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Textile and apparel supply chain management in Hong Kong Jimmy K.C. Lam Institute of Textiles and Clothing, the Hong Kong Polytechnic University, Hunghom, Hong Kong, and R. Postle Department of Textile, The University of New South Wales, Sydney, Australia Abstract Purpose – This paper aims to review the concept of supply chain management. The typical problems facing with textile and apparel supply chain are short product cycle for fashion articles, long production lead-time and forecasting errors for fashion items. The Hong Kong textile and apparel supply chain faces additional problems of distance from customers in the US and European markets, long production lead-times and minimum batch sizes for production, and, recently, elimination of quota restriction in the US market, all of which force them to improve efficiency and enhance competitiveness through supply chain management. Seeks also to provide a selective bibliography for industrial practitioners with sources which can help them develop their supply chain strategies for the fashion market in Hong Kong. Design/methodology/approach – A range of recent published (1993-2005) works, which aim to provide practical advice are critiqued to aid the individual practitioner to manage its supply chain strategies in Hong Kong. These sources are sorted into sections: supply chain management in Hong Kong, textile and apparel supply chain management in Hong Kong, and problems faced by small and medium-sized enterprises for textile and apparel supply chain. Findings – The differentiation of product demands into functional and innovative products helps the supply chain company to employ different supply chain strategies for different products, namely responsive supply chain strategy for innovative products and efficiency supply chain strategy for functional products. These two supply chain strategies are focused on the downstream supply chain aiming at shortening the time to research the market and also to reduce the stock levels in the retailing industry. Research limitations/implications – This is not an exhaustive list and cases are mainly from the Hong Kong textile and apparel industry, which perhaps limits its usefulness elsewhere. Practical implications – A very useful source of information and impartial advice for industrial practitioners to develop their own supply chain strategies for the fashion market in Hong Kong. Especially recently with the elimination of quota to the US market, the management of the supply chain is critical. Originality/value – This paper fulfils an identified information/resources need and offers practical help to industrial practitioners on then supply chain management for the Hong Kong textile and apparel industry. Keywords Supply chain management, Textile industry, Hong Kong Paper type General review 1. Introduction In recent years, “world class” organizations purchase products, move and market goods and services on a global basis in order to meet customers’ needs on a timely basis, with relevant and high quality products produced and delivered in a cost effective manner. The current issue and full text archive of this journal is available at www.emeraldinsight.com/0955-6222.htm Apparel supply chain management 265 Received October 2004 Revised March 2006 Accepted March 2006 International Journal of Clothing Science and Technology Vol. 18 No. 4, 2006 pp. 265-277 q Emerald Group Publishing Limited 0955-6222 DOI 10.1108/09556220610668491

Transcript of Textile and Apparel Supply Chain Management in Hong Kong

Page 1: Textile and Apparel Supply Chain Management in Hong Kong

Textile and apparel supply chainmanagement in Hong Kong

Jimmy K.C. LamInstitute of Textiles and Clothing, the Hong Kong Polytechnic University,

Hunghom, Hong Kong, and

R. PostleDepartment of Textile, The University of New South Wales, Sydney, Australia

Abstract

Purpose – This paper aims to review the concept of supply chain management. The typical problemsfacing with textile and apparel supply chain are short product cycle for fashion articles, longproduction lead-time and forecasting errors for fashion items. The Hong Kong textile and apparelsupply chain faces additional problems of distance from customers in the US and European markets,long production lead-times and minimum batch sizes for production, and, recently, elimination ofquota restriction in the US market, all of which force them to improve efficiency and enhancecompetitiveness through supply chain management. Seeks also to provide a selective bibliography forindustrial practitioners with sources which can help them develop their supply chain strategies for thefashion market in Hong Kong.

Design/methodology/approach – A range of recent published (1993-2005) works, which aim toprovide practical advice are critiqued to aid the individual practitioner to manage its supply chainstrategies in Hong Kong. These sources are sorted into sections: supply chain management inHong Kong, textile and apparel supply chain management in Hong Kong, and problems faced by smalland medium-sized enterprises for textile and apparel supply chain.

Findings – The differentiation of product demands into functional and innovative products helps thesupply chain company to employ different supply chain strategies for different products, namelyresponsive supply chain strategy for innovative products and efficiency supply chain strategy forfunctional products. These two supply chain strategies are focused on the downstream supply chainaiming at shortening the time to research the market and also to reduce the stock levels in the retailingindustry.

Research limitations/implications – This is not an exhaustive list and cases are mainly from theHong Kong textile and apparel industry, which perhaps limits its usefulness elsewhere.

Practical implications – A very useful source of information and impartial advice for industrialpractitioners to develop their own supply chain strategies for the fashion market in Hong Kong.Especially recently with the elimination of quota to the US market, the management of the supplychain is critical.

Originality/value – This paper fulfils an identified information/resources need and offers practicalhelp to industrial practitioners on then supply chain management for the Hong Kong textile andapparel industry.

Keywords Supply chain management, Textile industry, Hong Kong

Paper type General review

1. IntroductionIn recent years, “world class” organizations purchase products, move and market goodsand services on a global basis in order to meet customers’ needs on a timely basis, withrelevant and high quality products produced and delivered in a cost effective manner.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0955-6222.htm

Apparel supplychain

management

265

Received October 2004Revised March 2006

Accepted March 2006

International Journal of ClothingScience and Technology

Vol. 18 No. 4, 2006pp. 265-277

q Emerald Group Publishing Limited0955-6222

DOI 10.1108/09556220610668491

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To achieve this goal, the concept of supply chain management (Cox et al., 1995) hasproven to be of vital importance especially for the Hong Kong textile and garmentindustries. Hong Kong has become an important sourcing and control centre for theglobal garment industry with production plants in China, Indonesia, Thailand and India(Hong Kong Government Industry Department, 1995).

Although billions of dollars of apparel business are conducted in Hong Kong,relatively little knowledge about the management of supply chains is reported inpublished research. The technologies of electronic data interchange (EDI), flexiblemanufacturing, automated warehousing and rapid logistics appear to achieve littleimprovement in the supply chain management (Fisher, 1997). New managementconcepts such as quick response, efficient consumer response, mass customization,lean manufacturing again fail to deliver the cost saving and performanceimprovements in the supply chain (Fisher, 1997).

2. Supply chain managementCompanies have traditionally viewed themselves as entities that exist independentlyand have to compete against each other in order to survive. However, such mindsetcannot be sustained as no organization can operate alone in complete independence.Firms are finding that they can no longer compete effectively in isolation of theirsuppliers or other entities in the supply chain and are realizing the benefits ofcollaborative relationships within and beyond their own organization (Cox et al., 1995).The concept of the supply chain and its management are attracting increasingattention on behalf of both academic and industrial practitioners.

2.1 Definition of supply chain managementVarious definitions of a supply chain have been offered in recent years as the concepthas gained popularity. The APIC dictionary (Cox et al., 1995) describes the supplychain as:

. the process from the initial raw materials to the ultimate consumption of thefinished product linking across supplier-user companies; and

. the functions within and outside a company that enable the value chain to makeproducts and provide services to the customers.

The Supply Chain Council (1997) uses the definition:

The supply chain – a term increasingly used by logistics professionals – encompasses everyeffort involved in producing and delivering a final product, from the supplier’s supplier to thecustomer’s customer. Four basic processes – plan, source, make, deliver – broadly definethese efforts, which include managing supply and demand, sourcing raw materials and parts,manufacturing and assembly, warehousing and inventory tracking, order entry and ordermanagement, distribution across all channels and delivery to the customers.

Quinn (1997) defines the supply chain as:

. . . all of those activities associated with moving goods from the raw materials stage throughto the end-user. This includes sourcing and procurement, production scheduling, orderprocessing, inventory management, transportation, warehousing and customer services.Importantly, it also embodies the information systems so necessary to monitor all of thoseactivities.

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In addition to defining the supply chain, several authors have further defined theconcept of supply chain management. As defined by Ellram and Copper (1993), supplychain management is “an integrating philosophy to manage the total flow of adistribution channel from supplier to ultimate customer”. Monczka and Morgan (1997)state that:

. . . integrated supply chain is about going from the external customer and then managing allthe processes that are needed to provide the customer with value in a horizontal way.

They believe that supply chains, not firms, compete and that those who will be thestrongest competitors are those that:

. . . can provide management and leadership to the fully integrated supply chain includingexternal customer as well as prime suppliers, their suppliers, and their supplier’ suppliers.

From these definitions, a summary definition of the supply chain can be stated as:

All the activities involved in delivering a product from raw material through to the customerincluding sourcing raw materials and parts, manufacturing and assembly, warehousing andinventory tracking, order entry and order management, distribution across all channels,delivery to the customer and the information systems necessary to monitor all of theseactivities.

Supply chain management coordinates and integrates all of these activities into aseamless process. It links all of the partners in the chain including departments withinan organization and external partners including suppliers, carriers, third-partycompanies and information systems providers.

Recently, a new type of supply chain is emerging in the industry, namely thelate design responsive supply chain (Macedo, 2005). This supply chain combinesthe traditional supply chain and agile design-responsive supply chain together toeliminate product inventories and delivery times for fashion market.

2.2 Supply chain management in Hong KongTwo local supply chain management studies have been conducted in Hong Kong.The first study titled “Supply Chain Management, linkage to total industry benefits”was initiated by HKANA (1996) and commissioned by Coopers & Lybrand Consultantsto access the impact of supply chain management on the domestic industry. Thesecond study titled “Supply Chain Management in Global Trade” was again initiatedby HKANA (1997) and commissioned by Kurt Salmon Associates to access the supplychain management for export industry.

The first report identified the bottleneck to the implementation of supply chainsin Hong Kong in terms of technology, information sharing, training and skill inunderstanding the supply chain management concept.

Figure 1 shows that “no information sharing” is the major barrier to theimplementation of supply chain management in Hong Kong. This may be due tothe lack of trust amongst the trading partners and/or the lack of knowledge about thebenefits of supply chain management. This issue was reported again by Borneman(2005) on his study in textile industry in US.

Figure 2 shows that the awareness of supply chain management in Hong Kongis very low. Only 4 per cent of those surveyed indicated that they were “quiteknowledgeable” about supply chain management. About 27 per cent of those surveyed

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showed had “heard the term, but that’s all” and over 52 per cent mentioned that theyhad “never heard of it”.

The low awareness of the supply chain management concept in the industry makesit difficult to share information amongst trading partners.

The first report also benchmarked the supply chain performance of the Hong Kongmanufacturers and retailers to the world average. Both are below the world averagewith the retailer supply chain performing slightly better than the manufacturer supplychain. As a result of this first Hong Kong report, the supply chain managementresource centre was established by HKANA in 1998 to provide training and to increasethe awareness of supply chain management for the Hong Kong industry.

The second Hong Kong report by Kurt Salmon Associates (HKANA, 1997)identified that by implementation of supply chain management practices, Hong Kong’sexport industries would save up to HK$9.2 billion (Australian $2.1 billion) on logisticsand administration costs. The consultants concluded that the route for Hong Kong toexcellence is to become the supply chain management thought-leader in global trade.

The consultants further suggested that speed sourcing and replenishment are twokey factors for Hong Kong to succeed in global supply chain management (HKANA,1997).

The two Hong Kong reports clearly show how important supply chain managementis to the Hong Kong domestic and export industry. These reports indicate that thesupply chain management practices in the Hong Kong industry are far below the worldaverage.

Figure 1.Barriers to theimplementation of SCM inHong Kong

Figure 2.Awareness of SCM inHong Kong

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3. Textile and apparel supply chain management in Hong KongAlthough the two consultant reports show that Hong Kong industry in general is notwell prepared for the supply chain management, the textile and apparel industry inHong Kong, however, is quite different.

A report on the techno-economic and market research study on Hong Kong’s textile,clothing and footwear industries (Trade and Industry Department, Hong KongGovernment, 2000) shows that some supply chain management is already beingundertaken by large enterprises in Hong Kong in response to demand from theirbuyers for supply chain co-ordination. The tactics includes: integration of supply chainthrough vendor partnership; streaming of supply chain through elimination ofintermediaries; and focussing on core competency to gain competitive advantage, asshown in the following three examples.

3.1 Supply chain backward integrationFountain Set (Trade and Industry Department, Hong Kong Government, 2000) which isa major Hong Kong knitted fabric manufacturer, entered into agreements with severalcotton yarn spinning mills in the Mainland of China to enhance control over the supplyand quality of raw material. The manufacturer can reduce order lead-time as well asinventory levels. On the other hand, the spinning mills can receive a transfer ofadvanced production know-how to enhance their production efficiency.

3.2 Supply chain forward integrationTextile Apparel Limited (TAL) (Trade and Industry Department, Hong KongGovernment, 2000) is the major shirt manufacturer for the US market. It has partneredwith J.C. Penney to monitor the weekly stock level of all its retail chain outlets andthrough its “SPEED” program, shirts can be manufactured and shipped to US within48 h.

Yue Yuen which is a Hong Kong-listed footwear manufacturer, has assisted Nike tosource cheap but reliable raw material, manage inventories and deliver products,through a just-in-time system (Wall Street Journal, 2000).

3.3 Supply chain virtual integrationAs the biggest trading firm in Hong Kong, Li & Fung provides a “one-stop-shop” for itscustomers from product development, raw material sourcing, production planning andmanagement, quality assurance, export documentation to shipping consolidation.As Li (Magretta, 1998) said:

The policy of not owning any production facilities keeps the supply chain flexible andadaptable; encouraging the constant search for quality-conscious, cost-effective producersthat can deliver to a deadline.

Li & Fung (Magretta, 1998) has been a pioneer in “dispersed manufacturing”.It performs the higher-value-added tasks such as design and quality control inHong Kong and out sources the lower-value-added tasks to the best possible locationsaround the world. The result is a truly global product. To produce a garment, forexample, the company might purchase yarn from Korea that will be woven and dyed inTaiwan, then shipped to Thailand for final assembly, where it will be matched withzippers from a Japanese company. For every order, the goal is to customize the valuechain to meet the customer’s specific needs.

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3.3.1 Problems face by small and medium size enterprises for textile and apparelsupply chain. Despite the success of the enterprises that have adopted the supply chainmanagement concept in the textile and apparel industry, the industry members on thewhole are still relatively small in order to take full advantage of the new concept.The success stories mentioned previously all involve large enterprises in Hong Kong.They are either the biggest trader (Li & Fung to 7,500 network producers) or thebiggest manufacturer (TAL to J.C. Penny chain stores) or the biggest customer tosuppliers (Fountain Set to China yarn suppliers) in the supply chain.

However, most of the manufacturers in Hong Kong are small to medium scale andthey lack the resources and bargaining power (unlike the big enterprises) in the supplychain. The findings from Hunter and Valention (1995) on the low success rate of quickresponse after a ten year period in US, may explain some problems facing supply chainmanagement in the textile and apparel industry.

Four problems were identified by Hunter and Valention (1995) on the failure of quickresponse in the apparel industry in USA. The following four problems were identified:

(1) Too high expectations on behalf of the management from the program and theslow pace of changes in management practices and corporate culture.

(2) Adversarial relationships between sectors change readily so partnerships donot remain:

The major problem is that increase in profits coming from the practice ofquick response goes to the retailer, while the up-stream participants take onmost of the cost burden. Without some sharing of the benefits as well as thecosts, partnerships are unlikely to develop.

(3) The structural difference of the textile/apparel pipeline in industry:

In sharp contrast to the automobile, appliance and electronic businesses,where the fabricator of the end-product dominates the smaller-parts suppliersand distributors, the apparel manufacturer is typically small with littleinfluence over either the textile supplier or retailer.

(4) The technical problems of standardization, communication and data accuracyin the industry:

Although EDI has been used in industry for decades as a data exchange betweendifferent systems, no standard EDI format has been developed. Different vendorshave their own EDI format and thus make the communication and data mappingdifficult. The same is true for product identification and article numbering. It hasbeen estimated that up to 70 per cent of EDI transactions, including barcodes,contain wrong or incomplete information (Hunter and Valention, 1995).

The Hong Kong textile and apparel supply chain is faced with the similar situation tothat described by Hunter and Valention (1995). Most garment manufacturers are smallto medium scale not having the resources and power to negotiate with big players inthe supply chain. An interview with one of the Hong Kong medium size sweatermanufacturers (Ho, 2001) found that the company has to deploy three different EDIsystems for its US buyers for its order and production monitoring system in the supplychain. In addition, since most of the sweater production is carried out in China andBangladesh, the management must ensure that the three systems would work properlyin a remote and under-developed area.

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The elimination of quota restrictions to US market imposes another problem in thesupply chain management. Major findings of the study “Opportunities and Challengesas the Garment Quota System Ends” conducted by Hong Kong Productivity Council(Chow, 2005) shows that 90 per cent of the interviewed manufacturers cut their price upto 25 per cent in the first half 2005. About 62 per cent of the total respondents agreed thatUS/EC customers tended to purchase more because of lower prices in the absence ofquota cost. To improve the competition, 69 per cent of the respondents agreed to improvethe efficiency and enhance competitiveness through supply chain management.

3.3.2 Fashion demand efficiency and responsive supply chain managementBesides the technology and management issues in the supply chain, Fisher (1997)found that most companies failed in their supply chain management because of theirmismatch between supply chain strategy and the nature of demand for their products.Based on the demand pattern, Fisher divided products into two categories in thesupply chain: either primarily functional or primarily innovative.

Functional products such as those obtained from grocery stores or patrol stations,normally do not change quickly with time; they have a stable and predictable demandand a long life cycle. However, their stability invites competition, which often leads tolow profit margins.

Innovative products like fashion apparel or personal computers, can enablecompanies to achieve higher profit margins. However, the very newness of innovativeproducts makes demand unpredictable. In addition, their life cycle is short, usually justa few months, because as imitators erode the competition advantage that innovativeproduct enjoy, companies are forced to introduce a steady stream of newer innovations.The short life cycles and the greater variety which are typical of these products furtherincrease unpredictability.

Table I shows the demand nature for functional and innovative products in thesupply chain.

With their high profit margins and volatile demand, innovative products require afundamentally different supply chain than do stable, low-margin functional products.Fisher (1997) suggests that an efficiency supply chain strategy with focus on costminimization should be used for functional products. A responsive supply chainstrategy with focus on products availability, matching the marketplace with customerdemands, should be used for innovative products. The failure of supply chainmanagement is often due to mismatch between supply chain strategy and the natureof product demand.

Functional Innovative

Aspect of demand Predictable demand Unpredictable demandProduct life cycle More than 2 years 3 months to 1 yearContribution margin (per cent) 5-20 20-60Product variety Low (10-20 variants

per catalogue)High (often millions ofvariants per catalogue)

Average forecast error (per cent) 10 40-100Average stock out rate (per cent) 1-2 10-40Average season markdown (per cent) 0 10-25Lead-time required for made-to-order products 6 months to 1 year 1 day to 2 weeks

Table I.Demand for functional

versus innovativeproducts in the supply

chain

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Table II shows the two different supply chain strategies used for functional andinnovative products. As can be seen, the primary focus of the efficiency supply chainstrategy is to minimize the overall production cost. The responsive supply chainstrategy focuses on the maximum product availability to market, reduced stock outand forced markdowns.

The problem with these two strategies is that the same product, for example apparelgoods, can be both functional and innovative. A fashion garment in the earlyintroduction stage can be an innovative product. However, at the end of the product lifecycle, it becomes a functional product. It is therefore difficult for the companies tojudge whether they should use responsive or efficiency supply chain strategies for eachproduct in different stages of the life cycle. Nevertheless, Fisher provides a frameworkfor the management to match the nature of the product with the supply chain strategy.

Another problem with the textile and apparel supply chain is the product forecastand short life cycle for fashion and apparel goods. A fashion garment, by definition, ischanging all the time and therefore, it is highly volatile and unpredictable. Thechallenge in managing the supply chain for fashion articles is to ensure productavailability while keeping product obsolescence low. The ability to respond to marketsignals and to develop accurate demand forecasts (and to update them based oncurrent information) is critical.

Fisher and Raman (1994) developed an accurate response for women’s apparel soldby catalogue using the early sales data as an accurate predictor of life-cycle demand.He found that conventional forecasting based on a team of expert merchants has anaverage forecast error of 55 per cent. However, using the early sales data of the firsttwo weeks of demand, the life-cycle forecasts for the same products developed bysimple extrapolation can improve the average forecasting error by 8 per cent (Figure 3).

Fisher and Raman (1994) also found out that if the committee has a strongagreement on the forecast, the forecast error would be reduced. Conversely, if thecommittee has a low agreement on the forecast, the error of forecasting would increase(Figure 4). This technique would improve the forecast error for high fashion articlesand make the supply chain more responsive to the market demand.

3.3.3 Upstream supply chain management problems faced by Hong Kong textile andapparel industries. Considering the problems of the Hong Kong textile and apparel

Efficiency supply chain process Responsive supply chain process

Primary purpose Supply predictable, demand efficientlyat the lowest cost

Respond quickly to unpredictabledemand to minimum stock out andforced markdowns

Manufacturingfocus

Maintain high average utilization rate Deploy excess buffer capacity

Inventorystrategy

Generate high turns and minimizeinventory throughout the chain

Deploy significant buffer stocks ofparts or finished goods

Lead-time focus Shorten lead-time as long as it does notincrease cost

Invest aggressively in ways to reducelead-time

Approach tosuppliers

Primary on cost and quality Primary on speed, flexibility andquality

Product designstrategy

Maximum performance and minimizecost

Use modular design in order topostpone product differentiation

Table II.Efficiency supply chainand responsive supplychain processes

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supply chain, most garments produced in Hong Kong are intended for export and largeamounts of the required materials are imported. Managing the international logisticstherefore is crucial for the Hong Kong clothing industry.

Moon (1999) surveyed 105 clothing manufacturing firms in Hong Kong with25 companies for in-depth interview to understand the supply logistics for Hong Konggarment manufacturers. Results show that the overall logistics cost for in-comingfabrics, expressed as a percentage of total fabric cost, ranges from 1.5 to 8 per cent,with an average value of 3.7 per cent. Transportation consumes over 95 per cent of theoverall logistics cost.

Most surveyed firms, however, consider that the logistics are not important in theirsupply chain. This finding is rather contradictory to conventional thinking in thesupply chain. Moon (1999) concluded that the Hong Kong clothing manufacturers like

Figure 3.Accurate response to

market signals

Figure 4.Forecast error and degreeof agreement amongst the

committee

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to focus on their core business function, for example sourcing, production, marketing,which are always regarded as the determinants of the firm’s existence. The clothingmanufacturers therefore spent less effort on supply-side logistics and were not awareof the importance of developing logistics excellence in honing their competitive edge.

Hong Kong has long been regarded as an important sourcing centre for clothingproduction in the Far East for the world market. Leung (1999) therefore, studied theHong Kong textile and apparel supply chain from the supplier viewpoint. By analysisof the case study of a skiwear supply chain in Hong Kong (Hammond and Raman,1995), Leung (1999) found that two reasons to limit the flexibility of the supply chain inHong Kong were long production lead-time and large batch requirements forproduction, as shown in Table III.

Leung found that the key issues that constrain the flexibility of the supply chainwere:

. little sharing of information amongst retailers, distributor and suppliers; and

. fluctuation of fabric demand.

For the suppliers, key constraints for the supply chain flexibility were:. batch size of greige goods;. quota restriction to US market;. lead-times; and. insufficient experience in managing demand.

To increase the supply chain flexibility, Leung (1999) concluded that inventory-holdingpoints should be located for the greige goods in the supply chain. This pre-positioningof greige fabric has enabled the skiwear company under study in the supply chain toreact more quickly to the market demand for its distributor and trading partners inHong Kong. They were able to print/dye the right pattern/colours for their styles,based on market information.

The problems of information sharing and communication amongst the supply chainmembers are reported by Chen (2005) for his study on supply chain management infashion industry between UK retailer shops and Chinese clothing manufacturers.He pointed out that “misunderstanding is a big issue in translating specifications fromEnglish into Chinese” and estimated that the manufacturers in China on averagereceive and understand 65.5 per cent of the retailer’s information (Chen, 2005).

Items Lead-time Minimum quantities

Raw material informationGreige fabric 45-90 days 5,000-10,000 yardsDyeing of fabrics 45-60 days 1,000 yard per colourGarment Production InformationWeekly output 12 parkas 1200 units in same styleLine configuration 40 people/lineShipment informationHK – Seattle – Denver 42 days

Table III.Lead-time and batch sizein Hong Kong for skiwearproduction

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4. ConclusionFrom definition, the supply chain involves all the activities in delivering product fromraw material to the final customer. The supply chain activities span from internalorganization to external trading partners of suppliers, carriers, third-party companiesand information system providers. The management of the supply chain, therefore, is acomplex process and involves trust; partnership and information sharing between theupstream and downstream supply chain partners.

The consultancy reports on supply chain management surveys show that Hong Kongindustry is generally not aware of the concept of supply chain management. Theindustrial benchmark for both manufacturing and retailing industries in Hong Kong forthe supply chain performance is below the world average.

Although some large enterprises in the textile and apparel industry in Hong Konghave adopted some forms of supply chain management with their US trading partnersto streamline the supply chain management process, the real benefit of supply chainmanagement is still largely restricted to big players in the industry.

The typical problems facing with textile and apparel supply chain are short productcycle for fashion articles, long production lead-time and forecasting errors for fashionitems. The Hong Kong textile and apparel supply chain faces additional problems ofdistance from customers in the US and European markets, long production lead-timesand minimum batch sizes for production and recently, the elimination of quotarestrictions in the US market; all these force the industry to maintain its competitivenessthrough supply chain management.

The “Accurate Response” suggested by Fisher and Raman (1994) helps toimprove the forecast for short cycle and high fashion apparel items and thus wouldbe very useful to manage the supply chain in downstream retailing industry. Thedifferentiation of product demands into functional and innovative products helps thesupply chain company to employ different supply chain strategies for differentproducts, namely responsive supply chain strategy for innovative products andefficiency supply chain strategy for functional products. Again, these two supplychain strategies are focussed on the downstream supply chain aiming at shorteningthe time to reach the market and also to reduce the stock levels in the retailingindustry.

The Hong Kong textile and apparel industry, however, is mainly an export-orientedindustry. It occupies the upstream position in the textile and apparel supply chain.It focuses on design, material sourcing, sample making, dispersed manufacturing,co-ordination, transportation, documentation, quality assurance and testing in thesupply chain.

The strength of the Hong Kong textile and apparel supply chain lies in its closerelationships with all suppliers in the chain. The geographical and cultural affinity tothe Mainland of China further enhances the relationship between Hong Kong and itstrading partners. Hong Kong, on the one hand, is able to access a pool of qualitysuppliers in the Mainland of China; on the other hand, Hong Kong can take advantagesof its own leading position in sales, marketing and professional services to assistoverseas buyers explore the China market, which has become the largest marketin Asia.

The supply chain in Hong Kong, therefore, instead of focussing on logistics,transportation, time to market and forecast demands, should focus on product

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design, material control, and production co-ordination. The Hong Kong supplychain activities should streamline the whole production process from fibres toyarn, knitting, weaving, dyeing and finishing, through to the garmentmanufacturing process.

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Supply Chain Council (1997), available at: www.supply-chain.org

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Trade and Industry Department (2000), Techno-economic and Market Research on Hong Kong’sTextiles and Clothing Industries, Trade and Industry Department, Hong KongGovernment.

Wall Street Journal (2000), “Overseas suppliers to US brands are thriving”, The Wall StreetJournal, 10 March.

Further reading

Lee, H., Padmanabhan, V. and Whang, S. (1997), “The bullwhip effect in supply chains”,Sloan Management Review, Spring, pp. 93-102.

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