1. Caserta, Italy 30 November 2005
21/04/2017
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. …for developing countries
Technical cooperation arm of WTO and UNCTAD for operational enterprise-oriented capacity building for trade promotion and export development.
…for developing countries

3. Context:
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

4. Characteristics of T&C industry in DCs
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

5. Structure Market The Role of Fashion Pressure for SMEs in the
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. Example : Liz Clairborne
2004 – Top 50 Vendors represented 80% of our volume
2010 – Top 25 Strategic Partner Suppliers will represent 80% of our volume
Source Liz Clairborne

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

11. 4. Pressure from Frequent Fashion Changes Demands Quick Response
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

12. 5. Pressure to Form Strategic Alliances
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

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

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

15. 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

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

17. Design & Product Development

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

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

20. SMEs need to diversify: marketing
To sell Fashion: SMEs need to take over VC Responsibilities i.e. Provide Services
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)

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

22. Number 2 service: Use of e- technology
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

23. 3. Assist buyers in selling fashion
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

24. The Fundamental Relationship: Matching the Elements

25. Small Customer – Fashion Product – Mass Factory

26. Mass Customer – Commodity Product – Small Factory

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

28. Result of Services: Ability to Produce Fashion Products & Quick Response
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

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

30. Summary: SMEs in DCs do mainly CMT but no fashion products
21/04/2017
Summary:
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
Mitumba: Trae grew from 0.4 billion $ in 1980 to 1.4 billion $ in Taking the low cost of 2nd hand clothing into consideration the quantities are large!
Welfare implications: Poor consumers gain; supply chai industry for 2nd hand clothing gains (importers, traders, merchants). T&C industry loses.
In order to reduce Mitumba:
Tax incentives for those who donate to charities;
b) Lack of information on the consumer/donator’s side n the mplications

31. The Fashion Process in DCs and IP
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

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