Stakeholders eye long-term solutions

PUBLISHED : Wednesday, 16 March, 2011, 12:00am
UPDATED : Wednesday, 16 March, 2011, 12:00am

Although the global fashion industry continues to thrive, the sector's long-term sustainable development faces many challenges, ranging from the rising costs of raw materials and labour, to the diminishing supply chain.

To discuss these issues, stakeholders from around the world will gather at the annual Prime Source Forum (PSF), an ideal platform to explore concerns that have an impact on the industry, to formulate long-term strategic solutions and to identify opportunities for growth.

Sponsored by Swarovski Elements, this year's PSF takes place at the Convention and Exhibition Centre from March 30 to April 1, and is organised by UBM Asia, APLF and SIC Group.

Fluctuations in commodity markets and the surging prices of some raw materials pose a major challenge to the global apparel industry, according to Thomas Nelson, managing director and vice-president of global product procurement for VF Asia, a subsidiary of global fashion company VF Corporation. 'Cotton was in the US 50 cents [a pound] range in 2010 and is now above US$2,' he says. 'We spend more time researching and monitoring commodity pricing to ensure we are getting the best deals.'

Echoing Nelson's sentiment is Joachim Hensch, president of the International Association of Clothing Designers and Executives. 'The rising cost of raw materials has caused a lot of movement in the manufacturing areas,' he says. 'Many buyers are forced to find new companies to make up for the price increases to keep retail prices stable.'

Hensch, who is also the head of the pattern design department at Hugo Boss, highlights the possible hidden costs incurred in building relationships with new suppliers. 'Many relationships previously built [between the buyers and suppliers] are replaced by relationships with new partners,' he says. 'I wonder if all the parties involved are aware of these hidden extra costs and the risk of compromising the quality of their products.'

Honorary chairman of the Textile Council of Hong Kong and CEO of TAL Group Dr Harry Lee says the garment manufacturer offers more value-added services to help its customers mitigate rising cotton prices. 'We initiate collaboration with our customers and help them manage their inventories, including accessories purchased from other suppliers,' he says.

'Some of our customers have agreed to close their back-office operations and let us help them handle the sales trend forecasting and purchases of items from other suppliers. We help them get the right items so that they are sold quickly.'

Meanwhile, the global apparel supply chain is fast diminishing, with the mainland accounting for almost 70 per cent of the world's supply. Asia has experienced robust economic growth since 2009 and this has driven up production costs. 'The cost of manufacturing in China increases at an annual rate of 10 per cent and the increase in Vietnam is 12 per cent,' says Ranjan Mahtani, the CEO and managing director of the Epic Group, a leading garment manufacturer. 'These countries have become increasingly expensive. Suppliers have to have huge capital outlays to operate. The big are getting bigger, squeezing the smaller players out of business.'

The global industry is closely watching the economic development of the mainland. If its economy continues on its strong growth, some workers will become reluctant to work in garment factories for 10 to 12 hours a day and might leave in search of other opportunities. This could lead to a shortage of labour, Mahtani says, which will have an impact on the supply chain.

Because of the gradual appreciation of the yuan, coupled with economic growth and the WTO initiative, the central government does not provide the same level of subsidies to state-owned factories as it previously did. 'If China is getting progressively [more] expensive, the supply has to go somewhere else,' Mahtani says. 'The shifting of sourcing from China to other countries, mainly Bangladesh, Cambodia and Vietnam, is at an annual rate from 2 to 5 per cent.'

PSF has tailored its programme to feature workshops and open discussions on these pressing issues. The forum will focus attention on global standardisation and examine aspects such as sustainability, compliance and product safety. Experts will update delegates on the latest technologies developed to improve the efficiency and cost-effectiveness of the supply chain.

With the diminishing global supply chain becoming a major concern, the forum will look at the challenges and opportunities of supply chains in the decade ahead. Industry veterans will outline their strategies to deal with currency fluctuations, and provide insights into surging production costs and rising wages. The speakers are expected to challenge participants to consider alternative sourcing hubs to the mainland.

PSF will explore the development of new materials designed to tackle rising prices of raw materials. It will also look at ways to nurture and retain talented individuals responsible for the revival of upscale hand-made products in Europe and the United States. International brands, such as adidas, Guess and Hugo Boss, specialists in sourcing, new industry-focused technologies and academics, will share their expertise and experiences at the forum.

Nelson, who is also chairman of Global Apparel, Footwear, and Textile Initiative (GAFTI), says it is vital to have global product safety standards to ensure companies ship garments that meet the expectations of consumers. 'If product standards differ from country to country, or change continuously, it will be very difficult to ensure the standards are met 100 per cent all the time,' he says. 'This could create a situation in which fines are levied or inventories destroyed.'

An estimated US$2 billion is spent policing factories for compliance issues annually. The industry needs to be assured if the factories they work with are really compliant, or whether they fully disclose the relevant information and will be in business for the long term. 'We need common metrics, benchmarks and goals,' Nelson says. 'We need to work together to create a 'proactive' compliance plan which requires factories to have constant improvement in areas, such as working conditions.' GAFTI focuses on the standardisation of product quality and safety, compliance, green issues and other areas in the production of clothing and accessories.

Hensch points out that consumers are becoming better informed, particularly those buying more upscale products. 'The trend of customisation challenges our industry because it affects the production lead times and capabilities of the supply chain,' he says.

'The grading system has become more locally adapted. Not only do customers want the brands, they want the clothes to fit properly as well. This trend calls for more individualised manufacturing planning and more in-depth product and market-specific knowledge.'

Mahtani believes PSF takes place at a critical time for the industry. 'For the first time in 15 years, the garment sector faces a challenge to raise retail prices by between 10 and 15 per cent,' he says. 'The sector went through 'deflation' with retail prices on a downward trend worldwide for the past 15 years.'

Hensch says PSF is an excellent base to build awareness of the challenges. 'You will find 'round tables' with experts. It also helps expand our networks.'

'Everybody at PSF shares information and experience,' Mahtani says. 'Through this, the less globalised suppliers and customers can get better market knowledge and formulate better strategies.'

Meanwhile, the chairman and chief executive of Ace Style Intimate Apparel, Dr Andrew Sia, will be speaking about sourcing, training and retaining talent in the industry on April 1.