Comparative industrial database development to enhance competitive capability

According to any changes in situations, trends, and circumstances of textile and garment industries; whether quota annulment of textiles in WTO agreement, rapid growth of goods from competitive countries —like China, India, Pakistan, and Vietnam, lack of labors and high labor’s cost, purchasing behavioral change of main purchasers in partnership countries; as well as pressures from domestic economic fluctuation, value of money, and oil price, all of these cause major concerns on competitive status of Thailand textile and garment industries. Thailand Textile Institute (THTI) is thus authorized from Office of Industrial Economics (OIE) to conduct a study on status, potential, and capability of competition in textile and garment industries of Thailand. The study takes into account these changed tendencies of world’s market competition; as well as evaluates capability of the 4 Asian competitive countries, i.e. China, India, Pakistan, and Vietnam for guiding industrial entrepreneurs to adapt to opportunities and obstacles, and relevant governmental departments to regulate policies.

The current study applies theory of competitive capability of Michael E.Porter by setting 6 categories of indicator:

As a result of the purchasing behavioral analysis of major purchasers in USA, there is a significant change. Orders traditionally distributed in several countries in accordance with quota become selectively made for a few countries which are the readiest for response to purchaser’s need. An example of which is China because it has capability to manufacture textile and garment goods with a variety of patterns, qualities, and competitive prices, as well as its rapid delivery. At the same time USA, which begins to realize that its textile trades with China are likely to be so high that China would almost be the only one it orders, thus has to extend its trade relationships with other countries of distinctly inexpensive costs like India, Pakistan, as well as ASEAN countries such as Vietnam and Indonesia.

Thailand and other ASEAN countries are viewed as second tiers for Niche goods. USA purchasers consider placing orders from these countries to balance its sourcing in view of cost, flexibility, and quickness; thereby reducing any risks in case first tier countries could not respond to its needs.

In addition, supplying pattern also changes. Purchaser’s need previously lying in need for original equipment manufacturer now changes into more need for a full package supplier over an entire supply chain; whether designing, raw material sourcing, production, quality control, delivery, inventory management, retail management, as well as training of all such personnel. The most important seems to be raw material sourcing.

The effect of rapid expansion in textile and garment goods from China on every world’s market causes USA to issue a safeguard measure which is valid until 2008. European markets are also concerned on this rapid growth. Consequently, China decides to make a memorandum with the European Union in which the growth of 10 categories in clothing goods exported to the European markets will not be more than 8- 12.5% each year. These events positively effect on Thailand and other ASEAN countries, but these factors will elapse before long.

Global manufacturers in textile and garment industries also adapt to these conditions by relocating their production bases to developing countries which gain advantages in competition, provide a large number of labors with inexpensive wages, or have other positive factors. ASEAN countries gain positive effects from this case.

When comparing textile and clothing manufacturers of Thailand with other countries, it is found that Thailand has complete goods but lacks active cooperation between upstream and downstream industries. Moreover, downstream manufacturers still have no plan for fabric sourcing by themselves according to new trend of purchasers. Most entrepreneurs still play a role of CMT (Cutting, Making, Trimming) dressmaker.

According to a comparative evaluation on competitive capability of each application area in textile and clothing industries of the countries in which such area is their main industry by analyzing 3 countries per industry, the evaluation results are as follows:

Textile Industry To make the capability of this industry sustainable, it is required emphasis on development relevant to purchaser’s needs in clothing industry, ability to create distinction by using innovation; thereby adding more value, and making the market more attractive than China, the leader, in view of high mass production and low cost. There are considered these following markets:

According to the above data, it is suggested that the direction of this industry should extend to the way of developing products to be more distinctive by means of innovation and technology transfer concentrating on ASEAN and domestic markets for import compensation. Governmental support preferably lies in creating supportive factors to enable entrepreneurs to apply researches, e.g. Share Service Center- Pilot Plant, to actual production.

As for principal markets e.g. USA, EU, it is required to maintain major market share by internal management of supply chain to correspond to requirements and criteria in these markets, pay close attention to any information, analyze and evaluate and distribute the information to signal every department to work cooperatively.

Garment Industry

The quota annulment of textile and garment industries result in purchasing behavior of world’s major suppliers. From purchasing in accordance with their quota, the suppliers change to purchase from a few manufacturers by emphasizing on big potential ones capable of complete servicing, especially the main stages e.g. raw material sourcing, quality control, delivery, and inventory management.

The study result shows that China has a very high potential in this industry. It is ready among a price-based group, a market majority. At the same time, among a qualitybased one, China is also competitive. A competitive direction of this industry thus should avoid a competition in a market with China’s high capability to the inferior one. It is preferable to use distinctive point of quality, delivery, production skills, management, innovative differentiation, and higher-skilled complex products for enabling Thailand to better compete with the price-based only markets.

A new strategic position of Thailand clothing industry is to change its role of original equipment manufacturer (OEM or CMT) extending to more value activity in value chain and to change its role to a full package service provider by means of building supply chain partnership, applying IT system to support its operations, doing a cooperative developmental research with upstream industries, coordinating to create a prototype product, forming a quick response system to support its competitive capability, etc.