Opportunities and challenges in the global supply chain: the Brazilian case

The article below, by IAF’s Board of Directors member and Abit’s President Fernando Valente Pimentel is the first in a series of articles on the winners of the new fashion industry that will be published in this newsletter. Each edition will feature another IAF member country association.

Fernando Valente Pimentel:
The combination of technology with current foreign policies in South American countries creates new challenges and opportunities for the textile and apparel industry in the region. In terms of the market, there is a total transformation in process, in the wake of the free trade agreement between the European Union and Mercosur, which should still take around three years to be effectively ratified, in addition to the bilateral treaty already signed with the EFTA and on-going negotiations with Canada, South Korea, Singapore, Japan, Mexico and the USA.

In this emerging scenario, new and broad opportunities are opening up to new sourcing of production, domestic sales and exports of textile and apparel products, in a regional hub with major potential for growth and consolidation in the global context. Obviously, Asian countries remain and will continue to remain strong in this market, in terms of both production and consumption. Changes coming from international geopolitics could open spaces for new suppliers in the global supply market, which has placed particular value on issues related to compliance in its wider approach.

New technologies favor competitive exploitation of these opportunities, now in the context of Industry 4.0. There is growing use of new materials, processes, commercial channels, management techniques and hybridization of products and services, transforming the entire factory structure. Brand new production technologies and interfaces between consumers and manufacturers will foster new business models. Regardless of their retail relationship, small industries will be able to explore their own means to make sales, which not necessarily need to occur in geographic proximity.

Automated and modular manufacturing, mobile and sustainable mini-factories, with a strong local and regional presence, will work together with virtualization systems to create and produce. The multitude of products with wearable technologies and the use of biotech and modern materials could raise demand for smart and functional textiles. It is important to stress that in Brazil, while these advances are being made, there is concern with economic, social and environmental sustainability, which becomes a significant competitive edge in a consumption context governed by increasingly proactive citizens who demand well-established ethical and ecological practices.

Specifically in Brazil, where the textile and apparel industry is already heading toward Advanced Manufacturing, there are other highly favorable factors for competitive prospection of the opportunities created by new economic diplomacy: there are 27,500 companies and 1.5 million jobs. We are among the world’s largest producers and consumers of textile and apparel products, relying on an integrated industry, from cotton farming and natural, artificial and synthetic fiber production to manufacturing of finished goods and on through to spinning and weaving mills, advanced design and a growing incorporation of technology.

The biggest challenge in Brazil and in most nations in South America is to promote gains in competitiveness, reducing taxes, bureaucracy, infrastructure bottlenecks and other factors that burden the productive sector, such as interest and exchange rate policies that are not always suited to the substantial GDP growth targets. Nevertheless, the overall political scenario in the region points to a search for solutions to these obstacles, backing the new perspectives dawning on the horizon of these new international relations.

The apparel industry, the entire apparel supply chain is facing a perfect storm created of a mix of societal changes, political developments and technological advances. The storm leaves plenty of victims as witnessed most prominently by failing retail chains in Europe and the US. But precisely this mix of changes is creating winners as well. New bridges between strong local structures and global markets are emerging. Brazil’s large, integrated industry; its strong investments in technology and sustainability and design when combined with market opening could be an important source of the new fashion industry’s winners.