The clothing industry in Brazil and Germany. Production within micro enterprises versus full-package supply

Bachelor Thesis, 2016

79 Pages, Grade: 1,0


Table of Contents

List of Abbreviations

List of Figures

List of Tables

1 Introduction
1.1 Research Objective
1.2 Organization of the Research

2 The Textile Value Chain
2.1 Value Added Activities within the Textile Value Chain
2.2 The Textile Industry
2.3 The Clothing Industry
2.4 Vertical Range of Manufacture

3 The German Clothing Industry
3.1 Current Situation
3.2 Manufacturing Situation in Germany
3.3 Production and Sourcing Strategies - German Clothing Companies
3.3.1 In-house Production
3.3.2 Indirect Sourcing
3.3.3 Direct Sourcing - Cut, Make and Trim
3.3.4 Direct Sourcing - Full-package Supply
3.3.5 Industrial Upgrading

4 The Brazilian Clothing Industry
4.1 Current Situation
4.2 Manufacturing Situation in Brazil
4.2.1 Emergence of Micro and Small Enterprise Manufacturers
4.2.2 Development Challenges for Micro and Small Enterprise Manufacturers
4.3 Production and Sourcing Strategies - Brazilian Clothing Companies
4.3.1 In-house Production in Brazil
4.3.2 Full-package Supply in Brazil
4.3.3 Production Strategy with Micro and Small Enterprise Manufacturers
4.4 Summary

5 Comparison: Brazilian Micro and Small Enterprise Manufacturers vs Global Full-package Suppliers
5.1 Characteristics
5.2 Buyer - Manufacturer Relationship
5.3 Value Added Services
5.4 Conclusion

6 Field Research
6.1 Qualitative Research - Expert Interviews
6.1.1 Methodology
6.1.2 Results
6.2 Quantitative Research - Survey of Manufacturers
6.2.1 Methodology
6.2.2 Results

7. Conclusion




This work was developed in cooperation between the HTW - University of Applied Sciences, Berlin, Germany and the UDESC - Universidade do Estado de Santa Cata­rina, Florianopolis, Brazil. It was composed on the basis of a research project about micro and small enterprise garment manufacturers in Brazil. The project took place under the supervision of Prof. Silene Seibel, between March and July 2016 at the UDESC, in Florianopolis.

My motivation for this work and the research project undertaken is grounded on dif­ferent international experiences, which I made during my studies in China and Brazil. These enabled me to enlarge my horizon and my understanding about processes in the global clothing industry. In 2015 I spent one exchange semester studying at the UDESC in Florianopolis and subsequently completed an internship in one of the largest Brazilian clothing companies. During this time I realized the potential of the Brazilian clothing industry, but did also recognize that the industry is characterized by a different structure of manufacturing, coined mainly by micro and small enterprise garment manufacturers. Therefore I got curious to do research about this unique structure in Brazil in order to understand how the Brazilian clothing industry is differ­ent from other industries.

Throughout the research I had the opportunity to directly interact with members of the industry, which made it possible for me to get a realistic insight of the structures and the current situation of the Brazilian clothing industry. Therefore I wish to thank all enterprises, companies, institutions and experts that participated in this research and who made it possible to achieve the results presented in this work.

Moreover my gratitude goes to my supervisors Prof. Monika Fuchs of the HTW - University of Applied Sciences in Berlin and Prof. Silene Seibel of the UDESC - Uni­versidade do Estado de Santa Catarina in Florianopolis. I would like to thank them for their support, consultation and the opportunity to conclude my studies with this inter­national cooperation. Additionally I would like to thank Mariana Campos, who was part of the research group and supported me with her creativity and her excellent skills in the Portuguese language.

List of Abbreviations

Abbildung in dieer Leseprobe nicht enthalten

List of Figures

Figure 1: Value added activities along the value chain

Figure 2: The textile value chain

Figure 3: Processes within the clothing industry

Figure 4: The magic square within process management

Figure 5: Production and sourcing strategies - an overview

Figure 6: Cut, make and trim - allocation of value added activities

Figure 7: Full-package supply - allocation of value added activities

Figure 8: Regional concentration of the Brazilian apparel and textile industry

Figure 9: Hybrid production model - Cia. Hering

Figure 10: Industrial subcontracting of micro and small enterprise manufacturers ...

Figure 11: Order splitting to Facgoes

Figure 12: Comparison - value added services performed

Figure 13: Share of companies’ sizes

Figure 14: Ranking - manufacturers’ core products

Figure 15: Ranking - machine park

Figure 16: Overview - cutting section

Figure 17: Ranking - informational system improvements

Figure 18: Type of buyers

Figure 19: Amount of buyers

Figure 20: Buyers’ recognition

Figure 21: Manufacturers' export orientation

Figure 22: Relationship buyer - manufacturer

Figure 23: Investments into manufacturers’ development

Figure 24: Ranking - largest challenges in daily business

Figure 25: Ranking - growth inhibiting factors

Figure 26: Overview - material sourcing

Figure 27: Value added services performed

Figure 28: Value added services desired to improve

Figure 29: Tendency within industrial upgrading

List of Tables

Table 1: Top five importing and exporting countries of apparel and textiles in 2014.

Table 2: The ten largest European clothing companies in 2014

Table 3: Overview - distribution of company size - 2014

Table 4: Characteristics - Brazilian Facgoes vs. global full-package suppliers

Table 5: Relationship between buyers and Brazilian Facgoes vs. global full-package suppliers

Table 6: Research sample - expert interviews 41

1 Introduction

The Brazilian clothing industry is considered to be the fourth largest garment manu­facturer and the fifth largest textile producer in the world, but its relevance in exports is rather modest. Garments in Brazil are predominantly manufactured for the domes­tic market and the country owns a complete textile value chain, including processes from fiber production and textile processing to manufacturing up to retail. Especially the field of confection is characterized by a particular structure, dominated by micro and small enterprise manufacturers, and here Brazil is different from other markets like Germany, where clothing companies do mainly depend on foreign suppliers.

The trend to source garments through global full-package suppliers is increasing within the German clothing industry. As a consequence more activities are shifted to the supplier and the companies’ share in the value added on the product is decreas­ing. Brazilian clothing companies in contrast produce a large part of their garments within domestic micro and small enterprises, which are offering less value added ser­vices, resulting in a larger part of the value added staying with the clothing compa­nies themselves. Therefore the research on micro and small enterprises and their trajectory in striving for growth is relevant and will be the subject of the research pa­per presented here.

1.1 Research Objective

This research aims at describing production and sourcing strategies used within the Brazilian clothing industry in comparison to strategies applied by German clothing companies. In this context the main focus is on comparing the strategies: Full- package supply used by German as well as by European clothing companies versus the production within micro and small enterprises in Brazil. The objective is to identify characteristics of the distribution of value added activities between buyers and sup­pliers in Brazil in order to find answers to the following research question:

Do micro and small enterprise garment manufacturers in Brazil have the potential to develop from pure service providers for buyers, performing only the work step of as­sembly, into suppliers offering more value added services like product design, prod­uct development and material sourcing?

1.2 Organization of the Research

Sources used for this work are primary and secondary literature, as well as conduct­ed survey and expert interviews. This research focuses exclusively on the field of garment manufacturing, while processes related to the textile industry and sales will not be reviewed in detail. The companies considered in this paper can be split be­tween clothing companies that act as buyers and suppliers that accept their orders. The buyers may get subdivided into medium and large clothing companies interact­ing directly with their suppliers. Moreover they are well-known in their home countries and distribute their products mainly through retail and wholesale. They can be divid­ed into two groups:

1. Manufacturers: Clothing companies originating from the field of garment or textile manufacturing owning a profound know-how of product and production.
2. Traders: Companies trading clothing originating from the field of purchasing owning a profound know-how of selling and with less know-how about product and production.

The suppliers are categorized according to their value added services performed: as full-package suppliers and as cut, make and trim (CMT) manufacturers.

This work consists of seven chapters: Initially chapter two creates the theoretical basis for this work. The term value added is defined, and a brief overview of the pro­cesses along the textile value chain is given. The textile industry and the clothing in­dustry are considered separately from each other. The main focus remains on the clothing industry illustrating the tasks, which need to be carried out by a traditional clothing company in order to create value added. The chapter ends with a description of what vertical range of manufacture is, and also gives the distinction between verti­cal cooperation and vertical integration.

Chapter three focuses on the German clothing industry. It starts with an overview of today’s situation. This is followed by an abstract on the manufacturing situation influ­encing the application of production and sourcing strategies used by German as well as European clothing companies. An overview of sourcing in general and on the strategies of in-house production as well as indirect and direct sourcing is given. In order to illustrate which German and European companies own proper production units the companies Zara, Seidensticker, and Hugo Boss are briefly looked at. This choice of companies serves to show the different objectives the companies are pur- suing to improve aspects like quality, flexibility or know-how - depending on each company’s positioning in the market. The chapter goes to more details regarding the tendency of full-package supply and outlines the distribution of activities between buyers and suppliers. The process of industrial upgrading is presented in the end of the chapter in order to explain how full-package suppliers can emerge.

Chapter four refers to the Brazilian clothing industry. The first part gives an outline of the characteristics of the Brazilian clothing industry and grants an insight into eco­nomical developments that have an impact on the domestic textile and garment in­dustry. Subsequently the country’s manufacturing situation is reviewed, with the ma­jor focus on the domination of micro and small enterprises within the manufacturing landscape. This is followed by an overview of the production and sourcing strategies used by Brazilian clothing companies. Since the number of sources referring to this topic is limited, the information given in this chapter is mostly based on company cases. Based on the case study of Cia. Hering, a general summary of production and sourcing strategies used by Brazilian clothing companies is provided. The case study was chosen, because the company is an example for a vertically integrated manufac­turer, and additionally the company uses a hybrid production model, which combines different production and sourcing strategies. Further examples of the companies Du- dalina and Riachuelo serve to explain the advantages of in-house production for each company. These examples of companies were chosen because they show some similarity to the European companies presented, doing in-house production. The next subject refers to full-package suppliers within the Brazilian clothing industry. This is on the basis of the results from the expert interviews, since there were hardly any sources available. The following section explains the production strategy in micro and small enterprises, and the differences between Facgoes and Confecgoes as well as the process of order splitting and the subsequent influences on the buying com­panies are elaborated on.

Chapter five compares the production strategy in micro and small enterprises in Brazil versus the strategy of full-package supply used by European companies. The comparison is divided into three sections, firstly comparing the characteristics of mi­cro and small enterprise manufacturers with global full-package suppliers; this is fol­lowed by an analysis of the relationship between buyer and manufacturer; finally the value added services offered by each type of supplier are compared. The aim of the comparison is to examine the potential to see if micro and small enterprises in Brazil can offer more value added services. Questions for a field research are formulated using the results presented in this chapter. The research consists of a qualitative part, including interviews with experts from the Brazilian clothing industry, as well as a quantitative part including a survey with micro and small enterprise manufacturers.

Chapter six presents the results from the expert interviews followed by an evaluation of the survey of manufacturers.

Chapter seven initially summarizes the results of the work and provides a conclusion regarding the question if micro and small enterprises show potential to offer more value added services. Finally an outlook with suggestions for possible future devel­opments within the Brazilian clothing industry is formulated.

2 The Textile Value Chain

2.1 Value Added Activities within the Textile Value Chain

Increasing the value of a commodity by transforming it through processes like manu­facturing and further services into a product with a higher value than before is con­sidered as value added.1 The value creation processes applied in the clothing indus­try can be divided into tangible value added activities, like e.g. a manufacturing pro­cess within production and intangible value added activities, which are services like design and marketing, as shown in Figure 1.2

Abbildung in dieer Leseprobe nicht enthalten

Figure 1: Value added activities along the value chain3

The textile value chain illustrates the value creation processes within the textile and clothing industry. According to Dispan, the textile value chain is characterized by its multistage production processes that are linear determined indicating that all pro­cesses need to succeed in sequence to be concluded.4 Figure 2 visualizes the linked processes that are related to the value creation within the textile value chain.

Abbildung in dieer Leseprobe nicht enthalten

Figure 2: The textile value chain5

2.2 The Textile Industry

The value chain can be divided into the textile industry and the clothing industry. The textile industry with its high level of automation is a capital-intensive sector, the cloth­ing industry in contrast shows a lower level of automation and is shaped by labor- and wage-intensive processes, especially during the work step of sewing.5 6 As a basis for the textile industry, upstream activities like agriculture for the raw material produc­tion, chemical industry and mechanical engineering for textile and clothing specific machines and components take place. The textile industry starts its processes with fiber processing and yarn spinning, followed by production of fabrics like woven, cir­cular knit or non-woven materials that are finished afterwards. Downstream process­es in the chain include manufacturing, where products are assembled. At this point the value chain splits itself into the fields of technical textiles, home textiles and cloth­ing. Home and technical textiles are still considered to be a part of the textile indus­try.7

2.3 The Clothing Industry

Regarding the clothing industry as a whole, it can be divided into two sections. First there is the industrial section including the manufacturing of garments, which can be categorized into the work steps of cutting, sewing, trimming and finishing. Companies performing these services are considered to be clothing manufacturers, performing tangible activities. Secondly the commercial section includes all activities that are related to the product creation process, as well as marketing and trade functions to offer the product to the final consumer.8 Regarding the lifecycle of a textile product the chain also considers disposal and recycling.

Figure 3: Processes within the clothing industry9

Figure 3 shows functions that are generally obtained within the clothing industry. It is important to mention that this demonstration is a general approach within an exem­plary clothing company. Depending on the companies’ structures, processes are more complex, due to the fact that an increasing amount of activities is outsourced. First of all the process of product development takes place. The collection and prod­ucts are planned and designed. Therefore market research and analyses about tendencies and costumers are done by the Research and Development (R&D) de­partment and transformed into product ideas by the design department, these steps can be considered as intangible value added activities.10 Especially the degree of influence of the R&D and design departments is an indicator for competitiveness and innovation of the company’s products.11 Once the collection concept is elaborated, the product development process takes place. In cooperation with the pattern de­partment or external pattern experts, the product development process passes through several stages of sample approval until the garment can be implemented on an industrial scale. Pattern and sample development can be organized in different ways, depending on the applied production strategy of the company. The Make-or- Buy decision of the company is determining if the product is produced in-house or outsourced, and this also implies different ways of the production planning.12

Moreover aspects related to logistics and distribution take place, they can be catego­rized on the one hand into inbound logistics, related to all activities that happen be­fore manufacturing like e.g. sourcing materials or products. On the other hand out­bound logistics, taking place after manufacturing, are focusing on distribution pro­cesses like warehousing, packing and commissioning.13 Subsequently marketing as­pects are performed as further intangible value added activities to create a brand im­age and realize product advertisement.14 Sales can be realized through different dis­tribution channels like retail, wholesale, e-commerce and catalogues, which today are often used in combination, which is considered to be multichannel retailing.

2.4 Vertical Range of Manufacture

To define the share in the value added activities of a company, it is important to an­alyze its amount of internally performed processes along the value chain. In this con­text a vertical integrated company is a company, which is taking over responsibility for more than one process along the supply chain. The deeper the company’s vertical range of manufacture, the higher the participation on the processes along the value chain and the company’s own share in the value added.15

A clothing company can be considered as a vertical integrated company if several processes along the supply chain are performed internally by the company itself, e.g. product development, production, logistics, marketing and sales. The Spanish cloth­ing company Zara holding internal manufacturing units serves as an example for a vertically integrated company. Another approach of verticalization is the vertical co­operation. Meaning that in order to produce its own products a company cooperates with third parties. Instead of owning internal manufacturing units the company coop­erates with e.g. an external clothing manufacturer that takes over the responsibility for the manufacturing process. In this case the company’s own share in the value added decreases, but the control of the processes along the value chain is still hap- pening.16

Summarizing, the textile value chain is a supply chain composed of processes that build up on one another, showing a clear separation between textile and clothing. The amount of internally performed processes by one company is an indicator for the company’s share in the value added process. In this context it can be distinguished between vertically integrated companies and vertically cooperating companies, with a decreasing share in the value added process. Value added activities can be distin­guished as tangible and intangible activities, considering that tangible activities arise in the field of production and intangible activities in processes before and after the production process.17

3 The German Clothing Industry

3.1 Current Situation

Referring to the worldwide imports and exports of apparel and textiles measured in USD in 2014, Germany occupies the second rank in imports (52,327 US$ million) and third rank in exports (37,285 US$ million).18 Approximately 75% of the export value goes to countries within the European Union, as one of the most important trading regions for the industry. This is followed by exports to other European coun­tries, which are not part of the European Union, as well as to Asia. Looking at the import situation, the most important supplying countries are China, Bangladesh, and Turkey. Especially the Asian region is of high significance, covering over 50% of the volumes of apparel and textiles imported. The European Union and further European countries account 30% of the share in imported apparel and textiles.19

Table 1: Top five importing and exporting countries of apparel and textiles in 2014 20

Table 1: Top five importing and exporting countries of apparel and textiles in 2014

Garment imports are of prime significance for the German clothing industry, as today it can be characterized as a service and trading oriented sector interacting with inter­national networks of suppliers, focusing on international production. For this reason most of the German, as well as the European clothing companies, today are consid­ered to be clothing traders instead of clothing manufacturers.21 Verticalization within the companies is gaining more importance. European clothing companies like H&M, Esprit and Inditex tend to connect trade and manufacturing, acting like vertically inte­grated or vertically cooperating retailers, to attend the customer demands.22 This is the reason why in order to stay competitive the focus on developing one‘s own brands with a strong brand image is increasing.23

Table 2 gives an overview of the first ten ranks of the largest European clothing com­panies in 2014. All in all German and Italian companies are strongest present under the first ten ranks. Companies are dominating that are originated in the high-end and luxury segment like e.g. the Burberry Group, the Christian Dior Group, Hugo Boss and Giorgio Armani. Regarding the relationship between the company and its own labels it is outstanding that the companies show the tendency to build groups or cor­porations with several private labels. This grants advantages for production and sales.

Table 2: The ten largest European clothing companies in 201424

Abbildung in dieer Leseprobe nicht enthalten

3.2 Manufacturing Situation in Germany

The clothing industry is considered to be a pioneer industry within the international division of labor. The field of garment manufacturing in particular shows a low level of automation with work intensive and low remunerated work steps, that are simple to transfer to new locations.25 For this reason the relocation of production to low-wage countries started in Germany as early as in the 1970's.26 This development initiated a structural change that is shaping the German clothing industry until today.27 Reasons for the early outsourcing actions were the rising wages and the lack of workforce af­ter the Second World War.28 An immense impact was the loss of approximately 90% of employments and enterprises in the field of clothing and textiles.29 Moreover the textile and clothing industry developed its sectors into two separate directions. The German textile industry today is known as an innovative sector for technical textiles and needs to be considered separately from the point of the clothing industry.30

The clothing industry reduced the proportions of national manufacturing extremely and changed the focus from domestic production to global sourcing. Today 98% of the sales within the German clothing industry are attained with products that are made by international suppliers, verifying the loss of importance of the German man­ufacturing industry and the growing importance of imports.31 Different trade agree­ments also influenced the structural changes and the import situation in Germany. To protect the national industry the Multi Fiber Agreement, later replaced by the Agree­ment of Textiles and Clothing, limited the amount of exported garments from devel­oping countries to industrial countries, through the application of exporting quotes until the end of 2004.32 Apart from the Multi Fiber Agreement and Agreement of Tex­tiles and Clothing, passive wage enhancement, also considered as CMT manufactur­ing, represented an exception from the exporting quotes and gained more signifi­cance for German clothing companies. In order to stay competitive, several compa­nies used the advantage to relocate their production to low-wage countries. No taxes were added if only the pure service of assembly was outsourced, considering the factthat the applied processes accounted less than 30% of the value added activities on the product.33 As passive wage enhancement was excluded in the Multi Fiber Agreement and Agreement of Textiles and Clothing, the amount of garments, as­sembled abroad, was constantly rising and companies started to focus on the estab­lishment of international networks for their production activities. Moreover the lifting of the Agreement of Textiles and Clothing in 2005 caused a worldwide increase of im­ports from low-wage countries and enhanced the import pressure within the German clothing industry.34

The structural changes within the German clothing industry redefined the activities and functions assumed by the companies. Within the headquarters of European clothing companies, human capital-intensive key functions like R&D, design, man­agement functions related to production or sourcing, finance, quality assurance, qual­ity control and costumer support, are assumed.35 These functions can be summa­rized in the fields of product development, sourcing, and distribution, referring to ac­tivities that take place before and after the process of production, and are considered as indicators for the companies’ competitiveness and success.36 Labor-intensive tan­gible production processes are predominantly outsourced to low-wage countries. In­dustrial garment manufacturing is rarely existing in Germany today and the number of employments in this sector is still decreasing. Only small production units for unique orders or sample production remain. Domestic production in Germany is seen as an exception, and can be found within high-end clothing companies like Hugo Boss.37 This type of company offers products with a high complexity regarding pat­tern, material and design, based on deep product know-how.38

In summary, the sector of manufacturing almost disappeared from the German cloth­ing industry. Nowadays, large and medium-sized German clothing companies coop­erate within international supplying networks and focus within their headquarters on intangible management activities that are crucial for the companies’ success. The boundaries between traditional clothing companies from the manufacturing field and trading companies are overlapping. Both types act like buying companies. Neverthe­less companies originated in the manufacturing sector on the one hand do often have deeper product know-how than pure trading companies. Traditional trading compa­nies on the other hand often possess a more profound knowledge of sales and distri­bution channels. The product know-how of a company influences the share in the value added activities of the company and defines the production or sourcing strate­gies the company applies.

3.3 Production and Sourcing Strategies - German Clothing Companies

According to Kummer et al., sourcing is considered as an action to supply a company with all production factors that are not fulfilled by the company itself. Moreover sourc­ing serves to supply a company with all materials, commodities, services, and spare parts.39 It is a key function in every company and is activated before the process of production. Regarding production, every company is confronted with the decision between make or buy, buying being often used as another term for sourcing. The make or buy decision is an indicator about the company’s vertical range of manufac­ture and its share in the value added process. In order to stay competitive and create value along the processes within the supply chain, an adequate interaction between the factors time, quality, flexibility, and cost is important, taking into consideration that the change of one factor impacts the other factors. The connections can be illustrated along a magic square shown in Figure 4.40

Abbildung in dieer Leseprobe nicht enthalten

Figure 4: The magic square within process management41

Based on the factors within the magic square the choice of the right sourcing or pro­duction strategy, or a combination of several strategies is essential for the company’ssuccess. Even companies with a lower share in the value added processes on their products can work successfully by applying the right sourcing strategies and balanc­es between time, quality, flexibility, and cost, always aiming at providing the right product range to its costumers.42

Transferring these factors to the apparel industry, there are additionally considered the trade-offs between capacity, speed and risk. The synergy between all these fac­tors impacts the decision for the sourcing strategy and region.43 The sourcing scenar­io within apparel shows high complexity today. Due to the early relocation of produc­tion to low-wage countries, the industry is characterized by outsourcing activities. Nevertheless the processes involved in sourcing do not only refer to the pure produc­tion factors. Nowadays a reliable supply and the improvements of all processes along the supply chain are objectives of sourcing activities, requiring strong relationships between buyers and suppliers.44 Large and medium sized clothing companies in Germany increased their focus on global sourcing strategies to improve their compet­itiveness.45 Global sourcing involves purchasing from international markets and co­operating with international suppliers, aiming at establishing long lasting relation- ships.46 Because the buying company is the trigger for starting production within in­ternational markets the clothing industry is considered to be a buyer-driven indus- try.47 Depending on the companies' philosophies and requirements on their products the following production and sourcing strategies can be applied:

1. In-house production, which can happen domestically or abroad. It indicates that a company decides to make their products within their own production units, and accordingly there is deeper production know-how and a higher share in internal performed value added activities.

2. Sourcing indicates that the company decides to buy their products, which can be realized through different strategies. Depending on the strategies applied, the share in the value added process of the buying company decreases, as several activities are transferred to the supplier. In general the sourcing strat­egies can be separated in:

a. Indirect sourcing from importers or agencies.
b. Direct sourcing from CMT manufacturers or full-package suppliers.48

Abbildung in dieser Leseprobe nicht enthalten

Figure 5: Production and sourcing strategies - an overview49

3.3.1 In-house Production

In-house production takes place when a company decides to make its products with­in its own production units. Where the own production facilities are located can be decided, whether the production will be done domestically or abroad.50 Running one’s own production units brings on the benefits of a higher control of capacities, time and quality. Further advantages are to be more flexible in reacting to urgent production requests like e.g. replenishment orders for never-out-of-stock items or fashionable trend items. It is especially rewarding if the factory is based close to the market of sales, since the delivery time is shorter. Moreover having one’s own pro­duction units can help protecting the production know-how of the company, which is significant for innovative products within e.g. the high-end and luxury segment, where innovative technologies and machinery are applied. Nevertheless in-house produc­tion does also require high investments into internal capacities and the industrial park.51

One example for domestic in-house production within Europe is the Inditex Group with its brand Zara in Spain. Focusing on the production of trend products the com­pany manufactures approximately 50% of its garments in-house. This grants the ad­vantage of acting flexibly and deliver trend items within a short time frame.52 Another example for a company aiming at preserving the highest quality standards is the German clothing company Seidensticker. The company is known for its high quality shirts within the high-end segment. In 2007 Seidensticker established its own produc­tion facility in Vietnam, where the company controls all production processes to as­sure the best quality standard.53 Hugo Boss, a traditional German clothing company, focuses on the protection of its own production know-how, and that is the reason why 20% of the production is done in the company’s own factories. As outlined in the pre­vious chapter production in Germany hardly exists anymore. Hugo Boss’ own pro­duction unit in Germany focuses on sample production and special products like cus­tomized suits that require profound product know-how. Their largest own factory abroad is based in Turkey, thus located close to the European market enabling the company to produce several products in the high-end segment and thereby preserv­ing the company’s own production know-how.54

Due to the manufacturing situation in Germany, domestic in-house production is be­coming less important.55 In summary this strategy of production is especially reward­ing in the high-end and luxury segment and enables a company to react fast and flex­ibly to costumer demands, particularly if the production location is close to the market of sales. Nevertheless profound production know-how and continuous investments into the factories’ capacities are needed to perform this strategy successfully.

3.3.2 Indirect Sourcing

Indirect sourcing always involves an intermediary that connects the demands of a buying company with the manufacturer.56 One way of indirect sourcing is the pur­chase of ready-to-sell garments through an importer. That means that the importer is in charge of design, product development and of the contact with the suppliers. The importer can be based closed to the market of sales or close to the producing mar­ket.


1 Cp. Muller-Stewens & Lechner (2003), p. 369.

2 Cp. Fernandez-Stark et al. (2011), p. 12.

3 Based on: Frederick (2010), p. 108, own development.

4 Cp. Dispan (2009), p.1.

5 Based on: Abit (2015), Ahlert et al. (2009), Gruger (2007), own development.

6 Cp. Bedacht (1995), p. 48f.

7 Cp. Ahlert et al. (2009), p. 43.

8 Cp. Ahlert et al. (2009), p. 43.

9 Based on: Abit (2015), Ahlert et al. (2009), Gruger (2007), own development.

10 Cp. Fernandez-Stark et al. (2011), p. 12.

11 Cp. Ahlert et al. (2009), p. 58.

12 Cp. Gruger (2007), p. 10f.

13 Cp. Fernandez-Stark et al. (2011), p. 13.

14 Cp. Gruger (2007), p. 10.

15 Cp. Zapfel (2000), p. 132ff.

16 Cp. Riekhof (2013), p. 44.

17 Cp. Fernandez-Stark et al. (2011), p.12.

18 Cp. Instituto de Estudos e Marketing Industrial, IEMI (2015), p.32.

19 Cp. Bundesministerium fur Wirtschaft und Energie (2014): Branchenskizze Textil und Bekleidung.

20 Adapted from: IEMI (2015), p. 32ff.

21 Cp. Dispan (2009), p. 15ff.


Cp. The Boston Consulting Group (2005): Die vertikale Verlockung - Eigener Handel als Erfolgs- strategie fur Gebrauchsguterhersteller?, p. 7.

23 Cp. Dispan (2009), p. 28.

24 Adapted from: Textil Wirtschaft: TW Rangliste 2014, own translation.

25 Cp. Dispan (2009), p 2.

26 Cp. Ibid, p.16.

27 Cp. Bundesministerium fur Wirtschaft und Energie (2014): Branchenskizze Textil und Bekleidung.

28 Cp. Sorge (2009), p. 88.

29 Cp. Dispan (2009), p. 17.

30 Cp. Krippendorf et al. (2009), p. 3.

31 Cp. Dispan (2009), p. 2.

32 Cp. Sorge (2009), p. 87f.

33 Cp. Sorge (2009), p. 88, p. 92f.

34 Cp. Dispan (2009), p. 20.

35 Cp. Ibid, p. 22.

36 Cp. Ahlert et al. (2009), p. 49.

37 Cp. Dispan (2009), p. 22f.

38 Cp. Gruger (2007), p. 133, p. 142.

39 Cp. Kummer et al. (2009), p. 114.

40 Cp. Ibid, p. 60, p. 112, p. 117, p. 152.

41 Based on: Kummer et al. (2009), p. 60, own development and translation.

42 Cp. Kummer et al. (2009), p. 112, p. 154.

43 Cp. Berg & Hedrich (2014): McKinsey & Company. What's next in apparel sourcing?, p. 63.

44 Cp. Grandke (2013), p. 72f.

45 Cp. Ahlert et al. (2009), p. 753.

46 Cp. Kummer et al. (2009), p. 122.

47 Cp. Gereffi (1999), p. 40.

48 Cp. Merkel et. al (2008), p. 31ff.

49 Based on: Dispan (2009), Gruger (2007), Merkel et al. (2007), own development.

50 Cp. Dispan (2009), p. 17f.

51 Cp. Merkel et al. (2007), p. 35f.

52 Cp. Merkel et al. (2007), p. 35f.

53 Cp. Probe (2007): Das Seidensticker-Feeling in Vietnam. In: Textil Wirtschaft 46, p. 34.

54 Cp. Hugo Boss: Annual Report 2014: Sourcing and Production.

55 Cp. Dispan (2009), p. 17f.

56 Cp. Merkel et al. (2007), p. 37ff.

Excerpt out of 79 pages


The clothing industry in Brazil and Germany. Production within micro enterprises versus full-package supply
University of Applied Sciences Berlin
Catalog Number
ISBN (eBook)
ISBN (Book)
Sourcing, Sourcing strategies, Production Strategies, Garment Industry, Full-Package Supply, Cut-Make-Trim Manufacturing, Industrial Upgrading, Brazil, Suppliers, Brazilian Garment Industry, Micro and Small Enterprise Garment Manufacturers
Quote paper
Clara Soltau (Author), 2016, The clothing industry in Brazil and Germany. Production within micro enterprises versus full-package supply, Munich, GRIN Verlag,


  • No comments yet.
Read the ebook
Title: The clothing industry in Brazil and Germany. Production within micro enterprises versus full-package supply

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free