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]