By Karen E. Thuermer, AJOT

The apparel and garment industry involves multiple treads that weave through international sourcing options, trade agreements, transportation modes, logistics operators and programs, piece manufacturing, and timing schemes. Whereas retailers have historically stocked their stores with seasonal items, today much of that stock is just-in-time (JIT) based models that gauge what sells, what doesn’t, and the latest fashions

All production at Inditex, regardless of its origin, is received at the logistical centers for the brand, from where it is distributed simultaneously to all the stores worldwide on a highly frequent and constant basis.

Multinational retailers H&M of Sweden and Zara of Spain are responsible for introducing these changes to the supply chain. They altered the industry by multiplying stores around the world and introducing schemes whereby the latest fashions are manufactured and stock replenished quickly using JIT models. The idea is to keep stock lean, fresh and up-to-date.

H&M exists in 43 countries and 2,629 stores at end of August 2012. It is ranked the second largest global clothing retailer, just behind Zara, and leads over third largest global clothing retailer, US-based GAP Inc.

Today Zara is present in 73 countries, with a network of more than 1.540 stores – most of which are located in major cities.

Core to Zara’s model is its parent company, Inditex, which operates as one of the world's largest fashion retailers with eight store formats -- Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe.

The Inditex Group is made up of more than 100 companies operating in textile design, manufacturing and distribution. The group's success and its unique business model, based on innovation and flexibility, have made Inditex one of the biggest fashion retailers in the world.

“Our approach to fashion – creativity, quality design and rapid turnaround to adjust to changing market demands -- has allowed us to expand internationally at a fast pace and has generated an excellent public response to our retailers' collections,” Inditex reports on its website.

All production, regardless of its origin, is received at the logistical centers for the brand, from where it is distributed simultaneously to all the stores worldwide on a highly frequent and constant basis.

Zara’s distribution takes place twice a week and each delivery always includes new models, so that its stores are constantly refreshing their stock.

The logistics system, which utilizes software designed by the company’s own teams, makes it possible for stores in Europe to place their orders at the distribution center and received them in store within 24 hours – 48 hours for American or Asian stores. This is because of Zara’s agile transport network, made possible by the fact manufacturers and suppliers locate close to retail outlets.

Over the past several years, US retailers like the Gap, American Eagle Outfitters and Macy’s have followed Zara’s example. Today they place smaller orders in more factories, and wait until the last minute to verify colors and cuts of fabric. Orders are generally rushed to the retail stores rather than being stockpiled in warehouses. In doing so, retailers have shrunk their concept-to-store times from 12 to about six to nine months, thereby eliminating a peak season rush.

Margins Remain Tight

Competition remains steep, however. Not only are retailers pressured to speed fashion to customers, they are pressured to increase margins. Speaking in January to industry officials in at TexWorld USA, Munir Mashooqullah, founder and president of Synergies Worldwide, stressed how retailers and wholesalers are facing extremely tight margins.

“It’s the manufacturers of raw materials who are making most of the money today,” he said.

The reason is the low cost options around the world from where these manufacturers source raw materials. Examples include Vietnam and Cambodia, which are in close proximity to mills in China. In fact, the United States Association of Importers of Textiles and Apparel (USA-ITA) states that Cambodia has emerged as the sixth largest importer of raw goods.

But even here competition is being felt. During the year ending June 30, Cambodia recorded a 0.37 percent rise in apparel exports to the United States, whereby China saw a 4 percent drop; Indonesia, a 7.61 percent drop, and Bangladesh a whopping 12.7 percent drop.

Julia Hughes, USA-ITA president, attributes Cambodia’s increase to that nation’s cost competitiveness based on low wages, duty-free access to most major markets, and the Generalized System of Preference (GSP).

Sourcing Trends

Cambodia, however, cannot satisfy all supply chain needs and must import most raw materials for production. Honduras and Nicaragua save U.S. manufacturers three to four weeks in lead time. Meanwhile, free trade agreements instigated by the United States, such as CAFTA-DR and those with Mauritius and countries in Africa, offer alternatives.

Textile Intelligence points to Malaysia as a nation where textile and clothing exports are set to double to an annual value of US$7.5 billion by 2020. Exports there advanced dramatically in 2011 by a significant 28.4 percent to US$3.8 billion. Within this total, textile exports grew by 33.5 percent to US$2.5 billion, reports Textile Outlook International in its Issue No. 158 report.

The report identifies several new growth areas in Malaysia’s textile and clothing industry: industrial and home textiles, functional fabrics, ethnic fabrics and high-end fabrics and garments. In addition, there are plans for greater emphasis on key support facilities and services such as design houses, fashion centers, and specialized dyeing and finishing facilities.

Technical Textile Markets reports that Asia, itself, will account for over half of global nonwoven fabric production by 2020. In this category alone, production in Asia increased by 7.4 percent to 3.1 million tons in 2011, rising by 10.0 percent in 2010 and 13.1 percent in 2009.

The fastest growing category of nonwoven fabrics was that of spunlaced nonwoven fabrics, which increased an average 20.0 percent per year between 2008 and 2011. It rose 21.8 percent in 2011 alone.

The report states that China and India, which account for over a third of the world’s population, are set to become the largest potential markets for such products.

“Although economic growth in Asia has revised downwards recently, it is still expected to be much faster than in Western economies,” Technical Textile Markets writes.

However, if Asia’s nonwoven fabric producers are to fulfill their potential, they will have to invest in the most advanced technology and production equipment available, as well as using higher quality man-made fibers and functional fibers, it continues.

One segment that the report finds is set for significant growth is textiles for the automotive industry.