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How Turkey’s Vertical Supply Chain Delivers Post-COVID Competitive Advantages

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Although Turkey is the sixth-largest supplier of global apparel, industry players are setting high goals to make an even bigger impact in a post-pandemic world. One industry body, the Istanbul Apparel Exporters’ Association (IHKIB), feels the sector’s focus on vertical integration, a diversified apparel product line and aggressive digitization across the supply chain gives Turkey a leg up on other markets, especially as brands continue to seek out quicker lead times as shipping loads are constrained.

At the 2020 Virtual Apparel Importers Trade & Transportation Conference hosted by the United States Fashion Industry Association (USFIA), Cem Altan, an IHKIB board member, said he believes that the competitive advantages brought on by the nation’s widely vertical processes would enable U.S. retailers to receive ordered goods at their warehouses within six weeks.

“Especially after Covid-19, nobody wants to carry stock anymore, and everybody wants to order what they can sell, so Turkey is a very big advantage,” Altan said.

As the leading apparel industry association in Turkey, Istanbul Apparel Exporters Association (IHKIB) represents more than 80 percent of the nation’s apparel exports and 12 percent of total exports. With more than 10,000 members in the apparel field, the organization’s influence has also stretched into fashion, launching both the Istanbul Fashion Academy and Istanbul Fashion Week.

IHKIB operates with numerous goals in mind for the apparel industry at large, including: promoting apparel manufacturing capabilities worldwide, enhancing the industry’s export capabilities, encouraging educational activities for a qualitative workforce, enhancing the sector’s design capabilities and supporting production and testing infrastructure.

Altan noted the Turkish apparel production industry as a whole thrives due to its ability to vertically integrate its manufacturing capabilities, whether through growing its own cotton and other raw materials or operating its own farming production. Turkey does also import cotton from the U.S. alongside its home-grown cotton.

During the event, Haldun Boz, another IHKIB board member lauded the sector’s ability to be vertical not just in the manufacturing process, but also in design, product development and trend setting. Boz referred to the industry’s up-and-coming design and development functions as a byproduct of an “army of experienced and young designers, and design schools.”

With Covid-19 changing the dynamics in the apparel supply chain, Turkey’s sourcing capabilities and focus on vertical integration across different fabrics enable the company to adapt to different challenges. Turkey supplies the second-most denim and hosiery worldwide and supplies the third-most woven products worldwide. Despite the success of these categories, knitwear is actually what really excels in Turkey, with the segment comprising more than 50 percent of all apparel produced and exported.

Boz also noted that Turkey has an advantage in that most negotiations prior to the pandemic were based on achieving the lowest costs, but he feels that is shifting further toward a desire for affordably priced, yet high-quality goods, making the market a more attractive one for apparel companies going forward.

U.S. market represents major growth opportunity for Turkish apparel exports

Presently, between 65 and 70 percent of apparel production goes to E.U. countries, while only four percent goes to the U.S. While Turkey is the third-largest apparel supplier to the E.U. and the sixth-largest supplier worldwide, according to IHKIB data, conversely, only one percent of apparel imports in the U.S. comes from Turkey. The association is aiming to push further into the U.S. market over the next five years, particularly as the Covid-19 pandemic subsides.

At the moment, Turkey’s apparel export capacity to the U.S. is about $650 million to $700 million, but it is commonly held throughout the country’s industry that this total is not enough.

IHKIB Chairman, Mustafa Gültepe set an industrywide goal to increase the export level to pre-ATC Agreement on Textiles & Clothing (ATC) periods, when apparel exports to the U.S. totaled more than $1.6 billion. Turkey’s manufacturers should have plenty of opportunities to deliver on the potential to meet new customer and product demands, with the country currently having a potential export value of $5 billion to the U.S. market.

Digitization takes center stage amid “partner chain” mentality

As the Turkish apparel industry continues to seek out a greater U.S. market share, Turkish mills were quick to get in on the digitization trend via digital communication and design technologies ahead of the pandemic, giving these businesses the opportunity to address orders in real time.

“It seems that as garment manufacturers, we need to change our tradition in general from top to bottom,” said S. Mehmet Kaya, another IHKIB board member. “We need to fix this new digital layer in our industry. As manufacturers and brand owners have to design our digital transformation together. We must learn from each other and know each other’s expectation and take further steps as desired without wasting any time and effort.”

But for any of these changes to truly take effect, all parties must upgrade their relationship from a supply chain to a “partner chain,” especially as in-season inventory management becomes a main topic of discussion of all supply chain stakeholders, according to Kaya.

“In order to keep fresh and actual garments in store, being responsive and maintaining flexible production is the ‘must essential,’” Kaya said. “To fulfill our responsibilities as a manufacturer partner of the chain, we can also consider landed-duty paid (LDP) contribution as well as our free on board (FOB) shipments. We can create never-out-of-stocks (NOOS) lines together with brands, figure out our bread and butter together and be more effective and agile in season as well.”

Learn more about the Istanbul Apparel Exporters’ Association (IHKIB), their members and recent projects here. Watch the 2020 Virtual Apparel Importers Trade & Transportation Conference session featuring Altan, Boz and Kaya here.

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