Sunday, January 29, 2017

Global Scenario of Apparel Manufacturing

The textile and apparel industries contribute significantly towards the national economy of many countries like as Vietnam, Bangladesh, Sri Lanka, Cambodia, Turkey etc. Although the apparel industry is global in nature, the manufacturing facilities from developed countries are shifting to developing countries to reduce the labor cost. Even in these developing countries, the garment industries are facing the greatest challenges in spite of the cheap labor cost, due to the short production life-cycle, high volatility, low predictability, high level of impulse purchase and the quick market response. To reduce the cost of production, the garment industries in developing countries are rather focusing on sourcing of cheaper raw materials and minimizing delivery cost than labor productivity due to the availability of cheap labor.

Although some of the apparel manufacturers still survive in the developed countries, they are struggling for survival due to low profitability. In the global competitive scenario, the advantage of manufacturing clothing items locally over manufacturing abroad includes closeness to the market and the ability to react to fashion changes faster than the foreign competitors. However, the local manufacturers are gradually reducing the production and focusing on performing only the entrepreneurial functions involved in apparel manufacturing, which include buying raw materials, designing clothes and accessories, preparing samples and arranging for the production, distribution and marketing of the finished product. Global clothing production has now shifted to, and is gradually centralizing in, countries such as China, Bangladesh, India, Korea, Cambodia, Pakistan and Vietnam.

The global trade of apparel and textile products is no longer governed by quotas since 1 January 2005, when the agreement on textiles and clothing was terminated. Recently, the global trade has been governed by legislation within the multilateral trading system, which helped in the steady increase of imports from countries with low labor costs. When customer satisfaction is considered, the speed of replenishment comes into play. Thus, the countries with proximity are more competitive for those goods where replenishment is important, and these economic factors will intensify.

The countries in Asia are the leading manufacturers of clothing items around the globe. Among the Asian countries, China continues to be the leading exporter of textiles and clothing items. But Bangladesh could become the world's top exporter of garments in a decade as China is gradually moving away from its long-held supremacy over the manufacture of low-end apparel. The global consumption of garment products stood at $445 billion in 2015, according to data from the World Trade Organization. China, the number one exporter, accounted for 39.26 percent global market share while Bangladesh's share was 5.9 percent. Bangladesh's garment export last fiscal year was $28 billion. The country has set a target to raise it to $50 billion by 2021. Meanwhile, China is losing its market share mainly due to higher costs of production and shortage of a skilled workforce.
Table 1: RMG export of Bangladesh 2015-2016
Table 2: RMG export of India 2015-2016
According to the World Trade Organization (WTO), the current dollar value of world apparel exports totaled $445 billion in 2015 (see the Table 1). Top three exporters of apparel include China, the European Union and Bangladesh. Altogether, they accounted for 70.3 percent of world exports. Among the top ten exporters of apparel, increases in export values were recorded by Vietnam (+10 percent), Cambodia (+8 percent), Bangladesh (+6 percent) and India (+2 percent).
Top 10 apparel exporter country, 2015
Table 1: Top 10 apparel exporter country, 2015
Table 2 show the leading global exporters and importers of clothing for the year 2015. It can be observed that China and the EU are the leading exporters and importers of clothing, respectively. Furthermore, a majority of the Asian countries are among the leading exporters of clothing items.
leading global exporters and importers of clothing for the year 2015
Table 2: Leading global exporters and importers of clothing for the year, 2015 (click on image for large size)
It was anticipated that the post-multi-fiber arrangement (MFA) era is likely to witness stiff competition among the apparel manufacturers in developing countries. Hence, the improvement in the productivity, quality and technology fronts will be the deciding factors for success. After the phase-out of the MFA and the end of the ‘China safeguard’ international buyers got the freedom of sourcing textile and apparel products from any country, subjected to the system of tariffs. Hence, the success of the apparel business in the post-MFA era depended mostly on the cost competitiveness. As procurement practices are no longer constrained by country-specific quotas, buyers can demand many more attributes such as product variety, quality and timely delivery in addition to the price. As there is no limit on the volume of clothing import from a given country, the volume factor could take care of the export competitiveness purely based on cost competitiveness. Hence, the global apparel production facilities would most likely be concentrated only among the most competitive firms.

In the post-MFA regime, it was expected that the global apparel market will expand largely in low-cost countries (such as China, Bangladesh and India) and countries in close proximity to the major markets (such as Mexico, Turkey and some Eastern European countries). The countries where the apparel sector had grown under quota protection will lose substantial amount of their share.

As expected, apparel manufacturers in countries such as Africa and Latin America whose ‘export competitiveness’ heavily relied on the quota system have lost market shares, whereas apparel manufacturers in countries such as India and China have gained appreciation. A number of countries such as Bangladesh, Cambodia, Vietnam, Indonesia, Sri Lanka, Pakistan and Honduras have maintained or increased their market shares. Apparel sourcing by retailers in the US and EU from regional suppliers has decreased due to the rapid growth in the procurement from low-cost Asian countries.

In addition to the free-trade policies, the apparel industries are also driven by technical advancements. The technical advancements in the equipment used in cutting and sewing are generic over the period; however, the other noticeable advancements are in 3D printing and digital printing.

The use of the Internet has facilitated the buying and selling of clothing and fashion accessories. However, online retailers deal with a high percentage of returns due to poor fit, material quality and customer satisfaction. Smart online shopping tools are being developed recently that can dramatically reduce returns and minimize shipping processes.

Few years before apparel manufacturers faced with the challenges of designing fashionable garments with multiple styles in short runs, managing stock levels, improving delivery speeds, achieving flexibility and versatility and ensuring consistent quality. They also had to produce clothing cost effectively for a market which is supplied largely from countries with very low wage rates. But at present time by using automation it is possible to reduce manpower and costs, achieving better and consistent quality and increasing productivity. Besides these broad advantages, there are many more benefits of using automated machines such as energy saving, less spare parts, less maintenance cost, less space requirement in production line, reduced handling, better WIP control, reduced operator stress and fatigue, easy production accountability, reduced alteration etc.

ERP (enterprise resource planning) software also widely used in apparel industry to increase productivity. There are versatile uses of erp in garment industry such as Production Planning, Trade finance, Supply chain, Inventory & Warehousing, Sales, Marketing, Laboratory, Production & Production Schedule Management, QC & Packaging, Distribution, Accounts, DSS, MIS etc.

  6. Garment Manufacturing Technology by Rajkishore Nayak Rajiv Padhye