Embracing digital changes is important for apparel manufacturing business strategy. It’s not just about the IT department – all leaders need to be a part of it to stay competitive. The factories need to think of technology as a tool to help, not just a goal. To make it simple, the factories need to first figure out what challenges are crucial for them and are they opportunities or threats? Then comes the focus on the most impactful parts of business to use resources and digital intervention wisely.
In conversation with Apparel Resources (AR), Yusuf Saleem, CEO (Process Excellence), MAS Innovation (MAS Holdings), sheds light on how complete digital transformation involves a full approach. The industry 4.0 transformation is by no means an easy task, however, if done with focus and purpose, it would make things easier, more impactful and provide a much better experience for all in the business. Here are some excerpts.
AR: What are you views on digitalisation of the apparel manufacturing processes? Do traditional business methods still hold relevance in today’s business landscape?
Yusuf: Most of us are familiar with examples like Toyota, which boasts the shortest development lead times in the car industry, the most synchronised supplier and manufacturing set-ups, the highest quality standards and offers consumers some of the best value-for-money cars. Many attribute these achievements to the Toyota Production System founded on lean principles. However, digitisation has played a significant role in enabling these accomplishments. Toyota has used digitisation to facilitate this value creation.
With regard to apparel manufacturing, while we use modern machines like auto fabric cutters, automated sewing machines and advanced technologies like ERP systems, digital planning tools and design software, I still refer to it as traditional. Why?
There are two main reasons. Firstly, although we’ve made improvements in design, materials and construction over the years, the prices of garments in stores haven’t changed much for consumers. Let’s compare this to mobile phones – what consumers paid for a basic phone decades ago was more than 10 times than what they pay for a similar phone today. The apparel industry hasn’t seen a comparable increase in value for the consumer.
Secondly, our business model hasn’t evolved significantly. We’ve been constantly chasing cheap labour since the shift of manufacturing to China by US brands. The industry has moved from country to country due to labour cost challenges, but the business model has stayed the same. Technological advancements have had only a minor impact over the last few decades and our lead times from concept to consumer remain long and relatively unchanged.
AR: Can digitalisation be difficult and risky? What’s the motivation behind MAS’ digitalisation endeavours?
Yusuf: While exploring data on the track record of digitisation in the apparel industry, I came across a data sheet from BCG specifically for the fashion and luxury sector, which closely aligns with apparel. The chart categorises companies implementing digitisation initiatives into three success buckets. The first is the ‘limited value’ category, indicating results below 50 per cent of the target impact with no sustainable change. The second is ‘value created but not met targets’, suggesting limited long-term change. The third is ‘target value has been met and sustainable change is created’. BCG labels these categories as the Woe Zone, Worry Zone and Win Zone respectively.
Looking at these three buckets across all industries, 13 per cent of companies fall into the Woe Zone, 52 per cent into the Worry Zone and 35 per cent into the Win Zone. However, within the fashion and luxury sector, which encompasses apparel, 15 per cent fall into the Woe Zone, 62 per cent into the Worry Zone and only 23 per cent, compared to the average of 35 per cent, fall into the Win Zone. This indicates that the success rate in the apparel sector is lower than the average across all industries surveyed.
We’ve been constantly chasing cheap labour since the shift of manufacturing to China by US brands. The industry has moved from country to country due to labour cost challenges, but the business model has stayed the same. |
The Global Lighthouse Network, acknowledged by both the World Economic Forum and McKinsey, recognises companies that have successfully implemented digitisation, resulting in significant business impacts and placing them in the Win Zone. Currently consisting of 132 companies, the first apparel company joined this prestigious list in September 2020. Alibaba Xunxi, established by Alibaba in Hangzhou, China, stands out for implementing end-to-end 4IR solutions, paving the way for a novel apparel C2M (Customisation to Manufacturing) business model. This transformation has notably reduced order lead times and enhanced productivity, particularly in managing highly customised and smaller order batch sizes.
The inclusion of an apparel company amongst these 132 serves as an inspirational milestone, proving that successful digitisation is attainable. This success story has motivated MAS to launch a similar initiative, aspiring to become a lighthouse in the apparel industry and inspiring others in the field to follow suit.
AR: What does it take for a factory to successfully transform processes digitally and stand out in the competition?
Yusuf: Firstly, digital transformation should be an integral part of your business strategy, not an isolated initiative relegated to the IT department or Chief Digital Officer. It’s a strategic move that requires involvement from all business leaders to bring in a competitive advantage. Consequently, all leaders must gain a substantial understanding of available digital tools, how other companies have utilised them and how they can address specific challenges such as cost, lead time or labour shortages within the business.
This brings us to the second point: in digital transformation, technology should serve as a means, not an end. Many companies mistakenly implement digitisation merely to showcase their digital tools. To avoid this, factories must comprehend their business needs and strategically match the right digital tools to support those needs.
I would like to broaden the headwinds that factories face. It’s crucial to note that while some headwinds are shared across industries, their impacts can vary significantly.
Take, for instance, the persistent trend of rising costs. Recognised as a long-term challenge, businesses need to develop capabilities that enhance productivity, allowing them to maintain or minimise price increases for their products as costs escalate.
Another noteworthy example is the unpredictable nature of consumer demand, influenced by the rapid evolution of needs through channels like social media. This trend, extending over the medium to long term, calls for businesses to cultivate the capacity to respond swiftly to shifting demand requirements. Agility in accommodating variations, achieved through reducing lead times and expanding product capabilities, is essential in navigating this dynamic landscape.
Lastly, the emergence of Trade 2.0 underscores the impacts and risks arising from a multipolar world. With various dominant economies and emerging countries globally, trade agreements, duty benefits and more will undergo frequent revisions. The fluctuating dynamics of trade advantages and disadvantages across countries necessitate the development of capabilities, such as maintaining a geographically diversified portfolio of manufacturing and sourcing locations, to adapt to this evolving trade landscape.
I recently came across a data sheet from BCG specifically for the fashion and luxury sector, which closely aligns with apparel. The chart categorises companies implementing digitisation initiatives into three success buckets. The first is the ‘limited value’ category, indicating results below 50 per cent of the target impact with no sustainable change. The second is ‘value created but not met targets’, suggesting limited long- term change. The third is ‘target value has been met and sustainable change is created’. |
AR: What, according to you, should be the priority areas for factory’s digitalisation?
Yusuf: Taking on rising costs and the imperative to become more productive prompts the question: where within your business should you focus on building this capability? Is it in your sales and marketing functions, planning functions, manufacturing, sourcing and supply chain functions, or should it span across all areas? Considering that digitisation is a costly and resource-intensive process, as mentioned earlier, directing efforts toward functions that contribute the most to the total cost bucket and initiating projects in these areas would yield the most impactful results.
Determining the most suitable and impactful technology intervention for the business is crucial. For instance, in a low-labour cost environment, replacing a person with a robot might increase overall costs. However, employing data analytics to optimise raw material spend or enhance capacity utilisation through better planning can yield more significant cost-related benefits and be a more viable option.
Addressing unpredictable demand requires a focus on lead time. Similar to cost considerations, identifying functions contributing to the longest lead times, facing significant capacity constraints or encountering agility constraints and initiating projects in these areas would be the most impactful. Evaluating the technology interventions best suited for the business is essential.
Digital transformation should be an integral part of your business strategy, not an isolated initiative relegated to the IT department or Chief Digital Officer. It’s a strategic move that requires involvement from all business leaders to bring in a competitive advantage. |
Consider the challenge of shortening lead times in the apparel industry, particularly in product creation. The process from concept development to product readiness involves lengthy lead times due to the procurement of raw materials, stitching and shipping samples for designer review. Virtual design and development tools, eliminating the need for physical samples, have made significant advancements, enabling faster feedback, changes and the development of new products in a fraction of the time.
To overcome capacity constraints, deploying a Manufacturing Execution System (MES) can connect and plan the end-to-end manufacturing process. MES allows for the synchronisation of raw material supplier capacities with garment manufacturer demands and it optimises pre-sewing processes traditionally planned in silos. This reduces capacity constraints by linking and planning all processes together in shorter time intervals.
Another critical headwind, the shortage of skilled labour, affects traditional industries like apparel. Examining the entire value stream helps identify functions requiring skilled workers and digital tools can be deployed to deskill these processes. Notably, certain digital tools designed to reduce lead time also contribute to deskill processes, such as virtual prototyping, ME and digital workflow tools that optimise manual work, freeing up individuals for more strategic problem-solving.