Mark Held, European Outdoor Group argued that the challenges facing the UK outdoor industry in 2012 include :
- Is the ‘Asian Dawn’ becoming a ‘sunset’?
- Climatic and economic uncertainties.
- Environmental campaigns by high leverage organisations.
Background to the UK Outdoor Industry
Mark Held’s honest, and penetrating presentation at innov_ex 12 confronted the UK outdoor industry with a daunting array of challenges and perceptive thoughts on ways forward. He showed vividly how the relatively young, dynamic and innovative UK outdoor industry of 1960s and 1970s, including companies like Karrimor,Mountain Equipment, Berghaus, Sprayway and many others, was based on indigenous skill within a supply chain that embraced OWN manufacturing operations , fabrics, finishing and components.(See Gear Timezone Timeline for details.)
Karrimor introduced lean manufacturing/quick response/no forward order required in the early 1990s. This involved pull manufacturing systems which were watched carefully by all, including Berghaus, with an assumption that this involved more stock. But Karrimor found that, as forecasting and response systems improved less stock was needed, bringing greater flexibility.
The opening of China’s borders and the prospect of low labour costs created a margin windfall and encouraged the outsourcing of manufacturing of first packs and then apparel to China in early 1990s. This move was led by Berghaus and rapidly followed by others, at a time when the whole industry was facing challenges. It created a margin windfall in an apparent buyers’ paradise.
To quote Mark Held, we collectively squandered these extra margins which were eroded by ever more competitive pricing as brands fought to compete with each other.
Is the ‘Asian Dawn’ becoming a ‘sunset’?
Held showed in 2012 the ‘Asian Dawn’ has given way to a potential ‘Sunset’ for the UK outdoor industry and asked whether UK outdoor industry is really suited to China?
The biggest problems facing the industry are :
1 Long lead times -an 18 month cycle which limits flexibility, potential for innovation and response to user feedback. Retailers have to place orders before design cycle is complete.
2. It is no longer a buyer’s paradise in China :
- Fewer working in garment industry.
- Labour costs rising by 13%- could go up to 25%.
- Declining margins.
There is also rising consumer demand in China and we are seeing the emergence of Chinese outdoor brands. It has become a manufacturers’ market rather than a buyers’ market where even the big players, such as adidas, cannot dictate terms as they could twenty years ago. This places SMEs who have only limited volume, and make up so much of the UK outdoor industry, in an awkward position.
Climatic and economic uncertainties make flexibility vital.
Alongside the changing conditions in China, the uncertain weather patterns are especially challenging for the outdoor industry. We can have a great winter, then no winter, drought and too much rain. Set against poor economic conditions, with raw material prices rising exponentially there is a growing need for flexibility, not lock in for the brands and for retailers.
Yet the current system with long lead times and a push system, rather than a demand pull system generates stocks and waste rather than responding to consumer needs.
Environmental Campaigns by high leverage organisations
The outdoor industry also needs to understand and respond to a range of high profile environment campaigns. Consumer expectations are rising and fast communications mean that a small group can have significant impact.
What is really important as Held explained is that you need to that know your brands are doing right things. Examples include the well planned and articulated Dirty Laundry Campaign from Green Peace and the Clean Clothes campaign both of which have implications within the supply chain and for consumers who want to know what it means for them.
But it can be tricky, time intensive and costly for companies to stay up to date. It is also challenging to track what is happening within a global supply chain and to be transparent in ways that can be audited. As Mike Berners-Lee showed in a short follow up overview at innov_ex there has been a sharp rise in emissions as the Chinese economy grows and expands making it harder even for the big players to pursue a transparent green agenda.
So where to now? How can the outdoor industry move forward?
With so many challenges facing a sector made up primarily of SMEs with little leverage what are the options?
- Collaboration and Co-operations between companies around issues such as environment.
- Review outsourcing arrangements.
- Pull rather than push manufacturing and retail systems.
- Innovation in the supply chain.
Collaboration and Co-operations between companies around issues such as environment
Mark Held commented that organisations,such as the European Outdoor Group and the Outdoor Industries Association, help to bring the industry together to share perspectives and to lobby and create a collective voice for outdoor companies. innov_ex, with its outward facing agenda also brought companies together to ‘share information and inspiration plus, most important, exchange views and experience’(Outdoori April 2012).
‘Now is the time for the UK outdoor industry to come together to re-assess strategic options’ says Held. This would include managing the supply chain.
Review outsourcing arrangements
Held suggested that the moment for China outsourcing was over and questioned whether it was best for the UK outdoor industry especially in 2012 when flexibility in face of uncertainty is a key problem.
He argued that re-locating in Europe might reduce some of the inflexibility of using Asia, citing the case of the Italian footwear sector and its use of Romania as an example. Brands were simply nearer to their manufacturers and to the necessary skills which cut down waste and lead times. 3D printing or additive manufacturing is developing rapidly with the cost of printers falling bringing the prospect of customised manufacturing which is ever closer to user needs. Already Fab Lab provides 3D printing services to companies.
Pull rather than push manufacturing and retail systems
In sharp contrast to ‘fast fashion’ companies such as Zara, the UK outdoor trade uses push rather than pull systems – pushing products through the manufacturing and retailing system rather than responding to consumer demand. Yet, in the uncertain market conditions the assumption always seems to be that pull or rapid response systems are only valid or possible for fashion companies.This is not the case, as Karrimor showed in the 90s.
The use of a pull system would allow flexibility and rapid response to unpredictable change – the very problems facing the UK outdoor industry now.
Innovation in the supply chain
Mark Held concluded that the modern brand needs to be :
Chemically compliant and fully transparent.
Flexible and responsive to market uncertainty and consumer needs.
Prepared to fund innovation through higher prices.