Comment: Strategies for success (Part I) - core competencies
By David Birnbaum | 23 February 2012
Today's garment factories are required to fit a new multi-dimensional model where core competencies beyond the manufacturing process help differentiate the top suppliers from the marginal ones. In the first of two articles, David Birnbaum explains that to operate successfully, factories and mills must radically alter the way they market their products.
For most of the past 50 years, the garment factory existed solely to make the product. The customer specified the quality, the delivery and the price. Of these, quality and delivery were both fixed. If your factory was unable to meet your customer's delivery or quality requirements, you would not receive the order.
On the other hand, the factory that could provide higher quality and/or faster delivery received no advantage. Price was the only area open to negotiation. To be eligible at all, your factory had to meet the customer's target price.
In the old model, the factory that offered the lower price was by definition the better factory, just as the factory that offered the lowest price was the best factory and would invariably receive the order.
In the old model, factory marketing was totally passive with the customer or his agent approaching potential factory suppliers. Those deemed reliable - able to ship a decent product on time at a reasonable price - received orders.
Business developed by attrition as customers discarded unreliable factories, distributing their orders among the remaining reliable factories. Provided your factory shipped a decent product on time, at a competitive price you could count on greater future business.
That model no longer exists. Today, the ability to ship a decent product on time, at a reasonable price is no longer an asset. It is an entry level requirement which at best allows a factory to go to end of a very long line of factories, all of which meet these minimum standards.
In the new model, the importance of the tangible product has been subordinated to the intangible process.
Where once the factory's role in the manufacturing process was limited to garment making, that role has now been extended to include every step from designer selects sample fabric to stock garments ready for shipment; and beyond the manufacturing process to post-production which take us to the final step in the product cycle - last stock garment sold to the consumer.
In this new model, the customer will ask the factory: "Which steps are you competent to perform and how much money can your performance save me?"
In the old model factory, core competency was defined solely as ability to cut, sew and finish garments. In that one-dimensional world, every factory could be graded as a point on a single line moving up from least competent to most competent.
In this new multi-dimensional model, the single graded line has given way to an almost infinite array of lines based on range of variables, including product type, customer type, services offered, and services required.
In this new model, to be successful a factory must provide a range of processes in which it excels and which are of value to a particular group of customers. It is these core competencies which differentiate the successful factory from its less successful competitors.
At the same time each customer must examine its own core competencies to determine what they lack, in order to provide customers with range of products and services they consider necessary to compete in their market.
Retailers and brand importers must overcome these core competency deficits, either internally by developing new competencies or externally by allocating these processes to suppliers who have these core competencies.
In this new model the successful supplier is the factory that is able supplement the limited abilities of its customers to create a comprehensive core value process.
In the new model a factory's ability to fill its customer's core competency deficits will become the single most important factor differentiating that customer's top strategic suppliers from their mid-level normal suppliers to their bottom marginal suppliers.
To operate successfully, factories and mills must radically alter the way they market their products. The old way - passively standing around waiting for the customer to provide orders - has become the road to failure.
In this new world, you the supplier must take a proactive dynamic approach
- Match your core competencies with your customers' needs
- Define your special abilities - core competencies
- Target a range of customers with complementary needs - core competency deficit
- Work together with your customer to create the greatest mutual benefit - comprehensive core value process - from this combination by:
- Changing your operation to suit your customers' requirements, thus enhancing your value as a strategic supplier;
- Persuading your customers to modify their operation, thus increasing the value of the relationship by taking maximum advantage of your abilities.
In a period when global trade declines, traditional relationships break down as old customers and suppliers go out of business while the survivors - both customers and factories - search for partners able to provide greater value.
This presents a special opportunity for those customers and suppliers who, having recognised the need for change, are willing make the effort to create that change.
When the global recession finally ends, we will see a new garment industry where the old dominant/subordinate relationship between customer and supplier has been replaced by one of mutual dependency.
To survive, each customer and supplier must decide where they stand now and more importantly where they want to stand in the future.
Click on the links below to read the other articles in this series:
David Birnbaum is the author of The Birnbaum Report, a monthly newsletter for garment industry professionals. Each issue analyses in-depth US garment imports of four major products from 21 countries, as well as ancillary data such as currency fluctuations, China quota premiums and clearance rates. Click here to visit David's website.
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Comment: Strategies for success (Part I) - core competencies