Lanka apparels in new supply chain breakthrough

Thursday, 9 January 2014 00:00 -     - {{hitsCtrl.values.hits}}

  • We are pioneering G4 level in Sri Lanka: Van Heusen’s Green
  • Our apparels now moving to OEM level: Risha
  • Also doubling our intimate buying from SL in next 12 months: PVH Corp
  Sri Lanka’s top forex earner apparels have arrived at the next level in global supply chains, and in the manufacturing front, have progressed beyond the original ODM status. “It’s a first time in the world for us. We are pioneering G4 level in Sri Lanka. We are beyond the experimental level and it’s a new supply chain model. We at PVH Corp are directly working with manufacturers instead of working through an office in Sri Lanka,” revealed Mark Green, the Executive Vice President of Global Supply Chain of New York’s PVH Corporation on 13 November in Colombo. PVH Executive Vice President Green was responding to questions by Media of Industry and Commerce, in the aftermath of his address to Textiles and Apparels Sector session of CHOGM Business Forum at Cinnamon Grand, Colombo. The New York Stock Exchange (NYSE) listed PVH Corp (or Phillips-Van Heusen) is one of the largest lifestyle apparel companies in the world (and also reportedly the world’s largest shirt companies) with 2012 retail sales totalling $ 16.8 billion from its brand portfolio. PVH, owns such well known global brands as Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Speedo, Warner’s and Olga under it. Its Calvin Klein earned $ 7.6 billion in 2012 while Tommy Hilfiger earned $ 6 billion brand revenues in the same year. PVC, the “branded apparel designer and retailer” has 2,035 stores across the world, 1,025 of which are located in Europe. PVH’s 2013 revenue projection stands at $ 8 billion. “Sourcing is evolving. Relationship between factories and buyers also changing” said Green and explained the supply chain evolution: “In the G1 level, manufacturers, retailers and brands, all reside in close proximity. There are no language, distance, time or competence challenges. This was pre-1980s. “In G2 generally taking place in 1980-2005, supply chains fractured, manufacturers and brands go global but retailers remain local. Agents and importers emerge. In G3 level retailers replace agents and importers with their own supply chain teams. This was evident from 1990 to 2012. G4 is onwards 2009 to near future-manufacturers reach a level of sophistication that replaces retailers’ own supply chain teams. “The comparison- In G3 domestic retail teams reach out to engage with offshore suppliers who are global multi-country manufacturers while in G4, supplier teams of offshore global multi-country manufacturers reach up to engage with retailers. In G5, in future, manufacturers go vertical or virtual vertical into retail environment.” Speaking of PVH’s Sri Lankan breakthrough, Green said: “We have specially chosen Sri Lanka for our supply chain G4 level experiment. In fact we are beyond the experimental level since we have achieved almost 80% progress in this regard, starting around October-November 2012. It’s a first time in the world for us. “We are pioneering G4 level in Sri Lanka. I am not saying that PVH pioneered G4 across the world, but I am not aware anybody else working in that level-we are in the whole vertical of G4! It’s a new supply chain model that we are experimenting. In this we at PVH are directly working with Lankan manufacturers, in this case, Sri Lanka’s Brandix, instead of working through an office in Sri Lanka. “We train Brandix to do product development-on approvals on colour and fit, colour breaking etc. They also work with us on planning and forecasting so that the model we base is not the FOB price of the product but the ultimate profitability of the whole business. The measure of success is the increase in the margin increase, as opposed to the traditional model where you buy from the cheapest supplier and manage your margin yourself. “The reason we are choosing Brandix is in fact a business reason-due to trust that we built with them and also their skills, capabilities and their ability to manage the supply chain points –design, development, costing, sourcing raw materials and so on–In fact, we are giving a piece of our business for them to enter and manage.” Asked of the annual volume/values of PVH’s purchases from Sri Lanka, Green responded: “It’s an internal piece of info and not for disclosure. PVH was not very engaged in intimate apparel business until we acquired the Warnaco Group in February 2013 and acquired Warner’s and Olga brands after which we started engaging more and more with Sri Lanka. “We also have a bigger strategy on Sri Lanka to source non-G4 apparels for these labels and we will be doubling our sourcing from Sri Lanka to this end, in the next twelve months. Still, at the moment Sri Lanka is a small percentage of our business.” Addressing the forum, Minister of Industry and Commerce Rishad Bathiudeen stressed that the Sri Lankan apparel sector has progressed beyond its ODM stage to OEM. “Sri Lanka’s apparel sector has progressed from its Original Design Manufacturing (ODM) stage and is now striving, to become an Original Equipment Manufacturer (OEM) to the world market. And our apparel journey will, continue to grow, and grow,” he said and added: “Apparels and few other products consist of 60% of our exports. We are aiming at $ 4 billion apparel exports by 2015. This alone shows as to how strong our export concentration is in this sector. “What is more important is that, it is this sector that supported us through the recent global market downturn. The forex contribution to Sri Lanka by our apparels is well known. In the half decade of 2007 to 2012, total apparel, export earnings increased by 38% to $ 3.8 billion. In the same period exports only by BOI exporters increased by 45% to $ 2.8 billion. Therefore there is no doubt, that the apparel sector is a success story for Sri Lanka, and for our $ 20 billion export goal, by 2020. “More importantly, I believe that, our apparel sector is a success story not only due to, the heavy foreign exchange earnings, or the global branding, we see today. In fact, it is a successful case study of moving away from a quota based stitching economy to one that is now globally competitive on its own efforts. Our apparel sector, achieved this by trying to go above 60% ‘value addition practice’, ‘real productivity enhancements’ and production aimed at premium quality.