Documente Academic
Documente Profesional
Documente Cultură
CHANGING
DYNAMICS IN
APPAREL SOURCING
22nd November 2018,
Thursday
WEBINAR
CHANGING DYNAMICS IN
APPAREL SOURCING
Topics Covered
01. Introduction
05. Sustainability
10. E-commerce
11. Conclusion
CHANGING DYNAMICS IN APPAREL SOURCING
Introduction
managing the supplier base.
3|
Western Europe: Luxury Apparel Vietnam, Myanmar &
Cambodia: High value
items like Jackets &
Overcoats
5|
CHANGING DYNAMICS IN APPAREL SOURCING
6|
CURRENT APPAREL
EXPORT SCENARIO
CHANGING DYNAMICS IN APPAREL SOURCING
8|
CHANGING DYNAMICS IN APPAREL SOURCING
Apparel exports from the largest manufacturer-exporter China, have been decreasing since
the last two years while countries like Bangladesh, Viet Nam and Cambodia have shown
tremendous growth in terms of Apparel export.
As per the Trade Development Bureau of China, the outbound investment from China in
Textiles & Clothing sector between 2003-2017 was 8.8 Bn USD with an annual increase of
20%.
The major destinations for China’s investment during this period were ASEAN, SE Asia and
Africa. In particular, Viet Nam, Bangladesh, Cambodia, Myanmar and Ethiopia.
The reason for China’s decreased exports is because the Chinese are changing their export
strategy. Instead of in house production, they are leveraging through manufacturing set
ups in low cost nations cited above.
This strategy has worked well for the Chinese. With rising labor cost and limited trade
preferential agreements, they are creating new supplier bases in these countries. So, even
though on first look it looks like that Sourcing from China is reducing, actually it is not. It is
just shifting to its other set ups, where there are duty advantages, low labor cost, proximity
to major buyers like US-Europe and government support to develop the industry.
9|
CHANGING DYNAMICS IN APPAREL SOURCING
Africa
Asia
10 |
CHANGING DYNAMICS IN APPAREL SOURCING
Americas
Oceania
11 |
WAGES &
LABOR MARKET
REGULATIONS
CHANGING DYNAMICS IN APPAREL SOURCING
13 |
CHANGING DYNAMICS IN APPAREL SOURCING
Bangladesh
% Change
% Change
% Change
% Change
% Change
Cambodia
Myanmar
Vietnam
Ethiopia
Wages
Wages YTD
53 -9.40% 140.9 3.40% 122.3 -0.90% 85.6 20.90% 18.3 -20.50%
2018 (EUR)
Wages LTD
58.6 136.3 123.4 70.8 23
2017 (EUR)
Wages YTD
63 -4.30% 167.3 9.20% 145.2 4.80% 101.7 27.80% 21.7 -16.00%
2018 (USD)
Wages LTD
65.8 153.1 138.6 79.5 25.9
2017 (USD)
14 |
PRODUCTION
SCALE
CHANGING DYNAMICS IN APPAREL SOURCING
Bangladesh
• Technology and quality compliance parameters have seeped in
Bangladesh’s apparel manufacturing systems.
16 |
CHANGING DYNAMICS IN APPAREL SOURCING
Vietnam
• There are around 6000 textile and garment manufacturing firms operating in
Vietnam, 84% of which are privately owned, 15% FDI, and remaining 1% are state-
owned.
• Since the labor cost advantages with China and India are diminishing, Vietnam
is gaining the business they are losing. To overcome the high cost of raw material (as
90% of it is imported), the government has already started investing heavily in the development of support
industries in Vietnam.
• In the 2006-15 period, Vietnam was the second biggest investor in the development of shuttle less
looms and the biggest investor in ring spindles and open-end rotors, amongst the ASEAN countries. The
country has also shown a marked expansion in its knitting sector. Government is also giving the apparel
manufacturers in the country opportunities to enhance their value-adding capabilities, develop their own
brands, become original design manufacturers (ODMs) rather than function only as subcontractors, etc.
The production capacity of the industry is predicted to rise by 12-14% p.a. from 2016-2020. The export
potential is also forecasted to rise by 15% p.a. during this period, and the Vietnamese textile and apparel
industry will reach US$50 billion by 2020.
17 |
CHANGING DYNAMICS IN APPAREL SOURCING
Myanmar
• Myanmar has high-quality workmanship due to many years of experience
in manufacturing for high-quality markets including Japan and Korea;
favorable labor costs; new investment law in force which strongly
promotes foreign investment; high level of international support from
different governments to provide technical assistance, training and
market access support; dynamic and involved sector association with
strong membership; substantial experience in outerwear manufacturing.
18 |
CHANGING DYNAMICS IN APPAREL SOURCING
Cambodia
• There are about 540 garment factories in Cambodia. It has an open and
liberal foreign-investment regime with a fairly pro investor legal and
policy framework, with the government providing incentives to entice
foreign investors.
19 |
CHANGING DYNAMICS IN APPAREL SOURCING
Ethiopia
• Ethiopia’s textile and apparel industry has grown at an average of 51%
and more than 65 international textile investment projects have been
licensed for foreign investors. The Ethiopian textiles and apparel industry
consists of approximately 188 medium and large-scale factories, 112 of
which are foreign-owned.
• The total industrial sector in the country equals about 17% of the country’s
GDP, with textiles and leather dominating the exports. Based on the
Growth and Transformation Plan I and II, the government intends to
construct 15 export-geared, state-of-the-art and eco-friendly industrial
parks in different regional states’ main cities.
20 |
SUSTAINABILITY
CHANGING DYNAMICS IN APPAREL SOURCING
22 |
CHANGING DYNAMICS IN APPAREL SOURCING
23 |
CHANGING DYNAMICS IN APPAREL SOURCING
24 |
CHANGING DYNAMICS IN APPAREL SOURCING
25 |
CHANGING DYNAMICS IN APPAREL SOURCING
Sustainability Ranking
Index HWR EWR EcWR Final Rank
Cambodia 3 2 3 1
Vietnam 1 4 2 2
Bangladesh 2 3 4 3
Ethiopia 5 1 5 4
Myanmar 4 5 1 5
26 |
DUTIES & TAXES
CHANGING DYNAMICS IN APPAREL SOURCING
Africa
Asia
28 |
CHANGING DYNAMICS IN APPAREL SOURCING
Americas
Antigua and Barbuda 0.32 0.28 0.53 0.61 1.12 37% Yes Yes
Then there are other emerging nations like Lesotho, Tanzania, Barbados etc. which are being favored
by few brands & retailers for its PTA’s with US/EU, duty free access, low labor cost and closer to home
sourcing model.
29 |
MACRO-ECONOMIC
CONDITIONS OF
SOURCING COUNTRIES
CHANGING DYNAMICS IN APPAREL SOURCING
Total Tax and Contribution Rate (% of Profit) 33.4 21.7 38.1 31.2 38.6
31 |
LOGISTICS FACTOR
CHANGING DYNAMICS IN APPAREL SOURCING
Proximity sourcing, re-shoring and on-shoring are the latest strategies followed by apparel brands. When
balancing cost through manufacturing in East Asian regions, they are also focusing on speed to market
through other alternatives. There is a strong trend toward proximity sourcing from North Africa and Turkey
for Europe, and Mexico and Latin America for the US. However, proximity sourcing is mainly relevant for
selected product categories and short lead time applications.
33 |
INDUSTRY 4.0
CHANGING DYNAMICS IN APPAREL SOURCING
Automation:
This will replace humans on the factory floor with robots and therefore allows the manufacturing
model to move away from low-cost labor countries towards those that are geographically
closer to the end market. It will allows the industry to restructure its data and operations, move
factories closer to market, reduce transportation costs and emissions, build up a more skilled
labor force that is potentially treated more fairly, and focus more closely on individual customer
needs. However, the biggest threat automation poses is putting a staggering 231 million jobs
at risk across 50 countries for manufacturing as a whole, according to the McKinsey Global
Institute.
35 |
CHANGING DYNAMICS IN APPAREL SOURCING
Apparel
production back Global Demand
to base for high quality
destinations like and
US. sustainability
factors makes
Automation
necessary
36 |
CHANGING DYNAMICS IN APPAREL SOURCING
E-COMMERCE
37 |
CHANGING DYNAMICS IN APPAREL SOURCING
38 |
CHANGING DYNAMICS IN APPAREL SOURCING
E Commerce
39 |
CHANGING DYNAMICS IN APPAREL SOURCING
• The fashion and apparel industry is expected to be marked by double-digit sales growth driven by an
expanding global market, over the next decade.
• Worldwide, experts predict that the ecommerce segment of fashion and apparel will increase at a
compound annual rate of 10.6% from $408 billion in 2017 to more than $706 billion by 2022.
• China is already the top consumer of fashion as measured by revenue, in addition , there will be
additional growth in Asia and emerging markets as smartphone penetration goes up as well as the by
the unprecedented expansion of the global middle class.
• In developed markets, merchants will increasingly drive growth with machine learning, artificial intelligence,
and ecommerce automation tools that offer highly relevant and personalized customer experiences.
Innovative brands will likely take share as fit technology, virtual fitting rooms, and AI-powered virtual
shopping assistants help consumers tailor or select the size and look most closely aligned with their
tastes and preferences. Voice-powered shopping, visual search, and smart speakers will be offered by
brands as intimate touchpoints with their customers.
• Brands have an increased risk of holding an inventory position, especially in an age characterized by near
instant changes in consumer taste and preference. Also, heightened customer expectations regarding
ethically sourced materials and green manufacturing practices will put brands in increased margin
pressure.
40 |
CHANGING DYNAMICS IN APPAREL SOURCING
Conclusion
• Sourcing has never been easy and more so difficult now. With continuously evolving
market dynamics and varied advantages offered by various sourcing destinations, the
choice is tough. However, if the strategy is clear and the focus in place, sourcing can
be planned in the most effective manner both for short term and long term.
• All that is needed is the right information mix for taking appropriate decisions from
time to time.
• Unlike the past, sourcing strategy needs to be revisited at a regular frequency to take
advantages of changes occurring in the market.
• Stagnant and fixed sourcing contracts are disadvantageous both for the supplier as
well as the brand/retailer.
• Of course, the sourcing model of China+VietNam+Many might still hold true but does
the advantages offered by it remain the same? Is proximity sourcing going to be the
game changer for brands?
41 |
Designed to assist you for a strategic & informed decision making process in your business, TexPro
is a one-of-a-kind user interface service. Serving as the go-to authority for market updates and
trends, TexPro brings you with well-rounded information on raw material prices, export-import data,
existing tariff rates of various countries, non-tariff barriers in place, trade agreements and government
policies, amongst others.