The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — The fear that robots will one day take our jobs is almost palpable across many industries today. Fashion is no different, with technology set to shift the current apparel sourcing model to such an extent that the supply chain as we know it may soon cease to exist.
On the one hand, the so-called “march of the machines” puts a staggering 231 million jobs at risk across 50 countries for manufacturing as a whole, according to the McKinsey Global Institute. But on the other hand, it allows an industry to restructure its data and operations, move factories closer to market, reduce transport costs and emissions, build up a more skilled labour force that is potentially treated more fairly, and focus more closely on individual customer needs.
Today’s sourcing revolution can be divided into two main areas. The first is digitisation, which links software patterns in a streamlined fashion and digitally houses all information, allowing cost analysis to be done at high speed and digital renderings of products to reduce the need for expensive prototypes.
The second is automation, which replaces humans on the factory floor with robots and therefore allows the manufacturing model to move away from low-cost labour countries towards those that are geographically closer to the end market.
The rise of both forces makes for a significant transformation as fashion manufacturing has traditionally been a globetrotter, with brands and factories hurtling from country to country in search of ever-cheaper workers. But a new report, “The Apparel Sourcing Caravan’s Next Stop: Digitisation”, suggests that a global supply chain dominated by low-cost labour could one day be replaced by a different model altogether.
A Revolution in the Making
“The fashion industry used to have a very specific sourcing process,” says Achim Berg, co-author of the report and co-lead of McKinsey’s global apparel, fashion and luxury practice. “The old paradigm in sourcing was always, ‘Let’s get it cheaper, let’s go to a less-developed country’, which is why fashion manufacturing moved from the West to Eastern Europe, to China and now to Southeast Asia and Africa. It has been the caravan of sourcing.
“But the reality is that we’re now reaching a limit in terms of finding ‘the next country’,” he continues. “And we’re also reaching a limit in the kind of transactional relationship companies can have with vendors. Everyone is looking for increased transparency, shorter lead times, and more flexibility, and the next big thing will be increasing productivity. All of that you can only change if you collaborate with a smaller number of vendors, and it is digitisation that will make that entire process more efficient.”
In an era of instant gratification and with an industry increasingly dominated by digital influencers, speed to market and customisation have become more important for some fashion players than cost alone. This is why the sourcing revolution is set to impact high street brands as much as luxury ones, with the former speeding up mass production times, and the latter using automation to customise pieces in order to afford to continue manufacturing in high-cost countries such as France and Italy.
I see small players having a hard time as it is a case of bigger budgets, bigger benefits.
“It’s not about luxury versus mass so much as big companies versus smaller ones, as this will require money and expertise,” says Berg. “I see small players having a hard time as it is a case of bigger budgets, bigger benefits.”
As a result, factories and brands that are unable or unwilling to change their model to incorporate digitisation into their daily operations and automation onto the factory floor will find themselves stranded far from their markets.
“With lead times getting shortened, manufacturing will need to move closer in, but transferring to higher-cost production companies would usually have a direct impact on the price of goods,” says Berg, referring to a renewed focus on proximity sourcing over reshoring.
“[This] is why both digitisation and automation make a lot of sense,” he continues. “We don’t believe it will bring mass production back to the West, as that concept is driven by nationalism and not for rational reasons. However, it’s ideal for neighbouring manufacturing countries such as Turkey and Mexico [which are close to big consumer markets like Europe and the US].”
Conversely, the digital sourcing revolution could also have a positive impact on China, which is currently a world leader in this area. However, China has also watched brands move elsewhere due to rising domestic wages. Digitisation will allow Chinese manufacturers to streamline their costs, while automation will fit more closely with the needs of their increasingly skilled but ageing workforce.
“This will help in China, where factories will employ fewer people but more high-paid technicians,” says Edward Hertzman, the founder of website The Sourcing Journal. “China is getting more expensive, which is great for their quality of life — they want seamstresses to one day become technicians, and this change will create a lot of jobs in the engineering space.”
East Africa is predicted to leapfrog ahead as big players don’t want to repeat the same mistakes when it comes to ethics or sustainability. As a result, when Chinese and other owners open factories in Africa, many will build a modern factory fully incorporated with digitisation.
But how soon will this sourcing revolution actually come? And how urgent is it for those in the apparel-manufacturing sector whose livelihood depends on it most?
When McKinsey surveyed chief purchasing officers of apparel companies, most believed that automation is coming fast. More than 60 percent of respondents believed that automation will be a major driver of sourcing decisions instead of labour cost by or before 2025. Nearly all the rest believed it would happen by 2030. Only a few sceptics doubted that automation would become the key decision driver within the next 20 years.
While increased automation is an inevitability, and this may sound like a bleak prognosis for many manufacturing workers, the sourcing revolution should in theory improve labour conditions for those who remain in employment, placing a higher emphasis on skills and training.
"I am not so worried about jobs lost in manufacturing as new jobs will be created when we transform along the current trajectory," says Wilkie Wong, the managing director of global sourcing for the Esquel Group, which produces garments across several Asian countries for brands including Ralph Lauren, Tommy Hilfiger and Nike.
“In the factories, we will need more engineers and technicians supporting the workers. We will need more analysts and data scientists to study the data. Also, if we become more competitive, our business will also grow, thereby allowing us to redeploy our people to areas where they are most needed.”
Increased Speed, Agility, Flexibility and Productivity
Putting aside any impact on the workforce, digitisation holds far more appeal than automation for manufacturers like Gerhard Flatz, the managing director of China-based apparel manufacturer KTC that has attracted performance brands like Rapha, Mammut and Gore Running Wear.
"Sourcing digitisation will allow the customer to speak far more loudly," he says. "One day soon, people will order customised goods through their mobile phones, which will then be digitally sent to the factory, where a machine will cut the fabric to the exact shape they requested, and a skilled seamstress will finish the job.
“People forget that a lot of human knowledge is necessary in apparel manufacturing and at the moment it is still much cheaper to use human capital than to start building robots.”
Rob Sinclair, president of supply chain solutions at Hong Kong-based sourcing giant Li & Fung, agrees, suggesting that digitisation will take the focus away from the buyer and place it firmly on the customer.
Sourcing digitisation will allow the customer to speak far more loudly.
“Historically a store buyer held the power of decision making,” he says. “They decided what to buy and how many units. With digitisation, through transparency and websites, consumers are making that decision, which means brands can now focus on the consumer. This in turn will lead to consumer intimacy on a very personal level.”
Li & Fung, which has undergone a challenging couple of years, is currently investing heavily in digitisation for reasons ranging from streamlined operations and greater transparency to predictive analytics in production and the important impact digital design will have on reducing costly prototypes. Li & Fung is not yet focusing on automation, largely because they do not own the factories they work with.
However, Sinclair is more hesitant about the suggestion that digitisation will lead to a physical shift in manufacturing. “Digitisation and geography are not mutually independent, but they’re not that closely linked either,” he says. “Digitisation coupled with automation will make manufacturing closer to end market more plausible. But it is not one size fits all. Certain brands will move down the automation journey faster than others, and we’re not going to see the entire industry change in one go.”
Hertzman, by contrast, believes the opposite, predicting major geographic relocations within the next two decades. “The landscape will be very different,” he says. “In the next five years I don’t see much change, [but] in the future, if we get to the perfect solution, there will be no inventory at all, as everything will be made on request as close to home as possible.
"Marquee brands such as Zara, H&M and Macy's will find a way to stay relevant by creating a different shopping experience that allows customers to try something on in store, which is then customised with the help of AI and made nearby," he adds.
While sourcing digitisation is certainly an ongoing revolution that is propelling many fashion manufacturers into action and leaving others behind, Sinclair believes it is not the end game either.
“It’s just the new super highway. It is the new enabler and a current of electricity in our industry, but once everyone is digital it is just a new playing field,” he says. “It’s what is after digitisation that is the [even] bigger question.”