Peter Liu is the managing director of AsiaNet Consultants, Asia Pacific’s leading executive search firm for sourcing, retailing, and supply chain management. Before joining AsiaNet, Liu was a member of the global supply chain practice of a major international executive search firm. His recent executive search work included senior sourcing and supply chain executives for global apparel manufacturers, retailers, and logistics service providers.
With over 20 years of line management experience, Liu has previously held senior positions at Peninsula Knitters, a major international sweater manufacturer and marketer based in Hong Kong. Prior to that he was president of Burlington Worldwide, a Hong Kong-based subsidiary of the largest textile company in the U.S.; main board director of TAL Apparel, a leading global woven garment manufacturer and marketer; managing director and chief representative to China, for Betz Lab, Inc., a major water treatment consulting company; and country manager, Taiwan, China and Hong Kong, for the DuPont TeflonÂ® business.
Liu has an MBA in export management and international business from the CASS Business School and a degree in chemistry from the University of London. He is a board member of the American Chamber of Commerce in Hong Kong and is the immediate past chairman of the Textile and Apparel Committee (2003–2008). He serves on the advisory boards of the Prime Source Forum and the University of Delaware's Department of Fashion and Apparel Studies and is a fellow of the Hong Kong Institute of Directors.
AsiaNet was founded in 1988 and is one of Asia Pacific’s longest established executive search firms. AsiaNet is a founding member of the International Executive Search Federation (IESF), which is the world’s largest executive search group with 101 offices in 43 countries. AsiaNet CEO Mark Geary is also the joint president of IESF. For more information visit www.asianetconsultants.com and www.iesf.com or contact: email@example.com, (852) 9265-1727.
Today’s worldwide economic downturn has had unprecedented effects on the global apparel industry. The negative impact is clear: firms are threatened by the widespread financial insecurity brought about by the credit crisis. At the same time, however, these conditions provide massive potential for positive change. With the present adversity comes the opportunity to overcome old challenges.
Even before the financial tsunami began to wreak its havoc last year, our industry already faced the dual challenges of being over-retailed and over-supplied. There have been far too many individual retailers and manufacturers all along the supply chain, creating an overly saturated playing field. Over-retailed and over-supplied industries tend to be inefficient; individual firms fail to meet an optimal level of performance.
The most obvious counter to this trend is a converse one of industry consolidation. Consolidation entails buyers reducing their number of manufacturing suppliers, and manufacturers narrowing their customer bases. With fewer vendors to deal with, buyers can enjoy simpler and less costly logistics and economies of scale (fewer large shipments as opposed to many smaller ones) in a consolidated environment.
Furthermore, by focusing on this smaller number of suppliers, firms benefit by saving manpower, time, and attention that must be devoted to dealing with individual companies. Consolidation benefits firms’ long-term prospects by establishing stronger relationships with fewer counterparts, leading to security, reliability, better service, and price incentives. Overall, these elements of consolidation combine to improve efficiency and lower costs for all.
The past 10 months have brought about an aptly named “era of survival” that will last for many more months to come. Numerous well-known brands failed to meet the immediate financial and economic challenges, and countless manufacturers ceased operations. These circumstances, however, set the stage for industry consolidation.
Consolidations to varying degrees have been carried out for efficiency’s sake in healthy economic times, but the current crisis has been a jarring catalyst for rapid change. Previously, managers had less incentive to spare the time and attention to carrying out reforms, but tough economic struggles have made these changes imperative. Now, consolidation is not merely a matter of optimal performance but necessary for survival. Retailers fear that some of their suppliers will not remain financially sound and vice versa. Both buyers and sellers are forced to obey the law of “survival of the fittest.” Financially unsound businesses fall and solid businesses remain to evolve. This makes it necessary for both interdependent groups to maintain relationships with a smaller number of reliable counterparts.
The process is brutal and painful in the short-term, but the final outcome promises to be bright and sustainable. I remain very optimistic about the apparel industry based on one simple fact: the pie — that is, demand for apparel — is growing larger every day. The incredible rate of population growth on our planet is coupled with a remarkable emergence of the middle class in the developing world. As this demographic gains prominence in the global economy, their demands will combine with consumer bases in the developed world to ensure a thriving, enduring market for apparel.
This basic human demand will not wane anytime soon. With growing affluence and exposure to the rest of the world, people will need and want clothes for every kind of occasion, function, weather, location, and style. I believe that the generations to come will command an even greater desire to express themselves and their identities through clothing. With future markets almost a given, the key to success is cost-effective service.
I had the honor for serving as the chairman of the Textile and Apparel Committee of the American Chamber of Commerce in Hong Kong for six years. Many movers and shakers of the apparel industry have been guest speakers at our monthly meetings. Back in 2004, when quotas were to be eliminated, many people predicted the demise of sourcing agents. At a breakfast meeting, the group managing director of a leading sourcing agent was questioned by the audience on his role in a world without quotas. His reply was, “In the supply chain there are four parties, namely the production team at the headquarters, their respective overseas buying offices, sourcing agents, and full-service factories. Obviously, there are duplications in roles. The million-dollar question is who [is unnecessary]?”
At the time, many people thought that full-service megafactories would win. Buyers can deal with the factories directly, cutting out the sourcing agents, and even their own overseas buying offices. Today, it turns out that some sourcing agents actually have the upper hand. By offering a cost-effective worldwide sourcing infrastructure, and cash to buy exclusive sourcing rights, the sourcing agent appeals to brands/retailers that are financially challenged. Adjusting one’s value proposition based upon circumstances at the time is a proven success formula.
Another industry leader, a head of manufacturing of a large U.S.-based wholesaler, concluded that fashion is perishable, like vegetables. Therefore, he proposed that the apparel supply chain should model after the supermarket trade to achieve optimal speed to market. Yet another leader spoke about anchoring production in China. Using the best available technology and efficient operations, they could beat the competition from manufacturing centers like Bangladesh without constantly having to move to lower cost locations.
The successful implementation of all these strategic initiatives starts with people. New ways of operating the business require new thinking. While most existing staff readily embrace change and the associated uncertainties, there are others who are overwhelmed by new technology and new ways of doing things.
During better economic days, some employers were too busy to spend their valuable time reviewing the competencies of their managers in the changing world. Others simply delayed making key personnel changes that would be necessary for long-term beneficial reform to avoid upsetting daily operations. This made sense at the time, especially since some companies have been burned for bringing in capable new blood only to see them leave after a short tenure without making lasting improvements. There could be many reasons, and at a recent global sourcing conference, I explained my views:
The definition of talent in the Oxford Dictionary is “the ability to do something well naturally.” That means that you are either born with it or you are nurtured over a long period of time. Talent usually does not come through attending short programs for two hours or two days or two months. Therefore, it is much better if during the selection process a candidate highlights and sells talents rather than trying to force an identity that he or she is not.
It is not easy to discover natural talent, especially during formal job interviews between the hiring manager and the job applicant when both parties have practical incentives to conclude the conversation. This “get it over with” mindset might lead to hasty and sometimes superficial exchanges. A firm handshake and good eye contact, while important, are no guarantee of success on the job. Professional headhunters who know the apparel industry and the talent pool can fill in this gap by acting as matchmakers; they can devote the necessary time and attention to intimately understand both employersâ€™ and candidates’ unique needs and traits.
To conclude, I would like to applaud the companies who are taking bold action in today’s adverse circumstances. They believe now is the time to speed up the implementation of the necessary strategic initiatives to ensure sustainable growth when the economy inevitably recovers once again.
The good news is that these initiatives are not rocket science. Consolidation has clearly been a tried-and-true strategy for success, cost-effective service has always been vital, and human capital has always been crucial to achieving goals in many industries. The challenge lies not in complexity but in the daunting prospect of taking the first step — human resources management. Crisis has brought challenges, but action will bring rewards.
Kevin M. Burke
Chief Executive Officer,
American Apparel &
Kevin M. Burke is the president and chief executive officer of the American Apparel and Footwear Association (AAFA), headquartered in Arlington, Virginia. Since Burke joined the organization in June 2001, AAFA has grown its membership base, its member programs, its financial position, and its standing on Capitol Hill.
Burke is a career government relations professional with 30 years of experience in Washington. He previously served five years as vice president of government relations for Food Distributors International, a trade association representing wholesalers of food to independent grocers and restaurants. Burke was responsible for all aspects of the associationâ€™s outreach to Congress and federal agencies on issues ranging from ergonomics to tax law and more. He also significantly expanded the scope of the associationâ€™s political action committee.
From 1987 to 1995, Burke was vice president of government relations for the American Bakers Association. While there, he spoke on behalf of wholesale baking companies on legislative and regulatory issues ranging from family/medical leave to transportation policy.
Before that, Burke managed the government relations office of the National Association of Broadcasters. This role included coordinating visits by association member executives with members of Congress, as well as fundraising and advocating on behalf of members to lawmakers and the administration. Burke also worked as a legislative assistant, and later, press secretary to Representative Norm Lent (R-NY). He began his career in 1979 with the Republican National Committee and the Reagan-Bush presidential campaign.
Burke currently serves on the boards of the American Apparel Education Foundation, Boys Hope Girls Hope, the Congressional Institute, the Fashion Institute of Technology’s Educational Foundation for the Fashion Industries, the International Apparel Federation, Kids In Distressed Situations, and the U.S. Chamber of Commerce’s National Chamber Foundation. He is also a member of various political and trade association CEO groups in the Washington, D.C. area.
Burke received a master’s degree in public administration in 1983 from the American University in Washington, D.C. He also holds a bachelorâ€™s degree from the State University of New York at Brockport. Married, with two children, Burke resides in Great Falls, Virginia, and enjoys golf, biking, and running.
The American Apparel and Footwear Association (AAFA) is the national trade association representing apparel, footwear, and other sewn products companies and their suppliers which compete in the global market and whose combined industries account for more than $225 billion in yearly retail sales. AAFA members also produce more than 80 percent of apparel and footwear sold at wholesale each year in the United States. AAFA members manufacture and market all types of apparel and footwear and are located in virtually every state, as well as internationally.
Imagine walking into a department store to buy a swimsuit for your upcoming summer vacation. As you browse through all the racks of one-pieces, two-pieces, and tank-inis in every color imaginable, you automatically meander to the sale rack to find a bargain. You finally find the perfect swimsuit that matches your style and does not bankrupt your savings. To make it better, it’s also a name brand with an embroidered logo everyone can see. As you try it on and picture how you’ll look sitting on a sandy beach drinking a margarita, do you care that this perfect swimsuit was made in Honduras, or any particular country for that matter? Probably not.
Consumer research has shared a very important truth with us about shopping habits. Consumers only care about three things when shopping: price, brand, and style. In a game of retail paper-rock-scissors (in this case, price-brand-style), price beats the brand, brand trumps the style, and style wins over price. These three factors are the chief competitors in the quest to satisfy consumer tastes and preferences. Geographical origin is a rare consideration in the search for the perfect garment, like the “little black dress.”
Given that reality, all apparel and footwear producers have been confronted with the challenge of creating a well-made and cost-friendly good. The simplest way to keep production costs low while maintaining the integrity of the product is to heavily control and manage that product’s supply chain.
U.S. apparel and footwear brands have chosen to remain competitive in the global marketplace by making their supply chains more efficient and sourcing many of their goods internationally. To maintain a competitive spirit and ensure a sustainable future for the U.S. apparel and footwear industry, the educational foundation of the fashion business has changed to meet supply chain demands. Through a diverse and internationally focused curriculum, today’s fashion students can learn the necessary tools to positively impact one of the first industries to defy boundaries and go global.
In the early 1970s, the apparel and footwear industry began to see large shifts toward international production. Mainly in response to competitive pressures from international companies, the industry moved production from the United States to the developing world in order to keep prices low and the quality high. In the case of footwear, by 1978, 53 percent of the footwear sold inside the United States was made outside the United States. According to the most recent trade data, that number has risen to an astonishing 99 percent. For apparel, the trend is relatively new. Until 1991, the domestic and international production ratio was equal at 50 percent. However, 2008 trade data estimates that nearly 96 percent of clothing sold in the United States was produced outside the country.
This trade data reflects the truly global nature of the apparel and footwear industry. And why shouldn’t it be? With only five percent of the world’s consumers living in the United States, neglecting the global marketplace would be neglecting 95 percent of consumers. Because the apparel and footwear industry is a “buy everywhere, sell everywhere” industry, embracing global competition is the only way U.S. apparel and footwear companies can guarantee a bright future.
In order for the industry to understand its place in the global economy, we are seeing a renaissance in educational curricula to assist students in understanding the global supply chain. We are also seeing pioneers taking the industry to a new level of competition and young employees eager to join the ranks.
Stepping onto any U.S. college or university campus, we see that strong emphasis has been placed on international business programs and courses. Students who are well versed in international business practices are the new leaders of tomorrow’s apparel and footwear industry. Many people think that the fashion industry only needs designers. That simply is not true. To get a shirt from the designer’s sketchpad and into the consumer’s closet requires teamwork and expertise far beyond one’s ability to draw.
Fashion designers cannot produce and sell their designs alone. A student who fervently studies “Product Lifecycle Management” fully understands the concept of creating a garment or shoe and getting it to the right market for the right consumer at the right time. Not only does this take a complete knowledge of international shipping logistics and product safety requirements, mastering the supply chain means utilizing the right technologies.
Recently, academic institutions have integrated technology into traditional courses of study. For the apparel and footwear industry, doing so has led to many improvements in the supply chain. For instance, by using Radio Frequency Identification (RFID), retailers, suppliers, and manufacturers are able to better communicate and control inventory needs. Also, by using new technologies, new fabrics can be created, garments can be constructed better, and the fit can be perfect.
While U.S. apparel and textile management educational programs touch on these emerging issues, more needs to be done to ensure that those in the industry are educated about new trade regulations and sourcing tactics. As we all know, change is inevitable. New technologies are created and force us to rethink how we do things. New legislative agendas and government regulations can benefit companies or harm them if they are not aware of the impact.
That is why it is important to continue exploring educational opportunities as professionals in the apparel and footwear industry. Joining a trade association provides you with access to information, guidance, and support in overcoming any industry-wide challenges. For instance, the American Apparel and Footwear Association (AAFA) helps keep members informed about new industry trends and issues, including international product safety, sourcing and logistics, and social responsibility.
The U.S. apparel and footwear industry is extremely competitive in the global marketplace because of the innovative and forward thinking of active industry participants. By making the supply chain more efficient, and therefore more effective, companies are able to satisfy consumer needs and meet their bottom line. If the U.S. apparel and footwear industry wants to maintain that competitive edge, we must continue improving the supply chain and ensure that students are being educated ahead of the curve.