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| Issue date:14/10/2009 |
| ATA Journal for Asia on Textile & Apparel - Oct 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
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| ASEAN suppliers are exploring new ways to enhance competitiveness in multiple areas of manufacture, trade and product development, reports Asep Setiaharja |
The region covered by the Association of Southeast Asian Nations, or ASEAN, is one of the manufacturing bases of the textile manufacturing, and major suppliers include Indonesia and Thailand. Vietnam and Cambodia have also risen to serve the global demand on clothing in recent years. For instance, Vietnam is among the major apparel suppliers to the US market in addition with China and other countries. Top five apparel exporters to the US market were China, Vietnam, Bangladesh, Honduras and Indonesia in 2008, according to the American Apparel & Footwear Association (AAFA).
The intra-ASEAN trade on textiles was not as big as extra-ASEAN, and the ASEAN Federation of Textile Industries (AFTEX) tried to find possibilities to upgrade ASEAN textile and apparel supply chain. Funded by the USAID, a study of the ASEAN Competitiveness Enhancement (ACE) Project was conducted for the period of March 2008-February 2013, involving the textile and apparel industry, as well as tourism.
Intra-ASEAN textile supply chain reduces lead times
Consisting Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, the ASEAN region has a population of over 560 million |
The intra-ASEAN textile trade was US$300 million in 2003 and it grew at double-digit rates, ranging between 19% and 27% from 2003 to 2007, compared to growths in global textile exports from the same countries between 4% and 12% in the same period. In this respect, the intra-ASEAN trade was active. The textile and apparel trade has accelerated after the elimination of textile and apparel quotas since 2005.
Malaysia and Thailand are major players in the intra-ASEAN textile trade and both countries demonstrate strong growths, according to the study. Indonesia lags behind; Singapore is an important hub for entrepôt trade.
The study recommended improvement areas to enhance the competitiveness of the ASEAN textile and apparel industry.
1. Reducing lead times
Today’s textile industry requires shorter lead times.
Six-month lead times for shipping an order were common ten years ago. The current benchmark is 45-60 days. The best turnaround time is approaching 28 to 35 days. As most ASEAN manufacturers ship fabrics from China or elsewhere in Asia, such short lead times are posing challenges to manufacturers located in the ASEAN.
Against this background, ASEAN suppliers are exploring new ways to minimize lead times in multiple areas of manufacture, trade and product development, by means of:
Moving material and trim manufacturers closer to apparel factories;
Moving the final finishing of fabrics and apparel closer to apparel factories;
Reducing the time required by a factory to initiate a new style and ship an order; and
Improving factories’ ability to increase manufacturing capacity rather than outsource production.
2. Improving manufacturing capabilities
Improving product capabilities is important to both fabric and apparel producers. A growing trend since the elimination of quotas is mass customization.
Most retailers and brands are offering new products in a shorter time, leading to the need of faster production of smaller orders.
The mass market, including large retailers and department stores, also demands to more diverse garment design process. Variations on finish, color and trim under a single theme are getting popular to provide increased choices to consumers.
To serve this segment of the market, ASEAN suppliers need a greater capability in fabric and garment finishing, and perhaps garment preproduction (sample, pattern and marker making). Upgrading of these capabilities has to be done.
3. Reducing costs
While increasing capability and quality is essential, it is crucial to keep costs low, particularly averaged costs.
Considering the potential benefits of integration in the ASEAN textile industry, textile associations gathered in Jakarta last year. There, the AFTEX and the ACE Project signed a joint partnership to enhance a vertical integration on textile among AFTEX members. The AFTEX is the umbrella organization of textile and apparel trade associations of the ASEAN, comprising 10 country members, namely Vietnam, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Thailand.
Main objectives of the partnership are:
To promote ASEAN’s image as a full-package source of quality textiles and apparel
To strengthen the competitiveness of existing ASEAN supply chains
To enhance the integration of ASEAN’s textile and apparel sector.
AFTEX and the ACE Project also organized joint action programs to:
Identify supply chain corridors
Offer supply chain corridors diagnosis
Develop marketing plan
Facilitate workforce development.
One-stop manufacturing service gets more popular
Andrew Hong |
At a seminar in Bandung of Indonesia this April, Andrew Hong, Permanent Secretary General of AFTEX said that consumer behavior, especially that of organization consumers and brand owners, have changed in recent years.
Buyers are demanding to cut down the sourcing cost, and they increasingly hope for more than manufacturing services, but also design and finishing services, for example. Textile and apparel suppliers from ASEAN countries have to make anticipation of these market changes to avoid potential loss of buyers and brand owners, Mr Hong explained.
Following the financial crisis, the global demand on textile and apparel products dropped drastically in late 2008 and early 2009.
Consumers in the US, the prime exporting market of ASEAN suppliers, also tightened their pulse strings for apparel and other consumer goods. US imports of apparel from ASEAN dropped 5.88% in the first quarter of 2009, and continued to decrease 8.72% in July.
Source: Office of Textile & Apparel, International Trade Administration, Department of Commerce - USA
US imports of garment from the ASEAN region (in million square meter equivalents) |
However, Mr Hong believed that the decline of demand was not only a consequence of the financial crisis. “Whether there’s the crisis or not, US imports from the ASEAN would have declined when consumers don’t buy what you are selling or you don’t sell what they are buying,” he said. He views that the vertical integration among suppliers is highly desirable.
In reality, most ASEAN countries do not have a full textile and apparel supply chain on their own with all the needed sectors.
Indonesia has established a relatively complete supply chain of textiles and apparel from upstream suppliers to downstream, e.g. from synthetic fiber making to garment making. Some other ASEAN members might not establish domestically a full supply chain, opening up an opportunity to integrate the textile and apparel industry among ASEAN countries.
He added that the implementation of an ASEAN free trade agreement has a positive impact on integration as import duties among these countries are lifted. Through the Common Effective Preferential Tariff (CEPT) scheme, fabric suppliers from Jakarta (in western part of Indonesia), for instance, can send products to Bangkok (Thailand) or Ho Chi Min City (Vietnam) as easy as to Papua (the easternmost part of Indonesia).
The time factor was also stressed by Benny Soetrisno, Chairman of Indonesian Textile Association, who agreed that the current lead time has been getting tighter.
Mr Soetrisno said: “Years ago we need at least 60 days to gain fabric samples approval from the buyer all the way to arranging shipment of the finished products. We are now able to go through the process in 30 days. An vertically integrated factory has a higher chance to gain an upper hand in the international competition.”
This integration is not confined to a single company or a group of companies; it is possible to build up such an integration and closer economic ties among companies and even across borders. The Indonesian textile and apparel sector is in support of the development of a virtual vertical integration. It will help not-yet-integrated companies to link up with others and stay competitive globally, he added.
Developing virtual vertical integration
The development of a virtual vertical integration in the ASEAN textile industry started with a joint marketing effort, called “Source ASEAN” according to the AFTEX. It integrates the textile supply chain of the ASEAN countries offering a variety of textile and apparel products and services under a single roof.
Through “Source ASEAN”, buyers can focus on the finished goods they demand and the upstream services and products can be sourced among ASEAN suppliers easily. On the supply side, ASEAN textile firms can introduce a strategic alliance with partners along the supply chain from fiber making, spinning, weaving and knitting to garment producing.
The AFTEX also promoted this idea in trade events and exhibitions including the Vietnam Textile & Garment Expo this April, the Bangkok International Fashion Fair in August, and the Indonesia Textile and Apparel Fair in October 2009.
The ASEAN Fashion Plus Fair was held concurrently with the BIFF & BIL 2009 this August |
Supported by ACE and USAID, the newly established www.SourceASEAN.com serves as the official website of the ASEAN Federation of Textile Industries (AFTEX). It is a one-stop online shop or e-marketplace for regional and international buyers. Meetings with international buyers from North America and Europe were also planned by the AFTEX to further promote the ASEAN as a textile sourcing destination.
Moreover, participating ministers of the 41st ASEAN Economic Ministers’ (AEM) Meeting this August in Thailand welcomed the ASEAN Fashion Plus Fair that brought together various stakeholders such as textile and apparel manufacturers, department stores, fashion buyers and designers. As a next step, the Ministers agreed that ASEAN trade fairs could support outreach and the expansion of ASEAN trade. The ASEAN Fashion Plus Fair was held concurrently with the Bangkok International Fashion Fair 2009 and Bangkok International Leather Fair 2009 (BIFF & BIL 2009) on August 13-16 this year.
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Copyright © Adsale Publishing Limited. Credit goes to Adsale Industry Portal when used.
We reserve the right to take legal action against any party who reprint any part of this article without acknowledgement. For enquiries, please contact the Editorial Department. |
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