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    © International Trade Centre, International Trade Forum - Issue 3/2005

    Photo: Photodisc

    Buyers are pushing clothing manufacturers to use information technology to speed up delivery, lower costs and improve services.

    Before rushing to invest in technology solutions, manufacturers should piece together the value chain "puzzle", from fabric mill to retailer.

    Information technologies are changing trade in textiles and clothing. A few years ago, a cheap product was incompatible with fast delivery. Clothing manufacturers produced either standard goods in bulk at low prices with long lead times, or pricey fashionable items with short time-to-market. If buyers wanted faster delivery, they had to pay a higher price. With the evolution of e-solutions, this has changed.

    Many developing country producers are not aware of these changes and what they imply for participation in global, buyer-driven value chains. They don't always realize that the ability to adopt e-applications is a key survival tool in the post-quota era.

    Major international buyers are shifting to new ways of buying, and developing country exporters have to adapt. As quotas cease to restrict buyers' choices, their sourcing requirements and patterns are changing. Looking to get the most benefit from quota-free markets, shorten lead times and reduce expensive inventories, larger buyers are exploring ways to connect the entire value chain electronically, including sourcing of fabrics and accessories, garment manufacturing, and sales to the final customer. This goes hand-in-hand with an increased demand for service-oriented suppliers.

    Lean retailing

    Retailers are concentrating on their core business, which is selling to the end consumer. Many are turning to "lean retailing", or cutting down inventory to the minimum, as a means to achieve this. Reducing stocks requires fast and on-time delivery from the manufacturer. Shipments become smaller but more frequent, with point-of-sale data transmitted directly to the manufacturer, who gets alerted when to produce and ship garments.

    Raising the bar for manufacturers

    More and more, clothing manufacturers are becoming service providers to retailers. With lean retailing and the evolution of electronic solutions, retailers give up more responsibilities, which manufacturers who want to remain competitive have to take up.

    From product development to fabric and trim sourcing, these developments create new challenges for garment manufacturers in developing countries, on top of those they faced before. To stay competitive, manufacturers need to find innovative solutions that go beyond "just" manufacturing good-quality products. In many cases, information technology or "e" can help them become more efficient and offer new services.

    Adopting "e" successfully

    The use of e-applications per se does not guarantee success. To adopt e-applications successfully and develop fruitful long-term relationships with major buyers, many manufacturers will have to move from a "fire-fighting" approach to a more systematic way of doing business. An important success factor is to reorganize the company's business and management structure, and then decide where to apply e-solutions along the value chain.

    Manufacturers need to develop business processes to implement and manage e-technologies efficiently. For example, to provide buyers with a "quick response", manufacturers have to analyse the complex problem of what is their optimal time-to-market. Quick response is like a puzzle made up of the entire value chain, which manufacturers should piece together before introducing e-solutions. They can learn from exporters in other developing countries that have already found ways to integrate their systems with those of customers and suppliers, opening up long-term perspectives.

    Textile and clothing exporters need to view e-business in its broadest sense and not as an alternative term for online sales. E-applications can increase efficiency and reduce costs and lead-time. They are already widely used in the market to improve customer relationships, forming part of a larger approach to customer satisfaction.

    Trends to watch

    Over the next three to five years, the main trends affecting developing country manufacturers will not be in production technology, but in technology to link the value chain. The reason is low labour costs in most developing countries, which offset the advantages of e-solutions in manufacturing.

    One key trend is to develop e-solutions in partnership with buyers, or simply take over their system. Close partnerships start with sharing information, advance towards synchronized planning and reach an optimum when workflow cooperation between buyer and supplier is automated. Electronic data interchange (EDI) systems are the most common applications to ensure that the retailer is never out of stock. However, as the JC Penney-TAL example shows, the tendency is increasingly towards vendor-managed inventories, where manufacturers such as TAL take over stock-replenishing responsibilities for retailers like JC Penney.

    Other e-solutions gaining ground are integrated design and product development. Virtual garment prototyping and real-time "try on", which simulate the fit and appearance of new garment designs in two or three dimensions, reduce research and development costs considerably.

    Reverse Internet auctions, as described in the Newage case study, demonstrate both the bargaining power of retailers and the fact that manufacturers in developing countries have to adapt quickly to newly introduced e-tools if they want to keep their customers. Using the Internet for sales is not yet an option for developing country clothing manufacturers, as they are located far from their markets with their different habits, tastes and languages. For countries with large domestic markets such as Brazil, China and India, selling directly to consumers will be an option in the future.

    Sourcing could be an area for e-solutions. In this case, the clothing manufacturer would be the buyer. However, clothing manufacturers face powerful business partners in textile mills. Around the world, textile mills are consolidating and growing. Thus, when sourcing fabrics and trims, clothing manufacturers have to contend with stronger bargaining power on the other side, which restricts a proactive development of e-solutions.

    Finally, logistics - including organizing shipments - are becoming more important, especially with the further development of lean retailing. Introducing software solutions that help buyers to know exactly where their merchandise is, are important services that increase the competitiveness of manufacturers.

    In textiles and clothing, understanding the changing market and the role of e-solutions is an unavoidable challenge for manufacturers of all sizes who wish to stay in the game.

    Matthias Knappe is ITC Senior Market Adviser on textiles and clothing. For more information about e-applications in textiles and clothing, see ITC's new publication, Get Connected (to order a copy visit ITC's e-shop at http://www.intracen.org/eshop), or visit ITC's site at http://www.intracen.org/textilesandclothing