“Apparel industry is a traditional industry with long history. There are many things replaced by digital world, seemingly only smartphones and clothing are irreplaceable, but the former have shorter life cycle. Clothing can be sustainable. We should ask how to do it?” said Banny Yu, at the seminar on “Achieving Sustainable Development of Hong Kong Fashion Industry” during Hong Kong Fashion Week for Fall/ Winter this year.
His answer is “6 Vitamin C”, which by ranking includes cost, country, capacity, capability, compliance and countability.
Cost: labor cost in Asian countries grows rapidly
Money is always the first priority over customers purchasing decision. Proper pricing affiliate with efficient cost management, including managing cost of labor, materials, logistic and sourcing, is challenging to apparel manufacturers due to the growth of production cost of apparel sector in many Asian countries in recent years, Mr Yu explained.
According to the McKinsey 2013 apparel survey cited in Mr Yu’s presentation, 76% of respondents expect 1.7% cost increase in the coming year. He doubts it was underrated because of rapid growth of the labor cost in several Asian countries, such as the minimum wage of mainland China was increased by 15% to 18%, Cambodia increased by 40% to 50%, and Bangladesh increased by 200%.
Although we cannot stop the wage growing, Mr Yu stressed that manufacturers can choose their factories location by studying where is the place with lower labor cost.
Country: buyers decrease sourcing value from China
Regarding another vitamin C, country, Mr Yu said Global Sourcing Strategy is widely adopted by many apparel producers, and geographic factor is influencing the sourcing cost management. He cited the McKinsey survey as saying 50% buyers will revise their supplier source bases for lower sourcing cost concern, and 72% of buyers decrease their sourcing value from China and will shift to other countries due to the rising sourcing cost there in recent years.
Free Trade Agreements, meanwhile, is a notable factor in production cost management in textile industry. It is critical to the decision-making of which country to be production base and what kind of products the manufacturers will do. Mr Yu explained, for example, with Trans-Pacific Partnership (TPP) agreement, Chinese investors are flocking to Vietnam which will enjoy duty-free benefits.
Apart from money issue, business regulation, infrastructures and political issues of a country play important roles. The most notable cases in recent were worker safety concerns in Bangladesh and the garment strike in Cambodia, which were set back to the nations’ apparel industry and caused uncertainty to their economic development.
Besides, transportation and logistics is a big part in production cost, so proximity of the production base cannot be ignored to decide the plant’s location.