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A Pivotal Trip to LA

When starting a company, there is a long list of things you could do first draft up a business plan, set up your legal entity, decide on a name...the list goes on. From the very beginning, we knew Pareto would be a product-obsessed company. The first thing on our to-do list was (of course) developing our product. While many of our tech entrepreneur friends could build their product from behind a computer by writing lines of code, we knew that our journey would look very different. We would need to build an intricate supply chain to bring our pieces to life. 

And so it begins...we booked a trip to Los Angeles (a respected destination for clothing manufacturing in the US) to start formalizing relationships with supply chain partners and kick off product development for our first wardrobe addition. We’ll cut to the chase. This trip did not go as planned. Our objective was to leave the trip energized and with a strong gameplan – who we would work with and how we would work with them. Instead, while we met some incredible craftsmen, we left feeling even more disenchanted by the apparel industry. That said, we also left armed with learnings that have been pivotal in shaping Pareto into what it is today.

 

What The Trip Looked Like

Before we left Chicago, we laid out what we considered must-haves for our supply chain. One of these must-haves was traceability. We knew that the decisions made at every stage of our supply chain would impact the quality of the final piece. The cotton fiber length from the farm and the yarn twist multiple from the spinner would impact the strength of the fabric. The dyes and processes used at the dye house would impact how much the color would fade overtime. The number of stitches per inch used at the cut & sew factory would impact how durable the final garment would be. In order to be able to make these decisions, we needed to work directly with partners at every stage of our supply chain. If our mission was to make the best version of the clothing you actually wear, traceability was a must.

The trip was a whirlwind! Once we arrived in LA, we borrowed Jess’ sister’s car (thanks Becky!) and traversed back and forth across the city. For each meeting, we came prepared with a pitch deck that explained the Pareto vision and samples of our first wardrobe addition. Just writing that last sentence makes us laugh (and cringe) – we will always be those Powerpoint-loving consultants deep down. Everyone was nice enough to flip through the slides, but it was pretty obvious that they didn’t care about our corporate jargon. They wanted to talk about real operational details, rightfully so. We dug into quantities, reviewed timelines, toured facilities, and of course, discussed every minute detail of the T-Shirt Dress we’d be making. At the end of each meeting, we would ask them for a few names of additional people that they would recommend we connect with during our trip, and then we would quickly set up meetings for the next day. 

 

What We Learned

While we knew traceability was different from what other brands were prioritizing, we did not realize how difficult it would be to achieve. Several barriers became more and more apparent to us as the trip went on, all largely the result of how the industry has operated forever. Here are the four key lessons we learned...

    1. An apparel supply chain is extremely fragmented
    2. The cut & sew factory (the last stage of the supply chain, where fabric is turned into a piece of clothing) is frequently the "connector" between the brand and the rest of the supply chain 
    3. Supply chain partners are often disincentivized to tell you the players that come before them in the process (and honestly, many times they don’t know)
    4. The word “sustainability” frequently gets thrown around, and as a result, has become less meaningful

1) An apparel supply chain is extremely fragmented. With every apparel supply chain, there are many stages, and at each stage, the form of the good changes dramatically (especially compared to other common purchases, like fruits and vegetables). For example, let’s take a look at a cotton T-Shirt Dress...

5 stages

There are five main stages in the journey. First, a farm grows the cotton. Second, a yarn spinner spins the cotton into yarn. Third, a knitting facility knits the yarn into fabric. Fourth, a dye house dyes the greige fabric (greige means pre-dyed). Fifth, and lastly, the cut & sew factory sews the T-Shirt Dress. This journey is extremely fragmented, meaning each stage happens in a different facility, requiring unique and specific capabilities (just imagine how different a knitting facility looks vs. a dye house!). Also, each stage typically takes place in a different part of the world. The cotton could be grown in the US, the yarn spun in China, the fabric knitted in India, the fabric dyed back in China, the dress sewn in Bangladesh, and then ultimately, the dress sold in the US. This fragmentation is a key driver behind why apparel production accounts for an estimated 10% of global carbon emissions (check out this great TED-Ed video on The Life Cycle of a T-Shirt and NPR’s Planet Money series documenting “the world behind a simple shirt”). Depending on the piece of clothing (e.g., t-shirt, denim jacket, sweater), the stages look a bit different but are typically extremely fragmented. 

2) The cut & sew factory is frequently the "connector" between the brand and the rest of the supply chain. Due to the complexity and fragmentation of many of the early stages, the cut & sew factory (the last stage) frequently attempts to simplify the ecosystem for the brand by becoming a “one-stop-shop.” Brands decide which cut & sew factory they want to work with, and then, the factory coordinates the rest, including sourcing fabric, dyeing fabric, sewing the garment, and more. The cut & sew factory removes any need for the brand to work with partners earlier in the supply chain. Factories have books of endless fabric swatches, sourced from “their guys.” Brands choose which they like best, just like picking off a restaurant menu. Don’t get us wrong, there are many efficiencies that come with this setup – it helps brands bring product to market quickly. Going into this trip, we knew that this was the case; however, throughout the trip, it became even more apparent that this process was not going to work for the brand that we wanted to build. 

3) Supply chain partners are often disincentivized to tell you the players that come before them in the process (and honestly, many times they don’t know). Since traceability back to the cotton farm was a must-have for our product, it was key for us to ask clarifying questions with every partner we met. Where is this fabric knitted? Where is it dyed? Where is the cotton grown? When we asked these questions, we rarely were given answers. We realized that this was for two reasons. First, there is little incentive to share this information with brands. For decades, companies have profited from acting as connectors, bringing business to their contacts. For example, if the knitter tells a brand where they dye their fabric, brands have the opportunity to circumvent them and go directly to the source. The knitter will then lose out on their commission. This model is not necessarily bad, it just wasn't going to work for us. (See below for an example email thread with a large fabric knitter). The second reason, and most concerning for us, was that they frequently don’t know the answer. This is because parts of the process inherently make it difficult – e.g., raw cotton is frequently aggregated between farms before shipped across the world, middlemen are frequently used along the journey to help facilitate transportation, customer service, sales, etc. For these reasons, sharing details about each step of the supply chain is very challenging, even for partners who are willing.

Email thread

4) The word “sustainability” frequently gets thrown around and, as a result, has become less meaningful. Brands are often criticized for throwing around the term “sustainability” and using it as a marketing lever. In the industry, this action is coined as greenwashing (check out this long, but spot-on article by Elizabeth Cline about the prevalence of greenwashing). It became very apparent during our trip that greenwashing is not only something brands do; supply chain partners are also guilty of using “sustainability” as a marketing tactic. In many of our conversations, partners used terms like “low impact,” “certified,” and “sustainably sourced.” When we dug deeper, we realized these terms had become less meaningful. On what dimension is it “low impact”? What type of “certification”? How is it “sustainably sourced”? Many hope that by hearing these buzzwords, brands will feel good enough and check “sustainability" off the list. While it is great that all stakeholders are thinking about and referencing “sustainability,” it is not enough.

 

How It Shaped Pareto

In the moment, this trip was discouraging. We left LA feeling even more disenchanted by the apparel industry. How do brands not know every hand that touches their clothing? How is it okay for brands to not know where their cotton is grown? How is it okay for brands to not know which chemicals are being used to dye their pieces? There is no way to ensure you are making the best decisions without knowing the full journey of the product. 

We did give ourselves a moment to be discouraged but quickly realized that the whole reason we set out to build Pareto in the first place was to build something better. Our supply chain approach would be another critical element of our journey towards better. What we learned in LA was pivotal in taking Pareto to the next stage. Here are the two main ways in which the trip shaped the brand – we'll keep these short because our next two musings will dive deeper into each.

1) It forced us to reimagine the process of developing our supply chain. Starting with the last stage, the cut & sew factory, and trying to build a supply chain backwards would not work for us. We would never be able to know the partner at every stage, and as a result, we would never be able to make the highest quality product. Instead, we needed to build our supply chain from the first stage forward. By starting with the farmer and moving forwards, each partner along the journey would be incentivized to share where they send their output (e.g., their cotton, their yarn). This flow of information creates a win win – they get to sell more of their product, we achieve the visibility required to make the best product possible. We ask the farmer which spinners they sell their cotton to. We ask the spinner which knitters they sell their yarn to. We ask the knitter which dye houses they work with. And so on. One step at a time, we build a fully traceable supply chain, from the farm to your closet.

2) It forced us to reevaluate how we would approach “sustainability”. The topic of “sustainability” is rarely addressed holistically in the apparel industry. There are two main factors that contribute to a brand’s impact on our planet and people how clothing is made and the quantity of clothing made. We always knew that the quantity of clothing made was being neglected by most brands, but we didn’t originally recognize how much opportunity there still was to reevaluate how the industry tackled how clothing is made. If we were going to build a brand that could make a true impact on the “sustainability” of the industry, we needed to leverage the power of traceability to not only make the best product but also to make the most responsible product. 

 
Phewww...for better or for worse, it has taken us a lot of time to process, synthesize, and document this trip. Please don’t walk away from this musing thinking that it immediately “clicked” for us or that it was a straight line from the beginning. In the moment, it felt like a wacky scribble. But after all, we set out to build a product-obsessed company, so here we are, obsessing over our product.

 

As always, we’d love to hear from you in the comments – are there elements of the apparel supply chain that are still confusing or that you would be interested in learning more about?

Comments (2)

  • Daisy Carlson on September 12, 2021

    Incredible work for your company. I wish you the best! I love my 2 sweat shirts and I will be able to use them as soon as this HOT weather cools down!

  • Lea on March 09, 2021

    Love your insight to build the supply chain forward! Super interesting and looking forward to the next one!

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