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

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

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