Sample Essay It makes sense to conclude that Sri Lanka garments industry

1.  “What will be the affect that globalisation might have on the overall garment industry in Sri Lanka, particularly She's”. 

It makes sense to conclude that Sri Lana's garment industry is squeezed by processes of globalization and regionalisation. Regarding globalization, functional integration in the network has not resulted in linkage that is crucial to reduce lead times and thereby become more flexible. The industry is vulnerable to price competition and it is difficult to get a good footing in competition in quality. This is because even the lower cost countries can manufacture garments of good quality and the lead countries in the North decide who will get access to the hottest designs and produce the highest quality items. The latter tend to be manufacturers with greater proximity to the markets with the highest purchasing power in the North. The need for shorter lead times stimulates regionalisation and Sri Lanka is situated far away from the two regions. Western orientation, both politically and in market orientation (garments), implies that Sri Lanka is not easily integrated in the Asian region either. In other words, regionalisation may exacerbate the problems already experienced in terms of globalisation. In addition to the limited industrial development effects that are the outcome of the functional division of labour, regionalisation makes it even harder to obtain market access.

 

When governments pursue regionalism, they stimulate freer trade which is mainly to enhance economies of scale and expand the market on the one hand. On the other hand, they protect their countries from some negative effects of freer trade, by shutting out extra-regional competitors. The process of regionalisation does not fully impede sourcing of standardised items from selected countries far away. Promotion of the latter may even be conducive to reach political goals. It is likely that Sri Lanka continues to be tied in, both to the European and American trading blocs for the production of some good quality and reasonably priced standardised garments for the middle market. This is because of the trust and relationships that have been built up over time and the need of the buyers to diversify risks, especially as long as bureaucratic problems may delay exports from lower cost locations. However, to be tied in as a supplier of standardised products for the middle market is a vulnerable position, especially when the market is flat and lead firms and buyers in the network pass down adjustment costs to the suppliers. Graduation into higher quality market segments is also likely to hit a ceiling. Perceived value linked to a brand-name is the essential ingredient in high quality products. The production process of such high quality garments may require limited elements of specialised skills and knowledge. Hence, foreign owners of the brand-name appropriate most of the rents because they can bargain with a number of potential suppliers. When manufacturers earn low levels of profits, the prospects of reinvestment in production and sustained industrial upgrading in the host countries are negligible.

 

The textile and garment industries are often referred to as typically global and footloose industries. They were in fact "... the first manufacturing industries to take on a global dimension" and "... the most geographically dispersed of all industries across both developed and developing countries" (Dickens 1998, p.283). Manufacture of textiles and garments shifted from Europe and the USA to Japan in the 1950s; to the three East Asian Niles, South Korea, Taiwan and Hong Kong, in the 1960s and then to China, South East Asia, and Sri Lanka in the 1980s. Subsequently, in the 1990s Vietnam and Latin-American countries were included among the export-oriented manufacturers of garments. Although Asian countries still are the main suppliers of garments to the OECD, there are signs of increasing regionalisation of the garment industry. Intra-Asia trade is increasing. So is trade between North America and Latin America/the Caribbean region. In addition, countries in Eastern Europe and the European rim, i.e. countries such as Tunisia, Morocco and Turkey, are becoming increasingly important suppliers to Western Europe (Giraffe 1994, 1999, Mortimer 1999).

 

 

 

The garment industry is not only the most rapidly growing sector of the manufacturing industry in Sri Lanka. During the last 10-15 years there has been a gradual upgrading of the garment industry from export-oriented production of simple budget clothes to exports of branded garments for the middle market and even for the more fashion-oriented high-end market. The garment industry received more than 40% of the investment in manufacturing in the 1980s and 1990s. This was to a large extent due to tariff hopping by East Asian companies. In 1995 the garment industry employed 230,000 persons in 750 factories (Kilogram and Foley 1999). Exports of garments accounted for 50% of the total exports of merchandise from Sri Lanka in 1999. The process of regionalisation in the garment industry and the abolition of quota trade under the Multi Fibre Arrangements (MFA) and later the Agreement on Textile and Clothing (ACT) at the end of 2004, pose a challenge to the garment industry in the country. The largest market of exports of garments from Sri Lanka is the USA which accounts for about 60% of it in value. Another 34 percent were exported to the European Union (EU). With effect from 1st March 2001, quota restrictions on exports of garments from Sri Lanka to the EU were fully abolished. Until then, about 25 percent of the exports to the EU had been under quota restrictions ( 1999, International textile briefs 2000, 2001, 2000, European Commission 2001).

 

 

 What globalisation is, whether it takes place and whether it can be considered a meaningful analytical category is still under debate. In a nutshell globalisation can be considered a multidimensional process that serves to compress the world (Oxford 1995). At present, however, more and more writers on globalisation stick to the distinction that internationalisation per se refers to dispersion of economic activities to more than one country, whereas globalisation refers to a more advanced form of internationalisation signified by "functional integration between internationally dispersed economic activities" (Dickens 1998). Functional integration means co-ordination and regulation that tie the economic activities together and globalisation is considered essentially a qualitative process (Dickens and Yeung 1999). Advances in computer technology facilitates co-ordination and regulation at distance. Sourcing is an example of a form of functional integration which is increasing. It refers to a relationship where a core firm (the one that sources, not necessarily the lead firm in a chain) buys semi-finished or finished products from a supplier elsewhere and uses this as an input in its production or to its product range (1998).  Regionalization could simply be a an effect of production and trade decisions made by firms as a response to competition in general (Hem 2000). In fact, regional firms and corporations have been the principal actors of regionalisation in East Asia (Hogget 1999). This is not to deny that the nature of competition and business decisions are affected by changes and differences in economic policies and political conditions between places.

 

 
Regionalism is one of more approaches to deal with global problems, and new regionalism can be considered a political corrective to adverse effects of economic globalization. As a corrective to or modifier of globalisation, it can be a stepping-stone of globalisation or a stumbling-block of the whole process. This is in line with the process-tendency view on globalisation, i.e. that more tendencies may co-exist and that there are tendencies and counter-tendencies. Amen (1997, 2000) considers regionalisation something that can and should replace globalisation. He argues that deepening globalisation is a post 1945 phenomenon and that the world has been heading for global disorder and chaos since the 1990s. The regions should be self-reliant and an alternative to Neoliberalism globalisation. The argument is of the stumbling-block type. Misty (2000), in contrast, implies that regionalism may facilitate economic globalisation of a positive type, i.e. with less adverse effects than is the case at present. This is a stepping-stone type of argument, although he holds that "... the world is inexorably becoming a single global market place, with or without regionalism." (p. 151) Globalisation sceptics argue that economic activities tend to be more regional than global in orientation (1995,1996, 2000).

 

 

 

The garment industry in Sri Lanka is not bigger than that the people involved know each other. This also means that the buying offices "know" who in the industry to select. Generally a buying office stays with the same suppliers for a long time and then gradually expands to new suppliers, but commitments are made on a batch to batch basis. The preference is to work with big and resourceful groups that have more factories. According to buyers and other industry representatives, it is easier for the big and resourceful to fulfil product quality requirements, meet larger orders and reduce delivery times.  It is no doubt that quota hopping coupled with a favourable cost level is the major reason for location of export-oriented garment industry in Sri Lanka. In the late 1970s labour costs in Sri Lanka were low for unskilled, semi-skilled and skilled workers (Vidanapathirana 1986). Cheaper labour was the case not only in comparison with Taiwan and South Korea, but also compared with India, Philippines and Malaysia. In a study of ten Asian countries, Sri Lanka was second only to Singapore in terms of productivity (Business Asia ref. in Vidanapathirana 1986). The garment manufactures in Sri Lanka earn more profits than before, but this is because they manufacture larger quantities. Profit margins dip lightly in spite of the upgrading of product quality. Technology rents and organisational rents for the manufacturers in Sri Lanka to foreign lead firms and coordinators as relational rents and parts of the relational rents are absorbed by price reductions in the market.

 

According to one of the manufacturers, prices have come down 20 percent the last two-three years, but investments to meet quality requirements are more expensive than before. According to public statistics, profit margins vary considerably and were negative for the category of wearing apparel in 1983. In the early nineties it has varied from 30 percent in 1991 to 40 percent in 1992, 50 percent in 1993 and minus 20 percent in 1994 (Slater et al. 1997). More importantly, it is a paradox that dynamics of the networks can impede local backward linkages. Increasing competition in the textile and garment industry could mean that co-ordinators and lead firms in the commodity chains require that the garment manufacturers import textiles made by firms and affiliates in the home countries of the lead firm, and that production-sharing agreements which inhibit backward linkages increase. The fact that price competition becomes more severe together with the fact that buying offices interfere more than before with wage levels and working conditions, mean that manufacturers in larger business groups will be better equipped to survive the tougher competitive climate. The garment industry is expected to undergo a process of restructuring where small and less resourceful units will have to close down - no universal standard of corporate behaviour and system of enforcement are in place.

 

 

 

 

2. “The changing dynamics of “supply chain management” and the effect that this is having on Sri Lanka apparel industry”.  

 

 

The garment industry in Vietnam has been included in global buyer-driven networks since the 1990 s. Industrial upgrading takes place, but the changes are generally small and incremental. Profit margins tend to decline and backward linkages in the home country are few. The garment industry in Sri Lanka was included in buyer-driven networks already in the 1980 s and shares this experience. The objective is to explain what processes and mechanisms that lead to this outcome and discuss in what respects it is a result of contingencies and in what respects impediments to industrial development are inherent to buyer-driven networks. The creation of an internationally competitive clothing industry in Sri Lanka is one of major achievements of the economic reforms introduced in 1977. The 1977 reforms adopted a liberal attitude towards foreign direct investment making Sri Lanka South Asia’s earliest liberalizer and its most hospitable destination for foreign investment. Key policy measures included liberalization of foreign investment laws, tax holidays on profits and salaries, duty-free access to imported inputs and setting up the Kaunakakai Investment Processing Zone (Ganeshamoorthy, 2002).

 

The bulk of FID was destined for the clothing industry in Sri Lanka which received a twenty-two fold increase in annual FID inflows from $12 million in 1987-89 to $264 million in 2000-2004. Foreign firms presently generate clothing exports worth $2 billion per year (2000-2002) and a total of 280,234 jobs. Transformed by FID, the clothing industry has thus emerged as the country’s largest manufactured export (accounting for 66% of total manufactured exports in 2000-2004) and manufacturing employer. Domestic firms gradually entered export markets initially as subcontractors and then direct exporters. Empirical studies on FID in clothing industry in Sri Lanka have been carried out largely at the macro and industry level. This literature has examined trends in FID, factors affecting FID inflows, the efficiency of the investment incentives and the paucity of backward linkages within the clothing industry (for a selection see Ashman, 1989; FIATS 1993; Kilogram and Foley, 1999; Athukorala, and Rajapathirana, 2000; UNCLAD, 2004). The following have been suggested to explain the entry of export-oriented FID into clothing in Sri Lanka: a strategic geographical location, access to multi-fiber agreement (MFA) quotas, attractive investment incentives, and ample supplies of low cost and trainable Labour. Sri Lana's persistent location disadvantages are said to include: political instability, poor quality physical infrastructure, and weak sub-contractors/industrial suppliers to MNC.

 

 

Few attempts have been made, however, to examine the export behaviour of foreign and local firms in the clothing industry in Sri Lanka. Investigation of this issue has been hampered by the lack of firm-level data and the need for costly firm surveys. The handful of case studies of clothing firms and small sample econometric analysis highlight two notable findings: (a) foreign firms are better exporters than domestic firms; and (b) that technological capabilities and human capital approaching international best practice levels are important determinants of export advantage (Loll and Wignaraja, 1995; Wignaraja, 1998; Deraniyagala, 2001; Chandrasiri, 2003; Knutson, 2004). These preliminary yet striking findings require empirical verification and further analysis using larger samples of clothing firms. Clarification of this issue would also contribute to policy debates in Sri Lanka (and elsewhere in the developing world) over the role of ownership in clothing industry in a post-MFA context and the allocation of incentives towards foreign or domestic firms. Most strikingly foreign ownership is positively associated with firm-level export shares in the clothing industry. Henceforth, the relatively superior exporting behavior of foreign owned firms is supported by econometric evidence. The positive signs on the technology index and the human capital variables indicate that building domestic technological capability and investments in human capital also influence export shares. Thus, the results from our large sample econometric study confirm those of previous case studies and small sample econometric analysis.

 

Thus, the firm size, university educated employees affect the technological behavior of Sri Lankan clothing firms. The correct sign on the firm size variable suggests that different explanations for the firm size effect are valid. It is also likely that firm size may reflect foreign ownership. The positive sign on the university-educated workers variable suggests that higher-level skills are related to building technological capabilities. The positive sign on the R&D variable indicates that formal R&D efforts complement efforts at enhancing production capability. The mapping of enterprise perceptions points to a weakening investment climate in Sri Lanka since the early 1990s. This worrying trend could indicate future investment plans and a gradual loss in the competitiveness of Sri Lana's leading manufactured export. The most significant constraint is electricity supply and pricing. Other major constraints include: economic policy uncertainty, macroeconomic instability, transportation, labor regulations and corruption.

 

 

 

 

 

 

 

 

 

 

Furthermore, whilst Sri Lanka has a reasonable range of business support services, issues of affordability and service quality remain concerns for clothing enterprises. More generally, the study of Sri Lankan clothing enterprises shows that firm-level investigations of export performance are a fruitful undertaking as they highlight technology, skills and other phenomena that drive the creation of competitive export advantage in developing countries (Loll, 1986 and 1992). When combined with information on the nature of a country’s investment climate and business services, such studies can be a powerful tool for the development of policies for private sector development in outward-oriented developing economies. Continuously improving a country’s investment climate, facilitating the development of business service markets and upgrading Somes as subcontractors to foreign firms are the key policy lessons for developing countries.

 

 

 

 

 

 

 

 

 

 

3. “How supply chain works for competitive improvement of an apparel cluster”. 

 

As the study team does not recommend the textiles and garments cluster to be included in the next stage the cluster initiative. Sri Lana's apparel cluster in does not have the competitive advantages required to survive and thrive in the current international market environment, and the domestic market is extremely small and disintegrated. In-country cluster linkages are practically non-existent. Under the predominant contracting manufacturing operation, where producers import materials from overseas and export their products, most producers are more integrated into a global supply chain than an in-country supply chain. In order to raise standards of living, leverage its resources, tap into new markets, and attract sustainable business investment, the country needs to focus on increasing the competitiveness of its key economic sectors. The last decade has been a difficult one for the region and Sri Lanka as the country was a relatively wealthy economic entity. However, the country suffered economic disruptions as a result of the break-up of the certain unions and its internal civil wars. While the economy is contending with post-conflict instability and mismanagement, the private sector has a high level of talented entrepreneurs eager to resume or expand economic activities.

 

 

However, globalization has dramatically transformed the trading environment over the past decade as the markets have become more competitive, supply chains more efficient and consumers more discriminating. Sri Lanka must rapidly adapt to this evolving environment or will be left behind. The country must begin to come to terms with current competitiveness practices and take the necessary steps in each industry to identify its strengths, address its weaknesses, recapture former markets, and enter new ones. The apparel industry of the country, its stakeholders must come together to identify and implement strategies to improve their ability to compete effectively in regional and global markets. Aside, apparel industry clusters can be defined as agglomerations of firms in similar or related fields that grow within or are attracted to a region/nation. They rely on an active set of relationships among themselves to ensure individual and collective efficiency and competitiveness:

 

Buyer and Suppliers

 

The relationships encompass the core companies that produce goods and services that are sold to final customers. They also include companies at an earlier stage of the value-adding chain that supply the inputs raw materials, intermediate goods and services that are used in the assembly of final goods and services. Distributors of final goods and services, where separate from the producers, are also considered part of these clusters.

 

Competitors and Collaborators

 

They consist of companies that produce the same or similar goods and services at a specific level in the value chain, and they exist because competitors frequently share information about product and process innovations, and market opportunities. These companies may, in fact, formally collaborate in mutually beneficial strategic alliances. While there is cooperation in some areas, there must be rivalry among firms in order to create global competitiveness, and promote innovation and excellence.

 

Shared Resources

 

These relationships exist when firms rely on the same sources of raw materials, technology, human resources, services, and information, even though they may use these resources to produce goods and services for very different markets.

 

 

 

 

 

 

 

 

Critical Mass of Competitive Factors

 

Industry clusters represent critical masses of information, skills, relationships, and infrastructure in a particular field. Having a critical mass of these competitiveness factors provides the foundation for a strong and viable cluster. Competitive advantage is not created within a single firm alone. Efficiency in internal operations is a necessary, but not sufficient condition to compete globally. Factors external to the business, but internal to the regional economic foundation, are increasingly important for creating and sustaining competitive advantage that would include:

 

Ø      Skilled and adaptable human resources

Ø      Availability of financial capital to support business expansion and new investment

Ø      Support of physical infrastructure for transportation, communications, energy

Ø      Access to technologies on which new products and processes are based

Ø      A responsive regulatory and taxation structure than balances business competitiveness with other policy goals

Ø      A high quality of life that attracts residents and businesses to stay in a region

 

Cluster competitiveness programs are processes whereby industry stakeholders identify challenges and opportunities that can be addressed more effectively by cooperative actions rather than individual efforts. The principal objective of the cluster competitiveness initiative is to create a framework and process for productive change. This initiative will not only facilitate the development and communication of shared vision on competitiveness but will also create a process to ensure than actions are taken to build an enabling business environment. It will achieve this through working groups to disseminate the latest thinking on industry clusters and on building competitive advantages at the firm and industry levels. This produces a cluster analysis, which informs the competitiveness debate and provides the selected cluster and others with a springboard for taking strategic action. By generating critical or strategy information that will allow the public and private sectors to adopt timely public policies and competitive business strategies, Georgia will be able to improve its competitive assets and enhance its relative competitive position based on the use of reliable data and solid analysis. Thus, such strategy information and analysis will allow the improvement in the competitiveness of national industry clusters and regional economic inputs. At the cluster level, tools and methodologies will be applied to identify challenges, limitations and opportunities of major industry clusters – a key to the country’s economic future.

 

 

4. “Buyer driven networks and the lack of opportunity this gives to the suppliers to leverage for profit”. 

Buyer-driven commodity networks are typical to the textile and garment industry. In the textile and garment industry the input-output structure starts upstream at the raw materials end, i.e. either in production of cotton or in the chemical industry with production of synthetic fibres. Then follows the midstream spinning and weaving industry and the downstream garment industry. The accessory industry producing thread, labels padding, shoulder pads, buttons, hangers, cartons and poly-bags etc. represent backward linkages of the garment industry. The essence of Giraffe's publications (1999) – is to elucidate that there are in fact possibilities for industries in buyer-driven chains to improve their role in the international division of labour and contribute to industrialisation in the domestic economy. What is special about buyer-driven chains, is that the lead firm does not manufacture goods that compete with the goods of its suppliers. The supplier may thus benefit from technological rents. In a broader perspective, Kolinsky (2000) writes that barriers to entry in production have fallen and it is difficult to compete with countries such as China which has an abundance of well educated labour. From the angle of the lead firm: "The primary economic rents in the chain of production are increasingly to be found in areas outside production." (Kolinsky 2000, p. 11)

 

 

The garment industry is difficult to mechanise and automate and can thus serve as a major employer in countries with abundance of cheap labour. Increasing cost competition in the garment industry signifies that the demand-led crisis was shifted into a supply-led crisis which in turn led to the introduction of MFA as means of protection of the garment industry in industrial countries. Cheap labour is not the only supply-side location factor manufacturers pay attention to, educational level and the skills of the workers are taken into consideration. Moreover, when powerless clothing supplier encroaches on the core competence of its dominant network partner and emerges as a competitor in its own right. In global capitalism, economic activity is not only international in scope; it is also global in organization. ‘Internationalization’ refers to the geographic spread of economic activities across national boundaries. As such, it is not a new phenomenon; indeed, it has been a prominent feature of the world economy since at least the 17th Century when colonial empires began to carve up the globe in search of raw materials and new markets for their manufactured exports. ‘Globalization’ is much more recent than internationalization because it implies the functional integration and coordination of internationally dispersed activities. Industrial and commercial capital has promoted globalization by establishing two distinct types of international economic networks: ‘producer-driven’ and ‘buyer-driven’ commodity chains (Hill, 1989, p. 466).

 

 

 

Buyer-driven commodity chains refer to those industries in which large retailers, branded marketers and branded manufacturers play the pivotal roles in setting up. The organization of producer-driven and buyer-driven global commodity chains decentralized production networks in a variety of exporting countries, typically located in the Third World. This pattern of trade-led industrialization has become common in labor-intensive, consumer goods industries such as garments, footwear, toys, house wares, consumer electronics, and a variety of handicrafts. Production is generally carried out by tiered networks of Third World contractors that make finished goods to the specifications of foreign buyers. Profitability is greatest in the relatively concentrated segments of global commodity chains characterized by high barriers to the entry of new firms. In producer-driven chains, manufacturers making advanced products like aircraft, automobiles and computers are the key economic agents not only in terms of their earnings, but also in their ability to exert control over backward linkages with raw material and component suppliers, and forward linkages into distribution and retailing. The transnational in producer-driven chains usually belong to global oligopolies. Buyer-driven commodity chains, by contrast, are characterized by highly competitive, locally owned, and globally dispersed production systems.

 

 

 

 

Profits in buyer-driven chains derive not from scale, volume, and technological advances as in producer-driven chains, but rather from unique combinations of high-value research, design, sales, marketing and financial services that allow the retailers, branded marketers and branded manufacturers to act as strategic brokers in linking overseas factories with evolving product niches in the main consumer markets. Thus, whereas producer-driven commodity chains are controlled by industrial firms at the point of production, the main leverage in buyer-driven chains is exercised by retailers, marketers, and manufacturers through their ability to shape mass consumption via strong brand names and their reliance on global sourcing strategies to meet this demand. The leading firms in producer-driven and buyer-driven commodity chains use barriers to entry to generate different kinds of ‘rents’ in global industries. Buyer-driven chains are most closely tied to relational rents, which refer to several families of inter-firm relationships, including the techniques of supply chain management that link large assemblers with small and medium-size enterprises, the construction of strategic alliances and small firms clustering together in a particular locality and manifesting elements of collective efficiency. (Kolinsky, 1998)

 

 

 

 

 

Furthermore, the process of filling the distribution pipeline is leading these retailers to develop strong ties with global suppliers, particularly in low-cost countries (Management Horizons, 1993). Nowhere are these changes more visible than in apparel, which is the top merchandise category for most consumer goods retailers. Between 1987 and 1991, the five largest softwoods chains in the United States increased their share of the national apparel market from 35 to 45 percent (Dickerson, 1995, p. 452). The global organization of the clothing industry has been the prime example of buyer-driven commodity chains. However, previous empirical studies to substantiate Giraffe's assertion have been highly Western centric and predominantly based on the empirical evidence of American retailers and brand name companies. Thus, the organization of clothing firms in the global economy can develop diverse intra-sect oral commodity chain coordination's. Using a hypothetical clothing commodity chain as an example, I attempt to identify the individual commodity chains within which Indonesian clothing firms are embedded.  The clothing industry is widely cited as an industrial sector that is embedded primarily in buyer-driven structures of global commodity chains in which retailers and brand-name companies, rather than manufacturers, are the key driving forces. Analysis of clothing production systems has been predominantly Western-centric emphasis on similarities and/or differences between competitors in different institutional and societal contexts (Jones & Hull, 1997) and stimulated the demand for industrially manufactured clothing.

 

In contrast, buyer-driven commodity chains are trade-based horizontal networks coordinated by retailers, trading houses and brand-name companies. Firms coordinating buyer-driven commodity chains deal predominantly with Labour-intensive manufactured consumer goods, such as clothing, footwear, toys, house wear and consumer electronics. The geographical separation of the production process from design, research and development and marketing is the key characteristic of this type of commodity chain. The core firms or buyers specialize in design and marketing activities without actually owning and operating internalized production facilities. This allows them to focus on final consumer markets by responding with strategic decisions to changes in consumption. They own brands and maintain them by designing appropriate products and creating extensive marketing campaigns in target markets. (Castells, 2000; Dickens, 2003)

 

 

 

 

 

 

 

 

 

 

 

5. “The effect that the working environment; working methods and worker motivation has on the apparel industries competitiveness”. 

 

Finally, the choice of location to expand into was driven by the firm’s “labor strategy.” As the manager reported, the firm wanted to pick a site where US quotas were still available and where it could “import labor” (Interview, March 2000). This “importing of labor” was striking. One the one hand it underscored clearly that for firms like these, labor costs still remain the primary driver of competition within the garment industry in terms of its long-run business strategy. As Thune (2000) and Giraffe (2000) have shown Sri Lana's firms have moved up the garment value chain by becoming “middle-men” or brokers of international demand and low cost production. They manage the production process and get orders from large buyers, but the production can take place in several overseas platforms where labor costs are low. “What varies is the nationality of the work-force not who controls them,” Thune finds. In this case as well, the firm’s idea is to import not Indian but Sri Lankan workers into the Gulf (Dubai and Bahrain) because they are the “cheapest and most mobile.” These problematic notions were shocking to hear openly, but the manager went on: “We prefer to hire women workers. Indian women will never travel without their whole family. Sri Lankan women are more willing to go alone.” The firm had also scoped out similar “production platforms” in other countries and the cost of labor was a factor in all of them.

 

For example it ruled out locating in South Africa because “the government has stopped allowing workers to be brought in from third countries.” In Latin America, after considerable research the company has tentatively picked Chile, Uruguay and Paraguay as possibilities. The latter two were “ideal” because they give the firm a Latin American base and low labor costs, but relative to other low-cost Latin American countries they are politically stable. Aside, eexperts predict that the US apparel industry will be adversely affected by the liberalization process and to effectively meet increased foreign competition, the US apparel industry needs to modernize its manufacturing and marketing strategies. Apparel manufacturers need to develop better production strategies that allow for quick response to changing retailer needs. In addition, they need to establish a comprehensive marketing program in support of retailers. A model program can demonstrate how small firms can work together to become world-class competitors. Long the country's major beneficiary of protectionist tariffs and quotas, the apparel industry is likely to be the sector most hard hit by the liberalization of trade stemming from the North American Free Trade Agreement (NAFTA) and changes in the General Agreement on Trade and Tariffs (GATT). Having depended heavily on protection to maintain markets, the industry is now in critical need of the modernization that the Clinton administration wants to foster among U.S. manufacturers.

 

 

 

In spite of the fact that the apparel and textile industries account for $16 billion of the extra $19 billion U.S. consumers pay annually for goods to cover tariff costs and quota rents, U.S. companies have been steadily losing ground to foreign competitors. The trade deficit in clothing nearly quintupled from $4.5 billion in 1979 to $21.6 billion in 1990. In the same period, employment in clothing, yarn making, broad woven- and knit-fabric production and fabric finishing fell by 375,000 jobs. The elimination of tariffs and quotas on Mexican imports and whatever changes result from the GATT negotiations will only worsen conditions. Employment data indicate that of 771 no metropolitan counties in 10 South-eastern states, 209 had 20 percent or more of their 1987 private confirm employment in textile and apparel production. The proportion of non-metropolitan counties that had more than 20 percent apparel and textile employment was remarkably high in several states. Another argument for caring about what happens to the industry is that clothing workers who lost their jobs during the 1980s have had a difficult time obtaining other work with equivalent pay, despite the fact that apparel wages are considerably lower than the average manufacturing wage. Part of the problem is that dislocated clothing workers have lower educational levels and are more likely to be older, female, and members of minority groups than the average dislocated worker. Their skills, too, such as sewing-machine operation, are less readily transferable to other occupations. For many workers, a healthy apparel industry is the only safeguard against downward economic mobility.

 

 

Although there are numerous examples of companies that have taken the competitive "low road" of steadily relocating production to areas of cheaper, more plentiful labour while paying little attention to quality or worker treatment, the reality is that the industry's technical efficiency has improved much more rapidly than generally believed. During the 1980s, multifactor productivity grew at a rate greater than the median rate for all manufacturing sectors. Some part of this good performance reflects the weeding out of less efficient firms, but many firms have responded to competition by investing in better production equipment and adopting more effective management practices. Modernization will not be easy because the vast majority of companies are small or medium-sized enterprises (Somes) that employ fewer than 500 people. They find it difficult to afford the staff to focus on areas such as R&D, customer service, quality control, labour relations, and international marketing areas that will be increasingly important to success. They also may not see the benefits of making such improvements even if they can afford to do so. Although a number of public programs exist that are supposed to help these companies become more competitive, these efforts have lacked the funding, visibility, coordination, convenience and integration necessary to make a difference.

 

 

Furthermore, apparel-worker wages are currently much lower than those of European and Japanese workers, which improve the prospects for increasing exports to these regions. To put the industry on the path to economic competitiveness, it will be necessary for the government to address more generalized problems such as onerous health care costs and foreign trade barriers and to increase the rate of product and process innovation. But we focus on the additional action that will be needed to achieve success in this case: the modernization of the existing apparel manufacturing base. Fashion is fickle, and retailers would like to be able to respond more rapidly to shifts in demand. No matter how quickly the East Asian companies that dominate clothing production for U.S. retailers can manufacture garments, they typically must contend with the two to three months required for sea transit to the United States. If U.S. suppliers could reduce the time between orders and delivery to a minimum, they would have a major advantage over their Asian competitors. Partnerships between U.S. retailers and manufacturers could permit ordering closer to a season's opening as well as rapid restocking of hot-selling items. This would significantly increase profits by increasing sales and reducing forced markdowns and inventories.

 

 

 

In the past substantial in-process inventories balanced the flow of product through the plant so that labour and capital equipment were constantly in use. However, this system sacrifices speed and flexibility because production of a new product must often wait until operators complete several weeks or months of work already in progress. Quick response will require rapid changes in products and styles and therefore a new approach to balancing production emphasizes the use of modular manufacturing techniques, which rely on small production teams to rapidly reconfigure production equipment in response to a product change and to produce much smaller product lots than are common now. Quality is also essential to quick-response programs, because there is no time to fix defective merchandise. Fortunately, use of more flexible production systems can improve quality as well as facilitate quick response. Most manufacturers still make clothing in assembly-line fashion, with each worker at a station performing the same task over and over. The classic piece-rate system is still used almost universally to determine wages. This system lacks any incentive for the average worker to even monitor quality, because his or her compensation depends exclusively on how many times a day an assigned task, such as stitching an arm to the body of a shirt, is completed. Successful implementation develops a sharing of values between top management and other employees, fostering a cooperative, focused work process. Such employee dedication to quality has become one indicator of world-class work organizations.

 

The apparel industry is far from providing quick response, quality, and total packaging to major customers. Few firms have entered quick-response partnerships, many have no acquaintance with quality-management principles or quality requirements established by the International Standards Organization (the so-called ISO 9000 standards), and even the most sophisticated are only now considering modular production. Unless these capabilities develop rapidly and extensively, the industry will be in an unnecessarily weak position to face the opening of trade. The public sector cannot rebuild the apparel industry, but it can catalyze its modernization by fostering incipient government and industry efforts. What is needed is a model for how the industry can operate competitively. We therefore suggest that government and industry cooperatively pursue a demonstration program, which can be implemented without substantial change in the structure or legal authority of the existing federal, state, and local business-assistance infrastructure. The program would require a minimum contribution, either in funding or in kind, from each state that wants its firms to participate. Local governments and private parties could contribute to a state's resource commitment. We suggest that the federal government match the state contributions; several sources of federal matching funds are available.

 

 

 

Most apparel firms have no relationship with the federal, state, and local entities that have programs to help businesses. Moreover, apparel companies, particularly the Somes, have been very hard to organize for any purpose. A hook--the promise of getting long-term retail contracts through the network--is needed to generate interest. To promote acceptance of the benchmarks, government agencies would begin to shift their purchasing to companies that met them. This would not only further stimulate interest among firms in achieving benchmark performance but also produce considerable savings for public agencies. Beyond Della's quick-response program, the effort might embrace procurements for federal security forces, prisons, hospitals, and local police, fire, sanitation, and recreation personnel. Once product and process benchmarks are set, an expanded team would begin to put together a network of companies that meet the benchmarks. The purpose would be to create a group of companies that can collectively provide quick response, quality, and total packaging to large retail and public sector accounts. A small network staff would serve as the point of contact, coordinate the flow of information, and carry out network programs.

 

 

 

 

Beyond collectively seeking market opportunities, the network could acquire privately held information on technologies or management practices; effect the joint purchase of materials, insurance, equipment, and training; develop applied research projects, including new, patentable machinery; and coordinate the sharing of specialized facilities that no one firm could acquire on its own. The primary thrust of this activity would not be to help all firms become state of the art, although some firms might do so; it will likely prove quite sufficient to bring network producers fully "up to date" in a broad range of performance areas, which often will simply require the use of proven "state-of-the-shelf" technologies or management systems. The centre's on-site staff would include a broad range of experts who would otherwise be geographically separated and have sporadic, if any, contact. It might bring together experts in business loans; high school and community college apprenticeship programs; apparel research, design, engineering, and testing; government procurement; total quality management; exporting; and training. Private sector presence at the centre would be encouraged through, for instance, visiting engineers or other manufacturing personnel or a teaching fellow program to foster the cross-fertilization needed to keep in touch with the real world of the apparel industry.

 

 

 

Research on the effects of work systems requires a theoretically meaningful specification and measurement of the type of work organization. We defined and investigated four key dimensions of participation--the level of autonomy in decision-making, membership in a self-directed production team, membership in an offline problem-solving group, and the level of communication within and across workgroups of specific high-performance practices and of high-performance work systems as a whole, we performed multiple estimations to explore how workers' educational attainment and other independent variables mediate the results. Capelin and Daniel (1996) found that new forms of work organization raised wages "for all but clerical workers" in a national sample of firms, even when the analysis controlled for the education level of workers hired by the firms. This suggests that workers of equal measured skill were earning more in high-performance systems, although it is possible that unmeasured skills accounted for the differences. Bailey and Bernhardt (1997), in research based on case studies of service firms, found that when firms moved to more innovative forms of work organization, they raised wages but also recruited more educated workers. Oysterman (2000) found that wages in plants with high-performance systems did not rise more than in other plants over a five-year period. However, he did not report comparative information on the wage level (Applaud, Bailey, Berg, and Kullberg 2000; Bailey 1993).

 

 

Organizing the work process so that non-managerial employees have the opportunity to contribute discretionary effort is the central feature of a high-performance work system. High performance work systems emphasize the devolution of the gathering and processing of information to the level of non-managerial employees, who act on and use the information for problem-solving and decision-making. To capture this element of a high-performance work system, we create an "opportunity to participate" scale consisting of participation in self-directed and offline teams, autonomy over work tasks and opportunities to communicate with employees outside the work group. Employees may lose some direct incentives to work hard when the company shifts from an individual-oriented pay or evaluation system to a group system. This can happen in the apparel industry, for example, when a plant moves from an individual piece rate to a group piece rate or bonus system. The most productive workers usually earn less when they are moved into teams. If the introduction of high-performance practices leads to jobs that are more interesting and provide greater intrinsic rewards, then workers may be willing to accept lower wages. This is one form of compensating differential, and some managers we interviewed stated that they would be able to attract and retain a better work force, without raising wages, if they used teams and related strategies.

 

 

 

In the case production in apparel, for example, team workers are trained to carry out several of the tasks performed by their team as a whole, in order to overcome bottlenecks and smooth out the production process. Even when workers are expected to perform a single task, managers believe that high-performance systems are most effective when workers at least understand the role and function of co-workers and other team members (1994)  that the demand for interpersonal and behavioural skills is greater in more participatory types of work organization. In addition, workers in participatory work systems are expected to assume supervisory and coordination functions traditionally performed by supervisors or specialized support personnel. Many teams are at least partially responsible for setting production targets, solving problems, figuring out better ways to accomplish their tasks, carrying out minor equipment repairs and coordinating their work with other teams. Workers need to have the appropriate incentives and skills, but it is the organization of work itself that gives them the opportunity to provide effective discretionary effort. High-performance work systems have been shown to improve performance, reduce costs, and increase productivity (1995;1997;. 2000).

 

 

 

In a competitive labour market, increased productivity does not necessarily lead to higher wages if workers' skills do not increase. If, as we have shown is the case, workers in the new production processes require higher skills, then wages will be higher for this reason. However, high-performance systems may also create economic rents or surplus, and part of these gains may be distributed to workers (Applaud et al. 2000; Ichniowski et al. 1997). Employment in the apparel industry steadily declined as foreign competition is primarily responsible for this fall in apparel employment. U.S. firms are at a disadvantage relative to foreign competitors because of the characteristics of apparel production, which is labour-intensive and has low capital and technology requirements and limited capital-labour substitutability. The moderate skill requirements in the industry and its easily copied and cheap technology leave it vulnerable to competition from firms in countries with much lower hourly compensation costs (Employment and Earnings 1999). Initially, domestic apparel firms responded to heightened competition from apparel producers in low-wage countries by intensifying their traditional cost-cutting strategies. They relocated domestic operations and established production facilities in low-wage countries, used Taylor's techniques to more precisely engineer individual tasks and reduce the sewing time required for any item of clothing, and used automation to reduce skill requirements (Kurt Salmon Associates 1988).

 

 

To meet the objectives, apparel manufacturers have introduced high-performance work systems that combine new forms of work organization with increased training and incentives that encourage teamwork. The most common form of high-performance work organization in apparel is a team-based approach referred to as modular production. In modular production, a worker performs one or more tasks and then passes the work directly to another worker who then performs subsequent tasks (Applaud et al. 2000). Workers have traditionally enjoyed a certain degree of participation in production decisions and there is little automation of the production process. As a result, the differences between what we might call "old" and "new" work systems are less distinct in this industry than in apparel or steel. Internal firm hierarchy has traditionally been flat and there are few first line supervisors, even in traditional work systems (Pill and McDuffie 1996). Contingent pay is the most straightforward approach to providing incentives or motivation. High-performance workers in apparel and medical electronics were also more likely to receive bonuses for meeting production targets. In contrast, workers in more participatory work systems in apparel received more formal and informal training.

 

 

 

Thus, employers in apparel industry relied more on formal company training to prepare employees to work in high-performance systems, while managers in medical electronics and imaging tended to use workers with higher levels of formal education, especially college graduates. In apparel it was the combination of teams with high levels of autonomy and communication that led to high performance benefiting both employers and workers. Efficiencies created by the new work organization may also increase productivity and thereby generate a surplus that employers are willing to share with workers. This does appear to be what happened in the apparel industry, employers are able to produce apparel at lower labour costs, if wages remain unchanged (Applaud et al. 2000).

 

 

6. “The part of retail and consumer pressure to provide acceptable work spaces and equipment and non forced labour”. Comment on the development of WRAP, and SA 8000, and Health and Safety Standards.

 

Companies have found that adopting and enforcing a code of conduct can yield the following practical business benefits:

Protect brand reputation: The reputation of a company and its brands is a valuable asset that requires protection. More now than ever, consumers are examining and judging whether corporate practices are ethical. This includes practices of suppliers, whether wholly owned or independent, that are part of the value chain that provides profit to the brand. As trust in the private sector plummets, evidenced by a 2002 Gallup poll of 46 countries in which national legislatures and companies were the institutions least trusted by society, consumers are asking companies to demonstrate that working conditions are safe and fair, particularly in developing countries. Codes of conduct are typically based upon compliance with local law and are also associated with international norms such as the International Labour Organization (ILK) covenants. When they are applied consistently and universally codes may help protect brand reputation by aligning business partner behaviour with accepted norms.

 

 

 

Strengthen legal compliance and reduce future risk and liability: Codes are designed for universal implementation. In locations of lax legal enforcement, this is challenging, but still useful for identifying desirable, committed, and forward-thinking business partners. Good labour standards may reduce the risk of future liability, in case laws are enforced or governments launch campaigns targeting industry. Workers themselves may seek redress for legal violations, as in the case of workers in the Northern Mariana islands who formed a class action lawsuit against several US-based brands and retailers. Reduce negative publicity, increase ability to respond to crisis: Implementing a code of conduct may prepare a company to respond to an unexpected crisis. Codes may provide staff with guidelines on making appropriate decisions thereby avoiding risk and communicating values to business partners. Developing a code can provide a company with an awareness of issues that may arise and provides staff with relevant experiences to help guide its actions if something unexpected does occur. Most importantly, should negative publicity occur, having a code and relevant experience with the issues allows a company to refrain from taking a defensive posture, or offering an unsatisfactory reaction; instead, the company may respond in a principled, flexible, and proactive manner to address the core issues. Companies going beyond compliance to address root causes. Legal compliance is the first step and the base of any code of conduct program, some companies are experimenting with other approaches that help workers and factory managers to assume more control over their workplace conditions. These programs include intensive technical training on safety issues, training and consulting to increase productivity, providing legal information and government contact information to workers, and encouraging the development of dispute resolution mechanisms in the workplace.

The apparel industries were the first to adopt and implements codes. The use of codes has expanded to include other industries known to have particularly serious situations involving trafficked workers or dangerous work environments including: the cocoa industry in West Africa; the diamond industry and the oil industry. Companies are taking a cautious approach to identifying business partners with acceptable labour practices, and the use of audits prior to placing orders is increasingly becoming routine. Companies then rely upon international standards to provide principles such as limiting the hours of work, non-discrimination in the workplace and respecting freedom of association. The audit cycle time varies by risk, business importance, company resources, and severity of audit findings. In response to stakeholder concerns, some companies have pursued the idea of completely independent external audits, although such mechanisms are generally costly and require greater effort to arrange. Suppliers may not have the resources needed to fully implement all corrective actions that result from the audit. A company can help marshal resources for suppliers, such as providing assistance via staff experts, identifying training opportunities, sharing best practices from other cases, or producing written guidelines for suppliers.

 

 

 

 

 

 

Apparel producers are accountable for their global production practices to consumers, retailers, governments, and others. Several organizations are dedicated to setting manufacturing standards, particularly regarding human rights. WRAP is unique among apparently similar organizations because it combines all of the following important attributes. Consumers and retailers ultimately drive manufacturing, but from the factories’ immediate perspective, the market for their products consists of the companies that source apparel and footwear. Increasingly, factories will be obliged to heed requests of companies requiring compliance with WRAP principles and procedures. In its governance and finances, WRAP is independent of the industrial sectors for which it offers factory certification programs. Since its incorporation in 2000, its charter mandates that the majority of its Board members be from non-industry professions. Representatives from varied industries bring a needed perspective to the Board since the purpose of WRAP is to make progress in the workplaces of their industries. However, the Board members drawn from academia, civil society, and other arenas can and do occasionally outvote them. WRAP is not a membership association to which companies such as universities, pay dues. Factories pay WRAP an application fee. Monitors pay WRAP an annual registration fee for each country in which they seek WRAP accreditation. Each factory then negotiates an inspection fee with the accredited monitor of its choice WRAP does not set these fees nor benefit from them.

 

 

 

WRAP certifies individual factories, many of which are small or medium businesses contracted by brand managers or retailers. The certification is not for the brand and not for the company that owns it. Factory certification, on the other hand, places responsibility for improving workplace conditions squarely on the shoulders of those who own and operate a specific facility. Recognizing the potential for individual manufacturers to adopt inconsistent standards and to duplicate monitoring, several prominent apparel producers approached the American Apparel Manufacturers Association to coordinate the industry’s role in addressing these issues. It reached beyond the apparel manufacturers and brand managers to retailers, human rights advocates, public interest organizations, development agencies, and the licensing community. The WRAP standards are consistently weaker than those in other multi-company codes and seldom go beyond compliance with local labour and other legislation. Lawrence Doherty says that the standards are "basically the ILK standards" but they are not as stringent as the ILK standards. The standards on environment require only that manufacturers comply with local laws which are applicable to their operations and follow "environmentally conscious" practices. The standards on compensation require only that manufacturers pay the local minimum wage. The primary source of proof of working conditions is factory records and the self-assessment form. Monitoring visits are undertaken but at present there are no specific requirements for how site visits are done. There is no requirement to consult with local NGOs, religious organizations, human rights organizations or others who might be trusted by workers. There is no requirement that workers be interviewed off-site.

 

 

Although outsourcing is a generically applicable modern term, in the context of this article it is considered to apply to the IT sector. Outsourcing in its basic meaning, is letting or hiring a person to do something that you cannot do yourself. It happens based on skill-set availability, resource availability and the need. Going on hierarchy; cooking, plumbing, professional assistance, marketing, banks, client relationship, and so on. It cruised along unrecognized or 'unthreatened' ever since the beginning of civilization. Then, from somewhere in the early eighties it picked up momentum with the advent of IT and networking. The outsourcing concept started galloping as IT rocketed ahead with Indians and India contributing probably the most.

The plan cycle for the outsourcing:

• Plan - Identify the processes and assess your competence to perform them effectively for cost-quality-speed-innovation-change. It must be an objective assessment.
• Do - Perform deployment of ownership to the processes both internally and externally including relationship management.
• Check- Verify effectiveness of processes, relationships and supply chain management.
• Act - Establish and implement the review - correct - improve mechanism

 

 

 

 

 

 

7.  “The impact of implementing improved working conditions in the apparel industry has on improving competitiveness”.

 

While much of the job loss has been a result of textile mills and apparel factories going out of business in the face of fierce domestic and international competition, a significant part of the decrease has been caused by efforts that companies have made to survive. In the past few decades, textile and apparel companies have been struggling to reinvent themselves. By investing in new technologies, merging to reduce costs, employing foreign workers to perform certain operations, and developing new products and services, they have been attempting to find a niche in the international market. According to some measures they have been successful, as production has remained stable and companies have been profitable. On the basis of other measures--employment and foreign trade, primarily--they have not fared as well. What emerges from recent changes in the international economy and the domestic textile and apparel industries is a complex picture of job loss and survival strategies. The dynamism that has recently characterized the sector is likely to increase as international trade grows in coming years. Employment will continue to decline, but the industries are still projected to provide over a million jobs because the international economy affects each occupation differently, opportunities will vary across the wide spectrum of occupations involved in producing textile and apparel items. The reasons for this are complex, but understanding them is a vital part of anticipating the likely opportunities in these industries and learning how to take advantage of them.

 

The apparel industries make up the chain of production and distribution that is responsible for providing consumers with clothes and other products. The textile industry is the first link in this chain. Textile mills make yarn, thread, and fabric for clothing, but they also manufacture such products as carpeting, automotive upholstery, cord, and twine. The major processes in these highly automated mills include yarn spinning, weaving, knitting, tufting and no woven production. Employment is widely distributed throughout the different sectors of the industry, but most workers produce items that are eventually used to produce apparel. The apparel industry has been known as the "needles and scissors" part of the sewn products sector. Although new technologies have made this name outdated, it still conveys the main functions of the industry taking fabrics from the textile industry and cutting and assembling the pieces into finished goods for the retail market. In addition to cutting and assembly, these goods must also be designed, spread, pressed, dyed, washed and transported to consumers functions which require a variety of occupations. Still, most workers in the industry are sewing machine operators, who perform the most labor-intensive step in apparel production. In part because apparel production is more labor-intensive than textile production, the apparel industry employs more workers about 915,000 in 1995. Nearly three quarters of the employees in the apparel industry are women, compared to about a third of the workers for the entire manufacturing sector.

 

 

 

The causes for this recent acceleration in job loss are related to a number of factors, but most experts agree that the major reasons are growing imports and productivity increases. Supporting this idea, last year's rapid decline occurred in the context of recent trade agreements that have dismantled previous barriers to trade and investment in new technologies that have boosted worker productivity. The following sections investigate the ways that these trends have affected workers in the industries. Globalization has been driven by many forces, including technological advancements in transportation, communication, and production, as well as the worldwide search for markets. These developments have allowed international investors and entrepreneurs to take advantage of differing production costs by locating factories and offices in a number of countries. The apparel industry has historically been the largest consumer of textiles, so as imports capture more of the apparel market, they will detract from textile production. Apparel from Latin America may be an exception to this, but to the extent that apparel imports from Asian nations grow, the odds that these goods will be made with American textiles diminish. The apparel industry has been broadly affected by globalization – the most telling indicator of this is the enormous trade deficit in apparel $34 billion in the year 1995. As imports continue to grow, they account for a larger share of domestic consumption. In fact, in 1995 for the first time, the majority of apparel purchased in the United States was imported. While these imports have helped to keep prices low for consumers, they have also contributed to employment decline in the apparel industry. The apparel industries have been able to maintain production levels and increase them in some segments while shedding workers consistently.

 

They have done this primarily through increasing labor productivity, increasing the amount that each worker is able to produce in a given time. Productivity gains have come primarily from automation and the restructuring of work processes. In many cases, this has been the result of employing more highly skilled workers who can operate computers, but in other instances it has been the result of automation that reduces the dependence on skilled workers. As with international trade, productivity growth has affected each of the industries differently. Although textile workers remained relatively unscathed by increasing imports, they have been more deeply affected by technological change. The primary reason for this is that textile production, because of its large scale and uniformity, is more amenable to technological innovations. After decades of investment in new technologies, textile firms are able to churn out thousands of square yards every hour with as few as 10 or 20 employees. Some of the technological developments that make this possible are open-end spinning of yarn and shuttle less looms. The application of computers and lasers to textile production has also boosted productivity and quality significantly. Many experts predict that the pace of change due to new technology, international competition, and other trends will quicken in the coming decade. In this environment, it is difficult to predict what the future holds for apparel workers. The effects of trade and technology will combine to negatively affect the labor market for apparel workers. Imports will likely supply the net growth in apparel consumption in the domestic market, leading to little or no growth in textiles and apparel output and will combine with growing worker productivity to eliminate positions for hundreds of thousands of workers.

 

Competitive pressures have contributed to a growing concentration of producers in the sector. As companies merge, firms take advantage of economies of scale and lay off workers. The pressures placed on apparel makers by the retail sector, demanding consumers, and international trade will continue to force producers to streamline operations and cut costs wherever possible. This will mean job losses for tens of thousands of workers over the coming decade. In coming years, occupations that require more education will enjoy the most stable employment, but most jobs will continue to be held by lower skilled workers. Some workers in these occupations may need to receive additional training to use new automation or to work in a flexible manufacturing system, but skill levels are not expected to increase greatly because much of the new equipment is designed to keep worker retraining to a minimum. The modernization of the industry will result in a premium being placed on workers who understand how to work with new computer-controlled machines.