Unified Strategies: The New Strategic Paradigm in Action

The end of the FOB-only competitive era has opened the way to new, more rational strategies.  However, the 40-year reign of the marauding garmentos has left its mark.

It will take time to overcome the endemic mistrust between customers and their suppliers; as well as the even greater mistrust between the industry as a whole and rest of the world.

The problem is parallax:  Imagine you are an astronomer.  You are looking through your telescope at a specific star.  You then take your telescope, travel 500 miles and look at the same star.  You will see that the star has shifted position in the sky. In fact the star has not moved, it is you that has moved.  Astronomers define this apparent change as parallax.

What is true when we look at the stars in the universe is equally true, when we look at our relatively small global garment industry.

  • To the suppliers, customers are bunch of extortionists who care only about FOB price
  • To the academics, suppliers are a bunch of exploiters who unless policed 24 hours a day will invariably employ 10 year old children 70 hours per week in slave-labor conditions, just to earn a few extra cents profit.
  • To the customers and their factory suppliers, the academics are a bunch of ignorant ideologues whose entire knowledge of the global garment industry is limited to walking down the aisles of Saks Fifth Avenue; and who know little and care less of the highly competitive nature of the garment industry, and less about the problems of working in countries, which have minimal logistics, less electricity and virtually no educated management.

To move forward we must first realign our perception to a unified view of the global industry as a whole and the role of each player in that industry

Fortunately, a new generation of professionals from all disciplines is now moving from the parallax view to a unified view.

This is the first step to a new industry where players compete, while at the same time cooperate within the industry and collaborate with important players from outside the industry.

These are the two strategies required by the new industry:

Cooperative Strategies — where customers work directly with their factory suppliers to increase more services such as higher productivity and faster speed-to-market.

Collaborative Strategies ­— where customers work together and with other global institutions for mutual benefit.

From Passt to Future

Once again, back to the past

The old pre-professional FOB-only Competitive Strategies

The customer dictates his requirements to the supplier in terms of delivery, price, quality as well as compliance and other areas of corporate social responsibility (CSR).  In this regard the customer offers few if any assists.

Competitive strategies are by nature fundamentally flawed.

Because each customer has its own requirements, the factory supplier is faced with need to meet differing needs within a single structure and system.  For example since each customer has its own compliance standards, the factory is faced with need to continually modify his factory to meet conflicting requirements.

The factory often does not have access to the facilities to meet customer requirements.  For example, without professional support the factory cannot reduce required lead times to meet customers’ delivery dates or increase productivity to meet customers’ target prices;

The factory lacks professional management and technical skills needed to provide services to meet customers’ requirements;

In many cases the factory lacks access to the capital at reasonable rates of interest, needed to develop the operation their customers require.

The flaws inherent in competitive strategies invariably cause customers to migrate from the traditional factory supplier to the transnational giants, who because of their size are able to develop in-house the facilities to meet even the most exorbitant customer demands.

The transnational factory can effortlessly pass compliance simultaneously for any number of compliance structures.  If necessary it can construct purpose-built factories to meet the specific needs of special customers.

The transnational factory employs teams of highly skilled professional engineers who constantly work to reduce lead-times and raise productivity.

The transnational factory with its educated and experienced managers is at the forefront of the strategic move from product-maker to service-provider.

The transnational factory with branches in South Asia need not worry about the 11%-15% charged by local banks in India, Bangladesh or Pakistan banks.  They can meet their full banking needs I Hong Kong, at Hong Kong rates.

The result is until and unless new strategies are implemented the transnationals have two unbeatable advantages over the locals.

  1. With higher productivity, they can produce at lower cost per unit.
  2. With greater service, they can charge a premium.

Lower costs and higher prices make competition very hard.

Into the present

The customer dictates its requirements but at the same time assists the factory to meet those requirements.  For example, the single most important pro-active move is to increase factory productivity.  This is where the cooperative strategy brings strategic change.

There are two points to consider here

Actually this takes no imagination whatsoever.  This is how the global garment industry operates — at least from he top

Cooperative strategies are quickly becoming the norm among U.S. based major brand importers as well as some garment retailers The consequential advantages of cooperative strategies to both customers and their factory suppliers are enormous.

However, it is important recognize that cooperative strategies would have been impossible (and indeed are still impossible) to customers living in the FOB-only competitive world, for one obvious reason:

The benefits of the new skills introduced by the customer to the factory will invariably be passed on to all of the factory’s customers, almost all of which are the customer’s competitors.

Herein lies the axiom on which all cooperative strategies are based

 

Benefits for all are more profitable than benefits for none

 However, cooperative strategies face serious limitations

A customer cooperating with its factory brings beneficial change to both. However that change is limited to what the single customer can achieve working alone with its suppliers.

The problem is that most of the problems facing the factory cannot be solved internally.  The industry must recognize that most change must come from the outside. To effect real change, both the customer and its supplier must move from the factory to the industry as a whole and beyond.

If the customer and/or his factory supplier wants to play a role in that change it must have a seat at the table where the decisions are made.

Just as cooperative strategies are based on the belief that for those operating within the industry benefits for all is better than benefits for none; so too must we in the industry recognize that to the degree that our industry operates in the real world benefits for all includes everybody within and without the industry

Collaborative Strategies

If we are to effect real change these are some of the people who must sit at the table where change is decided

There is however one proviso

We cannot bring everybody to the table.  Not everyone is interested let alone committed to change.  Those still living in the old pre professional era when the old FOB-only strategy when the industry was dominated by the garmento-marauders have no place at the table.

Cooperative strategies begin with a single country

The coalition of the willing[1]

This is not some academic dream and I am not a college professor.

The industry is moving towards unified strategies as a practical solution to long existing problems, which have plagued us from the very beginning just as they plague us today.

Provided these strategies are implemented correctly, the industry will benefit, so too will the people in the countries where we produce our goods, and the consumers in the countries where we sell our goods.



[1] THL is currently in the process of organizing a unified strategy project.  This list consists of the organizations that we would like to work with in this project. We accept that the list is incomplete and that other organizations are equally capable of carrying out the required tasks

 

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One Response to Unified Strategies: The New Strategic Paradigm in Action

  1. Keerthi Abe says:

    Unified Strategy of The coalition of the willing is “advertising” the productivity gap across the industry. This gap arise due to new qualifiers such as lean and transparent players. Who will be naming them if you don’t Mr. Birnbaum?

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