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The Value Chain in T&C Industries in Domestic and International Markets

This presentation discusses the importance of small and medium-sized enterprises (SMEs) in the textiles and clothing (T&C) industries, specifically in the fashion sector. It explores the market pressure faced by SMEs, the need for diversification and the role of SMEs in providing services along the T&C value chain. The presentation also emphasizes the adoption of e-technology solutions and the need to match customer requirements and factory capabilities.

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The Value Chain in T&C Industries in Domestic and International Markets

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  1. The Value Chain in T&C Industries in Domestic and International Markets The Role of SMEs in the T&C Industries; The Economics and Business of Fashion Presentation by Mr. Matthias KNAPPE Caserta, Italy 30 November 2005

  2. Technical cooperation arm of WTO and UNCTAD for operational enterprise-oriented capacity building for trade promotion and export development. …for developing countries

  3. Global T&C trade: 453 billion $ (clothing 258 bio $) T&C: 7% of global merchandise trade LDC share of world clothing trade: 5% Many DCs & LDCs depend on clothing exports or regard clothing as a future export sector, but not the domestic maket WTO: T&C is a normal sector Context:

  4. Most LDCs have no integrated T&C industry (clothing exports = 8 times textile exports) SMEs mainly produce clothing and not textiles Poor market diversification Poor product diversification Mainly CMT/maquila: « full-package » to be developed (incl. product dev. & design) Fashion for the domestic market is minimal Characteristics of T&C industry in DCs

  5. Structure Market Pressure for SMEs in DCs The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services

  6. 1. Prices are falling Source: Textile Outlook International No. 116 March-April 2005

  7. EU: Import Price Development for Clothing

  8. 2. Consolidation (at 4 levels): what are the consequences for SMEs? Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002

  9. Full Service Buyers requirements Manufacturing & Sourcing & Product Development Manufacturing & Sourcing Manufacturing 3. Move towards a Service Industry: Have SMEs the vision? Value-Added Time 1970 2005

  10. From 2 to multiple selling seasons More fashion products with short product life cycles vs. basic products with regular replenishments Quick response: a « puzzle » of many variables along the value chain This « puzzle » needs to be solved first Difficult with practices establised over decades Stop « firefighting »: new business strategies, processes & procedures 4. Pressure from Frequent Fashion Changes Demands Quick Response

  11. Quota system forced retailers to take over value chain responsibilities These responsibilities be given to suppliers To do so trustworthy partners are needed Virtual vertical operations: integrated system between manufacturer and retailer 5. Pressure to Form Strategic Alliances

  12. Prices are falling Consolidation Move towards a service industry Frequent fashion changes Strategic alliances Summary: Market Pressure

  13. Structure Market Pressure for SMEs in DCs The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services

  14. The T&C Value Chain Fibres Yarn Fabrics End-Users Man-made Ginning Carding Combing Spinning Yarn dying Weaving Knitting Bleaching Dying Finishing Apparel Home Furnishing Natural Industrial Goods

  15. Sales (+Marketing) Outbound Logistics Customs-GSP/Quota Export Clearance Manufacturing Inbound Logistics Customs, Import Clearance Sourcing Buyer – Manufacturer Strategic relationship Product development Design & Sketches Market Research Fashion = Quick Response = Services

  16. Design & Product Development

  17. Multiple points of communication Limited process Visibility Not centralized Multiple versions Duplication of efforts Lack of control Print Houses Testing Labs Dye Houses Converters Suppliers Factories Agents Mills Reality: Complex & Complicated Value Chain Source: Liz Clairborne Source: PTC

  18. Structure Market Pressure for SMEs in DCs The Role of SMEs in the T&C Value Chain Fashion Products: a Result of Services

  19. SMEs need to diversify: marketing Everybody offers: good quality, competitive prices & on-time delivery Therefore, provide services buyers want: 1) make and send the garment quickly to my store (participate in the fashion VC) 2) Organize everything and I’ll pay you (service) To sell Fashion: SMEs need to take over VC Responsibilities i.e. Provide Services

  20. Material Sourcing: No.1 service demanded by buyers Cost structure of a woven shirt up to the FOB point 75% of cost = sourcing

  21. The new trading environment forces the adoption of « e » solutions along the VC Trend is led by US buyers and HKG trading houses, followed by EU buyers E-applications are used throughout the value chain; trend: full VC « e » integration Quick responds demands « e »: design and logistics Number 2 service: Use of e- technology

  22. The need to understand: markets, buyer requirements, buyer’s customer requirements, and competitors Need to diversify product range,possibly markets Need to match factory size, customer size and product 3. Assist buyers in selling fashion

  23. The Fundamental Relationship: Matching the Elements

  24. Small Customer – Fashion Product – Mass Factory

  25. Mass Customer – Commodity Product – Small Factory

  26. Small Customer – Fashion Product – Small Factory 300 Machine Factory Giorgio Armani Cashmere Men’s Jackets

  27. Understanding of: the market, customer & customer’s customer Material sourcing: prerequesit to understand & engage in fashion production E-business: prerequisite for fast delivery Partnership: prerequisite for engaging in fashion products Matching the elements of a partnership Result of Services: Ability to Produce Fashion Products & Quick Response

  28. Structure Market Pressure for SMEs in DCs Fashion Products: a Result of Services The Role of SMEs in the T&C Value Chain

  29. SMEs in DCs do mainly CMT but no fashion products Post-quota situation puts pressure on SMEs to take over VC responsibilities Moving into fashion is a process, starting with material sourcing Fashion products: a result of services Industry consolidation competitive pressure implications on IP Summary:

  30. Most design does not start from original concept Use of existing info (design, colours, fabrics) Shopping the stores (& cutting & copying) Visit fashion shows (and cutting & copying) Possibilities in niche markets for national, ethical & folklore design Exploit fashion potential: collaboration of SMEs in the north and south The Fashion Process in DCs and IP

  31. THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact: Matthias Knappe, Senior Market Development Officer Knappe@intracen.org

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