So as the Chair person in TFIA, what would be your description about the state of global TCF industry presently? How do you see Australia placed in it?
In general, Australia is experiencing many of the difficulties that other global TCF industries are subject to, and particularly to changing spending patterns emanating from the reduction in consumer confidence. We are well connected to the rest of the world through liberalized trade and fiscal policies, which means that businesses are highly vulnerable to changes in trade parameters such as currency fluctuations, liquidity constraints & any change in consumer confidence and spending. The volatility of the market reinforces the need for flexibility at both Government and enterprise levels. The stimulus packages put in place by the Rudd Government have had some positive impact on demand however as these measures taper off, and because of the diversity of the sector, different market segments are likely to have varying experiences.
Typically Australia excels in high value added goods where its innovative capacity, flexibility and understanding of short run markets allow it to provide a competitive offer with compelling features including design and performance based user benefits.
Please also share with us more about the strengths and bottlenecks of Australian TCF industry.
The textiles, clothing and fashion industry in Australia continues to be a very diverse sector that undertakes a wide range of manufacturing, design and supply activities throughout the supply chain; from the processing of raw materials such as leather and fibres, through to intermediate production of fabrics and yarns, to the final design, manufacture and supply of finished textile, clothing and footwear products.
The last two decades have seen huge and ongoing structural changes in the TCF manufacturing industry as a result of changes in trade and industry policy (both domestically and internationally) and consequent increasing global competitive pressures. These pressures have seen many domestic manufacturers move away from production of commodity items. The downside of this appropriate strategic move is a dramatic reduction in volume production which is important to retain a critical mass of activity and ensure favourable scale economies. A consequent and not unexpected fall-out of this response to the structural pressures confronting the industry has been a large decline in the level of manufacturing employment over the past 10 years.
Currently in Australia there are a relatively small number of large well known players, which have a significant market presence, and a myriad of smaller businesses. There is also significant growth in small to medium sized design businesses many of which are not strictly manufacturers but remain an important part of the manufacturing supply chain, and who rely on domestic manufacturing to survive as a point of difference.
In order to remain competitive, the industry (with a few notable exceptions in carpets, woven fabrics and corporate and protective apparel) has reoriented itself from a largely domestic manufacturing sector, seeking scale efficiencies, to a mixture of smaller local manufacturing activities combining sophisticated design and niche marketing skills with a mix of local and imported components to their businesses to maximize the returns on local value added activities. Some sectors such as the yarn industry have been unable to compete due to the reliance on economies of scale and, to a large extent, are no longer locally produced.
Over the past 10 years in particular the manufacturing industry has very successfully diversified its operations into the less traditional TCF areas, such as performance based and industrial textiles with increasingly sophisticated functional uses, and niche clothing and footwear markets where product differentiation and high value adding are essential.
The carpet manufacturing industry in Australia continues to be a relatively strong individual sector employing roughly 3,000 people (mainly in Victoria), It is also the largest homogenous group within the textile sector. Geographic location and transportation costs are no longer significant natural barriers offering some protection and carpet manufacturers are ensuring continual investment in technological activities and are looking for competitive advantage through process and product innovation and actively seeking new markets for new innovative and quality product.
There has also been a growing trend that has seen many manufacturers source more products offshore, focusing their activities on supply chain management and in areas where Australia is more competitive such as design, branding and market development, innovation and customer service. As a result of this while many manufacturing specific areas have declined, these other areas have taken on increasing importance and focus and they have helped enhance the value of the remaining domestic manufacturing activities, ensuring a more competitive return for the industry where manufacturing is complemented by innovative design, marketing and supply chain management.
The TCF industries in Australia have become increasingly vertically aligned over the past decade, and as a result of this, whilst it is tempting to pigeon hole industry using a silo mentality, this is not the reality as the majority of companies no longer perform one specific function but have integrated themselves both up and down the supply chain (and often across different market applications and product lines). This strategy has been used to gain greater flexibility on product margins while at the same time increasing the level of control on the supply chain. Many manufacturers and suppliers who traditionally played an intermediate role have diversified into the retail space to seeking a direct link to the end consumer and many retailers have moved into the product development arena to gain greater control over quality management.
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.