Fashion apparel wholesalers, manufacturers, retailers and distributors are facing a changing economy, regulations and consumer demand—all while trying to reduce time to bring goods to market.
In the era of “fast fashion,” companies cannot solely choose a factory location based on cheap labor costs, hiring more workers to meet increased production demands. Brands that rely on a lower labor cost model as their strategy will find themselves potentially spending more in the longer term and falling behind the competition. Investments in factory digitization may provide the key to expanding the efficiencies of the labor force, keeping costs low and maximizing production without sacrificing quality.
According to Capgemini’s Smart Factories and the Modern Manufacturer Report, smart factories have the potential to add $500 billion to $1.5 trillion in value to the global economy in five years. The report found that 76 percent of manufacturers either have an ongoing smart factory initiative or are working on defining one.
Germany was one of the first countries to launch this kind of digitization, with its Industry 4.0 strategic initiative. According to the EU Digital Transformation Monitor, Germany “aimed to drive digital manufacturing forward by increasing digitization and the interconnection of products, value chains and business models.” Today, companies across the globe are realizing digitization is critical to keeping costs low and improving production.
As early adopters, the auto industry offers some measures that can be effective in the fashion apparel market. Yet, many brands are still chasing the old model and finding themselves mired in hidden costs of both human capital and compliance.
Stickier compliance web
Relocating a factory in search of the lowest wages—especially as factory work has typically been an extremely labor-intensive process—raises several issues. A new location increases startup costs and requires a deep understanding of the local and regional regulatory policies.
New regulations, including the recent EU General Data Protection Regulation, mean compliance must be a primary consideration—and can be an expensive line item in the budget—for manufacturers when opening factories in new countries. Each country comes with its own nuanced laws and regulatory challenges, which can include increased costs and labor requirements. By embracing digitization, instead of chasing new markets in pursuit of the lowest wages, companies can increase productivity and decrease costs without the stress of navigating new market compliance requirements.
Less money. More problems.
Successful apparel companies are looking beyond human capital for better productivity. Gone is the old-school thinking: Cheaper labor means I can hire more people who thereby can produce more goods. Yet, what if more employees in low-wage countries produced the same results as fewer employees from a higher-wage-paying country? Your ability to attract and retain talent in the higher-wage country, supplemented by technology advancements for automation—which can grow at scale—shows that lower-wage markets may not be economically sound for long-term growth strategies.
The cost of labor and wages are significantly lower in India than in China, however, India’s productivity is often estimated to be less than half of China’s. As is commonly understood, high-wage skilled laborers increase efficiency and productivity in a factory, which helps contribute to shortened lead times—a benefit that can be further amplified when technical automation and digitization are added. Companies will need to assess the recent enactment of tariffs, however. According to the American Apparel & Footwear Association, tariffs on Chinese goods will have devastating effects on retail and consumers.
Tools to increase production and profitability
Companies that embrace digitization and use technology to optimize their infrastructure and employee base will have increased reliability, production efficiency, automated production and more.
These technologies include solutions like Internet of Things (IoT). Now more than ever, connected devices are allowing information to be shared rapidly and keep the supply chain connected. Take Kaeser Kompressoren, for example. This German-based manufacturer of compressed air systems is using IoT sensors to avoid unplanned outages and downtime.
When it comes to predictive analytics, manufacturers are using it to optimize demand and forecast. With this technology, factories can change out different operations and different styles, so they can react faster, making data and insights more proactive and actionable.
And gone are the days of clunky mannequins. With the advent of virtual equipment, 3-D design and styling are reducing the time needed to make a physical sample, allowing manufacturers to move even quicker to market. Nike is using this strategy to optimize and streamline the production of customized sneakers for peak athletic performance.
Agility and automation can also allow the smart factory to adapt to changes with minimal intervention, so manufacturers can monitor and adjust in real-time. Leading global sewing machine manufacturer Juki is automating the collection and reporting of production activities with smart devices on the factory floor, allowing managers to be proactive and adjust to production changes and issues as they arise.
Considerations for digitization
Before implementing any solutions, companies should assess their customers’ needs and the capabilities of their current legacy infrastructure. Understanding the technology and capabilities of the current infrastructure and workforce, will help set a baseline for future smart factory success.
Examining the processes, governance and current workforce skillset can help companies prepare for digitization. More importantly, smart factory technology will shift skillsets, helping humans take on more strategic, productive roles.
Beyond these tools, companies should focus on their access and abundance of data, including how specific data sets can be actionable. Full data visibility and connectivity across the factory floor can allow for increased efficiencies. One China-based e-tailer, JD.com, is using data, robotics and connectivity in its fully automated distribution facility capable of processing 200,000 orders per day.
Embracing technology for future success
Smart factories are improving quality, efficiency, cost and safety—all important facets of today’s manufacturing industry. In the past, companies were focused on reducing costs to meet customer demand. With today’s smart factories and a commitment to transparency, compliance and sustainability, companies can meet their manufacturing and consumer demands.
Paul Magel, president, Business Applications and Technology Outsourcing division, CGS, leads the company’s flagship BlueCherry® Enterprise Suite of solutions for the fashion, apparel and consumer lifestyle products industry. He also manages the Cloud Technology and Cybersecurity practice overseeing sales, delivery, support and development.