For the global apparel manufacturing sector, digital transformation must start from scratch – in some cases the establishment of factory machinery. A new YCP Solidiance report charts the course towards an efficient, digitalised supply chain in the industry.
The study – prepared in collaboration with Brother Machinery Asia – focuses on the Asia Pacific (APAC) region, where the global apparel manufacturing industry has been epicentred for years owing to vast production facilities and low labour costs.
China is the stalwart – with expertise, experience, modern infrastructure, efficient supply chain management and high productivity. India is emerging as a key competitor, while the governments of Vietnam and Indonesia are also targeting the lucrative segment. In the backdrop, markets such as Sri Lanka, Pakistan, Bangladesh offer up even cheaper alternatives.
Together, these markets occupy the lion’s share of the global apparel manufacturing industry – worth nearly $9.5 billion according to YCP Solidiance. And the segment is growing. By 2021, this figure is expected to near the $10 billion mark, tracing a compound annual growth rate (CAGR) of nearly 5% since 2016.
The numbers reflect growth, although a closer look reveals an industry in crisis. The low labour costs that make Asian markets so dominant in apparel manufacturing are rapidly on the rise – in China particularly and across ASEAN markets. At a more fundamental level, the sector remains primitive from a technology perspective, riddling it with inefficiency and subjecting it to all manner of risks.
The digital imperative
Factories remain labour-intensive, while supply chains remain fragmented. All this while the global fashion industry demands more efficiency at lower costs. For YCP Solidiance, the way forward is clear – digital transformation.
“With business strategies getting harder to maintain and the high-cost Asian labour market, digitalisation is viewed as the effective solution to save cost in the long run. Implementing advanced technology, such as integrated IoT systems, has increased apparel production by 5% and cut cost and time by 88%,” noted YCP Solidiance Partner Satoshi Kuriga.
The numbers are staggering, and are even more appealing in light of the Covid-19 impact on apparel manufacturing. “The ongoing lockdowns across Asia have caused the apparel industry to lose over 70% of its functions and decreased the total sewing machine operating hours in Bangladesh, India, Indonesia, and Vietnam to 27%.”
For factories in the region, digital transformation has moved from a future imperative to an immediate necessity – evidenced by a marked increase in digital investments. With many starting their digital journey from scratch, a step-by-step approach will likely unfold – as detailed by the researchers.
Step one is to set up the hardware that can automate basic functions in the production process. Step two is to back up this hardware with advanced robotic and artificial intelligence technology, which can efficiently coordinate the machines through data and training. Step three is to integrate the hardware and software function and implement Internet of Things (IoT) technology.
Once these steps are complete, manufacturers can move on to the final stage of coordinating the entire supply chain ecosystem – from sourcing to retail – using technology such as blockchain to transparently record and monitor information as well as AI and data analytics to make the process more efficient.
What results is a digitalised supply chain that improves efficiency and productivity, while minimising both costs and risks. Such a setup would be a gold standard for fashion brands, and the race is on. Another product of the Covid-19 crisis has been the shift away from a high-risk China market, with many brands seeking a safer alternative with cheaper labour costs. Having upped their digital transformation investments, many manufacturers will now be in a position to fill this gap.