EMCC European Monitoring Centre on Change
Case studies in the textiles and leather sector
As with other mature industry sectors in Europe, the leather and textiles sector has undergone dramatic change over the past twenty years. The EMCC has commissioned eight case studies within the sector in Europe, aimed at showing how change is perceived in different companies. The studies outline how companies in the sector are currently positioning themselves and dealing with the positive and negative effects of change in the face of increasing globalisation and competition.
Globalisation is a major driver of change. Globalisation may be defined in different ways, and there are many factors that create a global environment for the textiles sector, such as efficient and low cost of transportation, efficient logistics from production to the counter, new and changing consumer patterns, and harmonisation of trade legislation. All these developments are supported by the penetration of information and communication technologies (ICT) across the entire business chain from design to production, logistics, sales, branding, and market research.
ICT permits the implementation of competitive strategies such as efficient outsourcing and advanced forms of supply chains. Two such examples shown in the case studies are the outsourcing practised by Hennes and Mauritz (H&M) and the closely-knit integrated local value chain practised by the Italian Liolà Group.
The cases form part of a wider study - including a report mapping the sector and scenarios- on industrial change in the textiles, clothing, and leather and footwear industries, carried out by the Technological Institute in Denmark for the European Monitoring Centre on Change (EMCC). The overall aim of the research is to contribute to a renewed, proactive impetus in the social dialogue agenda within the sector and at company level.
Case study themes and topics
The following issues were identified as being particularly relevant for the textiles and leather sector:
- Shift of jobs through outsourcing: new business models, business restructuring and impact on employment.
- Future developments in terms of new business models and technical textiles.
- The textile sector in relation to other sectors: automotive, furniture, new high-tech materials.
- Clusters and value chains as a holistic approach to change.
- ICT and globalisation: will future changes in global distribution and demand have major implications for technological and organisational change within the industry?
The analytical framework for the case studies was centred around the following areas:
- Company facts.
- Market dynamics and company changes.
- Organisation and the market.
- Supplier relations.
- Workforce, labour relations and the market.
- Education, training and research.
- Virtualisation of the workplace.
The case study firms
- Karstadt Warenhaus AG ( 161 kb), Germany - Clothing and leather retailer
- Hennes & Mauritz ( 150 kb), Sweden - Multi-national fashion clothing retailer
- Liolà S.p.A. ( 144 kb), Italy - Knitwear clothing at the high-end of the market, part of the Liolà group (illustrating the creation of a value chain)
- Liolàprint S.r.l. ( 119 kb), Italy - Printing and dyeing of fabrics for production, another Liolà group company
- Kvadrat A/S ( 137 kb), Denmark - High-end textiles producer primarily for the furniture industry
- Redgreen A/S ( 194 kb), Denmark - Nautically-inspired fashion clothing
- Randers Handskefabrik ( 117 kb), Denmark - A small glove-manufacturing company
- Skillfast-UK ( 209 kb), United Kingdom - A skills service provider in the textiles and clothing industry
A semi-structured analytical framework was prepared as a basis for the interviews. This was sent to the firms in advance of the interviews. Many companies that were contacted declined to participate in the study due to time constraints and/or for competitive reasons, also after consultation with trade union organisations. This has naturally influenced the selection of case studies, as well as the overall approach.
Future competitiveness of the sector
The case studies illustrate how previously distinct professional backgrounds and skills profiles have been progressively rendered obsolete and how new knowledge intensive skills profiles have been emerging and converging in recent times.
Though not explicitly formulated, all the case companies are aware that their sector is very much part of what has been defined as a move towards the ‘experience society’. Here goods are traded not only on the basis of consumer needs and objective factors, but also on the basis of consumer perceptions of goods and their underlying values, and on their association with a particular identity.
The competitiveness of the European textile industry will depend on a combination of new skills encompassing a mixture of:
- Quality management in distributed value chains.
- Design, prototyping and simulations with the use of ICT.
- Logistics management in distributed value chains.
- Ability to identify and manage strategic relationships.
As more and more functions are outsourced, the case studies also point to emerging new skills, which are currently not part of the curriculum in the textile sector:
- Brand management, brand valuation, brand creation.
- Trend spotting, trend analysis, trend drivers.
- Exploitation of innovations in different technology domains (pervasive computing, materials science, environmentally friendly technologies).
Case study highlights
The term ‘industrial change’ is set within the context of the European Commission’s White Paper on ‘Growth, competitiveness and employment’. It refers to the ongoing developments affecting economic and social actors in all sectors and fields of activity, both traditional sectors in decline as well as emerging new areas of activity. Industrial change is also related to non-material economic activities such as design and branding, which are central to the whole sector.
During the past two decades, traditional blue-collar jobs in the textiles industry, particularly those employing women (and in some instances involving child labour), have been gradually delocalised to Eastern Europe and to Asia. While the original motives for delocalisation were for cutting costs on the production side, recent technological developments are beginning to change the role of the suppliers in the sector. Traditionally, China and India were perceived as the sweatshops for Europe’s textile industry. Although this is still the case for much of the European industry, there is an increasing focus on strategic supplier relations for quality and delivery purposes. Higher skills levels and economic development in the Asian economies may represent new export markets to European industry. This may also lead to new roles for local companies that previously were chosen as outsourcing partners uniquely on the basis of low costs. These companies may assume a new strategic position in the global textile value chains as new markets increase in terms of their consumer buying power. This is, for example, the case with the Danish fashion design firm Redgreen, which has begun to outsource design and creative processes to its Chinese suppliers. This approach permits Redgreen to focus on its core competence: brand management.
The Danish company Kvadrat, which produces interior textiles for a global market, has also been looking to the Far East. While Kvadrat is a leading company within the European textile industry, the company does not have sufficient capital to invest in research and development (R&D) regarding new materials. It has therefore entered into a strategic collaboration with firms in Japan, notably with one firm that has patented a new environmentally correct way of producing plastic-coated materials.
In Denmark, the outsourcing strategy was chosen at a very early stage. As the textile industry at that time was concentrated in one region, this had a heavy negative impact on the employment situation. This was especially the case for women in blue-collar production jobs, since it was primarily these jobs that were delocalised to eastern Europe, to India, and to China. Since the start of the outsourcing process about 25 years ago, a whole range of new export-oriented companies have emerged in Denmark, mainly in the clothing fashion industry but also in new textiles. The sector as a whole is experiencing considerable growth at the moment. Central to this development has been a specialisation of skills supply to the sector within the vocational education system. The ‘right skills as a road to competition in a global market’ is also the backbone of the UK initiative Skillfast-UK, aimed at reducing skills gaps and shortages and anticipating future needs through leverage on the supply side of education and training.
The Italian holding company Liolà, which has a 150 year history, has taken a different pathway to meeting changing competition. Liolà strategy is based on local, vertical integration of all phases from production to sales, producing high-quality knitwear for different market segments.
The Danish glove manufacturer, Randers Handskefabrik, has found its market niche through a combination of traditional craftsmanship and the wholesale import of semi-manufactured goods for finishing.
For both H&M and the German clothing retailer Karstadt, the core strategy consists of a mix of superefficient supply chain management, logistics, and branding. This facilitates the delicate balance of cost and quality while at the same time meeting rapidly changing consumer preferences.
What all the companies have in common is the fact that they are looking to ICT not only for optimisation purposes, but also as a factor in design, branding, marketing, and for market intelligence and trend spotting. Speed is another key to success. For example, ICT means that a company like H&M can take just 20 days to transform an idea spotted on a catwalk into a product for sale in the stores.
Drivers of innovation
In 2003 the Danish Ministry of Economics and Industry Affairs conducted a benchmarking study on innovation (Nyholm, J. and Langkilde, L., September 2003). Part of this study included an analysis of innovation in the Danish fashion industry. Its conclusions also seem relevant to this broader study on European textiles and leather industry.
The 2003 study looked at three types of innovation in response to competition and globalisation. These were identified as:
- Research-driven innovation .
- User-driven innovation .
- Cost-driven innovation .
The Danish study and the EMCC case studies indicate that research-driven innovation at this stage plays a relatively minor and indirect role. Examples of this are training and strategic partnerships as practiced by Kvadrat, and sector initiatives related to new materials and ICT - for example, pervasive computing. Reasons for the limited research activities seem to be limitations of size and lack of financial and organisational capacity for the individual firm. The question is whether sectoral organisations, nationally or at a European level, could play a more active role as a facilitator of trans-sectoral research initiatives.
Companies that build their strategies on user-driven innovation are dependant on developing products and brands that offer an experience that is associated with a particular lifestyle and values. According to the Danish analysis, companies that are strong in user-driven innovation typically invest more in trends and lifestyle analysis. The design process tends to take place between designer, trends analysts, and buyers.
At management level especially, this calls for a mix of competencies that are not traditionally associated with the textile sector curriculum. Knowledge centres would seem to play a central role for companies whose strategies build on user-driven innovation, but most current Masters degree programmes seem to be too broad in scope to address the particular needs of the sector. A relevant question is therefore whether the European textile and footwear industry could benefit from the joint development of a European textile innovation Masters programme, organised in a modular way that could be adapted to local conditions, specific parts of the value chain, and the learning needs of small companies.
Company strategies that build on cost-driven innovation are characterised by a business model that combines a short production time, production on-demand to avoid producing to stock, and efficient logistics in order to meet the latest market needs as they appear. The proper match between price, quality and brand is essential. An innovative and efficient application of ICT is central in cost-driven innovation. Given the importance of cost-driven innovation for the competition strategies of textile companies, it might be interesting to explore in greater depth how ICT-related competencies can be integrated into the textile industry at different employment levels.
Jens Nyholm and Lotte Langkilde,Et benchmarkstudie af innovation og innovationspolitik, Økonomi og Erhvervsmnistereit, FORA and Inside Consulting, September 2003.