A Sustainable Supply Chain Value Model for the Textile Industry
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1 A Sustainable Supply Chain Value Model for the Textile Industry Kent Kvaal Global Vice President, Sales & Technical Resources ITMF Vietnam, 6 November 2012 A Sustainable Supply Chain Value Model for the Textile Industry 1
2 Industry Challenges Challenges the industry are faced with in delivering a garment. Sustainable Profitability! A Sustainable Supply Chain Value Model for the Textile Industry 2
3 Sustainability Challenge Cost Driven WTI Crude Oil Spot Price USD/Barrel Oct 26, 2010: USD 82.60/Barrel Oct 23, 2012: USD 86.65/Barrel Hourly Wages in US$ Data Source: Accenture Consulting Report Cotton Price Movement Season 2009/2010 A index Average ~ Sep 09: US $ Cent/KG Sep 12: US $ Cent/KG Season 2010/2011 A index Average ~ Season 2011/2012 A index range Low ~ 92.1 High A Sustainable Supply Chain Value Model for the Textile Industry 3
4 Sustainability Challenge All Major Input Costs Are Up. Cost impact for a 300gm knit cotton fabric over 2 years 8-10% 3-5% 70% 15-20% Average cost up +20% Fiber Utilities Labor Dyes & Chemicals All major input costs up! A Sustainable Supply Chain Value Model for the Textile Industry 4
5 Sustainability Challenge..And Consumer Sentiment Is Down US market data Awaiting updates by Alan Yang A Sustainable Supply Chain Value Model for the Textile Industry 5
6 Sustainability Challenge Resulting in Fewer Orders US Imports: Total Apparel in Sq. Meter Equivalents US Imports: Total Home Textiles in Sq. Meter Equivalents 30,000 25,000 20,000 15,000 10,000 5,000 0 World China Vietnam Bangladesh Indonesia Honduras 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 World China Pakistan India Mexico South Korea YTD July 2011 YTD July YTD July 2011 YTD July 2012 Units: In 000,000 Square Meter Equivalents (SME) Units: In 000,000 Square Meter Equivalents (SME) US Imports: Total Apparel Imports US Imports: Total Home Textile Imports Country % Change YTD July 2011 YTD July 2012 % Change World 24,743 23, % 13,694 13, % China 10,386 9, % 5,123 5, % Vietnam 1,910 1, % 1,169 1, % Bangladesh 1,606 1, % % Indonesia 1,261 1, % % Honduras 1,271 1, % % Source: Office of Textiles & Apparel (OTEXA) International Trade Administration, US Department of Commerce Country % Change YTD July 2011 YTD July 2012 % Change World 7,867 6, % 3,879 3, % China 3,219 2, % 1,558 1, % Pakistan 2,002 1, % 1, % India 1,294 1, % % Mexico % % South Korea % % Note:Cotton Non Apparel includes Pillow cases, Bed sheets, bed spreads, Quilts, terry towels & pile towels A Sustainable Supply Chain Value Model for the Textile Industry 6
7 Sustainability Challenge Environmental Drive NGOs Legislation Dirty Laundry: Reloaded is the first ever study to investigate differences in the amounts of hazardous chemicals found in fabric products before and after washing. Countries investigated in the report include China, Vietnam, the Philippines, Thailand, Sri Lanka and Turkey. Consumer Ho Chin Minh, Vietnam: Pollution has caused enterprises with excess workforce to move out of HCM city as part of the economic development strategy to reduce overcrowding. Enterprises are faced with difficulties in recruiting new skilled labor and increased transportation costs as a result of moving further from the city. Shaoxing, China: Central and local government faced with increased pressure on lax pollution control management where unregulated water and energy usage has lead to serious pollution. Governments are developing comprehensive supporting systems to promote sustainable development and environmental protection. Tirupur, India: Dyehouses have been dumping untreated effluent into the Noyyal River for years, rendering the water unsuitable or irrigation or drinking. Government was forced to shut down 700 dye plants in 2005 due to the damage done to the local environment. A Sustainable Supply Chain Value Model for the Textile Industry 7
8 Textile Industry Challenge Two-Fold: Manage Costs; Stimulate Demand Economic and Environmental Sustainability Challenges facing industry in delivering a simple cotton garment Value-Added Differentiation A Sustainable Supply Chain Value Model for the Textile Industry 8
9 Partnership! What Industry Needs From a Chemical Partner People Knowledge - technology experience - able to work in your facilities Product Portfolio - for your end articles - for your equipment Innovation - to help you improve your business - to help you meet new challenges Product Portfolio Innovation People Knowledge Dyes + Chemicals A Sustainable Supply Chain Value Model for the Textile Industry 9
10 People Knowledge Productivity Improvement Program Product Portfolio Innovation People Knowledge Textile Effects brings its proprietary know-how and expertise to audit textile mills to optimize their processes and production rates for savings in water, energy and effluent. Demonstrates the cost effectiveness of Huntsman products to create value. A Sustainable Supply Chain Value Model for the Textile Industry 10
11 What Partnership Can Deliver Economic and Environmental Sustainability Up to 50% reduction in utilities costs Resource consumption per year - 100%Co Knit (20t/day) Before audit Optimized Avitera SE/ PIP Water: m m m 3 Electricity: 2.1 mio KW 1.5 mio KW 0.8 mio KW CO 2 : 428 t 300 t 163 t One process optimisation step with a huge impact on sustainability. A Sustainable Supply Chain Value Model for the Textile Industry 11
12 Product Portfolio Intelligent Effects Drive Garment Differentiation Product Portfolio Innovation People Knowledge Freshness Garments need to be laundered less Active Comfort Make cleaning easier Lasting Color Give the garment a longer life Easy Care Plus Reduce the need for tumble drying / ironing A Sustainable Supply Chain Value Model for the Textile Industry 12
13 What Partnership Can Deliver Garment Differentiation for Active Comfort Generating Pricing Power through differentiation Men's Golf Pants 96%PES 4%Spandex Twill Retail Price : US$35 Retail Price : US$115 Add-on cost : US$ 1.6/pc A Sustainable Supply Chain Value Model for the Textile Industry 13
14 Working Towards A Sustainable Value Model Across All Stakeholders Sustainable Apparel Coalition (SAC): Formed to: Road to Zero Define and address environmental impact Establish environmental standards and consumer label for up to 60% of world apparel Huntsman Textile Effects - Founding Circle member A Sustainable Value Model for the Textile Industry 14 Textile Effects
15 A Sustainable Supply Chain Value Model for the Textile Industry 15
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