Blooming Clothing: The Case For Renewal

APPENDICES

APPENDIX 1: COMPANY TURNOVER AND FINANCIAL DATA

Balance Sheet as at 31 October, 1997, IR£

APPENDIX 4: The Irish Clothing Industry: Shaping Up For Change.

"The Irish Clothing sector is in the process of transition from being a traditional manufacturing industry to being an industry that is relatively knowledge-intensive, and makes use of a variety of professional skills."

(McIver Consulting, 1998)

During 1990-1998 the Irish clothing industry experienced a period of consolidation and change. This appendix describes the influences on change, the key drivers for competitiveness, and current and proposed strategic priorities.

Industry Profile

Employment in the clothing industry decreased by 15% between 1990 and 1996. By 1996 the industry was employing 13,200 people, representing about 6.7% of total manufacturing employment. The loss in employment was caused by company closures, most of which occurred during 1990-1993, due to the crisis in exchange rates between Ireland and the UK. The clothing trade, being very reliant on the UK market, and operating on low margins, was one of the main casualties of the crisis.

The Irish clothing industry has a relatively small share of its home market - an estimated share of 15% in 1996 - but is a strong exporter. In 1996, 86% of clothing output was exported.

Dependence on the UK market has loosened since 1993, and it now accounts for 63% of clothing exports. Other significant markets are Germany, France, Switzerland and Spain.

Pay in the industry is lower than in other manufacturing sectors, reflecting the reality that the value added per employee is lower than in other more modern and less labour-intensive manufacturing sectors. However, there are indications that companies in the sector are becoming stronger, albeit at a slower rate than the average for Irish industry as a whole. In 1996, Forbairt, the state support agency responsible for indigenous industry, launched an initiative for the clothing sector called Securing the Future. It proposes improving competitiveness by focusing on three strands:

* A Competitiveness Improvement Programme (CIP).

* The Irish Garment Technology Centre - seminars and projects, supported by EU and State funding.

* Support for Design and R&D programmes.

During 1992 -1996, Forbairt paid grants totalling IR£13.8 m. to clothing firms. Areas of support included improvements in manufacturing systems, computer aided design (CAD), and recruitment of designers.

Support for international sales was channelled through Enterprise Ireland. Specific supports included the Market Development Fund, Targeted Marketing Consultancy and Marketing Activity Investment Support. During 1992 - 1997, the Irish Trade Board, the precursor of Enterprise Ireland, invested IR£9.8 m. in the clothing sector.

Training support was provided by FAS - the Industrial Training Authority. Specific training programmes were put in place to cover machinists, production management, design and marketing. These initiatives cost almost IR£3 m. during the period 1991 - 1995. The industry was very positive about training, but many programmes ran with fewer participants than intended. FAS had to postpone or cancel some events due to companies being unable to manage

without key staff.

Agency interventions were regarded as playing an important role in bringing about change in the industry. Key areas were the prominence now given to design, and increased use of CAD techniques.

Factors Influencing Change

While it would be simplistic to isolate direct cause-and-effect relationships, several factors were important to the clothing industry environment during the 1990s.

Changing Economic Conditions:

As Ireland became a more developed economy, labour costs rose, particularly affecting labour intensive industries such as clothing. Lower cost economies in Eastern Europe, Morocco, China and India were now the new players for labour intensive industries. In Eastern Europe and Morocco, the clothing industry was upgrading itself to become an equal player with firms in Western Europe.

Labour Market Shortages:

Traditionally, the clothing industry recruited young women on low rates of pay, particularly when compared to more modern manufacturing. With a more buoyant employment situation, clothing companies were now experiencing more difficulty in recruiting and retaining staff. For management, this raised problems with productivity and with upgrading to higher technologies which depended on more skilled people.

Outsourcing:

The practice of outsourcing production, mainly to Eastern Europe and North Africa, had become prevalent in the European clothing industry since 1991. Irish companies, for reasons of their own, had been slow to follow this trend. The savings on production costs were reduced by transport costs and by management time needed to co-ordinate between locations. Lead times were long and more suited to large-scale production. However, with the labour shortage becoming acute, Irish companies were re-evaluating the situation. For the future, many were considering using their own production base for short runs, urgent orders and samples, and outsourcing the larger, longer term business.

Design & Branding:

Since 1991, many companies have improved their branding and marketing resources. The number of professional designers working in the industry has doubled. Companies have worked to establish and strengthen brands, with a few key firms integrating forward into retailing.

Retail Chains in Ireland:

Chain stores from the UK and mainland Europe had made significant inroads in the Irish market. These chains usually locate their purchasing function in their home country offices. They rely on global sourcing and large volumes to keep prices keen. For Irish suppliers, access to these buying centres, price, and production capacity are problem areas. The result is that a growing sector of the Irish clothing market is almost closed off to Irish suppliers. The other effect of the chain stores is to put pressure on the independent retailers, which have been good customers for Irish fashion. The prospect of an economic slowdown would make the independents vulnerable.

Technological Change:

The industry had widely adapted to CAD techniques, but CAM (Computer Aided Manufacturing) was less common, as it required a reasonable level of scale to be cost-effective. At the moment, the more technologically adept clothing firms were considering integrating information from production, logistics and finance systems. This was considered a key issue in the context of supply chain management, which calls for better communication and information for supply partnerships.

The Future:

The industry view is currently positive, and it is felt that most clothing firms have improved in technology and in operational performance. Some companies have built strong relationships with retailers in the UK. As it is evident that Irish firms cannot compete merely on price, two alternative strategies are suggested for future competitiveness:

* A strong combination of design and marketing. This would allow the firm to build a brand with a strong reputation.

* Strength in service, particularly in efficient turnaround of orders. This would allow the company to build a strength as a contract manufacturer.

In conclusion, a sectoral review commissioned by FAS (McIver Consultants, 1998), proposed the following vision of the industry:

"The vision should be of a knowledge-intensive industry that is strong on design, strong on marketing, strong on logistics management, strong on clothing technology.....and is positioned in markets where these strengths make sense. It could make reference to fashion and to branding. The vision would recognise that professional employment in the sector will increase, and that shop-floor employment may decrease."

REFERENCES

Kotler, P. (1994), Marketing Management: Analysis, Planning, Implementation and Control, Englewood Cliffs: Prentice Hall, 8th edition.

Euromomitor (1998), European Marketing Data and Statistics, London: Euromonitor Publications, 33rd edition.

Company Returns, The Companies Registration Office: Dublin.

McIver Consulting (1998), A Clothing Industry Update Study, report submitted to the Textile, Clothing and Footwear Committee and Fas: Dublin.

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