Impact on environment creating negative image of industry
After almost forty years, the International Apparel Federation has become the world's leading federation for apparel manufacturers, their associations, and the supporting industry. IAF's membership now includes apparel associations from more than 40 countries representing over 150,000 companies who provide products and services to the apparel industry - a membership that represents over 20 million employees. Associate members are prominent companies or institutes in technology, business services, retailing, logistics, culture and education. The IAF redrafted its mission statement in 2006, broadening its scope and embracing the entire apparel chain. The same year, its headquarters moved from London to Zeist, near Amsterdam where the first IAF office was set up, before moving on to Berlin. Han Bekke, president of the federation, talks about the future of apparel industry.
How has the apparel world changed in the last few years?
The apparel industry in the past few years has had to work under volatile global macro-economic conditions. The fashion market has become a very competitive market with high pressure on margins. Since 2009, the global apparel market has been experiencing a slowdown in growth to some 2-3 per cent per year as a result of the economic crisis that started in 2008.
But, there are also positive signs. In its latest World Economic Outlook, the International Monetary Fund (IMF) indicates that the growth of the world economy in 2018 and 2019 will be 3.9 per cent on an average. Economic growth in the European Union (EU) will be 2.4 per cent, Japan 1.2 per cent, and the United States (US) 2.9 per cent. The conclusion is that strong economic growth will be there in other parts of the world too like in India, China and Brazil. The IMF also reported that the growth of welfare in western countries in per capita terms will never be as high as before the financial crisis of 2008. The reasons for this that the IMF is mentioning in its report are: population getting older, decreasing labour participation, and a low growth in productivity. For all of us working in the apparel and textiles industry, it is good to realise that these figures can be quickly influenced by geo-political developments, by tensions in international trade via import duties, by tax plans in major consumer markets, etc.
How can automation and technology reshape the global clothing industry?
Automation is reshaping the industry in many ways.
Digitising the product development process and doing away with physical samples will not only save costs, it will also enable a much faster and more flexible supply chain, which in turn will improve profitability. A digital sample of a product can be shown to potential customers very quickly after the product is created, and if the consumers don't like the product, it need not be produced at all. But this is only one example of the way digitisation improves operations and creates a balance of power in the supply chain. For instance, we now also see the quality control process being partly digitised, enabling self-assessments by manufacturers to be verified in a digital environment.
And then of course, there are the developments in robotisation, which have the potential to change the structure and the geography of the industry. But in the near and not-so-distant future I do not foresee a large percentage of the global apparel production being made by robots.
Where is the adoption rate of Industry 4.0 higher: sourcing, designing, development, manufacturing, distribution, or retailing?
If we look at industry 4.0 in the narrow sense, as driven by IOT (internet of things) then in manufacturing, where sewing machines are becoming intelligent, the adoption rate is picking up. We see a positive impact on productivity and flexibility caused by the enhanced functionality of machines.
What are the major challenges that the apparel sector is facing?
Consumer behaviour continues to change. According to the McKinsey survey 'State of Fashion 2018', consumers have become more demanding, more discerning and less predictable. This is challenging for companies in our sector who in my view have to reconsider their business models. Speed to market is key. Innovation is needed next to a sustainability approach.
Which factors affect the overall performance of the apparel industry?
New challenges and opportunities are ahead of us. Entrepreneurs are used to initiate, innovate and invest, knowing that risks will be there all the time. Geo-political tensions will continue, the trade policy landscape is still uncertain, and disruptive technologies will continue to come up, digitisation of the fashion market will not stop, and consumers will be more demanding. On top of this, we have a huge responsibility to make our value chain more sustainable, not only in terms of social conditions under which our products are produced, but also from an environmental point of view. The image of our sector has deteriorated in the past years, and I see a growing pressure from society to improve.
I see two main developments: a race to the bottom on the one hand, where one could question whether this is profitable at the end and whether it will improve the living and working conditions of workers in low wage countries. The pressure on our supply chain to be really transparent and be accountable for these conditions is increasing. On the other hand, I see a movement from focus on price to focus on quality, more value for money, sustainability and speed to market. This could make local manufacturing or re-shoring based on new technology (robots, 3D) attractive.
What is the future like for second-hand clothing and new clothing?
There is a consciousness among a growing group of consumers that part of the global environmental problems is caused by over-consumption and over-production. More and more stories are emerging about huge stockpiles of unsold clothing. By buying second-hand clothes, consumers alleviate their guilt about their negative impact on the environment. But second-hand clothing is only one manifestation of circular fashion. I believe circular fashion, including an increased use of fabrics from recycled sources, will be a theme of fast-growing importance.
What initiatives have you taken to improve the image of the apparel industry?
The adverse impact of apparel on the environment-in some cases on workers-and also a deteriorating perception of value caused by price races to the bottom are creating image problems for the industry. A negative image of an industry is really the largest threat any industry can face collectively, and can also only improve collectively. Industry associations, industry initiatives and global federations such as IAF, ITMF and WFSGI are in a good position to play this collective role. IAF, mainly using its World Fashion Convention platform, is a strong advocate of global collaboration to create smarter, stronger and more sustainable supply chains. Through projects, we support better collaboration between buyers and suppliers, we help reduce audit and standard fatigue and to improve their effectiveness, we support global schemes to increase the share of circular fashion, and we strive to better connect the worlds of large brands and retailers to the millions of small and medium-sized businesses in our industry.
Which major projects are you currently working on?
IAF's mission is to unite all stakeholders of the fashion industry, including brands, retailers, suppliers and country associations from around the world to enable and promote smarter, stronger, more sustainable supply chains. IAF is structurally carrying out projects with the multiple goals of supplementing income, learning and working in depth on industry development with its members. IAF has worked in the last two years on four projects: one each in Ethiopia and the Netherlands, and two in Bangladesh. In the Netherlands, IAF has been supporting Dutch member MODINT for several years in its innovation stimulation work. In Ethiopia, together with its member Actif Africa and funded by the EU, the IAF researched the development of the Ethiopian garment industry and organised export preparatory workshops for Ethiopian garment manufacturers. In Bangladesh, the IAF acted as advisor to the Dutch Embassy in Dhaka, helping it organise a large conference named 'Sustainable Sourcing in the Garment Sector (SSGS). This was a success and led to a follow up project which IAF is leading. It is essentially a feasibility study for a global management course aimed at both buyers and manufacturers called 'Collaborative Sourcing Course'. The Dutch Ministry, IAF, IAF member BGMEA and ILO Better Work are core project partners. Last year IAF opened its first regional office in Sialkot (Pakistan) at the premises of its Pakistan member PRGMEA in order to assist local manufacturers to respond to the challenges in de textile-clothing pipeline.
We are also working on a common project with ITMF (International Textile Manufacturers Federation) on audit effectiveness. There are too many audits and a lot of costs are involved for manufacturers. Our aim is to cut down these costs in our supply chain by harmonising these audits.
Sustainability is another topic IAF is working on in order to harmonise all the efforts worldwide to make our sector more sustainable.
With the US losing interest in buying new clothes, what is the future for apparel manufacturers?
I do not see US losing interest in buying new clothes. The issue there in my view is whether these clothes can be imported duty-free or not. There is NAFTA and we know that China is dominating the apparel market in the US. We have to see whether (Donald) Trump's trade policy will also affect our sector. So far, there are no signs this will happen, but uncertainty is key here. IAF is in favour of free but fair trade. Import duties and non-tariff barriers disturb the world trade in clothing and textiles and in that sense will hurt all companies working in our sector, not at least the consumers we want to serve.
What will be the effect of China's One Belt, One Road Initiative on the apparel industry in Asia?
It is hard to overstate the impact of this initiative, which is really going to have a fundamental impact on the global apparel production map in the coming decade. The investments made as a result of the initiative are boosting the development of the apparel industry in a large number of Asian and African countries. Following the hard investments in infrastructure and in machinery, next is the softer investments in people, their skills and in the management. Investments are needed to improve our industry in a more structural way; so, potentially this is a good development. I envision that IAF members and IAF's Chinese member CCCT will be working together more intensively in the coming years on all issues surrounding industrial development as a result.
What is the agenda of the upcoming World Fashion Convention?
The theme of the 34th IAF World fashion Convention from October 8-10, 2018 in Maastricht (The Netherlands) is "Building a smart future for fashion". In a world where prices cannot drop much lower, boats cannot go much faster and people cannot work much harder, improvements are made only when the business is made smarter. Sessions will be held on smart raw material use, smart supply chains, smart new business, smart manufacturing and smart retailing. This convention will show many inspiring examples of a smarter apparel supply chain.
The IAF Convention caters to apparel industry leaders from across the supply chain, from all continents. This convention is a unique opportunity to gain the insights necessary to understand where our industry is heading. Top speakers from across the globe cover the width of the supply chain, from raw materials to apparel sourcing and from production to retail trends. On top of that, the convention provides an excellent opportunity to meet the global industry in one location in a few days time. (RR)
