In the second instalment of a new four-part series of blogs, Thomas Gronbach, Director of Marketing at Lectra Germany, continues to explore the revolution in fashion sourcing.
The European Union (EU) has set up a €300 billion fund to boost investments through its entities: European Investment Bank (EIB), European Investment Fund (EIF) and European Bank for Reconstruction and Development (EBRD). So, how is this relevant for the European fashion and apparel ecosystem, i.e. brand and manufacturers?
Amongst different investment targets such as strategic infrastructures (i.e. digital networks and energy), transport infrastructure, education and sustainability the funds are targeted for innovate investments, boosting employment in small and medium sized businesses. These projects are set to begin between 2015 and 2017. In this period companies in the fashion and apparel industry that intend to improve their infrastructure and equipment in an innovative manner related to capacity increase, business model overhaul, international expansion or the modernization of production technology, can benefit from the fund.
Developing Business Models – From Cut, Make, Trim (CMT) to Full Package Sourcing
Traditionally, fashion and apparel manufacturers in Eastern European countries provided basic production services – cut fabrics, sewing the pieces and trimming the product. Any task proceeding or following this wage-oriented production scenario was the responsibility of the client. The manufacturers received patterns and markers provided by the client – the fashion brand.
This model got known as Cut, Make, Trim (CMT).
Contemporary requirements, however, demand additional tasks from apparel manufacturing partners. Fashion brands provide only the specification of their product and outsource design and other services – such as purchasing fabric or the shipment of goods. The model has been established in the market as Full Packaged Sourcing and certain fashion brands only seek partners within that scope. For manufacturers seeking new clients or projects, it is often mandatory to provide skills and services beyond CMT.
The expansion of business models of fashion manufacturers require modern technology to generate jobs, create capacities and gain efficiencies and present valid case to apply for EU investment funds.
Modernization of Production Technology
Contemporary modernization in production environments is strongly driven via digitization and connecting machines to the Internet. This phenomenon is captured in the trend-words: Industry 4.0, Internet of Things (IoT), Machine to Machine (M2M).
The principle defines that machines obtain an Internet address (IP Address) and communicate directly and securely: status, performance, and operational data to other entities in the network.
In fashion manufacturing this is to connect machines such as sewing machines or leather and fabric cutters to the provider’s support center. The benefit is to predict outages through reporting of worn-out consumable parts (for example, knifes in the case of cutters), observing of error-prone operation patterns and joint analysis of particular machine operation reports (bi-weekly, monthly or quarterly).
Overall, with a M2M connection of production machines to the provider’s support center Smart Service delivery is enabled. In a Smart Service environment call-centers place a majority of their calls out-bound, pro-actively preventing problems before they occur rather than receiving in-bound calls, when the problem has already happened and down-time is inevitable.
The investment in Smart Services – or Predictive Maintenance – represents innovations which are on target for the EU fund investment projects.
How to Access the EU Investment Funds
At Lectra’s executive forum ‘Fashion meets Apparel’ in Vienna, EU Fund specialist Mr. Radu will outline details about the EU Investment fund and discuss questions, how the funds are applicable for creating a fashion brand and its manufacturing such as:
- The structure and purpose of the latest €300 billion investment program from the EU
- What are the requirements for projects to successful apply for EU funds?
- Are EU funds the right investment vehicle for a given project?
- He will develop a decision matrix for EU support requests to facilitate a targeted investment strategy.
In part three of this series I will cover how European fashion brands and Eastern European manufacturers already maintain strong alliances (eco-system) and how these alliances can benefit from the current digitization of the value creation process in fashion.
If you missed part one of this series on how modern production technology and international currency exchange rates impact fashion sourcing, please click here.