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"The ‘2017 Global Sourcing Reference’ report from Kurt Salmon highlights as sourcing costs rise, retailers are being urged to reinvent their operating models to add value in their supply chains. Fast fashion entails retailers and brands to react equally as quickly to meet the demand of consumers, which has resulted in stiff competition. In order to beat one another, brands are introducing more lines per year at lower costs. The report further emphasises speedy production cycles are having a negative impact on the entire supply chain, with fashion brands and retailers struggling to keep up."
The ‘2017 Global Sourcing Reference’ report from Kurt Salmon highlights as sourcing costs rise, retailers are being urged to reinvent their operating models to add value in their supply chains. Fast fashion entails retailers and brands to react equally as quickly to meet the demand of consumers, which has resulted in stiff competition. In order to beat one another, brands are introducing more lines per year at lower costs. The report further emphasises speedy production cycles are having a negative impact on the entire supply chain, with fashion brands and retailers struggling to keep up.
Another report, ‘From Cost Focus to True Value Creation – On the Road to Analytical Sourcing & Supply Chain,’ outlines both commercial fashion brands and premium/luxury brands are finding it difficult to maintain comparable levels. Often, even total sell-through falls to levels below 70 per cent, causing inevitable margin losses from skyrocketing markdowns far beyond benchmark levels of 12-15 per cent.
Rising sourcing cost
Despite losing market share, China is still by far the biggest apparel exporter to the EU, at 28 per cent. While Bangladesh’s share is 19 per cent, Turkey 11 per cent, and India has 6 per cent. Meanwhile countries like Poland and the Czech Republic, are increasing their stake in the sourcing landscape. Far East importers make up 72 per cent of the value of top 20 countries, whereas Greater Europe stands for 22 per cent, and Africa 6 per cent.
Production Cost Index (PCI) values are rising sharply across all main sourcing regions. Plus, global cost increases for apparel and footwear production have steadily continued during the last two years. Sourcing markets with stable costs are rare while the majority show strong to strong increases of production costs. This does not only affect China, which has seen a strong upward trend for many years but also many of the typical low-cost sourcing destinations in Southeast Asia, such as Bangladesh, Pakistan and Indonesia. The report states recent cost increases have been driven by both rising labour costs and strengthening local currencies in the sourcing markets versus the US dollar and the euro.
Higher labour costs are due to rising minimum wages and the growing competition for skilled factory workers and increasing alternative work offers, especially in China. To capitalise on cost-effective markets, many retailers have shifted production from established yet increasingly costly regions, such as Southeast China, to less developed but cost-wise regions, such as Western China, Myanmar, and Cambodia. But, this is a temporary solution because even though cost pressure may reduce in the short term, it is a risk to flexibility and operational performance as well as product quality and CSR.
Sourcing priorities
Beyond production cost optimisation, there are more powerful levers that can help solve the current market challenges many brands and retailers are facing. The markdowns of 15-25 per cent of net sales are a powerful source of gross margin improvement. A close alignment between production development and supplier can play a significant role in unlocking this potential by providing ‘true’ consumer value and brand differentiation with regards to product innovation, time to market, reliability and execution excellence, as well as superior technical capabilities and quality.
As per the report, speed to market is the number one sourcing priority by respondents, followed by social and environmental compliance, quality, innovation management and end-to-end value chain collaboration. Asked about speed models such as rapid replenishment, test and scale, read and react or trend injection, two-thirds of respondents have them either in place or are currently planning to introduce them.
Supply chain ties
The report suggests differentiated supplier capabilities must be leveraged and developed in close collaboration along the entire value chain. Intensified collaboration will also mean more common standards, definitions and KPIs. An integrated cloud-based database, for example, provides end-to-end transparency and control, internally as well as with third party suppliers. Furthermore, it allows access to big data across the value chain and enhances predictive analytics for improved merchandise planning and production capacity planning etc. In re-shaping the fashion value chain, technology will prove to be the key enabler to provide the tools for analytical optimisation.
SRF’s net revenue from operations increased by 0.91 per cent in 2015-16. Profit before tax increased by 25.58 per cent while profit after tax moved up by 17.27 per cent. SRF’s main businesses are technical textiles, chemicals and polymers and packaging films. It has operations in India, Thailand and South Africa and commercial interests in more than 75 countries.
The company made investments worth Rs 3,200 crores across all business segments in the last five years. More than 50 per cent of these investments were made in the chemicals business alone. SRF’s nylon tyre cord fabrics business continues to retain leadership in the domestic market. The company would continue to enlarge its portfolio of other product segments such as coated and laminated fabrics under the technical textiles business.
The polyester yarn and fabrics segment turned around with its new focus on the yarn business for diversified industrial applications. In coated and laminated fabrics, the laminated fabrics segment performed satisfactorily in a tough competitive environment. The coated fabrics segment also turned around during the year, particularly in the off-season. The ongoing focus on becoming a solution provider along with the branding initiatives aimed at positioning the business as a value added entity has helped enhance the prospect of greater profitability.
Starting this month, the promotion of In Style • Hong Kong will begin in Bangkok. Organised by the Hong Kong Trade Development Council (HKTDC), the campaign will engage business leaders and entrepreneurs as well as consumers in Thailand to showcase Hong Kong’s vibrant lifestyle and creativity and explain how the city’s world-class services can help Thai companies expand their business overseas, especially to the Chinese mainland.
The promotion aims to deepen the already strong trade links between Thailand and Hong Kong, which is consistently rated as the world’s freest economy by the United States-based Heritage Foundation. In 2015, bilateral trade between the two economies reached $17.18 billion. The “In Style • Hong Kong” symposium on October 6 will highlight Hong Kong’s advantages as a trendsetting hub and reveal the potential of Hong Kong services sectors as partners for Thai companies. An invitation-only Gala Dinner will be held for 450 members of the business community, while a citywide promotion will combine retail and gourmet specials at venues across Bangkok for the public.
Rimsky Yuen, secretary for Justice of the Hong Kong Special Administrative Region (HKSAR) Government will officiate at the opening session of the symposium at the Plaza Athenee Bangkok. Following the opening session, many of Hong Kong’s business leaders will offer insights on how the country can facilitate the business expansion of Thai companies.
Pakistan’s exports of textile and clothing saw a decline of 2.64 per cent in July to August on a year-on-year basis. The GSP-Plus scheme provides zero-duty market access to Pakistan’s products, including textile and clothing, into the European Union. The country’s five-year textile policy is laden with incentives for the promotion of value-added sectors. Last year, exports of readymade garments witnessed nominal growth despite a fall in the exports of most products.
In July to August, exports of readymade garments witnessed an increase of 3.76 per cent from a year ago while those of bed wear surged 5.28 per cent. However, exports of knitwear, which is a value-added segment, declined 3.18 per cent on an annual basis. Imports of textile machinery witnessed year-on-year growth of over five per cent in the first two months of the current fiscal year. Exports of primary commodities like cotton yarn and cotton cloth registered negative growth of 16.64 per cent and 4.12 per cent in July to August on a year-on-year basis. Exports of towels also declined 17.42 per cent annually in July to August.
Exports of tents, canvas and tarpaulin went up by 82.55 per cent year-on-year while made-up articles, excluding towels, rose by 11.83 per cent and other textile materials increased by 9.35 per cent over the period under review.
Spinners in Pakistan resorted to panic buying to replenish their stocks reacting to rumors that India has deferred cotton exports. Due to the short crop last year, spinners imported around 2.8 million cotton bales from India. The crop is expected to be short this season, too, due to less area under cotton sowing. Some cotton growing belts in Pakistan are under pink bollworm after the recent rains. Many cotton growing areas are also facing a white fly attack.
But arrival of seed cotton, particularly in Punjab region, has improved a lot and around 50,000 to 60,000 bales are reaching ginneries per day. In the coming days, the seed cotton flow is expected to see further improvement. Erratic weather and overreliance on GM seeds has resulted in a catastrophic year for the country’s cotton farmers. Last year the cotton crop was extensively damaged by pest attack.
Pakistan is the fourth largest producer of cotton in the world, and also holds the third largest spinning capacity in Asia after China and India. Thousands of ginning and spinning units produce textile products from cotton. The country is the biggest buyer of Indian cotton. Pakistan usually imports about 12 lakh bales of cotton a year.
With its customers and end-users spread all across the globe, Garware-Wall Ropes (GWRL) is one of India’s leading players in technical textiles. Deploying its expertise in engineering of polymers and its in-depth knowledge of customer needs, the company provides application-focused solutions for various sectors, including deep-sea fishing, aquaculture, shipping, agriculture, sports, infrastructure, defence and transportation.
The company has integrated manufacturing facilities in Pune and Wai where a range of products are manufactured including ropes, nets and aquaculture cages for capturing and breeding fish, nets for sports such as tennis and soccer, insect and shade nets for high-value agriculture, coated fabrics for covers, tarps, tents and products and solutions for water management, waste management and erosion - control applications.
Driven by the mission to provide innovative, application-focused solutions to enhance value of customers globally, Garware has earned the trust of customers across all continents in over 75 countries. End-users of its products include fishermen, shipping companies, oil drillers, agriculturists, packers, transporters, construction companies, municipalities, Government organizations, clubs, universities, manufacturing plants and many others.
Garware has its marketing offices in the US, the UK and Canada improve customer responsiveness in respective time zones and ensures better understanding of local needs. Apart from being a leading player in the domestic market, Garware has a dominant market share in North America and parts of Europe and Australia. It earned Rs 829.20 crores for FY-16 as against Rs 786.60 crores last year. Its domestic sales amounted to Rs 449.04 crores and exports to Rs 380.16 crores for the year. The company’s net profit after tax of Rs 61.88 crores was 43.7 per cent higher than in 2014-15.
Hundreds of textile workers in India’s Tamil Nadu state demanded the first minimum wage increase in the state in more than 12 years. Last July, the Madras High Court ordered a pay hike of up to 30 per cent for hundreds of thousands of garment workers in the state but appeals by manufacturers against the order have left workers in as dilemma, it has been reported.
As per Court ruling, workers would get their pay rise from a monthly average of 4,500 rupees to 6,500 rupees ($68 to $98). This, campaigners say is comparable to wages for textile jobs in most other states. But manufacturers in Tamil Nadu say the hike is too high, putting them at a disadvantage to competitors in other states. Apropos the 1948 Minimum Wages Act, state governments are required to increase the basic minimum wage every five years to protect workers against labour exploitation but textile manufacturers have repeatedly challenged pay rises in Tamil Nadu.
According to S Elizabeth Rani, general secretary of the Garment and Fashion Workers Union, the government must enforce the minimum wage notification at the earliest. While wages have stagnated, the cost of living has kept increasing, she lamented.
After their home market suffered in the first half of this year from Islamist attacks, poor weather and social unrest, French women's ready-to-wear companies will increasingly focus on export markets to boost sales, sector officials have informed. Though known for high-profile luxury houses, France has also generated numerous mid-market fashion brands that are increasingly looking beyond the country for growth and investors.
Pierre-Francois Le Louet, the new chairman of the French Women's Ready-To-Wear Federation (FFPAPF) says ready-to-wear companies were mobilising to expand further in export markets, which are a lifeline in the face of lower consumption at home. The first-half sales of women's ready-to-wear garments fell 2.8 per cent to 4.9 billion euros ($5.5 billion) in France, the steepest decline since the first half of 2013, while exports rose 1.2 per cent to 1.5 billion, the Federation data shows.
However, the Federation, whose members include fashion brands such as Zadig & Voltaire, René Derhy, Zapa, Bérénice, Gérard Darel, Anne Fontaine and Cotélac, did not issue any forecast for the full year. The French ready-to-wear sector which makes 35 per cent of its sales by way of exports has strong ambitions in the United States, its No.2 export destination after Italy. Exports to Italy rose 9.8 per cent in the first half and 5 per cent to the United States. Sales to China, its No.3 export market, however, fell 23.7 per cent during the period. This was due to a slowing economy and a government crackdown on lavish gifting.
Trade in textiles and textile products between Indonesia and France has been growing rapidly. Indonesia’s export value of textiles and textile products to France touched $46.52 million in the first half of this year. In terms of exports, France ranks eighth in the European region and Indonesia's position can be consolidated further, feels Arlinda, Director General of National Export Development (PEN), The Ministry of Commerce (Trade). Arlinda says, the European Union has been trying to stem the flood of Chinese textiles after the end to textile quotas in 2005.
He said France is the center of world fashion and apparel manufacturer of high quality apparels. As per statistics, the export value of Indonesia continues to move North. Hence, the Ministry of Trade needs to promote it further through exhibitions and fairs.
On a worldwide basis, the Textile & Clothing (T&C) industry is a growing industry. Operating in a competitive environment, the EU and Japan are still playing lead roles in developing high technology and quality of fibres and fabrics as well as in creating high value added apparels and fashion. Both the EU and Japan are key export markets for their respective textile and clothing industry. In EU’s case, Japan is the seventh T&C export market reaching almost €1.9 billion. For the Japanese industry, the EU is the 3rd export market reaching almost €0.7 billion.
Euratex, the European Textile and Apparel Confederation, and JTF, Japanese Textile Federation, maintain excellent relationship and complementary activities. The trade structure of T&C between the EU and Japan is complementary. Under those circumstances, both industries believe that a trade deal would expand the trade and investment in T&C between the two parties and promote further business development. It would also build platforms in various types of R&D co-operation, thereby creating new innovations and business opportunities.
Over the last years, both associations have had deep discussions on the way to reach an agreement that would benefit companies mutually. They recently agreed on major issues, as for tariffs elimination and rules of origin. President of Euratex, Piolat emphasized that the European Apparel and Textile Confederation is the political voice of the textile and clothing industry in Europe. And it is the mission of Euratex to create a favourable environment within the European Union for manufacturing of textile and fashion products. The EU textile and clothing industry, including manmade fibres, remains an essential pillar of the local economy across the EU regions.
