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June 2, 2021

Developing a practical transformational strategy

Here's why a transformational strategy concept is the best way forward for the global garment industry.

For the past 18 months, since the start of the Covid-19 pandemic, serious garment industry professionals have been debating the sector’s future.

On one side are those who see the problems facing the industry now and in the future to be the result of the pandemic and the accompanying recession. Once the pandemic ends, they believe the industry will return to business as usual.

On the other side, there are those who see the problems as the festering results of long-term failures, and that the pandemic and recession are but catalysts speeding up the end of failing companies on both the customer and supplier sides.

Both sides recognise the importance of new tools such as digitisation and new consumer demands such as sustainability – and everyone agrees that these must be adopted in the post-virus industry.

There can be no doubt where I stand. I am part of the radical reformers. Players on all sides face existential threats. To survive they must move now to meet the demands of the new industry.

To succeed, players must be willing to bring fundamental change to the way they operate. These are transformational strategies.

Creating strategies to meet demand for future needs is indeed a great leap in the dark. The problem is further complicated by the absence of any one-size-fits-all solution. We may ask who, if anyone, would be willing to even consider – much less take the risk on – transformational strategies?

Surprisingly, in the past month I have been approached by groups in two major garment exporting countries – Turkey and India – to help develop transformational strategies.

Some of you, who have read my recent articles in Just Style, know of my efforts to create a transformational strategy for Singapore. Interestingly, senior executives at major companies have offered their support and assistance for the Singapore project. They see the value that Singapore can provide in the post-virus global industry

Cost to value analysis

The question remains, how does one develop a practical transformational strategy?

The answer is in cost to value analysis. If, indeed, the problems facing the industry today date back decades in the past, by understanding those problems and recognising that many of the “truths” we hold are in fact irrational, we can understand the underlying causes and in doing so bring fundamental change.

Why do we believe that forcing down factory FOB prices will markedly reduce costs, when the customer, having negotiated prices for materials, leaves the factory in the position where if they gave up 100% of their profit, the maximum reduction would equal less than 1% of retailer price?

Why after all this time, do we still believe that ever increasing markdowns are unavoidable, when Inditex found the solution 40 years ago?

Why do major garment exporting industries cling to mass market commodity production when that sector is failing now and will inevitably fall further in the post-virus industry? Why do they not move from dumb garment-making to more highly valued service-providing? Why do they not see that having offered the lowest FOB price, they are still losing business?

The problem is that the tools on which we rely, and on which we make our decisions, are fundamentally flawed and must be replaced with a simpler, more rational concept.

Ours is a thoroughly ruthless industry, where the basic rule has always been change or die.

I cannot argue that the transformational strategy concept is the best strategy.

I can argue that the transformational strategy concept is the only viable strategy.

About the author: David Birnbaum is an internationally renowned garment industry specialist working for major importers, retailers, suppliers, governments and institutions. His latest book The Guide to Cost to Value Analysis is available at Amazon. 

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