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Production channels
- 1. Bandhu Monisha Master in Fashion and Luxury Management, year 1 Evolution of Production Channels
- 2. Introduction In this article we will be talking about the evolution of production channels since the sixties of how manufacturing moved from the western developed countries to the mostly developing countries in Asia, which in turn contributed towards the economic growth of these developing countries. But the economic distribution was not uniform for all the countries and hence, there are western countries like Turkey and Mexico who did not enjoy equal economic growth which is causing the western countries to ‘re-shore’ or ‘near-shore’ their production bases from the Asian countries like China, India, Pakistan and Bangladesh. There are various reasons for this strategic decisions by the businesses like Burberry, Gucci, and Louis Vuitton. One of the reasons is the changing economic situation in the developing Asian countries as well as the economic situation in the neighbouring countries of the western developed countries. But all the reasons are not purely economic in nature, the changing customer preferences from cost effective to time effective businesses, importance of sustainability and circular economic model as part of the business practice which can be easier to perform with close proximity of supply chain and more transparency within the supply chain. The importance of labels such as ‘Made in Paris’, ‘Made in Italy’, and British and American made labels, which promises and regarded as superior quality and hence, in the mind of the customer justifies the premium prices, especially for luxury and premium businesses. For the article I have researched different brands and their manufacturing and production practises, the new innovative technologies developed for the changing demands and evolution fo the business practices from ‘push’ marketing strategy to ‘pull’ marketing strategy. I have also interviewed Vikas Sharma, who has over twenty years of experience working for export houses at various positions like quality controller, merchandiser, buying manager and area retail manager. I have also interviewed the owner of GDesigns, a boutique in Saket, Delhi in India. She follows the concept of production-on-demand and is working towards a sustainable business with zero-waste production and ethical management.
- 3. I. Major developments in production There were major changes that took place in the textile industry during the twentieth century. There was a radical change in the business model due to innovations in machinery, synthetic fibre, logistics and the most prominent due to internet age and globalisation of the businesses. According to my interviewee Vikas Sharma, the major development in production was the introduction of assembly line, which helped in making production more streamlined, faster with better control over the quality of the product, since one tailor is tasked with one part at a time, it makes him work faster with every other product with more precision. The other major development was with the internet age came software updates and ‘apps’, digital mobile applications, which help to keep in contact with the client/buyer at all times and with every step, which in turn helps in smooth working of the supply-chain. It also helped bring in more clients from all around the world, internet helped to streamline the communication channels around the world. Introduction of new fibres There was an increase in the use of synthetic fibres which steadily increased throughout the twentieth century. Polyester became very popular fibre and by the late nineteen seventies, more polyester was sold in the United States than cotton. By nineteen nineties around forty five percent of world fibre production consisted of artificial fibres. Labour costs During the twentieth century the manufacturing and production moved from the developed countries to developing countries due to cheap labour costs. Global production shifted towards China, India, Bangladesh, Korea, Cambodia, Pakistan and Vietnam, with China, India, Bangladesh and Pakistan becoming the largest exporters along with Germany and Italy. China currently is the leading exporter of textiles and clothing items with thirty three percent for textiles and thirty eight percent for clothing. Globalisation The expiration of MFA (Multi-Fibre Arrangement) in 2005 opened up opportunities for countries with low labour costs and freedom for international buyers to source textiles and apparel products from any country. Hence, the success of businesses depended mostly on the cost competitiveness. With the collapse of Soviet Union in 1989 and the end of cold war in 1991, the world became more inter-connected, trade and investment increased, while barriers on migration and cultural exchange relaxed. During the nineteen nineties Marks and Spenser, UK’s most reliable procurers of British made fashion decided to licence production overseas. It was during that time the once dominant UK clothing sector suffered its greatest decline.
- 4. II. Time versus cost as a factor for ‘re-shoring’, ‘near-shoring’ and short channels Over the past decade, US and European companies have off-shored their manufacturing to low cost labour countries mostly in Asia like China, India, Bangladesh. But in today’s market off-shoring is incompatible with the need for speed, for consumers and clients speed beats marginal cost advantage. Shipping inventory from China via sea to European markets typically takes around thirty days, the long lead time eliminates any possibility of flexibility. The manufacturing labour costs gap between off-shore countries like China and the near- shore countries like Turkey for western European market is shrinking. In 2005, the hourly manufacturing labour costs in Turkey was more than five times higher than in China, it reduced to 1.6 times by 2017. Mexico a near-shore market for the US offers lower average manufacturing labour costs than China. It is not surprising that seventy nine percent of respondents in the survey conducted by McKinsey believed that a step towards near-shoring for speed is highly likely by 2025, especially as the economics of near-shoring are starting to add up. With reducing time to market, companies can work in close proximity to customer demands and replenish stocks as and when required, without the need of over-production. The designs that are selling can be worked on quicker, produced and delivered while the ones not selling can be eliminated, all within a single season. Earlier, we had a six month cycle which was considered fast, but now a six weeks cycle or even less by some retailers are at play. The many online start-ups can replicate trends and bring them to customers within weeks. In the next decade retailers need to speed up and transform to a demand-focused model.
- 5. Automated Sewing Companies like Sewbo and SoftWear are revolutionising garment production machinery, using robots to fully automate sewing. ‘Sewbots’ or automated sewing machines could drastically reduce the need of human garment workers. Automated Finishing Levi’s laser technology drastically cuts finishing time for a pair of jeans from twenty minutes to ninety seconds. For their process Levi’s designer creates a digital image of a pair of distressed jeans which contains instructions for the company’s patented laser technology to decipher, the laser replicates the design onto the jeans. This technology allows the company to produce unfinished jeans in Asia and send them back to near-shore countries for finishing. This helps them to test different styles and quickly produce and market the best sellers. Automated Knitting Nike’s Flyknit product line uses computerised knitting process that has reduced material waste by eighty percent. Knitting innovation supports customisation, single-item production and new factory-in-store concept.
- 6. Localisation of manufacturing Louis Vuitton operates factories across Europe and California, where products for local stores are made and significant repairs are done. Louis Vuitton also streamlined its supply-chain by adopting ‘just-in-time’ method which reduced the production time of a handbag from eight days to a day. Instead of setting up an assembly line, they clustered craftspeople in groups that work on several different projects at once. According to the interviewee Vikas Sharma, there will be an increase in specialised production units to match the current rhythm of specialised brands and retail outlets. For example, currently in India we do not have specialised labour in the garment sector like for couture or fast-fashion. But we do have artisans and craftspeople, for example, embroiderers who have specialised skills in specific embroidery techniques passed down from generations, this is highly beneficial for luxury sectors.
- 7. III. Changing demands of customers The internet age brought about e-retailing which a customer uses to browse various markets simultaneously. Also, with social media the trends are now more often established by consumers as opposed to retailers and editors. Also, consumers are giving importance to the design and product development processes. There is a need for switch from ‘push’ to ‘pull’ model, a model in which products are developed, tested and produced on demand. Li&Fung test the sale of product before even producing them. They use virtual 3D rendering and start production process after the consumer orders are received. Some online companies like Boohoo and Lesara are emerging as ‘ultra-fast’ fashion players, overtaking the traditional fast-fashion companies with speed-to-market and growth rates. They have short product development calendars, sourcing of small batches and near-shoring are key for their success. Automation and data analytics have enabled start-ups to adopt agile made-to-order production cycles. The result is just-in-time production, reduced levels of overstock and an increase in the importance of small-batch production cycles. Supermarket model With the seismic shift to ‘pulled’ market strategy where market is based on the actual demand rather than being ‘pushed’ in the market based on best guesses and forecasts, there is an accompanying ‘supermarket’ model, in which inventory is only replenished when it is consumed. Companies like ASOS, Boohoo and Zara follow this model. Micro-factories Micro-factories are used in design studios to speed up the prototyping or on the shop floor to provide customisation and zero-waste. Berlin based Lesara, produces ninety percent of products in-house and has a ten day turnaround time for identifying trends to putting the in the market. Production-on-demand Adidas operates ‘speed-factories’ in Atlanta and Germany, together they are expected to produce about a million pairs of running shoes a year by 2020, using digital design to enable mass customisation. Uniqlo’s parent company, Fast Retailing, is working to produce on-demand knitwear through its partnership with Shima Seiki. Shima Seiki produces seamless knitwear which requires no production labour and is anticipated to be used for mass customisation. My second interviewee GDesigns follows a mixture of on-demand and micro-factory model, for their brand they buy fabrics in bulk and keep a few samples at the shop of different sizes, when a customer comes and needs an alteration they have a tailor at the shop floor to alter the product immediately. If the size is not available they can get it ready and sent to the customer within three to five days or even less in an emergency situation, the reason for this is because they keep the fabric available. This process also helps them to do customisation according to customer requirements, like for sleeves, collars, length and so on. The benefit of having a shop in India is the availability of low labour manufacturing cost and the abundance of skilled labour availability.
- 8. See-now, buy-now Arjé sells via ‘see-now, buy-now’ model, by investing in fabric and then designing into such fabric. They produce a set amount of unit each season at their partner factory in Italy, some are sold to retailers and the rest is sold via direct channels. They can produce new units with a turnaround of six to ten days. While founders Bessie Afnaim Corral and Oliver Corral buys the fabric upfront, it has less risk involved since fabric can be used over the years unlike back- stocking inventory. Direct-to-consumers New York designer Misha Nonoo, switched to direc-to-consumer model in 2016, she established a core collection of styles which are only updated every year or so. The production of piece by piece product has reduced at least a thirty five percent waste produced by the label. IV. Re-shoring as part of ‘country of origin’ Burberry, an iconic British clothing brand has continued to re-align its business towards a brand-led and customer-centric model. Burberry re-aligned its supply-chain activities by rebuilding manufacturing activities back in the UK, to support its brand repositioning itself as quintessentially British. The close proximity of supply chain with design and manufacture enables the promise of quality. This strategy has contributed towards increase in brand values as well as revenues. According to a survey by EEF/ Squire Sanders, one in six companies re-shored production back to the UK between 2011 and 2014. Re-shoring is an important strategy by firms to capitalize on the use of ‘country of origin’ as a competitive base, especially in high-end and luxury markets. Companies like Barbour, Burberry and Mulberry have re-shore part of their production processes in response to the growing demand for British made fashion. The brand appeal of ‘Made in Britain’ is a marker of authenticity, superior quality and of tradition in luxury fashion, which in turn, contributes to justifying premium pricing. Fratelli Rossetti, a luxury Italian shoe brand has a vertically integrated supply-chain for its heritage products. It outsources manufacturing of other products to Italian firms in the same district in order to preserve the authenticity of ‘Made in Italy’ label. Louis Vuitton and Chanel adopted a ‘centralised’ supply chain strategy that consists of in- house sourcing ad centralised distribution channels. Gucci’s repositioning of itself as a luxury brand was accomplished by maximising internal controls of product sourcing, distribution and brand communication. The benefits of co-location of design and R&D (research and development) with manufacturing in terms of innovation is very high.
- 9. V. Sustainability Near-shoring and more automated production models have the potential to support the adaptation of circular economy and further support sustainability, with on-demand production and innovations in knotting technology minimising waste. Stacy Flynn, CEO of Evrnu, is one of the pioneers of circular fashion, her ground-breaking technology breaks down cotton waste into liquid and then converts it into a stronger and higher performing fibre. A recent Adidas and Stella McCartney collaboration included a hoodie made from Evrnu’s regenerated cotton. Next, her team is working on breaking down and rebuilding polyester and then, bio-based and engineered fabric likes like rayon and Tencel. A vegan shoe brand Thousand Fell offers a close-loop model for sneakers where instead of throwing them out, the customer sends them back for recycling and get credit for a new pair. In January 2018, the Global Fashion Agenda (GFA) 2020 Circular Fashion Commitment was announced. Sixty four luxury and fast fashion companies signed the agreement to take steps towards circular fashion industry, it included Zara, H&M, Adidas and Kering.
- 10. Conclusion Fashion industry is considered one of the most polluting industry, with over-production, use and throw mentality of customers towards garments, cheap and non-biodegradable use of textiles. The industry have also been linked to unethical practises like low wages, unsafe environment for workers, child labour and health related issues due to over-work affecting everyone from managers, creative directors to manufacturers and labour. The customers are well-informed and demand a better future for the fashion industry. They prefer more transparent supply chain and ethical practises within the business model. The customers prefer the brands they are buying to have the same convictions and values as them. With tragedies surrounding the fashion industry, customers as well as businesses have become more vigilant and demand equality and decency for everyone involved. There is a new scope for the textile industry with the invention of circular textile materials made from various products like coconut, lotus leaves, banana and many other, which are compostable. The world is more connected that before and with rise of customisation and individualisation, brands are becoming more specialised to cater to the changing demands of the consumers, especially with their production process, logistics, supply chain and even designs and this trend may lead towards increase in country-wise or area-wise specialisations.