SLDF 2012: Collaboration, speed and the Sri Lanka brand
Collaboration, speed to market and building the 'Made in Sri Lanka' brand emerged as key themes at this year's South Asian Apparel Leadership Forum, held as part of last week's Sri Lanka Design Festival (SLDF).
While cost remains central to sourcing decisions, speed and flexibility are becoming increasingly important as market needs shift, with brands willing to pay a premium for quality and on-time delivery.
According to Mark Green, EVP of global supply chain at apparel firm PVH, owner of the Calvin Klein and Tommy Hilfiger brands, "what's changing and influencing sourcing is the complexity of demand rather than higher orders."
He added that sustainability, a key differentiator at many of Sri Lanka's garment factories, is "really a driving force." PVH, for example, aims to source 95% of its products from green factories.
But Green also emphasised the need for collaboration among Sri Lankan manufacturers. "Your competitor is the man in Bangladesh. I don't see this as a win-lose [situation]," he said, adding that Sri Lanka has managed well against price rises and labour shortages.
"In Bangladesh and other countries I hold Sri Lanka up as a [role] model."
Industry faces challenges
Yet some of those in the industry feel they are fighting an uphill battle. Rohan Abayakoon, chairman of the Sri Lanka Apparel Exporters Association, doesn't think the industry was winning in the battle against rising costs.
"It's a not a battle that we are winning at all on cost or capacity. But if we go back to the 1990s and 2000s, I would have to say that yes we were winning great prices, great advantage, long lead times, great volumes.
"Ten years later we aren't winning. As manufacturers the status quo has changed. I think it's important to understand that this is a battle that can't be fought alone. It has to be a collective approach."
"It all comes down to price, and that's a battle we just can't win. Because demands have changed, costs are going up and prices are going down, so how do we as manufacturers compete?"
As Abayakoon called for manufacturers to band together, Stephen Forte, managing director of global sales at Coats, also called for increased collaboration across the supply chain. He believes relationships between tier-one and tier-two suppliers need to be tighter in order for them to remain competitive.
Forte said that manufacturers and suppliers must co-ordinate and harmonise the entire supply chain to put it on par with automotive and other world-class industries.
Initiatives to increase the sophistication of the supply chain would include virtual sampling, integrated production with multiple vendors, increased transparency, supply alliances, shared best practice and better tier-two forecasting and order planning.
Yet Green insisted that sourcing decisions are not all about price, but about developing a supply chain that ensures markdowns are limited.
"The retail market at the moment is less interested in the initial markup; the focus is on how do you reduce markdown. Markdown has a huge impact on profit. Any region or company that can deliver speed and offer flexibility that can provide solutions for that side of the business will see big success.
"In sourcing there are some bad practices out there; companies that will move for 10 cents. But I believe that is changing, and in the coming years we will see a big change in retail sourcing."
Describing the markdown environment in the US, industry consultant David Birnbaum said markdowns are sometimes more than the price paid to suppliers. "If you can reduce markdown from 30%, 20%, 10%, you double your profits. The trick is not to complain, the trick is to create a strategy so that everyone sees the benefit."
Becoming a solutions provider
Vinod Hirdaramani, a director of the Hirdaramani Group, which operates 15 garment factories across Sri Lanka, Vietnam and Bangladesh, echoed this statement, saying: "We're not an apparel company, we're a solutions company."
He said the supply chain is getting more complex, and his company is looking at different ways it can improve, through things like lean manufacturing and "taking it to a world class level". The group is also making strides to improve the supply chain, and he emphasised that it will "continue to innovate".
Alessandra Cocchi, the managing director of East Max, MaxMara's Hong Kong sourcing office, agreed that cost is only one of many issues she looks at when sourcing.
Products need to be of the "correct quality", while factories should be efficient, there must be very good communication skills between the factory and the brand, the manufacturer needs a team that can respond quickly, and the sourcing country must also be politically stable.
Promoting Made in Sri Lanka
She believes the Sri Lankan industry needs to generate an "emotional response" to encourage consumers to buy more products made there.
"I would like to see a very defined value of the 'made in Sri Lanka' product. So when you see something in a shop, compared to other Asian countries, you immediately have a perception, an emotional one, that you are buying something special. It's not China, it's not Bangladesh, its Sri Lanka."
Mike Todaro, managing director of the American Apparel Producer's Network (AAPN), also said there needs to be better promotion of Sri Lanka so there is more awareness.
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