Chapter 10 Ch.10: Fabricating Fashion: The Textiles and Garment Industries

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Chapter 10 Ch.10 Fabric-ating Fashion The
Textiles and Garment Industries

• Presentation by Erin Friio, Clark Platt and Lisa
  Ziebart

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Historical background

• Original industry of 1st Industrial revolution of
  18th and 19th centuries in Britain.
• Lancashire - dark, satanic mills and sweatshops
• Manchester Cottonopolis
• Focused on simple technologies and low-skill
  labour
• First manufacturing industry to take a global
  dimension, most geographically dispersed
• Ex. NICs of the 19th century

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Textiles vs. Garments

• Textiles (process based)
• consists of two major operations the preparation
  of yarn (spinning) and the manufacture of fabric
  (weaving/knitting, finishing)
• Garments (finished product based)
• Designs, preparations, production

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Garments vs. Textile

• More organizationally fragmented
• Less sophisticated technologically
• International subcontracting
• Role of the retailer is growing Buyer-driven
  economy

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Textiles-Garment Production Chain

• Each stage has specific technological,
  organizational and geographical characteristics.
• Stages performed by firms of all sizes, but
  larger firms have increasing importance due to
  capital intensive textile industry
• Textile industry has 3 outputs, most important
  Garments

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Global Shifts - Production

• Employment is used to measure global production
  of textiles and garments.
• Today 20 million workers employed worldwide
  (countless remain unregistered)
• Becoming more important to the developing and
  less-developed countries vs. older industrialized
  economies
• Developed Employs the sensitive segments of
  the labour force women and ethnic minorities
• Developing Employs young females in conditions
  similar to the sweatshops and mills of the 19th
  century.

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Production Contd.

• Textiles
• China (gt 6 million) and India (1.5 million) VS.
• US (800,000) and Japan (600,000)
• Garments
• China (1.6 million)
• US, Russian Federation and Japan far behind

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Global Shifts - Trade

• General trends
• Decline of developed country producers and shift
  of production to East Asia, Mexico, the
  Caribbean, Eastern Europe and the Mediterranean
• More in the garments than textile industry
• Taking a closer look

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Textiles Imports and Exports

• Take note of
• Imports
• US
• Italy
• China
• Korea
• Taiwan
• Exports
• China

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Garments Imports and Exports

• Take note of
• Imports
• US (1/3rd)
• Japan growth
• Exports
• Less concentration vs. textiles (63.1)
• China
• Mexico (NAFTA)
• South Korea and Taiwan
• Indonesia and Thailand
• Developed countries (excluding US Italy)

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The Dynamics of the Market

• What influences the size, organization and
  location of the textiles and garment industry?
  Demand
• 50 of all textiles production goes to the
  garment industry
• 3 major types of garments
• Basic, Fashion-basic and Fashion
• Beyond basic, what determines demand? Affluence
• Demand stimulated from fashion change and
  higher-margin fashion related garments such as
  designer labels

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Growing Power of Retailing Chains

• In the garments industry more emphasis is being
  placed on the purchasing policies of major
  retailing chains
• Wal-Mart, Sears, JC Penney, K-Mart, etc.
• Retailing Revolution in US and UK since 1960s.
• Result Specialized garment retailers targeting
  niche markets according to age, income, etc.
• Purchasing power of chains gives considerable
  leverage over textiles and garments
  manufacturers.

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Growing Power of Retailing Chains contd

• Chains do not typically manufacture, but
  sub-contract
• No longer mass market, manufacturers must respond
  more rapidly to demands. Time importance, not
  just cost.
• Now lean manufacturer-retailer system
• Frequent shipments, ongoing orders
• Real-time sales tracking via SKU (stock-keeping
  units) generate weekly shipments

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Production costs and technology

• Production characteristics vary considerably
  depending on where the production takes place.
• ex. A process that is relatively capital
  intensive in one country maybe be relatively
  labour intensive in another.

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Labour

• For textile and garments manufacturing Labour
  costs are the most significant production factor.
• Textiles and Garments are the most Labour
  intensive industries.
• Labour costs are the most geographical variable
  in the production cost. (Figure 10.12)

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Hourly Labour Costs in the Garments Industry, 1998

• Figure 10.12 shows the huge labour cost gap
  between different countries. EXAMPLE over
  10.00/hr in the USA and 0.22/hr in Vietnam.

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Labour Cont.

• USA is in the best position of unit labour
  costs Levels of productivity. But even with
  productivity differences, developing countries
  have enormous labour cost advantage over
  developed market economies.
• Low Labour cost producers have a profit
  advantage because they produce standardized
  items.

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Characteristics of the labour force and
conditions of work

• 80 in garment industry, 50 in textiles are
  female
• Huge portion of labour force is relatively
  unskilled or semi-skilled with no easily
  transferable skills.
• Socio-culture role of women, in particular
  their family and domestic responsibilities makes
  them immobile geographically.
• Large number of the workforce tend to be
  immigrants or members of ethnic minority groups.

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Characteristics of the labour force and
conditions of work Cont.

• Mid 1990s garments establishments in San
  Francisco and Oakland, more than 50 in violation
  of minimum wage standards.
• Employment in these industries tend to fluctuate
  due to variations in demand. (whats popular)
• Workers have no protection over working
  conditions or job security. (there is never a
  shortage of workers)
• Factory employment is preferable than the
  alternative no job!
• Factory work provides otherwise unattainable
  income

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Characteristics of the labour force and
conditions of work Cont.

• Pressure from family for young daughters to work
  in factories to provide money for the family.
• Oxfam Popular pressure group for the
  protection of child labour and illegal practices.

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Technological Change

• cost of production and speed of response to
  changes in demand are greatly influenced by
  technology
• Technological innovation can increase levels of
  output with same size or smaller workforce.
• New labour saving technologies have increased
  especially in developed countries.

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Technological Change Cont.

• Two advantages of technological change are
  increased speed and the replacement of manual
  labour with mechanized and automated operations.
• Technological change has been more extensive in
  the textiles manufacturing sector than garments
  manufacture.
• Most important technological innovation is
  open-ended spinning - spinning of yarn.
  (increased the production 400 and labour was
  reduced 40).
• Garments industry remains manual- has not
  changed in the last 100 years. (Exceptions
  Grading, laying out and cutting material)

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Technological Change Cont.

• Current technological developments of the
  manufacturing of garments
• Increased flexibility of machines. Robots to
  recognize oddly shaped pieces, lay out material.
• Sequential operations less stages in the
  production line.
• Develop a unit production system to save time.
  60 of time is unbundling and re-bundling work
  pieces.

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The role of the state and the Multi-Fibre
Arrangement (MFA)

• MFA is an international regulatory framework
  in which the industries have operated under for 3
  decades.
• Most of the world trade in textiles and
  garments is covered by this agreement.
• MFA has been a major factor in changing the
  global pattern of production and trade.
• Introduced by developed countries to protect
  their countries producers. USA- UK

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MFA Cont.

• High inflow of low price imports from Japan,
  Hong Kong and other parts of Asian producers were
  restricted by the USA and the UK.
• 1962 restrictions turned into the Long Term
  Arrangement. (LTA)
• LTA regulated trade in cotton made textiles.
• LTA set up to protect developed countries
  domestic market.

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MFA Cont.

• LTA allowed a 5 annual increase of exports
• Lasted for 11 years.
• During LTA time World map became more complex.
  
• First, massive growth in man-made fibers not
  covered by the LTA were introduced.
• Second, developing countries became important
  exporters in textiles and garments.

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MFA Cont.

• 1973- MFA implemented
• more strict vs. LTA
• included cotton textiles, non-cotton and
  man-made fibres.
• Introduced to create order in trade for
  developed and developing countries but has
  greatly restricted the growth rate of exports
  from developing countries.

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Corporate Strategies in the Textile and Garments
Industries

• 2 basic points in the development of strategy in
  these industries
• Globalization of the textile and garments
  industries cannot be explained simply by
  relocation of production from developed to
  undeveloped countries
• When firms internationalize they use a number of
  methods, mostly international subcontracting and
  licensing.

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Textiles Industry

• A industry of large firms 30 of which lead the
  pack and include Burlington (USA), Toray
  (Japan), Coats (UK) and the Marzotto Group
  (Italy).
• Textile firms pursue one of three strategies
• Produce standardized goods for large markets
  using economies of scale.
• Supply large markets on the basis of utilizing
  low-cost labour in offshore locations
• Produce small quantities of specialized goods for
  specific market niches

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American and European Strategy

• The United States strategy has been to increase
  domestic concentration through acquisitions and
  mergers and increase productivity though heavy
  investment in new technology.
• Europe has used similar strategies
• Coats- transformed itself from a
  production-driven firm to a market driven
  firm.

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American and European Strategy Cont.

• Coats adopted a two-pronged strategy
• Shifting low value added activities, such as
  un-dyed thread manufacture, to low cost countries
  in eastern and southern Europe periphery and Asia
• Locating dye factories, which are less labour
  intensive, closer to its main markets

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Corporate Strategies in the Garments Industry

• The garments industry is the most fragmented and
  less dominated by large firms.
• 3 strategies
• Production of basic goods for large markets
  utilizing economies of scale
• Operation of small workshops (sweatshops)
• Production of short orders to fill manufacturers
  production gaps (specific segments)

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Corporate Strategies in the Garments Industry
cont.

• Additional organizational component to garments
  production factory-less firms organize entire
  systems of garment production-major international
  retail chains and buying groups have large
  purchasing power and leverage over garments
  manufacturers.
• International subcontracting, licensing and other
  forms of non-equity investments are very
  influential.

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Japanese Strategies

• Japanese garments industries are far less
  internationalized than its textiles industries
• Established subcontracting arrangements in Hong
  Kong, Taiwan, South Korea and Singapore.
• Production was mostly exported to the United
  States and not Japans domestic market

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US and European Garment Markets

• US firms increased level of offshore processing
  using suppliers in developing countries
• Levis- developed its own branch factories in
  both Western and Eastern Europe, Latin America,
  Asia together with licensing agreements.
• German and British heavily involved in
  international subcontracting
• More than 80 of all German garments imports come
  from East Germany, Poland, Hungary, Romania,
  Bulgaria and the former Yugoslavia
• Hugo Boss

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The exception?

• Italian firms have pursued a strategy of product
  specialization and fashion orientation with the
  aim of avoiding dependence upon goods affected by
  low cost competition
• Area trademark
• Benetton- 80 of garments still manufactured in
  Europe, mainly Italy.
• 500 subcontractors, 90 located in the Veneto
  region

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Regionalizing production networks in the Textile
and Garments industry

• Regional shifts
• 1950-60s- from North America and Western Europe
  to Japan
• 1970-80s- from Japan to Hong Kong, Taiwan and
  South Korea
• Late 1980-90s- from Hong Kong, Taiwan and South
  Korea to China, South East Asia and Sri Lanka
• 1990s- focus on United States, Mexico and the
  Caribbean

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Regional restructuring of the Asian
textiles-garments network

• Firms from Hong Kong, South Korea and Taiwan have
  shifted production offshore
• China, Malaysia, Thailand, Indonesia and Vietnam
  and Cambodia, newer wave of Asian producers
• Transformation can be conceptualized as a process
  of industrial upgrading

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Asian Upgrading Process

• Upgrading process consists of 3 sequential
  phases
• Simple assembly of basic garments for export
  trade
• Subcontract manufacturing to design specified by
  the buyer with the product sold under their brand
  name
• Development of own brand manufacturing OBM
  capability

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Triangle Manufacturing
USA
NIES
Offshore Factories
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United States focused regional production
networks in the Americas

• NAFTA has allowed for all tariffs on textiles and
  garments to be phased out.
• Maquiladora Production simple sewing of garments
  made from imported fabrics and using extremely
  cheap labour
• Full Package Production local manufacturers
  receive detailed specifications for garments from
  a buyer and the supplier is responsible for
  acquiring the inputs and coordinating all parts
  of production.

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Game!!!
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Major issue of Textiles and Garment Industry

• Sweatshops