global apparel exports -2006 & impact of mfa phase out

8/13/2019 Global Apparel Exports -2006 & Impact of MFA Phase Out

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EXECUTIVE SUMMARYThe MFA Strategic Sourcing Impact: The Private Sector

Perspective

Research suggests that quota is one of severalfactors considered when sourcing decisions aremade, and in isolation, it may not dramaticallyimpact strategic sourcing decisions.

China will receive significant growth towards theend of the decade, but only a modest increase inapparel production in the short term.

Developing long term strategic partnerships withkey suppliers was cited by most as the most

important future sourcing consideration

The elimination of quota will bring equilibriumto a global apparel industry that was artificiallyinfluenced through quota.


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Respondents shared the perspective that theelimination of quota will bring equilibrium to aglobal apparel industry that was previouslyartificially influenced.

Research suggests that companies view addressingpost MFA social and economic impacts as the role ofgovernment and industry, not the private sector

Interest from the private sector in future projectparticipation is contingent upon multi-constituentparticipation, as well as involvement from multiplebrands.

EXECUTIVE SUMMARY

The MFA Strategic Sou rcing Impact: The Private Sector

Perspective


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Sourcing Factors Quality

Price

Delivery

Capacity

Relationship / partnership with factory

Vertical integration

Speed to market / turnaround time

Reliability and consistency

Service and flexibility

Gross margin vs. gross pricing

Merchandising


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Costs, incentives, subsidies

Compliance with codes and ILOstandards

Workplace safety and conditions

Differentiation and innovation

Competitiveness Communication skills

Credit

Pre-production assistance

Transportation: access, costs Political Environment; safety; corruption

Trade Regulations / barriers

Ability to warehouse / ship

Raw Material / Fabric access and supply

Sourcing Factors


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The MFA Strategic Sourcing Impact:

Slight Decrease in Exports

Thailand- Slight Decrease in Exports Slight decrease its workforce is not as efficient

or productive (bra example with demonstratedlost business with expiration of quota); toocomplacent and has not invested for the futurethrough development of new technologies orprocesses; engineering improvements havehelped it manage its labor force; but still troubled

with delivery and execution; expect medium termok, but long term reduction. Has not capitalizedon supply chain linkages with neighboringcountries.


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Philippines- Slight Decrease in Exports

Difficult count ry to work in due to unrest;

union problems; noncompetitive; few key suppliers will remain, but industry

at large will decline.

Country also has other industries suchthat the garment sector is not vital

to its long-term economic viability.



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Lesotho - Substantial Decrease in Exports

Lead time and proximity difficult;may survive with niche anddifferentiated products but not likely;needs infrastructure development



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Indonesia -Mixed Response

good skills in suits and handicrafts;

competitive labor

rates; downside is corruption andpolitical instability


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Sri Lanka : Mixed Response

Mixed response; however infrastructure (road to

port) must be improved, and mill capacity and innovation must be

improved; politically stable; not

always price competitive; possesses skills and

hard working attitude; mostly work as subcontractors; need more government

intervention to promote

industry and abilities



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Bangladesh : Mixed Response

Anticipated status quo to growth although some mixed response;

low costs will keep the industry alive as will industry efforts,however using price asthe only means to add value may not beenough if vertical integration andother sourcing criteria are not

developed;

strong with basic volume driven items; need for infrastructureimprovements; slow production;

lack of raw materials;

antiquated banking system and terrible social compliance record: BGMEA/ILO program not as favorable as hoped, and quality

inconsistent;

Indias anticipated growth may also cannibalize Bangladeshsfuture.



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Major Global Apparel Suppliers-2006

USA, 595.171, 4%

India, 522.463, 3%Thailand, 597.758,

4%

Pakistan, 618.83, 4%

Germany, 669.13,

4%

Malaysia, 1,255.07,

8%

Italy, 1,353.59, 9%

Hong Kong,

1,723.21, 11%

China, 8,260.92,

53%

China Hong Kong Italy Malaysia Germany

Pakistan Thailand USA India


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According to an article published in the Business weekmagazine, 30 million jobs will be lost to China, the hardesthit countries would be Turkey, Mexico and some Africannations. The World Bank report says, this will be one of thelargest short-term transfers in history. Despite these

developments the apparel industry is estimated to grow atvery high pace and will provide employment to a largenumber of people all across the world.

MFA IMPACT - JOB LOSSES


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Competitive Imperatives

Quick Responsiveness: With increasingly high fashion, but shorter lifecycle of final products, buyers are demanding quick response from suppliers. Therefore, proximity to the market is becoming a very important factor.

Full Package Supply: Similarly, full package supply is being more preferable to fragmented assembly-type production process.

Scale Economies Scale economies in T&C production will be released due to the new souring strategiesSize matters

Multi-market Resilience From a Domestic Company to a Multinational Enterprise ( MNE) to hedge against risks and to take advantage of global resources and

learning opportunities


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IMPACT OF PHASE OUT on

Price

Every interviewee indicated that theirsuppliers have quoted pricereductions ranging from 5-20%.


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Future ProspectsThe global apparel manufacturingindustry is expected to grow more

than ever in times to come.According to an estimate, the globalapparel industry will reach a value of

US $ 1,781.7 billion by the end of2010.

global apparel exports -2006 & impact of mfa phase out

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