The Fashion Industry Is Heading For A Crossroads. The Era Of Low-Cost Supply Is Coming To An End.

(BCG) a newly released Research Report on fashion supply chain gives a bold conclusion through headlines and themes. The fashion industry goes to the crossroads, and the end of the supply era of low cost countries.

This is exactly the opposite of the "follow the low cost pointer" rule that the industry has been following in the past few decades.

The report clearly states: "if global fashion manufacturers want to increase production efficiency and expand speed, they can no longer shift from this low-cost country like they used to to the next low-cost country."

The innovation enables fashion companies to place manufacturing centers around target consumers to improve their reaction speed.

Accordingly, the report recommends that "fashion companies must adopt new cost tracking frameworks to control costs and provide incentives for key production partners to improve productivity."

The report pointed out that the choice of supply areas was to maintain low labor costs as the primary consideration so that product prices could remain competitive, and when a country's labor costs increased, fashion companies had to shift their production areas.

"Perhaps this migration will soon be over.

Cheap labor has become increasingly scarce and low cost countries are decreasing.

To cope with this trend, fashion companies must make full use of existing equipment to improve production efficiency, speed up the expansion of the market and eliminate the pressure of labor cost management.

BCG believes that the current challenge requires market companies to examine their production processes and production partners from three strategic perspectives.

1. Innovation: Innovation in garment production allows fashion apparel companies to place production facilities closer to the market, increase their responsiveness to the market and better manage the demand for raw materials.

Even if the cost advantage continues, such as power failure, telephone and Internet network breakdown, the report may cause additional costs and obstacles to the supply chain, the report said.

In severe cases, harsh production conditions were fatal. The collapse of the building in Sarwar, Bangladesh in 2013, fully confirmed this.

Political instability is also a potential threat in many areas. "

The current fashion cycle is shortened, but in the emerging low-cost countries (such as Burma and Ethiopia), the production cycle is longer. This contradiction makes people start looking for new ways to obtain low-cost supply.

"Their cost advantages are pient and may be eroded by the increase in non labor costs."

2. cooperation: increase cost pparency.

New technology and new technology, from digital design, 3D printing, to waterless dyeing and automatic tailoring, are cutting production costs and accelerating turnover.

A new clothing pricing method beyond the standard labor cost model has been established by fashion companies in minutes.

The new benchmark helps them to compare suppliers in different regions to select the most efficient ones.

The disadvantage of China's rising labor costs is offset by the advantages of higher productivity. In a comprehensive sense, competitiveness is not lost to Philippines and Kampuchea, which are cheaper in terms of labor costs.

3. value added: raw material management.

Fashion companies are also better managing raw materials through one or more of the four main methods.

A) "material engineering management" helps companies and suppliers to optimize fabric selection and production processes.

B) "combinatorial complexity simplification" refers to the integration of resources, using a simpler combination of yarn counts and weights to reduce the complexity of raw materials.

C) "value chain adjustment" requires companies to better arrange production time so as to distribute production burden evenly rather than relying on unstable speculation as before.

D) and supply chain integration can help fast fashion companies increase production or pform into new styles.

Today, fashion manufacturers have to calculate the costs associated with production of factors such as inefficient, skilled workers and political instability. They are also wondering whether the advantage of the cheap labor force is still worth a lot of work.

The report concludes that technological innovation and strategic progress are creating new sources of cost-effectiveness.

Those companies that can seize opportunities can not only end the migration to a cheaper labour country, but also leave other companies behind in this critical juncture.

After rapid expansion at this critical juncture, those companies that are not rigidly constrained by the "labor cost is the only lever to pry the industry" will gain fruitful booty.