Digital transformation of processes in the apparel industry, especially in the manufacturing end, is relatively slower compared to other industries. As the pressure from apparel brands to reduce cost is increasing and consumer’s trends are increasingly evolving, more diverse products are being manufactured in smaller quantities. Adding to this, the labour costs continue to increase in Asian countries, which is forcing the brands and manufacturers to come up with a different approach to lower costs. Digitalisation is one of the best options to achieve the goal. The industry has been reshaping during COVID-19 pandemic and changing the way how managements see their business, while at the same time speeding up the digital transformation process.
As per a white paper published by YCP Solidiance in collaboration with Brother Sewing Machine Brand, the global spending on digital transformation technologies and services in 2020 is forecasted to grow by 10.4 per cent to US $ 1.3 trillion, and the growth will be further accelerated due to the pandemic. The apparel manufacturing industry too saw more and more manufacturers taking this opportunity during the factory lockdown and starting the journey of digitalisation by adopting IoT and Smart Factory solutions.
The white paper shows the major evolution of the apparel industry toward digitalisation and integration of the hardware, software and IoT through several case studies.
Why the need for cost cutting is a major factor?
The advancement of sewing machines over the years and the expansion of garment factories carved out the path of digitalisation, which was followed by the moving of production factories to Asia to enjoy the cost advantage. The value of the global apparel manufacturing market totalled US $ 948.2 billion in 2020, while it is poised to reach US $ 992 billion in 2021, more than half of which is accounted by the Asia-Pacific region.
In Asia, the apparel industry is thriving although it remains difficult to dominate the industry due to the amount of competition. China still has a considerable amount of expertise in the industry, along with decades of experience, modern infrastructure, efficient supply chain management and high productivity. However, China is no longer the only and cheapest option nowadays, as other Asian counterparts have provided a range of sourcing choices for apparel factories. For example, Sri Lanka, Pakistan and Bangladesh offer lower costs of domestic supplies, as well as cheaper labour costs. Meanwhile, the textile and apparel industry is actively supported by the Government in Indonesia and Vietnam. Finally, India – which has a diverse and integrated fabric and apparel ecosystem – is expected to be the upcoming hub in terms of its role in the apparel supply chain.
However, the offshoring model regardless of the country is hardly compatible with the rising labour cost. In addition, migrating from the concept of cutting down the labour cost to production efficiency enhancement, which can be easily achieved with the help of digital transformation, appears more fitting as a long-term strategy. From the widespread e-commerce platform, knowledge of IoT and the adoption of Industry 4.0 amongst different industries, all the mentioned trends are indicating a foreseeable future for countries like Vietnam, Sri Lanka, India and Bangladesh to emerge as fast adopters of digital transformation technologies in the apparel industry.
Why COVID-19 speeds up the digitalisation process, following an increased awareness amongst brands and manufacturers…
The COVID-19 pandemic brings more attention to the digitalisation approach in the apparel industry and further speeds up the progress from what initially would be happening in 5-7 years to 2-3 years. Brother Machinery (Asia) Ltd.’s data says that due to lockdowns in Asian countries, the apparel industry lost over 70 per cent of functions, with total sewing machine operating hours in four countries – India, Bangladesh, Vietnam and Indonesia – having fallen to 27 per cent in April 2020, less than half of those in February ’20. Compared to February, the number of operating sewing machines in Asia returned to 70 per cent in June 2020. Although the operating ratio remained below 60 per cent, it has been on an upward trend since April. The only approach to be feasible amidst uncertainties as mentioned is to ‘be capable of visualising the capacity and taking advantage in negotiations.’ Hence, digitalisation became the method that every manufacturer and brand was working towards, with a more significant growth expected after July 2020.
During the pandemic, the affected factories, with a higher level of digitalisation, saw just minor damages for this reason: Plants with higher digitalisation level have shown better flexibility in order changing, thus the cooperating brand can amend its strategy and immediately put a new order; and better management of the resources would help the brand understand the feasibility of their suppliers and further amend the strategy and number of orders to avoid big losses and unnecessary waste.
(The next part of the feature would highlight how Digital Transformation in Apparel Industry’s Supply Chain Management can be done in three segments – Pre-production, Production and Post-production. The information will be an amalgamation of YCP Solidiance-Brother report and the ground experience of Apparel Resources)