Since the abolition of the multi-fibre agreement in 2005, the apparel industry has gone through a massive transformation that affected both apparel producing and apparel sourcing (buyer) countries. As there is no longer a quota constraint, buyers are constantly looking for manufacturers that can provide them with products that are cheaper, better, and able to deliver faster. They are also always on the lookout for innovative products that will set them apart from their competitors – the technical term for which is “product differentiation – which then allows to them to set better margins for themselves. Retailers are pressured to strike a balance on these fronts and many are forced to consolidate through mergers and acquisitions to take advantage of economies of scale as well as expand their product range and services. On the other hand, manufacturers must upgrade their facilities to meet buyers’ requests or face a potential loss of business. So for longer-term survival, apparel producers must also be able to offer novel and innovative products besides producing goods faster, cheaper, and better.
Apparel production for export is traditionally seen as a labour-intensive industry. Many developing economies relied on this industry to create jobs and earn foreign exchange. However, due to the transformation of the industry and advances in technology, the industry is now more capital and knowledge intensive.
The conventional belief that automation requires standardization and thus limits variety has been the primary reason for the slow uptake of automation in the fashion industry.
The conventional belief that automation requires standardization and thus limits variety has been the primary reason for the slow uptake of automation in the fashion and apparel production industry in the past; because fashion is not fashion if it is standardized! Hence, automation in the industry has been focused on the production of commodity products like t-shirts, polo shirts, and jeans. However, the rapid decline in the cost of robots has encouraged the use of artificial intelligence to produce non-standardized products, and this revolution will eventually change the way apparel is produced in the future. A Chinese company has already invested $20 million to set up a factory in America to produce t-shirts using 330 robots which will go into production in early 2018. This on-shoring with robots will significantly reduce the time to market as well as reduce the cost of production (no tariff or shipping cost) to deliver what buyers are looking for – cheaper, better, and faster! Yes, one factory will not change the way such commoditized products are being purchased from cheap labour countries, but it is the beginning of a new era of apparel production. More will inevitably follow as it makes a lot of business sense. It will for sure take off rapidly in the United States, what with its new America First policy in recent years!
A matter of survival
The question now is, how are cheap-labour countries going to survive in this new era? Sure, sitting around and refusing to move forward is easy enough but that will eventually lead to the fall of the industry in five to 10 years’ time. We will be back to square one, just like the four dragons — Korea, Hong Kong, Taiwan, and Singapore — in the 80s and 90s. There was no automation option in those days. The apparel export industry evaporated. Many companies either closed or moved off-shore to seek cheaper production countries. However, there are not many newly developing economies in today’s world for the industry to move to. The momentum for on-shore production with robots will thus slowly and surely take over the piece of the pie that has, until now, belonged to the cheaper labour countries of the last two decades. Cheaper labour countries must therefore rise to the occasion and adapt to the changing environment. With the labour cost and infrastructure cost still much higher in the US, Japan, and most of the EU, countries like Bangladesh, Indonesia, and Vietnam can move on to the route of automation to meet the demand of buyers. It is better to maintain the industry, albeit with a smaller workforce, than let the whole industry go out of business and lose all the jobs.
Automation will require a different skill set and the industry will have to work with the government to train and educate the workforce to meet this challenge. It is a matter of “automate, or evaporate!” At the same time, moving rapidly to develop innovative products is another strategy for ensuring long-term survivability. This requires a build-up of knowledge and network which will take time to develop. Creating an environment for innovators and manufacturers to congregate and brainstorm is the best way to go. The abundance of production facilities in cheap labour countries provides many opportunities for foreign innovators who want to collaborate and base their development in these countries. Knowledge-intensive countries do not have sufficient infrastructure in terms of apparel factories and production facilities for them to test out their innovations. The door must, however, be opened by the government, and the industry must be ready to welcome them.
Mostafiz Uddin is the Managing Director of Denim Expert Limited and Founder & CEO of Bangladesh Apparel Exchange (BAE).