From garment to fashion production: an analysis of the evolution of the apparel industry in Brazil.
| Autor | Pinto, Marcelo Machado Barbosa |
| Cargo | Report |
Introduction
In the last two decades the apparel industry has evolved in terms of manufacturing and retailing. This evolution is depicted in several studies that highlight the relocation of manufacturing across the apparel commodity chain as well as strategic moves of the main players of the apparel industry in a globalization process (Buxey, 2005; Gereffi, Humphrey, & Sturgeon, 2005; Pickles & Smith, 2011; Sammarra & Belussi, 2006; Schmitz & Knorringa, 2000).
Global value chains in the apparel industry have been preliminarily motivated by the search for cost advantages. The relocation of manufacturing from the US and the EU to other countries where labor has been less costly is a phenomenon observed since the 1970s (Berger, 2006; Bonacich & Waller, 1994; Jacobides & Billinger, 2006).
Apparel retailing has also been evolving due to the emergence of new markets, e.g. Brazil, Russia, India and China (Markusen, Wassall, DeNatale, & Cohen, 2008; Nika, 2010; Pontual, 2011; Prideaux, 2009), and the employment of new techniques for attracting consumer, e.g. fast fashion and rapid replenishment (Abernathy, Dunlop, Hammond, & Weil, 1999; Ferdows, Lewes, & Machuca, 2004; Michault, 2009; Richardson, 1996).
In emerging markets like Brazil, the evolution and relocation of the apparel industry has contributed to the establishment of sophisticated manufacturing clusters and to the rise of big box retailers. Several academic articles have stressed different aspects about the evolution of apparel industry from traditional manufacturing to the multinational enterprise based on global value chain production and retailing (Bonacich & Waller, 1994; Gereffi & Memedovic, 2003; Schmitz & Knorringa, 2000). Nevertheless this literature does not cover a variation of the evolution of the apparel industry that has been observed in Brazil where there is the emergence of a unique and local fashion apparel chain (Pinto, 2011; Pinto & Souza, 2011; Pontual, 2010). The evidence of this local evolution indicates that a new lens is required to understand an ongoing local phenomenon of upgrading apparel production. As reminded by Abernathy, Dunlop, Hammond and Weil (1999), apparel production involves several processes that lead to different products identified as fashion, fashion-basic and basic products. These processes engage distinct companies and guide them to different strategies. We found in Brazil several small and medium-sized companies producing and retailing based upon various business models (Costa & Rocha, 2009). There is also a set of companies devoted to fashion production which are embedded in a local and growing creative industry, such as the case of beachwear production (Pinto & Souza, 2011).
The identification of this local evidence sparks the questions driving this paper: Does global sourcing still explain the value upgrading process in the apparel production chain? Are there new sources of value upgrading to be considered? Is the dynamics of apparel production pervaded by a phenomenon that is strongly related to a cultural and creative know-how?
This paper (1) is organized as follows: the first section presents the introduction. The next section describes the literature review from which we draw upon the evolution of the apparel industry, highlighting the tangible and the intangible nuances of apparel production. The third section describes the research methods. The fourth section presents the results and the discussion from which we draw forth an alternative approach to explain the evolution of the apparel industry in Brazil. The final section presents the conclusions of this study.
Literature Review
This study is based on two theoretical approaches that consider the evolution of the apparel industry. The first one is aligned with studies of global apparel value chains and call attention to the industrial upgrading process that emphasizes the tangible production of apparel items (Abecassis-Moedas, 2006; Abernathy et al., 1999; Abernathy, Volpe, & Weil, 2005; Bonacich & Waller, 1994; Cheng & Gereffi, 1994; Ferdows et al., 2004; Gereffi, 1999; Gereffi et al., 2005; Gereffi & Memedovic, 2003; Jacobides & Billinger, 2006; Porter, 1990; Rabellotti, 2003; Sammarra & Belussi, 2006; Schmitz & Knorringa, 2000). We consider this approach to be the manufacturing approach. The second one is aligned with studies of cultural and creative industries and recognizes the cultural upgrading process that highlights the intangible production of a fashion concept or belief (Cholachatpinyo, Padgett, Crocker, & Fletcher, 2002; Currid, 2006, 2007; Djelic & Ainamo, 1999; Kawamura, 2006; Rantisi, 2002, 2004; Richardson, 1996; Skov, 2006; Uzzi, 1996, 1997; Williams & Currid-Halkett, 2011). Henceforth, we name this approach the cultural approach.
The evolution of the apparel industry: supplying global value chains
The manufacturing approach assumes that the apparel value chain is a process by which technology is combined with materials and labor and then processed, assembled, distributed and marketed. Furthermore, this approach assumes that upgrading occurs to products that are organizationally related through lead firms in global value chains (Gereffi, 1999). So, apparel manufacturers from emerging countries (e.g. Brazil) need to follow this value chain process in order to upgrade. The manufacturing approach reveals export models from emerging countries, for instance, original equipment manufacturing (OEM) and original brand name manufacturing (OBM) (Gereffi, 1999; Gereffi et al., 2005). OEM is characterized as a step up from a mere assembly of imported inputs (exporting processing zones) to a more integrated and skill-intensive activity of supplying goods and services in domestic and overseas markets. OBM is characterized as an export model that goes beyond OEM by joining production expertise in a learning manner with the design and sale of branded merchandise.
According to Jacobides and Billinger (2006), the main functions associated with apparel production can be depicted in the following schema (Figure 1). This flow is a mix of tangible and intangible value activities usually performed by different players that look for specific strategies aiming at creating and capturing value.
[FIGURE 1 OMITTED]
Gereffi (1999) considers the global apparel value chain to be a buyer-driven linear chain. In this configuration, leading companies (large retailers or/and branded marketers or/and branded manufacturers) control apparel chains, getting their main income from providers/followers who work in this value chain, such as traders, overseas buyers, licensed manufacturers, etc. Companies that negotiate prestigious brands or/and manufacture famous brands or/and sell huge amounts of goods to consumers make the rules. The main decisions taken by the coordinators of the apparel chain are associated with the choice of suppliers that are able to deliver orders to retail stores in time and with competitive prices. Low value-added contractors often attempt to incorporate value-added productive activities that were originally developed or controlled by the coordinator (usually large retailers). Thus, a supplier that was initially an assembler of components supplied by the coordinator would then start to produce these components. By doing this the supplier upgrades its role in the value chain stream. A low value-added supplier would increase its knowledge about the process in order to obtain higher revenue as part of the chain flow.
However, the potential for follow-up companies' to upgrade in global apparel chains is limited, mainly for the followers that usually perform tangible value-adding tasks. According to Rabellotti (2003), there are examples of industrial downgrading in companies that abandoned design and sale inputs when they join apparel value chains as manufacture contractors.
Gereffi (1999) suggests that apparel economic surplus is concentrated in the nodes of the chain where market power is stronger. On the retail side, giant discounters, national merchandise chains, warehouse clubs, and other large buyers account for the lion's share of the orders in the U.S. and European apparel market. They use their leverage to press for compliance from domestic as well as overseas apparel manufacturers. Unlike producer-driven value chains, in which supply factors largely determine the nature of demand, in the buyer-driven apparel chains the decisions made by big buyers (usually retailers) shape the global apparel value chains (Gereffi, 1999; Gereffi & Memedovic, 2003).
In this approach the upgrading of a participant company is primarily associated with the shift from assembly to full-package production. Compared with the mere assembly of imported inputs, full-package production fundamentally changes the relationship between buyers and suppliers in a direction that gives the supplying firm a far greater autonomy and learning potential for method upgrading. Full-package production becomes more frequent due to the fact that most retailers and marketers that order apparel are no longer able to manufacture them (Cheng & Gereffi, 1994; Gereffi et al., 2005).
Gereffi and Memedovic (2003) consider that large retailers in general lead the process towards mass customization and agile manufacturing. These authors state that there has been a striking merger as well as a growth in the retail segment of buyer-driven value chains in the United States. Meanwhile apparel manufacturers in Europe and Japan have become even more fragmented. While retailing and marketing is becoming more concentrated, manufacturing is splintering. To a certain degree, this trend is propelled by the information revolution that gives retailers better day-to-day market information about consumer purchasing decisions. This information allows retailers to demand more from their suppliers in terms of inventory management, quick response, more frequent deliveries, etc. As an implication of these...
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