The dynamics of the apparel value chain and how the global apparel industry is classified as a buyer-driven industry
1. The dynamics of the apparel value chain
1. The dynamics of the apparel value chain
1.1 Two types of value chains
Ø based on the concentration
of power between buyers and suppliers
of power between buyers and suppliers
1. producer-driven value chains
2. buyer-driven value chains
In
the past
q Producer-driven value chains
q In producer-driven value chains, usually transnational, manufactures
play the central roles in coordinating production networks.
Ø push system
Present
q Buyer-driven value chain
q Buyer-driven value chains are those in which large retailers,
marketers and branded manufacturers play the pivotal roles in setting up
decentralized production networks
Ø power shift to downstream
Ø pull system
1.2 Other dynamics
Ø Globalization
q Highly competitive
q Globally decentralized factory systems
q Low entry barriers
Ø China’s accession into the WTO
q Elimination of all textile quotas
2.1 Buyer-driven industry
Ø buyers (retailers, marketers and branded manufacturers) play the key
role in setting up decentralized production networks
Ø in a variety of exporting countries such as some developing
countries
2.2 Retailer:
Ø exercise the main role at the design and retail stages
Ø have higher power concentration
Ø develop a higher entry barrier among members of the value chain
Ø high entry barriers at the branding and retail stages will result in
higher market power and profitability
2.3 Use of IT
Use of advanced information systems,
retailers can:
Ø gain real-time market knowledge from the front line
Ø streamline supply chain operations at the back end
Ø manage their extensive global sourcing networks
2.4 Suppliers
and manufacturers:
Ø weak members in the value chain
Ø they have to compete in highly competitive and globally
decentralized factory systems with low entry barriers
Ø resulted in an ill-balanced and highly buyer-driven apparel industry
on a global scale.
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