www.infoDev.orgInformation forDevelopment Programwww.infoDev.org+ innovation & entrepreneurshipThe Global Textile andGarments Industry:The Role of Informationand CommunicationTechnologies (ICTs)in Exploiting theValue ChainInformation and CommunicationTechnology (ICT) has an important roleto play as developing countries adjustto the new era. These opportunities willderive from the ability of ICTs to openup parts of the supply chain (other thanbasic manufacturing and processing)to developing countries. This reportpresents case studies of companies thathave successfully used ICTs to move,for example, into higher-value activitiessuch as design and logistics, or toaccess niche markets.An infoDev publication prepared byEnlightenment EconomicsEdited by:Kerry McNamara (infoDev)June, 2008.AT
The Global Textile andGarments Industry:The Role of Informationand CommunicationTechnologies (ICTs)in Exploiting theValue ChainInformation and CommunicationTechnology (ICT) has an important roleto play as developing countries adjustto the new era. These opportunities willderive from the ability of ICTs to openup parts of the supply chain (other thanbasic manufacturing and processing)to developing countries. This reportpresents case studies of companies thathave successfully used ICTs to move,for example, into higher-value activitiessuch as design and logistics, or toaccess niche markets.www.infoDev.orgInformation forDevelopment ProgramAn infoDev publication prepared byEnlightenment EconomicsEdited by:Kerry McNamara (infoDev)June, 2008.ADDDD
Table of ContentsExecutive Summary 1Chapter 1. Overview 5Chapter 2. The Global Textile and Garments Value Chain 9Chapter 3. The Role of ICT in the Textile and Garments Value Chain 19Chapter 4. The Rise of China 29Chapter 5. Mauritius – A Garments Industry Under Threat 43Chapter 6. Strategies for Staying Competitive 57Chapter 7. Conclusion 69References 71Table of Contents iii
iv The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chain
The global textile and garment sector has been in astate of flux since 1 January 2005, when almost fourdecades of restrictions on trade formally came to anend with the demise of the Multi-Fibre Arrangement(MFA) quota system. Many developing countries nowface increasing competition and downward pressureon prices as the global garment industry consolidatesaround a relatively small number of winners.Information and Communication Technology(ICT) has an important role to play as developingcountries adjust to the new era. First, ICT, as ageneral purpose technology, can improve businesspractices and increase the efficiency and competi-tiveness of developing country firms. Secondly, ICTis the main driver that shifts value along the valuechain, enabling new business models, disaggregatingproduction chains, and creating new opportunitiesfor developing countries in the global supply chain.These opportunities will derive from the ability ofICTs to open up parts of the supply chain (otherthan basic manufacturing and processing) todeveloping countries. This report presents casestudies of companies that have successfully usedICTs to move, for example, into higher-valueactivities such as design and logistics, or to accessniche markets. The case studies demonstrate thevariety of strategies available to developing countryproducers. Whereas Chinese manufacturers havefocused on serving major retailers through large-scale production and speed-to-market through anemphasis on logistics, other examples showcompanies elsewhere adopting a strategy of movinginto fashion design and specialized fabrics or rawmaterials, or alternatively identifying niche marketsthat do not demand large-scale production. ICTshave been crucial in each case, although the type oftechnology needed varies from case to case.Yet technology alone will not provide the answersfor struggling garment makers in developingcountries. A suitable business environment,adequate infrastructure, and indeed a fundamentalcomparative advantage are also required. If an ICT-enhanced textile and garments sector is to be aneffective component of a developing country’spoverty-alleviation strategy, then the followingbroad questions must first be addressed by bothpolicymakers and private investors considering theirpost-MFA strategies:What is the right position to seek in a sector■■increasingly dominated by a very large scaleexporter, China, and what role might ICT havein such a strategy?What aspects of the wider enabling environment■■must be in place before investment in ICT fordevelopment makes sense?What are all the factors, including ICT invest-■■ment, which cause value to migrate along theglobal supply chain?To what extent are the opportunities offered by■■ICT in the textile industry limited (or pro-moted) by natural and historical factors inspecific countries?This sectoral report seeks to use the textile andgarments industry to demonstrate the type ofanalysis needed for a realistic strategy for ICT-enabled growth in any sector. Core tasks includeunderstanding the sector’s existing global valuechain; assessing a country’s potential competitivenessas value shifts along the chain; and highlighting anyobstacles to growth in the country’s domesticeconomic structure. This list includes tasks for theprivate sector and for policy makers. Particularaspects of the broader enabling environment will beimportant for competitiveness at each stage of thetextile and garments value chain, including:Infrastructure-roads, ports, and airports, as■■well as telecoms and other ICT investments.Policy and regulation, such as cost of access to■■telecoms and the internet, competition policy,banking regulations, customs clearance rules.Executive SummaryExecutive Summary 1
2 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value ChainRelevant business management skills, including■■the ability to restructure business models andreengineer firms.Other skills, sufficiently widely available that■■employers can hire the workers who will beneeded to implement ICT-based strategies.Information flows that determine patterns of■■trade and market access, including historical andpersonal links as well as officially mediated tradecontacts.Greatest attention here is given to the parts of thevalue chain that can be sustainably located in low-income countries. The textile and garments sector ishighly globalized, but its structure has for decadesprimarily been determined by restrictions on traderather than by free market forces. If the textiles andgarments sector is to play an enduring role inpoverty-alleviation in any developing country, thenthat country must carve out a place along this valuechain which it can defend against the unpredictablevagaries of the quotas, tariffs and subsidies imposedby developed countries.This study demonstrates how the process of usingICT to help a developing country firm establish aposition in the textiles and garments value chainoften falls into one of two approaches. This isbecause ICT creates two types of new opportunitiesfor firms in developing countries. First, it can meanthat for the first time a developing country firm canoffer an integrated “total package” garment solutionfor increasingly demanding (mostly large-scale)global retailers.The second type of opportunity is to use ICT tooccupy parts of the newly disaggregated value chainthat the firm has not occupied before, such ascustom design or custom production. These nichesuccesses may be the most relevant for smallerdeveloping country firms. They are readily accessibleby small producers thanks to ICTs, and are further-more higher value-added activities than basicmanufacture.This study attempts to develop these ideas throughan analysis of the textiles and garments sector,reinforced by specific company case studies.Section 1 provides a brief overview, including■■the quota and tariff regime and an introductionto the main trends affecting the supply chain.Section 2 takes a more in-depth look at the value■■chain and how it has evolved in recent years.Section 3 explains what types of ICT are used in■■the industry, and what barriers exist to uptake.Section 4 takes a detailed look at the reasons for■■China’s dominance in the sector, and considerswhich low-income countries look most vulner-able in the post-quota era.Section 5 uses Mauritius as a detailed case study■■to demonstrate how a country whose exportsmay be under threat from Chinese competitionmight analyze its position in the industry.Section 6 draws together the lessons learned■■about the role of ICT in maintaining andenhancing a competitive textiles and garmentssector, using other examples from Cambodia,Thailand and Uganda.Section 7 provides conclusions.■■The key conclusions are:ICTs can help companies in some developingcountries compete more effectively in the globalgarment and textiles sector.This may either be in specific niches or throughdeveloping specific advantages that avoid head-to-head competition with China on its key advantagesof scale and vertical integration in the area oflogistics. While countries such as Mauritius andBangladesh are unlikely to be able to match Chinesegarments producers in terms of speed-to-market forvery large-scale orders, they can nevertheless useICT to specialize in other aspects such as innovativefabrics or design.Thinking in terms of the whole supply chain iskey.Some developing country firms are successfullypursuing strategies of vertical integration back fromgarments into textiles and cotton. Other alterna-tives, however, include (upstream) design, fabricand yarn RD, and (downstream) developingniche markets.ICTs offer the scope for the creation of virtualsupply chains linking producers within countriesor regions.Scale and effective internal logistics are importantcompetitive advantages in supplying the majorgarment markets of the EU, US and Japan, andexplain the dominance of China. While fewcompanies elsewhere can hope to compete head-to-
Executive Summary 3head on this front with Chinese producers, captur-ing the efficiencies of a virtual supply chain couldallow smaller producers in particular to competemore effectively in other ways.The ICT requirements will vary from case to case.Producers will need to assess which parts of thesupply chain can offer them competitive advan-tages and benchmark their ICT requirementsagainst what is currently available. It will beimportant for firms to consider their ICT invest-ment needs in the light of a clear strategy as totheir position in global supply chains. However,the ICT needs can be substantial and smaller firmsin particular may be hindered by the difficulty offinancing the investments. Access to information isalso important.Much of the transition to the post-MFA worldwill depend on the strategic choices of privatesector firms.However, governments have a vital role in providingan adequate infrastructure and policy environment,and may also be important in coordinating access tofinance and information for smaller producers.However, countries which were almost entirelydependent on the quota regime, and which lackbasic comparative advantage and infrastructure,are unlikely to find the salvation of their garmentindustry in ICT investment.Note: Throughout this study “textiles” is used tomean yarn and/or fabric, while “clothing”, “gar-ments” and “apparel” are taken to be synonymous.“China” refers to mainland China unless otherwiseindicated.
4 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chain
1.1 Global Trade in Textilesand GarmentsThe global textiles and garments industry forms animportant component of world trade flows,particularly for some developing and least developedcountries where clothing accounts for a largeproportion of total exports. In 2004, world exportsof textiles were valued at $195bn and of clothing at$258bn, representing 2.2% and 2.9% respectively oftotal world merchandise trade (WTO, 2005).Developing countries produce half the world’s textileexports and nearly three-quarters of the world’sclothing exports (UNCTAD, 2005).Trade patterns in textiles and garments are similaralthough textiles tends to be a capital-intensivebusiness, while garment-making is labor-intensiveand usually relies on a low-cost workforce. Fortextiles, the European Union is the biggest exporter(if including intra-EU trade), followed by China.However, India, Turkey, Pakistan, Indonesia,Thailand and Mexico all rank among the top 15textile exporters, according to WTO trade statistics.Overall, Asia accounted for 45.1% of world textilesexports in 2004. The EU and the US are the biggestimporters of textiles, followed by China, whichneeds fabric for its large garments industry.For clothing, the EU is again the biggest exporter(including intra-EU exports), followed by Chinawith a 24% share of world garments exports.Although all other countries lag far behind, Turkey,Mexico, India, Indonesia, Bangladesh, Thailand,Vietnam, Tunisia and Pakistan all feature among thetop 15 clothing exporters. Overall, Asia accountedfor 46.8% of world clothing exports in 2004. Themajor importers of clothing are the EU and the US,with Japan trailing in third place.A distinctive feature of the clothing industry is thenumber of countries highly dependent on garmentexports, even though the absolute value of thoseexports is not high in global terms. In 2004 clothingprovided more than 40% of total merchandiseexports for Cambodia, El Salvador, Bangladesh, SriLanka, Mauritius and Lesotho. Such reliance on thegarments industry for both jobs and export revenuesmakes these countries, and their populations, veryvulnerable to adverse shifts in trading patterns. (SeeSections 2, 4 and 5.)1.2 Quotas, Tariffs andthe End of the Multi-FibreArrangementOn 1 January, 2005, the quota restraints of theMulti-Fibre Arrangement (MFA) expired, finallybringing to an end four decades of restrictions ontrade in textiles and garments among World TradeOrganization (WTO) members. Trade in theseproducts is now governed by normal WTO rules.The main impact of the quota system had been toplace limits on exports from a number of low-costcountries into the United States and Europe, whosedomestic industries could not compete against thelow-cost overseas products. The quotas placedsignificant restrictions on high-volume producingcountries such as India, Pakistan and Bangladesh,but in recent years the main target of the system hadbeen mainland China. By the 1990s, economicreform and development in China had created aburgeoning export-driven clothing industry thatwas grabbing global market share very rapidly. Incountries where quotas against China were aban-doned early, such as Australia and Japan, China hasin recent years accounted for 70%–80% of clothingimports.In practice, the MFA and ATC had only limitedsuccess in protecting manufacturers in the US andChapter 1OverviewOverview 5
6 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value ChainEU, which continued to decline. Instead, therestrictions stimulated unintended growth ingarment manufacturing in a number of low-costquota-free countries in Africa and Asia. At the sametime, the quota system kept garment prices higherthan they would otherwise have been, to thedetriment of European and American consumers.The result has been a highly distorted tradingpattern which in the run-up to the lifting of quotashad already begun to unravel, creating winners andlosers. The losers are the countries which hadbenefited from the artificial advantages created bythe quota system. Ahead of quota removal, theybegan to see garment factory closures and job lossesas production capacity shifted to China and otherproducers, including India, that were about tobecome free of quotas. Many of the countries worsthit were those which were most dependent ongarment production for export revenues.The value of Chinese clothing exports to the US hadjumped 56% in the first nine months of 2005, and44% to the EU in the first eight months of 2005.Tough trade negotiations began, and the protracteduncertainty caused considerable disruption to theindustry. The final result was agreements with Chinaby mid-2005 on new lower-level voluntary quotasthat would restrict Chinese export growth into theUS and EU until the end of 2008 and 2007respectively. Vulnerable developing country produc-ers have thus been given some extra time duringwhich to adjust to a completely quota free environ-ment, although many will still suffer from China’sincreasing market share of exports to the US andEU, and the gains which India and Bangladesh canmake now that their exports are unrestricted.The saving grace for some low-income countries willbe the complex system of tariffs and preferentialtrade agreements that remains firmly in place.Similarly, The African Growth and Opportunity Act(AGOA) offers duty- and quota-free entry into theUS until 2015 for certain textile and apparelproducts from designated sub-Saharan Africancountries, subject to strict rules about raw materialsorigin. Tariffs on textiles and clothing are generallyhigher than for other manufactured goods, so thispreferential market access offers many developingcountries a very useful platform from which todevise a strategy for their textiles and garmentsindustry. In total, there are more than 100 regionaltrade agreements that can affect the relativecompetitiveness of countries in various industries.1.3 Jobs and PovertyReductionMeasuring employment in the textiles and garmentssectors is difficult because of the large number ofsmall enterprises and numerous home-workers.More than 40 million workers are estimated to beemployed directly in the global textile and garmentmanufacturing industry, of whom around 19million are in China. The textiles and garmentssectors account for a very high proportion of totalmanufacturing jobs in a number of countries wherepoverty-alleviation is a central issue. These includeCambodia (80.1% of total manufacturing jobs),Mauritius (72.8%), Sri Lanka (49.2%), Bangladesh(35%), Pakistan (42.9%), Madagascar (45%),Turkey (34.3%), Morocco (27.3%), Guatemala(27.1%), Romania (25.3%), India (21.9%) andChina (18.9%) The fast growth of textiles andgarments manufacturing in Asia and other develop-ing countries has had a dramatic effect on employ-ment in the industry in developed countries. TheWorld Bank and IMF have estimated that barriers totextile and clothing trade have cost 35 jobs indeveloping countries for every job saved in richnations (de Jonquieres, 2004). The removal andreduction of quotas since 1 January 2005 thereforeoffers the scope for job creation in poorer countrieswhich will no longer be restricted by quotas.Balanced against this, however, are the serious joblosses in those low-income countries whose gar-ments industries only emerged as an unintendedconsequence of the quota system and which are nowsuffering factory closures.1.4 Trends in the Value ChainThe value chain in the textile and garments industrystretches from raw material production through yarnspinning, fabric weaving, dyeing and finishing,garment sewing, trimming, to labeling, packagingand delivery. The various elements in this supplychain are geographically dispersed, and involve anumber of different partners. During the pastdecade a number of key trends have emerged which
Overview 7have re-shaped the way the industry is organized.Any business hoping to compete in the worldmarket needs to asses the impact of these trends onits plans:■■ Geographical shifts. As already mentioned, theshift of garment manufacturing from developedto low-cost countries has been pronounced overthe past decade, with China leading the way inwinning market share. China, Turkey, Romania,Vietnam and Tunisia all recorded double digitannual clothing export growth for 2000–2004(WTO, 2005). In 2004, US imports of clothingfrom China rose by more than one-third to$16.2bn, exceeding imports by the EU andJapan for the first time. Africa’s exports ofclothing rose by 10% to $9.5bn in 2004, butmany African countries’ clothing industries havesince proved vulnerable to quota removal.■■ Transnational Corporations (TNCs). Theemergence of large international retailers hascome to dominate the global textiles andgarments industry, influencing the geographicallocations of parts of the value chain and puttingfurther downward pressure on prices because oftheir immense bargaining power. These US-,EU- and Japanese-based corporations need tosource large volumes of products, and in thepost-quota environment have shifted towardssourcing in larger amounts from fewer countries.The multinational companies have had a biginfluence on shaping the industry, and in manydeveloping countries the foreign affiliates oftransnational companies account for a largeshare of total production and exports(UNCTAD, 2005).■■ “Lean retailing”. The smart retailer wants toconcentrate on selling garments while transfer-ring as much as possible of the rest of the supplychain activities onto its suppliers—hence theimage of the “lean retailer”. In the jargon of theindustry, this calls upon the supplier to offer a“full package” service. Upstream, this can meantaking responsibility for sourcing fabric andtrim. Downstream, it means organizing thelogistics and transportation, and delivering theitems to the retailer’s warehouse or even stores ina “ready-for-sale” packaged state. Retailers areincreasingly cutting out agents and doingbusiness direct with manufacturers, who areexpected to provide a very much wider range ofsupport services and facilities than ever before.Taken to the limit, a supplier may take responsi-bility for monitoring the retailer’s stocks andplacing replenishment orders. In developingcountries, particularly those that do not have thesupporting industries, the shift towards a fullpackage service can represent a considerablechallenge. Instead of being responsible for onlyone part of the value chain, a supplier needs tobe able to co-ordinate and run several stagesalong that chain. This demands a high level ofintegration, and the necessary managementsystems and information technologies to make itpossible but it also offers an opportunity tomove into higher margin activities, improveprofits, and establish niche services.■■ Speed-to-market. It is instructive to turn thevalue chain on its head and view the wholeprocess from the retailers’ point of view. Gone arethe days when a season’s products were orderedup to 10 months in advance, delivered in bulk tolarge warehouses, and large stocks of unsolditems offloaded in end-of-season sales. Retailersnow use electronic point-of-sale barcodetechnology to collect and process huge quantitiesof data about what their customers are buyingand which lines are selling well. Garment retailerssuch as Zara and Hennes Moritz have set newstandards for fast turnover in styles and fashiontrends, and products have ever-shorter life-spans.This puts considerable demands on the garmentmanufacturers who must be able to respond to aseries of small, irregular orders. Logistics chainsneed to be able to support a turnaround from aretailer’s order to the delivery of finished productto the correct stores sometimes in just a few days.The manufacturer needs to have efficient supplyarrangements with the textile producers, who inturn need to make sure that they can access theappropriate raw materials. In a business wherespeed-to-market is paramount, the supply chainmust be highly integrated in terms of informa-tion and efficiency, while often being geographi-cally highly disintegrated.1.5 Use of ICTIt is the flow of information that binds together thetextile and garments supply chain, and ICT is themeans to achieve efficient information sharing.Appropriate technology can enable a supplier to
8 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chainimprove business practices, increase efficiency andcompetitiveness, and to meet the ever-shorter lead-times required. Within a company, ICT can providea detailed tracking mechanism so that the progressof an order through the production line is accessiblein real-time. Bottlenecks can be solved, andefficiencies much improved, for instance, throughthe use of an Enterprise Resource Planning (ERP)system, which integrates order processing, materialssourcing, manufacturing, account handling, andlogistics. Customers can then be given reliableprogress reports on order schedules, and productiv-ity greatly enhanced.Communications between a supplier and a customercan similarly be transformed by electronic com-munication, either through a dedicated ElectronicData Interchange (EDI) or on a more flexible web-based system. Documents such as Purchase Ordersare easily set up online, thereby reducing costs andavoiding mistakes. Replenishment orders, pricechecks, availability inquiries and stock checks can allbe handled through EDI or an equivalent internetdata exchange system. When fully connected, thisallows buyers can help themselves to information, sothat they do not have to wait for a supplier inanother time zone to respond. Orders can be placedat any time, on any day of the week.The introduction of ICT can enable a firm to offeran integrated “full package” service, but it alsoprovides new opportunities to capture emergingniches in a disaggregated value chain. For instance,the wide range of ICT applications already in usewithin the textiles and garments industry encom-passes everything from advanced Computer AidedDesign (CAD) and virtual prototyping packages, tothe online handling of routine customs and exportbureaucracy.It is possible to connect every stage of the wholevalue chain electronically, and for large commoditysuppliers this can bring big advantages. But develop-ing country suppliers often face a number of hurdlesin selecting and implementing a useful ICT system.Many other factors need to be assessed in order toproduce a successful ICT strategy. A slow, unreliableinternet connection at a factory in Africa, forinstance, may mean it takes hours to download adetailed electronic specification—yielding frustra-tion rather than any savings (see Section 3).1.6 Consumer PressureEthical standards and workplace conditions atsupplier factories have become more importantfollowing consumer protests about “sweat shops”and child labor in the textiles and garments industry.Prompted in some cases by negative publicity, manycompanies now subscribe to Corporate SocialResponsibility programs and Codes of Conductwhich cover their suppliers and subcontractors.Independent audits are carried out to ensurecompliance on a range of health, safety and environ-mental issues. Some developing country suppliersresent the extra costs that this involves, but largeUS and EU buyers are increasingly refusing to placeorders without such systems in place, and there issome acceptance of a connection between improvedconditions and productivity. International LabourOffice (ILO) involvement, such as in the BetterFactories Cambodia scheme, has helped to givecertain nations a “no-sweat shop” image that hasproven a competitive advantage and attractedbusiness. Several big name clothing retailers havenow become more pro-active and open overworkforce conditions. Eco-labeling is becomingmore popular with consumers in the US and EU,and presents a new challenge to developing countrymanufacturers. However, these voluntary schemestoo can be used effectively as marketing tools. At themoment, eco-labels tend to target niche markets,but it is possible that as public awareness increasesthey will present a new barrier—or opportunity—for manufacturers selling into developed countrymarkets.1Knappe, 2004a.1
2.1 From Fibres to FrocksThe textiles and garments value chain falls intodistinct segments: the production of raw materials(natural and man-made fibres); the manufacture ofyarn and fabric; the making of clothing, and theretailing of the finished items. It is the labor-intensive garment manufacturing stage—usually ofgreatest relevance to poverty alleviation in develop-ing countries—that is the focus of this study. Otherend-uses of fibres and textiles, including householdfurnishings and various industrial products, are notconsidered here in detail.In the past, industrialization in garment and textilemanufacture has been an important developmentroute for a large number of economies, despite thedistortions arising from the trade regime, as barriersto entry such as capital requirements and technicalknow-how were relatively low. The developmentalrole of the industry was all the more important assmall and medium enterprises could readily succeed,and as the industry has always employed a highproportion of women.However, the entire value chain has been alteredduring the past decade by the emergence of verylarge “lean retailers” such as Wal-Mart in theUnited States and Pinault-Printemps-Redoute inEurope. These global buyers, in implementingadvanced ICT in their own retailing, stock manage-ment and ordering operations, have driven ageographic relocation of value all the way backthrough the supply chain. Four decades ago, theindustrialized countries dominated global exportsin textiles and clothing; these days, developingcountries produce half of the world’s textile exportsand nearly three-quarters of world clothing exports(UNCTAD, 2005). While the share of developingcountries in the textile and garment trade has beenrising, the increase has been more pronounced inthe more labor-intensive and lower-value addedsegment of garment manufacture. Many of thehigh-value activities have not migrated. Accordingto one study, the EU textile and clothing industryhas retained high value added segments (forexample, new materials, technical textiles, high-endfashion, and sportswear) where design and research development are important competitive factors.This kind of innovation uses human capital (indesign and marketing) more intensively thaninformation technology (e-businessWatch, 2005).Macroeconomic statistics for some developedcountries offer a rough and ready confirmation: forexample, according to the Bureau of EconomicAnalysis figures for the United States, in the 10years to 2004, the output of the apparel industry(in dollars) declined by 44% whereas the cor-responding decline in value added was only 11%(data last accessed 14 March 2006). Figures areunfortunately not available for global output andvalue added or GDP in textiles and apparel bycountry or country group. However, there can belittle doubt from case study analysis that thedominant pattern so far has been the relocation oflower value output.The textiles and garments value chain has becomehighly globalized and buyer-driven with customerdemands shaping the industry. The major retailersseek competitive advantage in their own marketsthrough huge marketing efforts, strong brands andresponsiveness to the changes in consumer tasteswhich they themselves help to generate, all formingsignificant barriers to entry.In recent years, the distinctions between differenttypes of buyers have become quite blurred. There arebroadly three main categories of apparel buyers,although these also overlap so exact distinctionscannot be made2:Retailersi. (such as Gap, Hennes Moritz, etc)that sell own-label clothes in their own storesRangaswami, Oct 2005.2 Chapter 2The Global Textile andGarments Value ChainThe Global Textile and Garments Value Chain 9
10 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chainand usually, but not always, sub-contract themanufacturing;Marketersii. (such as Nike and Liz Claiborne),that specialize in design and marketing func-tions and contract all the actual production toothers, and also do not have their own retailoutlets apart from a small number of flagshipstores; andBranded manufacturers and marketersiii. (suchas the Sara Lee Corp,) who manufacture apparelin their own factories as well as sourcing fromunrelated factories, and whose products are soldmainly by third party retailers.In the first group, big retailers selling own-labelgarments are increasingly in control of their supplychains, performing the same function as marketersand manufacturers in terms of product design anddevelopment, followed by production which iscontracted out to overseas suppliers. This trend issometimes referred to as “vertical retailing”.3Meeting a buyer’s priorities is crucial for anydeveloping country garment manufacturer seekingnew business. These requirements will depend onthe specific product in question, but will includequality, price, reliability, “speed-to-market” and theability of the supplier to extend its capabilitiesbeyond the actual making of the garments (the so-called “full-package” service). The demands of themodern retailer mean that any garment productionline increasingly needs to be well-integrated into thevalue chain as a whole. See Figures 1 and 2.There are distinctions between different parts of theoverall manufacturing chain, but also within anyone segment of that chain and its associated valuechain. The production of yarn and fabric tends to becapital-intensive and reliant on technologicalinnovations such as new man-made fibres andimproved machinery, while clothing production, incontrast, remains a very labor-intensive process. Butthere is a big difference between manufacturing low-cost commodity items (such as cotton T-shirts andunderwear) in a highly-automated factory, andproducing small volumes of expensive hand-finishedtailored jackets. Any developing country needs todecide which type of product it can best produceand what parts of the associated value chain it canservice. As always in this industry, that decision hasGereffi et al, 2003.3 Figure 1. The Textile Clothing Manufacturing ChainFIBRESNaturalMan-madeYARNGinningCardingCombingSpinningDyeingFABRICWeaving orKnittingBleachingDyeingFinishingFINISHEDPRODUCTClothingHome furnishingsIndustryFigure 2. The Clothing Value ChainRDDesignInboundLogisticsManufacturingOutboundLogisticsPackagingWarehousingDeliveryMarketingBrandingRetailingDepartment storesOwn-brand storesChain storesDiscount stores
The Global Textile and Garments Value Chain 11to be made with reference to the quota and tariffssystems currently in place.Four considerations govern a country’s position inthe textile and garments value chain.4This providesa useful schematic grid that distinguishes thesecountry categories, and which illustrates the parts ofthe value chain that can be targeted by differentnations.The division in the natural fibre sector is■■between agricultural and non-agriculturaleconomies, rather than developing and devel-oped countries.Fabric production is capital-intensive and■■susceptible to technological advances and lies atthe cusp of competition between developed anddeveloping countries.Clothing production is labor-intensive, thus■■giving a great advantage to developing countriesin most product lines other than high-fashionand specialty products.Retailers in OECD countries, especially those■■that develop their own design capacities and tiesto offshore manufacturing centers, are coming todominate a greater length of the value chain.In practice, the distortions created by decades ofMFA quotas and complex tariff regimes are thenimposed on these natural categories and becomehighly influential in determining which actualcountries secure a position in the supply chain.Quota and tariff barriers have thus extended the livesof some uncompetitive garments manufacturers indeveloped countries (in the US and EU), curbed thegrowth of garment exports from large volume low-cost producers (e.g. China and India), and promotedtextile and garment manufacturing in countrieswhere quotas and tariffs offered opportunities (e.g.Mauritius and Lesotho). The precise impact of theMFA quotas has been very complex. Given this tradelandscape, capturing value successfully in any part ofthis chain has depended on a combination of gaininga competitive advantage through the use of ICT,exploiting economies of scale, and/or identifying anunoccupied niche.2.2 Geographical Shifts2.2.1 TextilesTextile production is more capital intensive and skillintensive than clothes manufacturing, and thereforetends to be less mobile and need longer lead times toestablish itself. Developing countries account for asmaller share of world textile exports than of apparelproduction, and small, least-developed countriesrarely export textiles at all, instead retaining anyproduction for domestic use. Among lower incomecountries, only China, India, Turkey and Pakistanachieved textile exports above $5bn in 2004. TheEU and US are the big textile importers, followedby China, which needs fabric imports for its hugegarments manufacturing industry. The graphs showthe leading textiles exporters and importers. (In eachcase, in order to focus on trade patterns betweenregions, clothing trade within the EU is notincluded.)OECD 2005a.4 Table 1. Developed Countries Developing CountriesSelf-sufficientin fibresNet importerof fibresNet exporter of fibres; position in fabric is indeterminate(case by case); net importer of clothing.E.g. Australia, France, NewZealand, US.Do not produce fibres for export; position in fabric isindeterminate; net importer of clothing.E.g. Japan, South KoreaCompetitive in fibres (which might be retained for domes-tic use); position in fabric indeterminate; net exporter ofclothing.E.g.China, Pakistan, South Africa.Do not produce fibres for export; position in fabric indeter-minate; net exporter of clothing.E.g. India, Indonesia
12 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value ChainThe textile business includes spinning, weaving orknitting, and dyeing, printing or other finishingprocesses. These functions are often integrated in thesame factory. The fibres are commonly cotton andpolyester, but also include rayon, wool, jute, flax andsilk. The capital intensity of the industry results inrelatively large minimum orders, so there is limitedscope to adjust production swiftly to consumertastes. The textile sector is thus 5Textile productionand clothing manufacture is not normally integratedwithin one company.2.2.2 ClothingClothing manufacture is labor-intensive and can befound in almost all developing countries, particu-larly least-developed countries. Since the 1950s, theindustry has seen several migrations, all involvingAsia and at each stage involving a shift to a countrywhere labor costs were initially lower.6As one writerput it, dominance “has historically been a fleetingmoment, a brief stop in the race to the bottom inthis intensely competitive industry”.7In the 1950sand early 1960s, the move was from North Americaand Western Europe to Japan, as western textile andclothing production was largely displaced byJapanese imports. The second shift was from Japanto Hong Kong, Taiwan and South Korea, whichtogether dominated global clothing exports in the1970s and early 1980s. By the late 1980s and the1990s there was a third migration, away from HongKong, Taiwan and South Korea to other lower-cost,developing countries. This included a big shift ofproduction to mainland China, where economicreform and opening up had prompted a surge inexport-oriented industrial growth. A number ofSouth-east Asian countries including Indonesia,Thailand, Malaysia and the Philippines, as well asSri Lanka, also benefited from the migration. And inthe 1990s, other new suppliers emerged in SouthAsia and Latin America.The impact of these dramatic geographic shifts onimporting countries was severe. In 1992 about 49%of all retail apparel sold in the US was madedomestically; by 1999 that proportion had fallen to12%.The reasons for the migrations were various. In HongKong, Taiwan and South Korea, the industry wasforced to adjust to rising wages, labor shortages, andhigher land values, as well as external factors such asstronger currencies and, as always, tariffs and quotas.By the end of the eighties, manufacturers in thesecountries needed to find lower-cost production basesand ways around quota restrictions. In one analysis,“In this division of labor, skill-intensive activities,which provided relatively high gross margins, such asproduct design, sample making, quality control,packing, warehousing, transport, quota transactionsand local financing in the apparel industry, stayed inEast Asia and labor-intensive activities were relo-cated.”8Thus countries in Africa, such as Mauritiusand Lesotho, enjoyed a surge in inward investmentfor garment manufacturing, but usually only tookover the lower-margin parts of the supply chain.China is overwhelmingly the biggest clothingexporter, but extra-EU exports are still sizeable.Meanwhile, the US, EU and Japan account for themajority of clothing imports.While lower wage costs were often the initial reasonfor shifting location, other factors have also playeda significant part. The goal of shorter lead-timescould be achieved by situating production nearerthe final markets. Mexico, the Caribbean Basin(Dominican Republic, Guatemala, Honduras, etc)and Central America are particularly attractivebecause of their proximity to the US. Most of thisproduction has traditionally been basic assemblywork—called “outward processing” or “productionsharing”—the sewing together of cut pieces andtrim provided by US companies. The complex rulesof origin in the preferential trade agreements haveoften limited the opportunities for these countriesto widen their role in the supply chain or moveinto higher margin activities. Turkey, North Africa(Tunisia and Morocco) and various former EasternEuropean countries (Romania, Poland andHungary) offer quicker access to the EU markets.Each supplying country has its own profile. Forexample, Turkey is a “full-package” supplier withvertically integrated textile and apparel companiesand strong links with Germany. Tunisia andMorocco are “outward-processing” sites that mainlyassemble apparel for firms in France and Italy. AndEastern Europe and the former Soviet Unioncountries do both outward processing and full-package servicing.Nordas, 2004.5 Gereffi et al, 2003.6 Rivoli, 2005.7 Gereffi et al, 2003.8
The Global Textile and Garments Value Chain 13It is East Asia as a regional supplier, however, whichremains the powerhouse of the apparel manufactur-ing business. Manufacturing companies, or buyingagents, may be headquartered in Hong Kong orTaiwan, for example, but will have outsourced mostproduction across the region. As well as initiatingthe mainland Chinese apparel boom, this shift hascreated work for some of the poorest communitiesin Asia including in India, Indonesia, Bangladesh,Vietnam and Pakistan. This can create some verywell-traveled items of clothing, as illustrated by oneanalysis of the production process of a cotton men’sshirt produced for a US retailer by a large transna-tional manufacturer based in Hong Kong:9Cotton■■ : Pakistan. Good-quality source, manu-facturer trusts fabric mill with selection.■■ Yarn: Malaysia. Regional vertical integrationwith fabric mill.■■ Fabric: Malaysia. Choice of dyeing techniquesand good relationship with main producer.Interlining■■ : (collar and cuffs): Malaysia andJapan. Interlining is a higher-value, capitalintensive product.Buttons■■ : China. The buyers specified thesupplier for this component only—the manufac-turer arranged everything else.Garment■■ : China. Company-owned factory putsthe shirt together.With this type of disaggregated supply chain, co-ordination and communication becomes vital forcontrolling the network of companies involved inthe production of just one product line. ICTtechnologies have brought considerable benefits inthis regard.The position of Sub-Saharan African countrysuppliers is almost entirely a consequence of thevarious quota and preferential tariff regimes such asAGOA for the US market and Cotonou for the EU.However, this meant that many least-developedcountries only produced the low-cost commodityitems for which China and other Asian manufactur-ers suffered quota restrictions, and did not expandinto higher-margin products and services. This hasmade them particularly vulnerable in the post-quotaenvironment, as commodity item production cannow be shifted back to large volume Asian producers.The rise of China, combined with the impact ofquota and tariff systems, is shown by an analysis ofthe supplier country shares of clothing imports intothe three big markets in 2004: the US, EU andJapan. At the point when MFA quotas finallyexpired, China already provided 19% of America’sclothing imports, with other East Asian and SouthAsian countries accounting for a further 36%. Thegeographically proximate suppliers in Mexico,Honduras, Guatemala and El Salvador togetheraccounted for 18%. For the EU, China’s hold onclothing is even more pronounced, with 24.4% ofimports (excluding intra-EU trade). But therelatively nearby sources in Turkey, Romania,Tunisia and Morocco managed a respectable 32%.Meanwhile, Japan gives a glimpse of China’spotential when unfettered by trade barriers (andassisted by geographical location). Japan abandonedquotas against Chinese clothing many years ago, and81% of its clothing imports now come from China.2.2.3 Patterns of Foreign DirectInvestment (FDI)Another way to look at the geographical spread ofthe value chain is through the allocation of foreigndirect investment (FDI). From 2002 to 2004, a totalof 275 FDI projects related to the manufacturing oftextiles and clothing were recorded (UNCTAD,2005). While 45% of the project investors were fromthe EU, some 35% originated in an Asia-Pacificcountry. Among Asian investors, the leaders wereJapan (31 projects), Taiwan (15), Turkey (13), SouthKorea (11), Malaysia (7) and China (6). The newlyindustrialized and industrializing East Asianeconomies are thus not only shifting garmentproduction to lower-cost neighboring countries, butalso investing directly in those countries. A conse-quence of the shifts driven by developed countryTNC retailers has been the emergence of some non-EU or US TNCs in garment manufacture. Incountries such as Lesotho, Madagascar, andMauritius, foreign-owned companies have histori-cally accounted for a large share of exports, withHong Kong and Taiwan the dominant investors.Much of that shift was to mainland China. As inmany industries, FDI has poured into China, and intextiles and clothing this has been particularlymarked ahead of quota removal. UNCTAD quotesChinese government statistics which said the numberof foreign-invested textiles and clothing enterprisesincreased in 2003 by 5,856 to nearly 20,000 in total.Knappe, 2005a.9
14 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chain2.2.4 The FutureMost industry observers agree that there will be aperiod of consolidation in the post-MFA era whichresults in buyers reducing the number of countriesfrom which they purchase. China followed by Indiaare viewed to be the two main winners, but theneed in some product lines for short lead-times willhelp to maintain the industries in countries situatedclose to the US and EU markets. Diversificationwill also be promoted by the desire of large buyersnot to be over-dependent on a single sourcecountry.There is less agreement about which countriessecure a place in the second tier with India. Onestudy expects Indonesia, Vietnam, Mexico andTurkey to look the strongest among low-costproducers.10South Korea and Taiwan are expectedto maintain niche roles as suppliers of higher-valueitems. On the other side of the world, theCaribbean Basin suppliers are expected to expandtheir production-sharing assembly sales into the USmarket, but face competition from Mexico on priceand speed-to-market. Sub-Saharan Africa faces thegreatest challenges because of low volumes, the lackof adequate domestic textile production, and itsadverse geographical location for access to themajor developed markets. In many cases, thelimitations of the wider business environment(transportation links, telecommunications infra-structure, access to capital and workforce skills) allexacerbate the problems caused by the end of quotabenefits.The influence of big transnational retailers andmanufacturers appears certain to increase, alongwith the expected physical shifts in the industry.Developing country suppliers will increasingly needto forge links with the large buyers, and offer thesort of services which are required. The relatively lowentry barriers into garment production encouragesnew entrants each year, and new competitivepressures for existing suppliers.2.3 Adding ValueProfits and value-added tend to be highest in theparts of the global supply chain where entry ishardest. The high-margin work includes research,design and product development, marketing andfinancial services. The retailers, designers andmarketers are able to act as strategic brokers inlinking overseas factories and traders with productniches in their main consumer markets.Traditionally, the part of the value chain which hasbeen situated in low-cost countries has been thelow-margin, labor-intensive work and untilrecently it has been extremely unusual for the highvalue-added work to migrate along with thestitching.Given the very different types of garments that areproduced, it is not possible to generalize about thevalue chain. But as a starting point the figures in thebox illustrate how the cost of a basic commodityproduct is broken down.11Strikingly, the cut-make-trim (CMT) cost accounts for just $2 of the final$30.65 retail price of a men’s cotton shirt. Even thetotal cost of the completed garment, at $6.80accounts for just 22% of the retail price.Even with low labor costs, the profit margins onthe actual manufacture of the garment tend to bevery thin. The retail price mark-up looks the mostgenerous part of the equation, until one remem-bers that this is what usually pays for all the designand development of a product. There is thus apotential mutually beneficial shift that can occur, ifmore of that design and development work can bemoved to the low-cost supplying company andcountry. The retailer can reduce costs, and thesupplier can expand into higher margin services.ICT can play a part in making this shift possible.That, more up-market, part of the industryemploys higher-paid workers and has smallerproduction runs. The emphasis on design andcapturing fashion tastes also means that a higherproportion of costs are incurred in developedcountries, and may be less likely to shift towardsthe manufacturer. When garment production inthis market segment is outsourced abroad, it islikely to be of higher value, and demand a moreskilled workforce.The different qualities of product often result invery different patterns of manufacturing. Basicgarments increasingly tend to be mass produced byvertically integrated companies, with most manu-facturing provided by low-cost suppliers. For aGereffi et al, 2003.10 Birnbaum, 2005.11
The Global Textile and Garments Value Chain 15developing country supplier to add value andincrease profit margins on a basic garment usuallymeans moving away from only offering assembly orcut-make-trim services, and into other parts of thevalue chain. Alternatively, a supplier can insteaddecide to focus on higher-margin fashion items,which often means identifying a suitable niche ofthe market.One study of how value originates during garmentmanufacture illustrates the differences between twolow-cost countries, one of which has a verticallyintegrated textiles and garments industry andanother which does not.12The figures are shown inthe table (with the health warning that someincome, e.g. of the self-employed, appears ascapital). Overall, however, the data shows the largeelement of unskilled labor, and the big differencebetween a country such as India with a domestictextile base, and a supplier like Vietnam which needsto import a lot of the content. Vietnam is thus at adisadvantage in terms of its value-added share.Although not in the table, the study citesBangladesh as a country which has managed toachieve greater vertical integration through promot-ing a domestic textile industry. In 1991, the importvalue of textiles was about 60% of the export valueof Bangladesh-made clothing, but this had fallen to40% by 2001.In the post-quota era, many vulnerable developingcountry suppliers need to move away from com-modity products and into higher value products.However, one of the unintended consequences ofthe quota system has already been to encourageChina to move into higher value-added activities.Quotas are volume-based, so it is more profitable touse a quota for a higher-margin upmarket version ofa product rather than a low-value version. Thelimitations on export quantities have also encour-aged China to start offering higher-margin ancillaryservices such as design, sourcing and logistics. As wewill see in the next section, buyers do want theirsuppliers to offer more than a narrow garmentmanufacturing service. The challenge for manydeveloping country suppliers is to be able to matchwhat their main competitor, China, is alreadydoing.Box 2. Examples of the Cost Structure of the Clothing Industry, 2001(per cent of gross output) Unskilled Skilled Total value Intermediate Of which Labour labor Capital added inputs importedIndia 21.1 2.9 7.8 31.8 68.2 1.8Vietnam 9.0 1.2 3.8 14.0 86.0 40.4Source: Nordås, 2004.Box 1. Cost Breakdown of a Men’sWoven Cotton Shirt Sold in the USMarket $Fabric 3.00CMT (cut-make-trim) 2.00Quota category 340 1.80FOB price (for completed garment) 6.80Duty (19.8%) 1.34Freight 0.30Clearance and inland transport 0.14LDP (landed-duty-paid) 8.58Private label importerprice mark-up 3.68Wholesale price 12.26Retail price mark-up 18.39Retail price 30.65Source: David Birnbaum. 2005. Source-it, Global material sourcingfor the clothing industry. Hypothetical case study based on standardUS costing. Retail mark-up includes RD, design, marketing, headoffice costs, other costs.Nordås, 2004.12
16 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chain2.4 The Buyers’ Requirements2.4.1 VolumeRetailers are getting bigger, and large retailers wantlarge volumes of products. By the mid-1990s thefive largest retailers—Wal-Mart, Sears, Kmart,Dayton Hudson and JC Penney—accounted for 68per cent of all apparel sales in the US.13These largeretailers are likely to consider only very largeproducers able to handle the sort of volumesneeded. Under the quota system, these largevolumes had to be sourced from a number ofdifferent countries. The expectation now is that thebiggest buyers will streamline the number ofcountries from which they source. Large factories inthe selected countries will be the main beneficiaries.Liz Clairborne, the US fashion marketer, providesan example of current thinking. Ahead of quotaremoval, the company envisaged halving both thenumber of countries from which it sourced itsclothes and the number of factories it used aroundthe world in three to four years. In the process,China’s share of company direct overseas sourcingwould rise significantly from 15 per cent in 2004 toperhaps half eventually.142.4.2 “Lean Retailing”The example (in Section 2.3) of the cost structureof a men’s cotton shirt demonstrated that a retailerhoping to reduce costs is unlikely to find enoughsavings in the cut-make-trim part (CMT) ofgarment production, and conversely that supplierswanting to increase profit margins need to lookoutside the confines of CMT. These two aims areon the face of it highly complementary. “Leanretailers” seek to outsource many, if not all, aspectsof their business between the design of items andthe sale of the finished product in the stores. If costsavings on CMT are so limited, then efficienciesclearly need to come from elsewhere in the valuechain. A fully-integrated supply chain should offerthose efficiencies. Thus a garment manufacturermay increasingly be expected to assume responsibil-ity for intermediate stages such as sourcing thefabric and trim, packaging and labeling for sale,and organizing the logistics of inventory anddelivery.The full package service can be thought of as thecontinuation of a trend that has been underwayamong developing country suppliers for almost 20years. This full package service clearly shifts a greatdeal more responsibility onto the supplier, but doesoffer the potential for seizing higher value segmentsof the value chain. Management know-how andtechnology, specifically ICT, come to the fore whenoffering a full package solution. The buyer wants totrack the process of each order very precisely, whichmeans i) that the supplier must already havetracking systems in place and ii) the informationabout individual orders must be easily accessed bythe retailer. All this demands close cooperationbetween the manufacturer and the retailer—andcompatible data-sharing and electronic informationexchange systems. Wal-Mart was an early mover inthis regard, insisting that suppliers implementinformation technologies for exchange of sales data,adopt standards for product labelling and deployspecific methods of material handling. Wal-Mart’saim was to cut inventory levels and reduce the lead-time for replenishment orders.152.4.3 Speed-to-MarketSuppliers must now provide these new services inrecord quick time. Until relatively recently, retailers’buyers would order a whole season’s supply of theselected garments up to 10 months before theywould go on sale. From the garment manufacturer’spoint of view, that system meant price and qualitywere the main ways to compete; logistics and speedof response were less important. This has changed.Customers expect much greater variety of choice,and a faster turnover of individual styles. Retailersneed to offer a large number of products, each witha shorter lifespan. Orders are for shorter productionruns, and involve point of sale ICT equipmentproviding real-time information about best-sellingitems. The retailer’s inventory levels are kept verylow, which helps to cut their costs. Four key factorsare involved in a supplier achieving sufficient speedand reliability to meet these demands: i) proximityto the retailer’s market, ii) adequacy of the transpor-tation infrastructure, iii) efficient customs adminis-tration, and iv) adequacy of the telecommunicationsand IT infrastructure. However the ability toorganize the supply chain quickly and efficiently canbe easily thwarted by factors completely outside acompany’s control.Gereffi et al, 2003.13 McGregor et al, 20 July 2004.14 Nordås, 2004.15
The Global Textile and Garments Value Chain 172.5 Barriers to ProgressProblems endemic in the external business environ-ment will make offering a full package service andshort lead-times extremely difficult for developingcountries. A recent Carnegie Endowment studylisted some typical external barriers:16■■ Domestic government policies. For example,suppliers need quick access to specialty fabrics,yarns, and trims used in the production of mostapparel today. Yet many countries withoutadequate domestic supplies impose high tariffson imported fabrics and trims.■■ Lack of human capital. Developing countryproducers often lack managers with the neces-sary skills needed to provide full packageservices. These skills include translating appareldesigns into production patterns, and supplychain management know-how. Tertiary educa-tion in textile and clothing skills is oftenunavailable. The management skills required alsoinclude tacit knowledge not readily acquiredwithout experience in a business alreadyimplementing the higher value-added services.Telecommunications and IT impediments■■ .Full package production and fast replenishmentdemands adequate ICT systems to connect thebuyer and supplier. This requires a modern andreliable telecommunications infrastructure, andback-up from IT professionals.■■ Transportation infrastructure. Good roads,railways, ports and airports are needed tofacilitate swift order deliveries, especially fromcountries distant from their buyers’ markets.■■ Customs Administration. Bad customsadministration can disrupt the best-planneddelivery schedule. Inefficient bureaucracy andcorruption are usually the main culprits.Market access restrictions also form an impedi-ment, although sometimes there is scope forcountry governments to adjust policies accord-ingly. Rules of origin are often the most complexaspects of preferential tariff regimes. For example,some Bangladeshi producers find it difficult toqualify for preferential rates, which require thatBangladeshi value content exceed all other regionalcontent. The domestic textile industry is too smallto support the larger garment-manufacturingsector, but if fabric in imported from India, thenits cost will very often exceed the cut-sew-trimcosts within Bangladesh, thus voiding any claimfor tariff reductions. The supplier is helpless,because if it raised the on-site garment assemblycosts to solve the tariff problem, then the productwould lose its cost-competitiveness.Suppliers in Bangladesh have to contend withseveral of the listed barriers.17Telecommunicationsservices can be poor, and energy supplies unreliable.Wages are among the lowest in the world, but so isproductivity. The lead-times for products can be120–150 days, compared with just 12 days inIndia. But Indian suppliers face their own chal-lenges. The costs of international transportation tothe US are much higher than for China, and thetransportation time is twice as long on average.Poor roads within India cause too much time to belost in reaching the ports. The supply chains withinIndia can be extremely complicated because anestimated 80% of the clothing industry is com-posed of small, family-run businesses which lackmodern equipment.Addressing such issues is a complex business,involving both the public and private sectors.Technology is never the only answer, but it is one ofthe answers. The next section turns to the specificrole of ICT in the global textile and garments valuechain.Rangaswami, 2005.16 UNCTAD, 2005.17
18 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chain
The use of ICT is no longer an optional extra fordeveloping country manufacturers wanting tocompete effectively in a global textiles and garmentsmarket where speed-to-market and price are keydeterminants. The shift to “just in time” operationsis possible with the appropriate uses of ICT acrossthe length of the value chain. At the same time, asmargins are driven lower by global competition,ICT can help secure necessary cost savings in thesourcing and manufacturing process. The new-stylelean supply chain requires a very high level of co-ordination among manufacturers at the differentstages. This, in turn, depends on accurate and timelyinformation flows, from raw material sourcing andthe manufacturing process, through to delivery tothe end customer. A large amount of informationneeds to be collected, processed, transmitted andused in a value-enhancing way.Still, ICT is not an end in itself. It is important for asupplier in a developing country to appreciate thatinvestment in ICT will not alone solve a businessproblem; the purchase of a new software system doesnot immediately win new customers or retain oldones. The key is to establish the desired businessoutcomes, and only then to ask what role ICT hasin achieving these goals.One instructive survey of garment buyers’ futuresourcing plans asked respondents to rate theimportance of various factory-specific factors,including “Technological Level”. The result can beseen in the table below. It demonstrates that use oftechnology was of “critical” or “major” importancefor 60% of buyers, but that technology was just oneof several performance criteria which a factory mustsatisfy. Just as relevant, therefore, as the explicitquestion about technological level is the more subtlerole of ICT in improving performance in the otherhighly-rated factors, such as price and productquality. (The survey was conducted in the context ofwork on corporate social responsibility, which maySource: FIAS 2004)Table 2. Importance of Factory-Specific Factors in the Decision to SourceFrom or Invest in a Country—a Survey of Buyers.% Critical Major Moderate Minor NonePrice, Production Costs 40.0 53.3 6.7 0 0Health Safety Practices 20.0 60.0 20.0 0 0Product Quality 53.3 46.7 0 0 0Production Capacity 0 93.3 6.7 0 0Workforce Skills Productivity 6.7 80.0 13.3 0 0Technological Level 13.3 46.7 40.0 0 0Product Development Range of Services 6.6 46.7 46.7 0 0Storage Facilities Transportation Infrastructure 13.3 40.0 40.0 6.7 0Delivery Lead Times Rapid Re-orders 13.3 60.0 26.7 0 0Chapter 3The Role of Ict in the Textileand Garments Value ChainThe Role of ICT in the Textile and Garments Value Chain 19
20 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chainhave encouraged the very strong response regardinghealth and safety practices.)183.1 Information Flows and ICTA key question is the type of interactions for whichICT can be useful in the business processes appliedin the textile and garments industry. Some specificICT technologies can be used to secure the requiredoutcomes. Some of the hardware and softwareapplications are difficult to understand without ademonstration, and one of the first hurdles faced bya developing country supplier is the challenge ofsimply obtaining objective advice about whattechnologies might be appropriate.There are three key areas of communication betweenretailers and manufacturers for which ICT isimportant:19■■ Exchange of information including any datathat influences the action and performance ofother parts of the supply chain. This includessales data, inventory management, productionschedules and shipment details.Synchronized planning■■ so that all parties agreewhat is to be done with the information that isexchanged. This will create strategies forproduct introduction, forecasting and replen-ishment.Workflow coordination■■ which exploitssynergies between the different supply chainparticipants.A schematic diagram can best illustrate, in a verysimplified manner, some of the information flowsimportant for a developing country supplier thatcould be enhanced by ICT. Electronic applicationscan be used to improve performance at each stage inthe supply chain, and can also be used in the manage-ment of all activities across the supply chain. In eithercase, implementation is likely to improve communica-tion between several different players. It is thereforeuseful to consider the various phases in which ICTmight be introduced into a garment-making com-pany. Intentia, a Swedish company specializing in leansupply chain technology, defines three stages:20First, there is need for coordination and■■monitoring within the various stages of thegarment company production line so thatbottle-necks are removed and managers knowimmediately the status of any orders. This isusually achieved through an Enterprise ResourcePlanning (ERP) system (see Section 3.2). Oncea system is up and running for the productionline itself, the technology can be expandedfurther along the supply chain, for example bylinking warehousing and transportationprocesses to the ERP backbone. This increasesvisibility of delivery, cost and other executionactivities for the entire customer and supplierorder process within the supplying company.Other relevant ICT at this stage would includecomputer aided design (CAD), while relatedtechnologies could cover pattern making,cutting, and packaging/labeling.The next step would be the integration and■■synchronization of inbound and outboundorder management activities with tradingpartners. Purchase orders, for instance, are besthandled electronically. For this step, companiesmust be willing to share important informationwith immediate trading partners. Normallythis information is restricted to tacticalfunctions and is focused on short-term costsavings, operational efficiencies and customerservice. Inbound logistics would include thetransportation and customs clearance forfabrics and yarn. Outbound logistics wouldcover customs clearance, tariff and quotahandling, shipping and transportation for thefinished products.Finally, internet-enabled systems can be used to■■synchronize the network of supplier relation-ships into a single, scaleable “virtual” enterprisewith a fully integrated system between manufac-turer and retailer. Demand, manufacturing,logistics and storage data will be visible to alltrading partners in the supply chain. Theresulting network organization is capable ofimproved flexibility and responsiveness, andenables optimization of each component of thevalue network. The retailer or buyer will havefull access to delivery status information, so thatall orders can be tracked. The supplier willsimilarly receive information about inventorylevels for the relevant products, and data onFIAS, 2004.18 International Trade Centre, 2005.19 Adapted from McKee and Ross, 2005, with material from Knappe,20 2004b.
The Role of ICT in the Textile and Garments Value Chain 21actual sales of the products. Replenishmentorders may start to be automated, or mainly inthe hands of the supplier, and stock levels willbe kept very lean. Systems can be designedaccording to whether the product is a non-seasonal basic garment or a fast-changingfashion item.In parallel with these customer-supplier links, therewill be extended use of ICT by the supplier. Thecreation of a simple website brings new B2B(business to business) and B2C (business toconsumer) marketing opportunities for firms in far-flung locations, while internet access brings much-needed information about the fast-changing fashionmarket. Overall, ICT can facilitate the provision bythe supplier of a much broader range of services tothe buyer, including aspects of product develop-ment, design and online sourcing of fabric and trim.Thus ICT can help suppliers to take over widervalue chain responsibilities as part of movingtowards a full package solution.3.2 Specific TechnologiesA number of specific types of information andcommunication technologies are used in the textilesand garments sector, many of which were created forother industries and then adapted for the needs ofthe apparel value chain. An ICT system is usuallyconfigured for the particular needs of the user, butany technology must obviously be compatible withthe systems used by both customer and supplier. Afew of the most common types of system and typicalscenarios are briefly described here, together withsome recent advances which are likely to becomemore common in coming years.3.2.1 Electronic Resource Planning(ERP)ERP is a system for managing and integrating anumber of different business activities within acompany, including order processing, materialssourcing, manufacturing, account handling, andlogistics. It can be introduced in modules. ERP maystart off as an internal company resource, butinformation and data from the system can subse-quently be made available to the other players in thesupply chain, particularly the buyer.A functioning ERP system should provide access toa range of information and tracking data including:purchase orders from customers;■■purchase orders issued to fabric and trim■■suppliers;Figure 3. ICT-linked Information Flows in the Textile and Garments Value ChainSALES INFORMATION DIRECT ORDERFabricsRDClothingPhysical DeliveryCLOTHING VALUE CHAINRetailer MARKETDELIVERY STATUS INFORMATIONInboundLogisticsProductionOutboundLogisticsMarketingto RetailersSource: Adapted from a slide by Matthias Knappe of the International Trade Centre UNCTAD/WTO. The Changing Global TC Market and the role of “e” Applications to IncreaseCompetitiveness. Sao Paulo, November 2004.
22 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chainfabric inventory control;■■garment production line processes from cutting■■to finishing;status of particular work orders;■■work station usage/performance (for lines and■■individual workers);dispatch details;■■supplier inventories;■■customs documentation; and■■quota applications (if relevant).■■Such real-time information means that suppliers cansee how their part of the supply chain is performing.Customers can be given reliable progress reports,and productivity can be improved after identifyingbottlenecks. Staff time formerly spent collecting datacan be redeployed. Although employees often resentthe system’s ability to monitor individual workeroutput, the new data also means that conscientiousemployees can be identified and rewarded withbonuses.3.2.2 Electronic Data Interchange(EDI) and internet-based datatransmission systemsSupply chain management systems need communi-cation networks connecting a supplier with thecustomer. EDI has traditionally been the mostcommonly used technology, but web-based systemsare gradually taking over. EDI is a system whichtransmits documents electronically in a standardformat and syntax. Electronic transmission largelyremoves the possibility of the supplier introducingorder-entry errors, thereby reducing costs andavoiding mistakes. Orders can be placed at any time,on any day of the week.During the course of a transaction for garments, anEDI system can handle:availability inquiries;■■the Purchase Order from the retailer (or agent)■■to the garment supplier and/or fabric supplier;an Advanced Ship Notice from the fabric■■supplier;an Advanced Ship Notice from the garment■■manufacturer;a report on the status of orders;■■order amendments;■■generation of packing lists;■■generation and printing of barcode labels;■■automatic generation of an invoice;■■replenishment orders;■■provision of an audit trail covering the history of■■the contract.Recent web-based alternatives and XML (eXten-sible Markup Language) protocol systems offer thesame functionality as EDI but without the need fora dedicated system for a single customer, and aremore attractive and cheaper for small- and me-dium-sized suppliers in developing countries. Web-based alternatives are making progress, althoughmany major clothing retailers continue to use theirlegacy EDI systems. Wal-Mart is the most promi-nent retailer to have moved to internet dataexchange, and is rolling out the move through itssupply base.3.2.3 Integrated SystemsIn an integrated supply chain, all partners willideally have real-time access to information fromeach stage of production. This is possible using aweb-based transaction/project management system.One typical example is the ecTrack softwareapplication sold by Integrated SolutionsTechnology (IST), a technology business started in1998 by the Luen Thai apparel company. Thetimeline can include all stages from pre-productionto delivery. The supply chain partners collaborateto modify this plan until it satisfies all theirrequirements. An integrated supply chain enablessuch information to be available to both the retailerand the supplier, so that orders can be swiftlyadjusted.At the retailer’s end, point of sale information isclosely related to inventory management. A fullyintegrated system will include real-time, onlineinventory monitoring which is vital if stock levelsare to be kept low. The overall level of coordinationand collaboration in an ICT-enabled world dependson a clear definition of responsibilities and tasks.Once this is achieved a high level of tracking andservice is available, with information updated andshared in real-time.3.2.4 Logistics “e”-InformationThe transportation and warehousing of goods needsto be integrated with the rest of the supply chain ifbottlenecks and delayed deliveries are to be avoided,but standalone software packages are also available.Manifests and customs documentation can now be
The Role of ICT in the Textile and Garments Value Chain 23handled online in some countries, which can speedup the bureaucracy considerably. The logisticsinformation highway is a two-way street. The retailerand the supplier need to be able to track stock andshipments, but the firm’s logistics managers alsoneed to know about upcoming order flows. A web-based system can provide this access to all the supplychain players.3.2.5 Design and Virtual PrototypingICT also has an important and growing role in theearly design stages of a product’s evolution.Sophisticated computer aided design (CAD)software packages cover all stages of the process frominitial drawings and 3D simulations of garments,following on to pattern generation and productionof data outputs suitable for a computer-aidedmanufacturing (CAM) process.Virtual prototyping offers what its name suggests: adigital prototype rather than a physical prototype isused to simulate designs and fabrics, evaluatecomfort, and provide animations to demonstrate thegarment. The applications can assess the behavior ofthe garment’s fabric in different postures (sitting orrunning, for instance). This offers the opportunityto speed up product development and would greatlycut costs. Prospective designs can be shared quicklybetween a large number of people using internettransmission. These applications are too expensive atthe moment for a typical developing countrysupplier, but in the future may become morerelevant for companies producing garment samplesfor buyers.3.2.6 Online PortalsThe internet offers easy and cheap access to informa-tion for developing country manufacturers, whopreviously could be very isolated from global industrytrends. Apart from keeping in touch with patterns ofdemand, web access can also provide information ondevelopments in the relevant ICT technologies.3.2.7 E-CommerceThere are intrinsic limitations to B2B e-commercesourcing in the textile and garments sector becauseof buyers usually need to handle samples and touchfabrics before making their decisions. Even for thosecompanies which do not want to take the risk, theinternet provides access to details about the productson offer and their suppliers.As a seller, setting up a website to showcase acompany’s products is straightforward. Thus adeveloping country garment maker can use its ownwebsite to advertise its own products, while usingthe web to search the sites of companies from whichit can source yarn, fabric, and trim. Once relation-ships are established between a buyer and itspreferred suppliers, an internet-based system can beused for the negotiation of contract terms.3.2.8 Vendor Managed Inventory (VMI)A “lean retailer” wants to do as little as possibleapart from selling clothes. One way to achieve this isfor the garment manufacturer to take responsibilityfor checking and replenishing the retailer’s stocklevels—the so-called Vendor Managed Inventory(VMI). A high level of collaboration and trust isBox 3. The Worth Global Style NetworkOne of the main challenges for developing country suppliers is keeping track of global trends on the catwalk and in the fast-moving fashionindustry. The Worth Global Style Network (www.wgsn.com) was launched in 1998 as an online source of information about clothing andtextile trends around the world. Clients pay an annual fee for access to a range of information including reports about trade shows, marketoverviews, the latest trends, sector-specific intelligence and even photographs of thousands of shop windows. The information is deliveredquickly, often within hours of an event.Access to the site only needs an internet connection, and so is readily available to developing country manufacturers. By keeping up-to-speed with market developments, a supplier is better placed to know what buyers will want. Information on yarn and textiles is alsoprovided.Before the advent of ICT information systems, developing country suppliers were often at a disadvantage because they were unable toaccess timely information about developments in the textiles and garments industry. The internet has now brought such information to allsuppliers. In October 2005, WGSN was bought for £140m ($245m) by Emap, the publishing company, which hopes to double the sizeof the business.
24 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value Chainnecessary for such an arrangement, and it is onlyusually relevant for long-term business relationships.VMI needs a very high degree of systems integra-tion. The supplier receives information about salesand customer-country inventory levels through anEDI or web-based ICT link. Under VMI, enormoustrust is put in the overseas suppliers, both in termsof giving them access to market-sensitive informa-tion and control over inventory levels. This makesinventory management both easier and moreimportant: any supplier who allows a customer torun out of a popular item, or whose aggressivereordering leaves a lot of unsold stock, will lose bothbusiness relationships and income.3.2.9 Radio Frequency Identification(RFID)The RFID label—or “smart tag”—emits a radiosignal that can be picked up by a short range receiver.In the first instance RFID is being used to labelpallets and cartons, but as prices drop the smart tagscould be attached or incorporated into singlegarments. The technology opens up the possibility oftracking items at the piece level, which should leadto greater efficiencies in the supply chain and evenmore precise inventory control. RFID technologywill start to matter for any developing countrysupplier that is providing labeling and packaging.The data provided by RFID will be available in real-time and therefore offers a means to the most precisetype of monitoring of the supply chain—at leastfrom the point when the smart tag is fitted. This willbring great benefits to retailers, which in turn willexpect their suppliers to accommodate the newtechnology. However, managing the large amount ofdata which RFID makes possible will be a newchallenge.3.2.10 Mass CustomizationThe swift collection and transmission of data hascreated the potential for garments to be manufac-tured for an individual customer at an affordableprice—the so-called “lot size of one” or “masscustomization”. The process depends on the possibil-ity of being able to track an individual item throughthe supply chain, something that has becomepossible with ICT. Implementation usually involvesthese steps:A customer visits the store, where a body scan■■machine provides the necessary measurements.Alternatively, this can be done manually in store,or provided direct by the customer from self-measurement, and input to a website.The measurements and other details of the order■■(color, number of units etc) are transmitted byinternet to the supplier factory.Box 4. Reverse AuctionsOne ICT tool useful to garment retailers to shorten the apparel buying cycle and reduce purchase prices is the web-based “reverse auc-tion”. Pinault-Printemps-Redoute (PPR), the French luxury goods company, uses an auction platform developed by Agentrics, (formerly GNXand WWRE) to streamline its apparel buying process. The online auction process enables simultaneous negotiations with a number ofpotential suppliers, improves the consistency of information from these companies, and cuts out a lot of the paperwork and travel tradition-ally involved in sourcing garments.Auction coordinators within PPR first identify the products and services to be negotiated online. Requests for Bid and specification sheets foran apparel product are sent to a number of pre-selected suppliers, who must then provide a sample of the item to PPR by a specified date.At the designated time for the auction, all the invited suppliers log into a secure internet site and place their opening bids. The participantsthen reduce their bids incrementally, if they want to undercut a competitor’s lower price. The duration of the auction is fixed before the start,but the auction can be extended if someone places a lower bid just before the planned deadline.PPR uses reverse auctions to source seasonal basics, such as T-shirts and jeans, and also for more expensive garments such as jersey dress-es and suits. On average, purchase prices across all Agentric’s customers have fallen by around 10% as a result of using online auctions,and the apparel buying cycle time has reduced from weeks to days. From the suppliers’ point of view, the process makes the purchasingprocess more transparent for all the companies taking part, for example by enabling them to witness rival bids. The suppliers also benefitfrom very clear specification sheets and an open communication channel with the buyer.All that a supplier in a developing country needs to participate in a reverse auction is a computer with a reliable internet connection. Usu-ally the main challenge is not the technology, but the willingness to be involved in this new method for winning contracts. But participationin auctions may increasingly become a necessary feature of winning business.
The Role of ICT in the Textile and Garments Value Chain 25Made to Measure software generates the pattern.■■The fabric is cut and the garment manufactured.■■The finished item can be shipped direct to the■■customer or to a specific store.A turnaround time of less than a month is usuallypossible. Only suppliers with the appropriatetechnology will be able to support a retailer offeringthis option as it demands a swift information flowfrom the shop floor to the production line and thenback again.3.3 Barriers to EntryMany developing country garment producers weresimply unaware of how key information technolo-gies were changing the patterns of trade in textilesand garments. Recent research shows low onlineexchange of documents and only limited digitiza-tion and integration of commercial activitiesamong developing country producers. Somewhatmore common was “e”-collaboration in productdevelopment.21There can be several obstacles that hinder the uptakeof ICT in low-cost supplier countries, including:lack of knowledge about available technologies;■■low awareness of the expectations of buyers in■■the US and EU;inability to access capital to fund the necessary■■investment;shortcomings in the wider business environ-■■ment;low levels of existing IT equipment or incompat-■■ible systems;cultural barriers to information sharing; and■■Lack of awareness of upcoming technologies.■■Making the transition from a low-tech operation toa business that can be integrated into an ICT-enabled value chain is daunting without adequatesupport. Most businesses choose to implement anyelectronic processes in an incremental fashion. Thefirst step, which the majority of suppliers havealready made, is simply an e-mail account andinternet access. A reliable internet connection and apassword is all that is needed to gain access to acustomer’s internal network where orders can bemanaged electronically. Introducing ERP toimprove efficiencies on the production line can alsobe done in small, modular steps over an extendedperiod of time. And once this is achieved, the newinformation and data can be shared with custom-ers, and greater integration of the value chainachieved.For a virtuous circle to be attained, workforceinvolvement is of key importance. Problems canarise from opposition to changes in workingpractices and unfamiliar systems. Resistance is bestcountered by clear explanation that the newtechnologies offer the potential to improve businesssystems (thus safeguarding jobs by retainingcustomers). The level of apparent surveillance thatICT systems provide can often appear more of athreat than a benefit to employees at all levels of thecompany.The implementation of technology needs to be partof overall management goals, which include devisingbusiness strategy, nurturing customer relationshipsand overseeing production and product develop-ment. An appropriate management structure thusneeds to be introduced which will integrate the waythe company is organized with the new ICTtechnology. The traditional approaches to businessmust adjust. Considerable cultural and organiza-tional changes are necessary within companies(whether in a developed and developing country)that have previously seen themselves as isolatedentities, rather than as part of an integrated virtualextended business.Some supply chains are considerably more complexthan others, and a highly-mechanized manufacturerof commodity garments will find it more attractiveand simpler to implement some of the ICT systemsdescribed earlier than a low-tech producer of morespecialized products. In later sections, we look atseveral companies that have embraced new forms ofICT. But this first case study looks at a successfulfirm (which did not want to be identified) whosesupply chain demonstrates the considerable chal-lenges when implementing ICT with developingcountry suppliers.Knappe, 2004b.21
26 The Global Textile and Garments Industry: The Role of ICTs in Exploiting the Value ChainCase Study: Company XCompany X is a European retailer of women’s andchildren’s garments, including craft-orientedproduct designs demanding a high level of hand-work during manufacture.22The company’s saleshave almost doubled since 2000, which has meant acorrespondingly fast expansion of the supplier base.About 60% of the firm’s garments are now sourcedin China, a further 30% in India, and the remain-der from Turkey and Europe including some formerEastern bloc countries. The company’s main office isin London, with sourcing units in Delhi andShanghai.The company’s Indian operations provide a usefulillustration of how the use of ICT can be restrictedby the realities of a complex supply chain in adeveloping country. A complex garment may takeseveral weeks to manufacture, often relying on arange of time-consuming beading and embroideryskills. Unlike a commodity garment manufacturerwith an automated factory production line, thisfirm’s fragmented supply chain includes thousandsof village home-workers. In this context, ICT playsan important role for the Indian suppliers, but thekey technologies are mobile phones, digital camerasand e-mail, rather than cutting-edge softwareapplications.A selection of styles is made each month in Londonfor delivery six months hence. In India, the sourcingoffice will then liaise with the head offices of theIndian manufacturers to agree on designs, obtainsamples, and set timetables for each stage of gettinga product to market. An Indian supplier may haveits head office in Delhi, but will commissionproduction from around the country. This part ofthe manufacturing supply chain is therefore far fromtransparent.The Delhi sourcing office is on the internet andcommunicates with the Indian suppliers via e-mail,telephone and fax. The supplier head offices usuallyrely on mobile phones to contact their regional staffwhen they are out on the road, as mobile coverage isgenerally good. The handworkers are often invillages that do not have electricity, let alone fixedline telephones, and the suppliers must physicallytravel around the villages to deliver piece-work andpick up finished items.The dilemma for the company is that a factory withmore structured supply base would mean losing theindividuality and hand-embellishments of thegarments. Furthermore, relationships with suppliersin India in some cases date back more than 20 years.One technology that has proved very useful in Indiais the digital camera. If a supplier has a problem, ora question, then photographs can be taken of thevarious garment options and e-mailed around all therelevant offices for a decision. This saves time at akey stage of the production process, and avoids therisk of losing samples sent by courier.In the London office, a Product DevelopmentManagement (PDM) system is linked to a smallnumber of suppliers. Although at a very early stage,one Indian supplier is now also setting up a factorywhich will introduce some basic ERP technologyand Company X would be keen to see otherfactories start installing basic tracking systems. Aswith all garment retailers, the priorities are productquality and speed-to-market.The company has the following checklist for theattributes it looks for in a potential supplier:Design innovation. Most of the design work■■takes place in the UK, but some existingsuppliers now produce their own samples whichare couriered to London for inspection. Thecompany would welcome more design input as apotential source of competitive advantage.Ability to translate design sketches into actual■■garments.Procedures and management systems. This is■■becoming more important given the growth insales volumes, and the need to track orders moresystematically.Innovative thinking with regard to applications,■■such as computerized cutting systems andpattern management.The potential to grow capacity as Company X■■expands.In the post-quota environment, there are no plans totransfer garment production away from India toChina, although the mainland has won a large shareof new business as the retailer has expanded. Thetwo countries offer different strengths: China isThe company asked to remain unidentified as a condition of providing22 information it considered commercially sensitive.