Lululemon’s Transparent Problem
Thin fabric shows flaws in yoga apparel maker’s over-stretched supply chain.
Lululemon Athletica warns that there will be shortages in its women’s pants made from its “signature” black Luon fabric, a blend of 86% nylon – 14% Lycra with a trademarked brand name and a secret but unpatented formula that is the intellectual property of Lululemon’s supplier.
A batch of bad Luon has been used in roughly 17% of current product inventory, by Lululemon’s reckoning. The compromised (and compromising) pants are see-through sheer and have been pulled from shelves and recalled from customers.
The company says that Luon is supplied to the mills it uses by a single manufacturer in Taiwan, and the fibers used to make the fabric are supplied to its Taiwanese manufacturer by a single source. Lululemon has faulted the Eclat Textile Co. for delivering the fabric that failed to measure up. But Eclat told the Wall Street Journal it is not to blame.
Lululemon is reviewing its overseas supply chain to figure out what went wrong. The company acknowledges (in its 10-Q) the risk of having limited control over a limited number of third-party suppliers, under short-term contracts, that provide all the fabrics for and make all its apparel. (See the table below for the top 20 shippers of product – primarily finished apparel – to Lululemon and its girls’ brand Ivivva in the US in 2012.)
Lululemon has also cautioned that its rapid growth may outpace its ability to manage operations and protect its brand. Indeed, Lululemon’s current trouble with sheer bottoms follows complaints of color-bleeding sports bras and tank tops last July.
One (other) thing is apparent: Lululemon will be diversifying its supply chain to lower the risk of being caught short on product again. The company has announced it expects to have two additional sources ready for manufacturing its key fabrics by the fall.
Date posted: March 27, 2013