“We need to blow up the X-shaped supply chain," says Edwin Keh

“We need to blow up the X-shaped supply chain," says Edwin Keh

Edwin Keh, CEO at the Hong Kong Research Institute of Textiles and Apparel (HKRITA) believes apparel retailers and brands must take a hard look at their current business models and supply chains if they want to remain competitive into the future.

"We are currently at an inflection point," Edwin Keh, CEO at the Hong Kong Research Institute of Textiles and Apparel (HKRITA), told delegates at the Fashion Forward conference hosted by technology specialist Lectra earlier this month in Bordeaux, France. "There's so much turbulence in the marketplace; all of us are facing all sorts of new challenges. Old things have gone, new things are coming in to take their place, but things are still in a flux."

He believes the role of the supply chain has changed thanks to the end of the quota system for textile and apparel products in 2005, the global financial crisis of 2008 – which changed consumption habits in the West and created new consumption in the East – and the surge in e-commerce since Christmas 2010. 

"These three things shifted the way we behaved, and it shifted the way companies behaved in the marketplace," Keh explains. [The supply chain] "became something we thought of as a cost centre to something that became a competitive advantage. And [it] changed from a hierarchy supply chain with designers at the top and manufacturers at the bottom, to a peer-to-peer relationship in which because we need things fast and we need things real-time. Because there are so many variables, we have to talk differently.

"The companies that aren't recognising or dealing with the world in this manner are the companies that are failing today."

The questions the industry should now be asking are: "What should we be making? How should we make these things? Where do we make these things? And who is going to make these for us?"

What gets made?

Rapid developments in technology mean mobile phones are now the hub of an average person's social life, yet technology in clothes has not made such innovative strides. Over the next decade, garments will have to be smart systems that "take care of us, that protect us, that keep us safe and keep us healthy," Keh says. 

"When it's cold we put on more clothes; when it's hot we take them off. There are complicated instructions about cleaning them. This is not going to be what will define our clothes in the next ten years."

HKRITA has become a pioneer in apparel innovation and has this year alone created clothes that clean themselves, that are hypo-allergenic, and a fabric that is effective against diseases such as Ebola. Fabric sensors have also been developed to measure impact and physiological changes in the body, and an "accidental discovery" revealed a product that removes wrinkles from the wearer.

"Not only do we have to think about its functionality, but also the expectation consumers have of their clothes," Keh explains. "All of these are going to define successful brands; they have to engage not only the aesthetics of the wearer but the hearts and minds of the consumer."

How is it made? 

On top of this, brands also need to consider how their products are made: they need to be smart and sustainable if they are to withstand the scrutiny of their supply chains. They also need to reflect the values and the high standards of the brand, Keh says. 

"Today we make stuff the traditional way and for 100 years this is how we've been making things. Are there better ways to make the same product? Of course there are. How things are made has to be smart, has to be green, has to bear up under scrutiny. All of our supply chains are under the microscope."

The challenge with manufacturing, Keh says, is the fixation with FOB (freight on board). "What we need to do is not think of the FOB but about the model of the business and the value we bring. Zara makes more because of the way it manages its supply chain, and integrates feedback and velocity in the supply chain. How fast you react in the marketplace matters."

It is also no longer enough to blame the weather and consumer sentiment for a poor quarter. Keh suggests brands take on board predictive analytics and utilise data better in order to be smarter in what they manufacture to avoid end of season discounts.

"We're one of the last industries in the world that still does batch manufacturing. We have to get away from this mentality that we've been operating in for the last 100 years. Predictive analytics will allow us to do that."

Where will it be made? 

The obsession with chasing FOB is a symptom of the deflationary business of apparel, which has led the industry into a disposable fashion mentality.

"Often times, that's really not where the answer is," Keh explains. "We have to really look at our total value chain and figure out where we can actually do things smarter, otherwise we'll run out of third world countries."

There has been much talk of China becoming an expensive country to source from, and the need to seek alternatives. But China's rapid growth rate over the last decade is only likely to increase as it shifts to a more consumer-led economy, drawing heavily on products made overseas.

"There should be a lot of emphasis and activities in countries like India and China because that's where the consumers are going to be," Keh says. "A deep understanding of those marketplaces is essential for us for the next ten years."

To cater to shoppers who want everything yesterday, both online and in-store, the Y-shaped supply chain is the future, Keh says, not the X-shaped one where you "stuff as much as you can in a 40ft container." The theory behind the Y-shaped supply chain: "Take one of many SKUs and deliver them to me; I want everything to be optimised to me."

"What we need to do is blow up the X-shaped supply chain and figure out how we can do consolidation, how we can satisfy the customer, and how we can get to this idea of continuous manufacturing – sell the stuff before you make the stuff."

Who will make it? 

Once again, the question of where and who will make the product comes back to China. "Your suppliers and the source of inspiration and creative content may be coming from somewhere else. Their value is no longer the labour component; it may be the creative component. So where things are made is important; it needs to be something that is thoughtful, intentional and something we think about in the next ten years."

Hand in hand with this, companies must also think about whether staff need equipping with new skillsets, whether they need to recruitment those with different skills, and whether there is an appropriate incentive scheme for the long-term.

Keh points to the motor industry as an example of investment and innovation. Tesla started out as a battery manufacturer that gained widespread attention in 2008 when it produced the first electric sports car. BMW, a car manufacturer, saw this as a threat and subsequently developed an electric car. 

"Who is going to win in the next ten years?" Keh asks. "Technology companies that become fashion companies? Or fashion companies that adopt technology? The jury is out."

Roadmap to the apparel supply chain of the future