. And with the big brands, it’s a little bit top down, let’s say they tell you exactly what you have to do for what price is.
There is very little space for a conversation to get things. Let’s say, spread the risk, let’s put it that way. So it’s all it’s the pyramid, it’s top down in that sense. So we focused on smaller brands, because it makes the power difference much smaller.
Within a big corporation, I will talk with the purchase officer. Well, if you work with smaller brands, most of the time you also deal with the owner or the CEO. So you can make much easier decisions on all kinds of things that really matter. And that includes prices, costing for transportation changes, that has to be made things that go wrong that needs a solution.
And within the big brands, that compensation is only one way. So everything that happens is basically always the manufacturer’s responsibility. And we have to absorb those costs.
And the smaller brands, certainly those that really share the same values. And I always say it’s not only the shareholders value, but it’s also the values about how you want to run the company, how you take care of your employees, how do you want to manage the stocks, how you want to decrease waste? All those — how do you want to look for better solutions to pack your products or whatever that is?
These are all important values for us to look at. And with smaller brands, they’re much more open for these kinds of things, and see if there is a solution for a problem we have. So we have seen this specifically, of course, during the Covid period where the smaller clients were actually much more flexible in trying to find a solution than the bigger brands.
Yeah, for sure, for sure. And let’s talk more about what happened with COVID with the order cancellations and delayed payments and all that. Because the pandemic really just exposed the cracks that were already there in the system and the power imbalances between big fashion brands and factories that has long been there.
So could you speak more about what happened at the start of the pandemic with the delayed payments, order cancellations, and sort of how the payment terms were before then that led to or partially led to the situation that we saw during covid?
Again, there, you have a big difference in the bigger brands and the smaller brands. For the bigger brands, there are payment terms up to 120 or 150 days, end of month, you can get your money earlier, but then you have to organize factoring. So basically, you have to pay money to get your money.
At the end of the month, if you sent the invoice, then there is a basically a financial institution in between which already pays the bill and then later to be paid by the brand.
So that is the kind of a standard it’s everything is based on forecasts and then actually orders.
So as we are in Cambodia, the lead time for products are a little bit longer, because all the materials we have to acquire are coming from China. So there is a bit of a delay compared to those manufacturers in China, because they can get it next door. And we still have to ship it so and then bring it to Siem Reap, make it and bring it and transport it back. So that will add one-two weeks at least on time. So forecasting, in that sense is extremely important to have enough materials in house. So you buy materials based on that forecast.
For three, four months out, at least, make sure you have enough stock in the warehouse, that there’s enough stock audit that suppliers, suppliers are ready for shipments. And that all has to be financed, of course, so when suddenly the situation changes, you have a lot of stock sitting there. And from one day to another, basically, the orders dropped by 60% You still have all your workers, because that’s also based on the older forecast. And we don’t have a lot of flexible workers, older people we have or most of them are in just they have a fixed contracts.
So your cost remains the same actually. But certainly, there is a giant drop in what is actually taken out of the warehouse in different parts of the of the world as we produce it in Cambodia, and then we bring it to either China, Europe or the states where the customer can take it up.
So there was a big change suddenly and let’s say the communication for the bigger brands was very little about what was going on. Because all the shops were closed and there was no sales anymore in the US and Europe.
Basically, it all stopped a little bit for the first couple of months and then it slowly recovered. But basically, we had to deal with yet at that big difference in forecast and in what was actually happening. So, basically, we have to absorb the cost, everything what was there the two three months, you have to see if you can, you can go through.
It was very different with the smaller brands where we immediately also had contact with of course see what was happening and we tried to figure out different possibilities to make the situation as good as possible. And that worked much better. So there was much better and intense communication in that whole period. And understanding also what it meant to have basically a company being out of work from one day to another, so that was the big difference.
Yeah. So, you’re quoted in a Vogue Business article talking about how that there is this, like consumer perception that poor labor and environmental practices are the result of irresponsible or unethical suppliers, rather than the price pressure and other actions taken by brands.
So why do you think that there is this misconception and people have this idea that it’s suppliers or factories that are the ones to blame for social or environmental issues?
Well a couple of reasons, I mean if you read the newspaper or listen to today’s news, it’s also about factories that do the bad things, bad working conditions, unsafe, et cetera, et cetera. And the brands always say, we didn’t know. And we do audits, and we’re okay. So it’s also, it’s always like, taking no responsibility whatsoever.
And I think very little people realize actually, what is going on on a bigger scale, and that is that the financial risk is completely with the supplier, so and I talk again with bigger brands. Smaller brands is a different situation. With the bigger brands, the financial risk is completely with the supplier, or at least they try to push it as much as possible down.
I can tell you that the last five years, we didn’t have an increase on our prices for we would have been a bit of a big brand. So as of 2017, is exactly the same price. We produce then and now. Because they said we’re still too expensive, basically that is the main message. While I know they make reasonable profits, or very good profits, but that is the bottom line.
So the perception is that the suppliers are the bad guys. And the brands are the good guys. They have a very good marketing machine of course. The brand is basically a marketing concept. And they can spend a lot of money on communication and how well they do.
But the real problem is that there is inequality on the financial risk. If you pay 150 days, end of month, then basically as a supplier, you have to find solutions to get the cash flow going because we have to pay every two weeks, if you suddenly can cancel orders without any reason or any extra payment. The supplier is stuck with all those materials and the people he has on the bailiff.
So this whole system is much bigger than just the bad guy and the good guys who wants to do good. It is really about how the system is working. And who is taking responsibility for what and it is, I think unfair for brands always to pinpoint, and put everything on the suppliers, including all the audits and all the things that come with it. Well, there is very little reflection on why it is.
And let’s be clear, there are good suppliers and there are bad suppliers and for sure there are suppliers who try to squeeze people and have very bad working conditions.
That is what is happening everywhere. That is not only in manufacturing, but I think there’s also a lot of companies that try to do really good, but they have to be very creative. And sometimes they cannot do the maintenance because the cash is not there.
Cash flow is the biggest challenge. And if there’s no continuity on the financial flow and suddenly, things happen, uncertainties that had to be managed, of course money most of the time, and there’s no compensation for it, then you get into a very difficult situation.
So it is all about do we all take a bit of the risk, and how do we distribute that risk over the total supply chain from the beginning till the end.
Yeah, yeah, absolutely. And when you talked about payment terms, it reminded me of a previous interview that I did with Amanda of Clotheshorse podcast, who was a buyer in the fast fashion industry. And she talked about these really crazy long payment terms.
And it just doesn’t even make any sense. Like, what 150 days, I think you said, I mean, that’s, that’s almost half a year, that’s almost six months, I mean, that’s just, that’s a crazy amount of time to wait to get paid for something that you already paid the costs for. You already paid for the materials and the labor and you’re waiting almost 6 months to get any payment from the brands.
Yeah, we sometimes say we feel a little bit like a bank. That goes basically we have the bank for the brands, because we… it’s not only waiting for your money, six months after you deliver something, but again, we have to buy the materials three, four months in advance. So in total, sometimes you finance eight, nine months of the total supply chain, and the ordinary consumer is not aware of it.
And if that ordinary consumer is going to a shop of a big brand, he gets the article on yesterday, immediately, otherwise, he doesn’t get that specific item. But basically, that that brand hasn’t paid yet, for that item, him or herself, if you understand what I mean, it still, the invoice to the supplier still needs to be paid.
And it’s an incredible long, long timeline. Again, in the supply chain, because it takes a long time to make something, ship something, and get it actually in the shop. But financially also, of course, it’s a long timeline.
And there is, with the big brands, there’s very little movement, it seems that it’s going to be changing now a little bit. I think more and more people are starting to be aware.
Instead of talking only about the bad suppliers, I think the consumer also start asking what are your payment terms to your supplier? And how do you let’s say deal with it if suddenly things change? And do you still request that the supplier is paying for everything?
I give you another example just lately, there’s new legislation in Europe for a print on every packaging that contains what exactly it contains in terms of material, and it’s good or bad for the environment and so on. That is a new legislation.
And that means that we have to print all kinds of new packaging and stuff. And the only, that is this is a bit unforeseen, it’s certainly not in calculated into the prices and what the brand says you have to take that cost because we’re not going to pay for it. It’s your responsibility. And there’s even not a suggestion to say okay, we understand that is an extra cost, maybe we should share that cost.
The same is for logistical cost and but I don’t know if you’re aware, but the logistical cost went up enormously container and it was let’s say $2- $3,000 max to the US pre-COVID is now around $14, $15,000. And we had to back with a big brands to come forward with a kind of a deal on how to share the cost. And you can imagine that if our cost per container is going up from 2 to $15,000, that is eating a lot of our profits.
So that pushes you of course into all kinds of situations you don’t want and if you really want to keep your company going then you start to be creative and you think about outsourcing, you postpone maintenance, which is maybe necessary, and so on and all. And then you create also unsafe and not so nice situations. So there is a direct link between that financial risk and the distribution of that financial risk and the situations we see in the factories.
Yeah, absolutely, I mean, you can see how factories can be pushed to the point of okay well either we go bankrupt, we close down, or we cut some corners and try to stay in business.
Exactly, exactly, yeah. And shutting down your business first of all is not so easy, secondly it’s quite the thing, I mean, you have five or six hundred people, that also gives a certain responsibility. So you want to keep it open, of course, as long as possible put all of time and money and energy in it.
So it is not an easy decision to shut it down. And it also it doesn’t solve the problem on itself. And because it will continue in a way, because the brands will go to another factory and do exactly the same. And this is how this whole cheap labor carousel is basically functioning.
Of course, at the moment, that’s the manufacturer is getting pushed to the limit, and really needs a price increase, otherwise, you cannot survive. They say, why are you getting too expensive, let’s go to Ethiopia, or let’s go to Bangladesh. And that is how that cheap labor production is moving around in certain areas, and people started opening a factory in another country. So that is something we want to move away from.
And so let’s talk positive as well, because that’s why we are looking for clients who also appreciate what we are doing, and want to pay a little bit extra for the services we provide. And for the environments we create for our workers, we have a couple of clients that came in first time in a factory saying, Wow, this is a nice place, this is exactly how we would have imagined that the factory should look like. And we always take that as a compliment.
And it’s hard work to do it like that. But at the same time also not very expensive, it’s not much more expensive, it’s a little bit more expensive. Because we have a very green environment with trees and small lake and all those kinds of things. And we have the canteen where we provide food and we have the daycare and we have the literacy classes. And of course, that costs money.
But it’s not that it’s it makes it much much more expensive, it’s a little bit more expensive to create decent work or working environment for people who were sitting behind the sewing machine all day basically.
So unfortunately, there are more and more brands also that take that into account who want to see the manufacturer as an extension of their brand instead of only somebody who produces and squeezed surprise and try to sell it as much as possible.
Right, I feel like for a lot of big brands, their solution is just to have these audits, instead of investing that effort in visiting the factories, developing the relationships with their suppliers, they just sort of have these audits and call it a day. But we know that’s obviously not enough. So what’s your take on audits?
Let’s say there’s a couple of levels where you can look at it. First of all, as a factory we have a couple of certifications. And that certification stands for social compliance, there’s a lot of ISO, so that is the whole thing how you manage your company communication, how you deal with your things go wrong, and so on. So we have everything in place.
So if we get an audit most of the time there’s nothing so it’s a completely useless exercise if they know a little bit about the content of those certificates, they will say that that should be good enough but okay, I can imagine that sometimes you want a bit of certainty yourself.
But I got often request if I can sign this and this which is basically a very thin piece of paper and our certification is much much better actually and covers much more areas than that request from the brand so I always feel yeah, it’s a bit of a paper tiger kind of thing and just want to check the box. So we are okay. So if something happens, the supplier signed so we are covered.
Yeah, it covers them, like it covers their liability. Like if something were to come up I often see that brands will be like, Well, no, because our supplier signed this code of conduct that they wouldn’t outsource and they can kind of clean their hands of it.
Exactly. But if you don’t pay and you don’t have the flexibility, let’s say if you to suddenly cancel orders or whatever and as a company, you kind of have the flexibility to have more or less workers in one month, time can be two, three of the people are different.
So the biggest challenge, actually, what I did find out of a factory is to have work for everybody every day. If you have 600 people and your orders are going up and down, of course, it’s a challenge to make sure that everybody is productive and generates enough money basically, that would cover his salary. That is at least the big challenge.
So if you have a very flexible order policy, you can cancel every time you force actually a factory into having things outsourced because that is the only way you can manage that financial risk. So but yeah, and there’s a Apotex, I wouldn’t outsource but the root cause of the outsourcing is not that the supplier is trying to, to do that because the supplier, you don’t like that so much outsourcing, actually. Because it’s also a lot of extra hassles, but it’s pushed by, again, the payment terms.
So to come back to the audit, so audits are good, of course, I mean, it’s nice to be and also good to be checked every now and then. But every brand wants his own audit. And we have two, three people, who are nearly full-time busy with kind of audits, and receiving the people and going through all the paperwork and check again.
And then you have two or three minor nonconformities. And that is that the fire extinguisher was not 40 centimeters from the door, but 60, and these kinds of things. I mean, there’s, and of course, I don’t say it is completely useless. But I think they’re one size fits all. And the last time the big brands visited me was more than five years ago.
So basically there’s no real relationship, in that sense with the factory, and seeing what is going on. I think it would be much better if the one responsible for the sourcing in the brand that is visiting the factory regularly. Deal with the management, see how they react on certain situations, discuss the difficulties, find the solutions, because there’s always problems, there’s always all kinds of problems.
There is ordering too much material because the forecast was too high, they’re still products finished that has not been taken off yet because the market change. There is all kinds of quality issues, there’s always something and there’s enough to discuss about. And when you do that regularly, every six months or whatever, first of all, you build a relationship, you see what is going on, you can see how the factory is actually dealing with these kinds of situations.
And I realized the last two years, of course, because COVID was all pretty impossible. So I blame nobody for that. But again, the last time I saw a big brand was more than five years ago. So it is that attitude, actually. You’re just an extension of a production thing you need to deliver and the price has to be right. And that’s it. And I think that doesn’t create the right environment on the long term.
So it’s not a partnership, it is really a power imbalance. And the audits are part of that.
Just check, we check if you do everything. All right. That is basically the message. And we also tell you what is right. Because it’s not always easy to operate the company in a completely different environment. And it’s very easy to sit in your office in whatever Europe or the US and tell what is good and what is bad. But if you come and work here, sometimes there’s a little bit more nuance to it. And often that is not completely recognized.
Yeah, yeah, that completely makes sense. And I really appreciate your perspective on the audits: the good and the bad.
And I am also very curious to hear your take on certifications, because you mentioned that Pactics does have some certifications. So what do you think the role of certifications are from the side of a manufacturer?
For us it is to create basically a framework in which we operate so it makes things clear, it gives us a structure on how to deal with all kinds of situations and make your standard operating procedures and so on. It tells you how to calculate the wages, how to communicate the wages, how to deal with all kinds of situations.
In the social area, let’s say human resources, worker representatives, unions, whatever, so it is very helpful. So that the state is good, it gives you that framework. And that on itself should be a kind of a guarantee for the brands to say okay, they have that in order. Because this certification has to be renewed. So there’s also audits for that you’re checked on it.
But every brand wants its own certification. Right? So and there’s many, many different certifications. So as a manufacturer, just a moment, you have to decide a little bit which certifications are useful and which are not so useful.
Now we opted for SA8000, which is a social compliance thing and that’s we did that in the early 2010. So 12 or 13 countries, and we’re exactly because we thought it was a very good framework.
Unfortunately, it is not really recognized. In Europe, there are some companies that know it, but in the US, it’s completely unknown. So well, it’s a very good framework, I think it’s very strong, and it helps us a lot. And it helps us a lot because we never have any issue with external audits in that sense.
But it is not the brands are like, Oh, wow, that’s interesting. Let’s have a look at it. Let’s study what that exactly means. Is it okay? If you have that, an audit is not needed on those kind of areas. You could say, Okay, we skip the social part, we only look maybe at the environmental part or other parts now. Still, for audits needs to be done.
And so there is you have the certification, but basically to the outside world it’s not always very useful, unless it’s something that they know. So that is basically the situation on certifications, and you can have 10 certifications, and then another customer is coming here and saying that’s all nice, but I want you to have that certification!
Oh man! So it sounds like though we should all get to know the SA8000 certification a little bit better.
I think so yeah.
And you say it even helped you. Did it guide you on and what you’ll prioritize?
Yeah, it’s all about basically it’s a, again it’s social compliance. So it lays out what you have to do to be a fair employer. And it’s all about communication about wages, how the wages are going to be calculated, you have to train your people also show they can follow how this is calculated, they can do it basically themselves.
It is, again, organizations of the workers representative, it’s unions, it’s about how you deal with labor law, it’s about how you deal with if there is any, let’s say misbehavior, misconduct, so it covers the total area actually of social compliance with a lot of communication and training with it.
So it helped us a lot in that sense to shape the company as it is and all the on with audits, we never have a big problems there because we have everything in place. It’s a very good framework. It’s also worked. It’s serious work. We have one person that is basically only looking at these kinds of things, and making sure we have everything in place and all the paperwork is done and all the communication is done and everybody’s involved and so on. So it takes effort, but it’s also worthwhile.
Okay, yeah. And just to clarify: all of these certifications, are you paying, is Pactics paying for these outright 100%? Is the manufacturer paying for all of these certifications?
Yup, our own certifications we pay for. And then the audits are normally paid for by the brand unless you are non-compliance, let’s say you have, if there’s an audit, then you gotta report, if you have serious non-compliance issue, you have to improve that.
And if there’s a then a second audit, to check if you did improve, if you don’t improve, most of the time, they want you to pay. We never were in that kind of situation, so that never happened to us. But having all those audits again, also, it takes a lot of time and energy. It doesn’t come for free, we don’t have to pay for it. But I still have to pay the people working on those audits and working with the auditors to make that work, used to most of the time, take two, three days at least.
Okay, yeah, that’s really interesting to know. Because just on an individual level, like a consumer, buying a shirt off a rack, it’s like, you really just don’t realize all these things that go into the process.
And to go back to something you said before, with the delayed payment terms. It’s sort of wild to think about, especially with how fast the fast fashion cycle is now, a shopper might literally buy like a dress from some fast fashion brand, wear it, toss it, and the supplier would have still not gotten paid for that if I understand that correctly —
Yeah, that’s technically possible I think, yeah.
I know that’s a little off track. But I was just thinking about that with our previous discussion on payment terms, and just sort of realizing that and how crazy that is.
But anyhow, good to get us back on track here. When we talk about audits, and certifications, I think a lot of people in the sustainable fashion space are starting to see the limitations of this and many are pointing to legislation as the solution or a solution.
But something I wanted to bring in that you said earlier was how that legislation can sometimes put the costs on the manufacturer and not on the brand.
And I think that’s not obviously the original goal of the legislation. I think it really is to get at the brands, but it falls short. And how do you think that we can avoid that with future legislation? Because there’s a lot coming up environmentally and socially, for more action from fashion. But how do we make sure that the costs of further compliance don’t land on suppliers and the brands get to avoid that… again?
Again, you have to include the costs for that, the costs to get compliance or to be up to certain environmental standards. You have to say in the legislation something about how that cost is going to be distributed.
Because otherwise what brands will do is say that this is suppliers. We just want the products in our store, who are completely compliant with whatever European or US legislation. And you’re at a manufacturing, so you have to make sure it’s okay. That is basically what they, the message they give you.
And these costs can go up considerably, of course, and if there is no in that legislation, there is not a let’s say guidance on how those costs should be distributed, I think we ended up with the same situation that everything has to change, and the supplier has to pay for it.
And as you can use these big brands, I think smaller brands, they think completely differently. Sometimes they even one thing is a little bit already before the legislation and they are happy to pay for it.
And also, I also have different conversation with the smaller brands. Well, actually we don’t want plastic bags anymore. We want you to make bags that we can reuse. They pay for it. It’s not a problem. It’s completely different kind of thing.
So they are already ahead of the legislation actually, because intrinsically they think it is important themselves not because it is legislations. Brands will wait for legislations to come. And then they implement. And that is a bit the green marketing, of course, and all those kinds of things. But I don’t think they have intrinsically the environmental issues in their scope, they have to because if you don’t you’re out of business, basically.
If you don’t use the word sustainable nowadays, then you’re done. So it’s a completely useless word, I think, in the meantime. And because it doesn’t say anything — everybody can say sustainable, and probably 80% of the things are not sustainable.
So what is sustainability then exactly? And there’s also something like financial sustainability, and where did that comes in? And there’s environmental, there’s social, there’s all these elements of sustainability, and it’s a little bit more complex, and just be nice for the environment.
It’s all about getting the total scope. And that is what we are doing with the smaller brands, we’re looking at the total supply chain and see what kind of alternatives are there? What is better? What are the pros, what are the cons? What kind of new techniques on dyeing? What kind of new techniques on printing that are much better, that create less waste?
How can we optimize the use of the fabrics? Can we optimize the products in such a way that we have less waste? Can we reduce the order quantity so the MOQ, so you don’t have too much in stock, but it’s easy to reorder, as we know, 20, 30% of the fashion is never used. So that’s if you start to imagine how much money and energy that cost, then it is much better to focus on these kinds of things than just put a print on a packaging, you understand what I mean?
It’s all there’s a lot of nonsense going on, actually, which looks very nice to the outside world, but actually doesn’t have a big impact. So as long as legislation really makes sense, and gives guidance to that total process, including the financial responsibilities of each partner, then it makes sense. And otherwise, it’s just another burden, I would say.
Mhm. And so you have a much more balanced, stronger partnership with smaller brands, as you mentioned. And yeah, it goes beyond just meeting the bare minimums of these audits, you know, checking boxes, and doing all these things because of legislation, but really working together to create a more sustainable product, yeah, as you said, the sustainable word is definitely overused.
But in any case, what in your mind is a stronger brand supplier relationship? Like what does that look like in practice? What are the key elements?
I think the key elements is that you share the same values, actually, and that you’re completely transparent about certain things. It’s a partnership, and like every partnership, you have to give and take, and you can not only take, because when things go wrong, that’s in every relationship you have.
In the end, the other one will either not survive or will go somewhere else. Right? So… but the most important thing is to make sure you’re aligned on a couple of things and how you want to deal with the people, how you want to have the products produced, which way to go, where to look at new materials that have lesser impact, ways of transportation, ways of packaging… all those kinds of things.
So, it is that total concept that you have to discuss with each other. And try to optimize. And with the smaller brands, that is a much easier conversation because most of them that is the reason why they are there is that they want these kinds of products that have less impact on the environment and a good impact on the social environment. So, it is a completely different starting point.
Well, if there’s only shareholder value, that’s only money that counts. And at least at the end of the quarter, the numbers have to look right. So, it is that, that big difference, I think,
Yeah. Yeah and we can see it with the, when the big brands pull in these tens of millions, or maybe even billion in profit, and the same ones that were canceling orders in the pandemic, delaying payment terms, notorious for just not paying their suppliers, and therefore, the workers making their clothes fairly — it’s just a matter of priorities.
And the smaller, mission-driven brands just have it at their core, it’s what they stand for, it’s what they care about. and that’s key.
So can you tell listeners what you are currently working on at Pactics to try to rebalance the brand supplier partnership?
Yeah, what we are trying to do at the moment is to do specific marketing on those smaller clients. So we want to reach out to those brands, who we think a little bit with us and think, not necessarily like us, but because you can have a different scope, but at least want to have the conversation on how you can make things better, more clever.
And use the expertise we have. And we can use the expertise they have. And it’s not a one way street. But so we are targeting specific companies that shared the same values as I mentioned earlier, that only certain regions that showed it are really busy with the same themes as we that are basically proud where the products are being made, and also share that on their website.
So a couple of brands we work with, we are basically we have a there’s a small YouTube picture where you can see our factory and so they see us as an extension of. That is where we are looking for and that we are targeting and trying to get in touch with so if you’re one of them, please feel free to contact with saying.
ELIZABETH[Laugh] Yeah, yeah I know, for sure. I mean it is so incredible to see the level of transparency that you have, on your website at Pactics. How you show the whole facility and you have solar panels and you talk about your biodiesel generator, and the rainwater harvesting.
And of course, the insuring healthy safe working conditions, and treating your employees fairly, and making sure they have benefits and are fairly compensated, and just all of that is truly incredible.
And I do hope that any brands listening, who are looking for manufacturers, will take note.
And I also wanted to touch on something you mentioned earlier with MOQs or minimum order quantities, and so can you tell us how you are enabling lowers MOQs, or minimum order quantities, and how that minimizes waste?
Like I said, it is known that in bigger factories, you have to order for example at least 5000 pieces of something and of those 5,000, first of all that’s for the retailer, quite an investment to buy 5000 pieces, and then he has to make sure that he sells it. So what we’re looking for and again this is for the smaller brands is to look to make the MOQ as low as possible.
Of course there’s a minimum, but let’s say that for certain bags or something like that we do it as of 500 pieces. With the standard factory, you don’t have to come with an order of 500 pieces, but we will have a look at it.
And it’s yes it’s a little bit more expensive, of course, to make 500 bags because the efficiency is lower and also the MOQ for material is most of the time higher than the 500 so you pay a little bit more on the material.
But still, it’s a big difference, of course, if you just have to buy 500 pieces of something or 5000, also in the cash flow of your own company. And we want to develop a system where you easily can reorder. So if there’s a high runner, okay, it’s easy to reorder and you don’t have to throw out or throw it away or give it away, whatever you have to do with it when you don’t sell your product as a retailer. But you really just have in stock what you need, and try to be as efficient as possible.
And I think that has a huge environmental impact as well. And then if you make use of recycled or upcycled, material and even add to that, so that is a bit the way we think we can also help retailers, brands with yeah, doing just don’t have too much stock that you have to throw away and just throw away money as well, because that’s also a huge environmental impact.
So again, and then different techniques of printing allows you also sometimes to do that, we have a very sophisticated printing technique that allows us to do very low MOQ instead of dying the tuition or dying, where you have to die at least 5000 kilos in a big washing machine and a lot of water involved and the overspill of the water is full with paint and it goes into filtration system, and it’s a very inefficient and probably also not very environmentally friendly way of dying.
And there are much better ways they’re a little bit more expensive, not that crazy expensive, a little bit more expensive, but have a much bigger impact on our direct environment. So these are the kinds of solutions we try to work on.
Mhm, yeah. Yeah because the high minimums are known as a main cause of textile waste. Brands will order more clothes and they know what to do with to meet these minimums and it adds up very quickly.
So thank you Arjen, for sharing so much with us today in this conversation. Where can listeners find out more and connect with Pactics?
We have a website, so pactics.com and you also find my contact details. Send me an email and I’ll be in touch with you happy to discuss anything that you would like to discuss.
Cool. And I do have one final question for you that I asked all guests that come on the show. And that is what would a better future for fashion look like to you?
Yeah, that’s a big question. But I think I answered that question a little bit already. And that is that the brands and the suppliers work much more together to try to figure out what is the best way for both parties to optimize the use of material resources and get to reasonable pricing.
And we should try to get away I think from the cheap, cheap, and lots and lots, but much more consciously decide what we’re going to make and what we are going to sell. And I think if that is a kind of a decent conversation, I think we make at least one step in a good direction.
And that’s a wrap for this episode with Arjen Laan of Pactics. I hope you enjoy this episode and got something out of it. This conversation was definitely perspective-shifting for me, we really don’t hear much from the manufacturer or supplier side in fashion. So I think that this was a really valuable conversation.
And if you know someone who would also find it interesting please send it their way or screenshot this episode and share it over in your Instagram stories. You can find me and this podcast @consciousstyle and I would love to know what you thought about this episode.
You can also DM me, I do my best to check my DMs, it might take a little while but I do really enjoy hearing from you.
And this is actually the last episode of the season which is bittersweet because I thoroughly enjoyed every conversation this season but I’m also looking forward to a little bit of a break before we dive into season 4.
Season 4 is going to be a big one. We’re diving into a really huge topic, one that feels very complex but I’m working on bringing on guests and developing topics and conversations that break it down in a much more manageable and accessible way.
So season 4 is going to be focused on post growth and the possibilities for a slower fashion industry. And I’m not gonna get too much into the details of what that all means and how that’s gonna work with a podcast because I’m still flushing out the details. But if you want to be the first to know what to expect in the next season definitely subscribe to my newsletter, The Conscious Edit. You can sign up at www.consciouslifeandstyle.com/edit and the link is also in the show notes.
And in this weekly newsletter, I share articles I’m reading in the sustainable fashion space, as well as podcasts or brands, campaigns I’m supporting, and various things like that you know whatever’s top of mind that particular week. And subscribers also get access to a free 10-page list of sustainable fashion resources to support you on your journey as a little welcome gift. So again that is at www.consciouslifeandstyle.com/edit and the link is in the show notes.
So I hope to see you over there or on Instagram, but if not, I will see you when we pick back up for season 4 of the podcast in a couple of weeks. Thank you so much for tuning in today, bye for now!
Originally trained as a nurse, Arjan joined Medecins Sans Frontieres, eventually becoming responsible for their worldwide Human Resources department. He then got an MBA and made the switch to the profit sector. At 50, Arjen decided to make a shift back into the NGO sector. In 2017, Arjen joined Pactics as their CEO.
Historically producing for the world’s biggest luxury brands, today Pactics focuses on sharing their expertise with smaller, mission-driven brands with aligned values. As a privately owned company, Pactics believes in fostering long-term relationships with their brand partners and their employees, rather than seeking short-term sales.
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