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The Value Chain In T&C Industries In Domestic And International Markets
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The Value Chain In T&C Industries In Domestic And International Markets

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    • 1. The Value Chain in T&C Industries in Domestic and International Markets The Role of SMEs in the T&C Industries; The Economics and Business of Fashion Presentation by Mr. Matthias KNAPPE Caserta, Italy 30 November 2005
    • 2. Technical cooperation arm of WTO and UNCTAD for operational enterprise-oriented capacity building for trade promotion and export development. … for developing countries
    • 3. Context:
      • Global T&C trade: 453 billion $ (clothing 258 bio $)
      • T&C: 7% of global merchandise trade
      • LDC share of world clothing trade: 5%
      • Many DCs & LDCs depend on clothing exports or regard clothing as a future export sector, but not the domestic maket
      • WTO: T&C is a normal sector
    • 4. Characteristics of T&C industry in DCs
      • Most LDCs have no integrated T&C industry (clothing exports = 8 times textile exports)
      • SMEs mainly produce clothing and not textiles
      • Poor market diversification
      • Poor product diversification
      • Mainly CMT/maquila: « full-package » to be developed (incl. product dev. & design)
      • Fashion for the domestic market is minimal
    • 5. Structure The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services Market Pressure for SMEs in DCs
    • 6. 1. Prices are falling Source: Textile Outlook International No. 116 March-April 2005
    • 7. EU: Import Price Development for Clothing
    • 8. 2. Consolidation (at 4 levels): what are the consequences for SMEs? Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002
    • 9. Example : Liz Clairborne
      • 2004 – Top 50 Vendors represented 80% of our volume
      • 2010 – Top 25 Strategic Partner Suppliers will represent 80% of our volume
      Source Liz Clairborne
    • 10. 3. Move towards a Service Industry: Have SMEs the vision? Value-Added Time 2005 1970 Manufacturing Manufacturing & Sourcing Manufacturing & Sourcing & Product Development Full Service Buyers requirements
    • 11. 4. Pressure from Frequent Fashion Changes Demands Quick Response
      • From 2 to multiple selling seasons
      • More fashion products with short product life cycles vs. basic products with regular replenishments
      • Quick response: a « puzzle » of many variables along the value chain
      • This « puzzle » needs to be solved first
      • Difficult with practices establised over decades
      • Stop « firefighting »: new business strategies, processes & procedures
    • 12. 5. Pressure to Form Strategic Alliances
      • Quota system forced retailers to take over value chain responsibilities
      • These responsibilities be given to suppliers
      • To do so trustworthy partners are needed
      • Virtual vertical operations: integrated system between manufacturer and retailer
    • 13. Summary: Market Pressure
      • Prices are falling
      • Consolidation
      • Move towards a service industry
      • Frequent fashion changes
      • Strategic alliances
    • 14. Structure The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services Market Pressure for SMEs in DCs
    • 15. Fibres Yarn Fabrics End-Users Man-made Natural Ginning Carding Combing Spinning Yarn dying Weaving Knitting Bleaching Dying Finishing Industrial Goods Home Furnishing Apparel The T&C Value Chain
    • 16. Fashion = Quick Response = Services Sourcing Manufacturing Sales (+Marketing) Inbound Logistics Customs, Import Clearance Outbound Logistics Customs-GSP/Quota Export Clearance Product development Design & Sketches Market Research Buyer – Manufacturer Strategic relationship
    • 17. Design & Product Development
    • 18.  
    • 19. Structure The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services Market Pressure for SMEs in DCs
    • 20. To sell Fashion: SMEs need to take over VC Responsibilities i.e. Provide Services
      • SMEs need to diversify: marketing
      • Everybody offers: good quality, competitive prices & on-time delivery
      • Therefore, provide services buyers want:
      • 1) make and send the garment quickly to my store (participate in the fashion VC)
      • 2) Organize everything and I’ll pay you (service)
    • 21. 75% of cost = sourcing Cost structure of a woven shirt up to the FOB point Material Sourcing: No.1 service demanded by buyers
    • 22. Number 2 service: Use of e- technology
      • The new trading environment forces the adoption of « e » solutions along the VC
      • Trend is led by US buyers and HKG trading houses, followed by EU buyers
      • E-applications are used throughout the value chain; trend: full VC « e » integration
      • Quick responds demands « e »: design and logistics
    • 23. 3. Assist buyers in selling fashion
      • The need to understand:
        • markets,
        • buyer requirements,
        • buyer’s customer requirements, and
        • competitors
      • Need to diversify product range,possibly markets
      • Need to match factory size, customer size and product
    • 24. The Fundamental Relationship: Matching the Elements
    • 25. Small Customer – Fashion Product – Mass Factory
    • 26. Mass Customer – Commodity Product – Small Factory
    • 27. Small Customer – Fashion Product – Small Factory 300 Machine Factory Giorgio Armani Cashmere Men’s Jackets
    • 28. Result of Services: Ability to Produce Fashion Products & Quick Response
      • Understanding of: the market, customer & customer’s customer
      • Material sourcing: prerequesit to understand & engage in fashion production
      • E-business: prerequisite for fast delivery
      • Partnership: prerequisite for engaging in fashion products
      • Matching the elements of a partnership
    • 29. Structure The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services Market Pressure for SMEs in DCs
    • 30. Summary:
      • SMEs in DCs do mainly CMT but no fashion products
      • Post-quota situation puts pressure on SMEs to take over VC responsibilities
      • Moving into fashion is a process, starting with material sourcing
      • Fashion products: a result of services
      • Industry consolidation competitive pressure implications on IP
    • 31. The Fashion Process in DCs and IP
      • Most design does not start from original concept
      • Use of existing info (design, colours, fabrics)
      • Shopping the stores (& cutting & copying)
      • Visit fashion shows (and cutting & copying)
      • Possibilities in niche markets for national, ethical & folklore design
      • Exploit fashion potential: collaboration of SMEs in the north and south
    • 32. THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact: Matthias Knappe , Senior Market Development Officer [email_address]

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