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8/13/2019 Global Apparel Exports -2006 & Impact of MFA Phase Out
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EXECUTIVE SUMMARYThe MFA Strategic Sourcing Impact: The Private Sector
Perspective
Research suggests that quota is one of severalfactors considered when sourcing decisions aremade, and in isolation, it may not dramaticallyimpact strategic sourcing decisions.
China will receive significant growth towards theend of the decade, but only a modest increase inapparel production in the short term.
Developing long term strategic partnerships withkey suppliers was cited by most as the most
important future sourcing consideration
The elimination of quota will bring equilibriumto a global apparel industry that was artificiallyinfluenced through quota.
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Respondents shared the perspective that theelimination of quota will bring equilibrium to aglobal apparel industry that was previouslyartificially influenced.
Research suggests that companies view addressingpost MFA social and economic impacts as the role ofgovernment and industry, not the private sector
Interest from the private sector in future projectparticipation is contingent upon multi-constituentparticipation, as well as involvement from multiplebrands.
EXECUTIVE SUMMARY
The MFA Strategic Sou rcing Impact: The Private Sector
Perspective
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Sourcing Factors Quality
Price
Delivery
Capacity
Relationship / partnership with factory
Vertical integration
Speed to market / turnaround time
Reliability and consistency
Service and flexibility
Gross margin vs. gross pricing
Merchandising
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Costs, incentives, subsidies
Compliance with codes and ILOstandards
Workplace safety and conditions
Differentiation and innovation
Competitiveness Communication skills
Credit
Pre-production assistance
Transportation: access, costs Political Environment; safety; corruption
Trade Regulations / barriers
Ability to warehouse / ship
Raw Material / Fabric access and supply
Sourcing Factors
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The MFA Strategic Sourcing Impact:
Slight Decrease in Exports
Thailand- Slight Decrease in Exports Slight decrease its workforce is not as efficient
or productive (bra example with demonstratedlost business with expiration of quota); toocomplacent and has not invested for the futurethrough development of new technologies orprocesses; engineering improvements havehelped it manage its labor force; but still troubled
with delivery and execution; expect medium termok, but long term reduction. Has not capitalizedon supply chain linkages with neighboringcountries.
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Philippines- Slight Decrease in Exports
Difficult count ry to work in due to unrest;
union problems; noncompetitive; few key suppliers will remain, but industry
at large will decline.
Country also has other industries suchthat the garment sector is not vital
to its long-term economic viability.
The MFA Strategic Sourcing Impact:
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Lesotho - Substantial Decrease in Exports
Lead time and proximity difficult;may survive with niche anddifferentiated products but not likely;needs infrastructure development
The MFA Strategic Sourcing Impact:
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The MFA Strategic Sourcing Impact:
Indonesia -Mixed Response
good skills in suits and handicrafts;
competitive labor
rates; downside is corruption andpolitical instability
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Sri Lanka : Mixed Response
Mixed response; however infrastructure (road to
port) must be improved, and mill capacity and innovation must be
improved; politically stable; not
always price competitive; possesses skills and
hard working attitude; mostly work as subcontractors; need more government
intervention to promote
industry and abilities
The MFA Strategic Sourcing Impact:
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Bangladesh : Mixed Response
Anticipated status quo to growth although some mixed response;
low costs will keep the industry alive as will industry efforts,however using price asthe only means to add value may not beenough if vertical integration andother sourcing criteria are not
developed;
strong with basic volume driven items; need for infrastructureimprovements; slow production;
lack of raw materials;
antiquated banking system and terrible social compliance record: BGMEA/ILO program not as favorable as hoped, and quality
inconsistent;
Indias anticipated growth may also cannibalize Bangladeshsfuture.
The MFA Strategic Sourcing Impact:
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Major Global Apparel Suppliers-2006
USA, 595.171, 4%
India, 522.463, 3%Thailand, 597.758,
4%
Pakistan, 618.83, 4%
Germany, 669.13,
4%
Malaysia, 1,255.07,
8%
Italy, 1,353.59, 9%
Hong Kong,
1,723.21, 11%
China, 8,260.92,
53%
China Hong Kong Italy Malaysia Germany
Pakistan Thailand USA India
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According to an article published in the Business weekmagazine, 30 million jobs will be lost to China, the hardesthit countries would be Turkey, Mexico and some Africannations. The World Bank report says, this will be one of thelargest short-term transfers in history. Despite these
developments the apparel industry is estimated to grow atvery high pace and will provide employment to a largenumber of people all across the world.
MFA IMPACT - JOB LOSSES
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Competitive Imperatives
Quick Responsiveness: With increasingly high fashion, but shorter lifecycle of final products, buyers are demanding quick response from suppliers. Therefore, proximity to the market is becoming a very important factor.
Full Package Supply: Similarly, full package supply is being more preferable to fragmented assembly-type production process.
Scale Economies Scale economies in T&C production will be released due to the new souring strategiesSize matters
Multi-market Resilience From a Domestic Company to a Multinational Enterprise ( MNE) to hedge against risks and to take advantage of global resources and
learning opportunities
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IMPACT OF PHASE OUT on
Price
Every interviewee indicated that theirsuppliers have quoted pricereductions ranging from 5-20%.
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Future ProspectsThe global apparel manufacturingindustry is expected to grow more
than ever in times to come.According to an estimate, the globalapparel industry will reach a value of
US $ 1,781.7 billion by the end of2010.