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January 28, 2005

Can Fast Fashion Save the U
...
Apparel Industry?
Peter Doeringer
Department of Economics, Boston University

Sarah Crean
Garment Industry Development Corporation

Comparative advantage seems to have doomed the U
...
apparel industry
...
S
...
With hourly compensation in China’s apparel
industry of less than $1 and only about $2
...
S
...
Since the average U
...
apparel
factory has only 27 employees and relies heavily on traditional technology, the industry lacks the
substantial scale economies and the new production techniques that have sometimes sheltered
other mature industries from global competition (Helpman and Krugman, 1985; Dertouzos, et
al
...
It is, therefore, not surprising that imports from labor abundant countries have risen
steadily since the mid-1970s and that apparel import penetration ratios have reached 71% by
value and 80% by volume (AAMA, Focus, 2002)
...


This research is sponsored by the National Science Foundation, the Alfred P
...
The authors want to acknowledge the assistance of Audrey Watson and Seth Meyers and owe a special debt to the
path-breaking work on the apparel industry of Frederick Abernathy, John T
...
We are also grateful to Bruno Courault, Lynn Oxborrow, Elisabeth Parat, Daniela Bigarelli, and Paolo
Crestanello whose counterpart research in France, Italy, and the UK has added to our understanding of the U
...

experience
...
The analysis and interpretation presented are those
of the authors and do not necessarily represent the views of the Garment Industry Development Corporation, the
Fiscal Policy Institute, or the other sponsors of the research
...
S
...
These are qualities that some high
wage countries have successfully exploited in defending their domestic markets against imports
and, in the case of Italy, maintaining a positive trade balance in apparel
...
S
...

The Structure and Organization of Apparel Supply Chains
The structure of apparel supply chains is critical to understanding how the U
...
apparel
industry has responded to global competition and why it has taken so long to develop effective
alternatives to traditional comparative advantage
...
Textile manufacturing is capital intensive and
highly automated with about 70% of employment being in large (500+) establishments (Census
of Manufactures, 1997)
...

In contrast, the average size of apparel firms is relatively small, and has been falling
...
Almost half of all apparel employment is in establishments with fewer than
100 workers (2001) and the average size of establishment has fallen from 58 in 1980 to 27
(2001)
...


3

Organizational Relationships
The organizational relationships within apparel supply chains are shaped by
considerations of market power and control of innovation, as well as efficiency
...
S
...
However, the market power
in upstream textiles has been used to reinforce scale economies in fabric manufacturing by
imposing large minimum orders and slow delivery times on apparel manufacturing and
downstream retailing has used its market power to define supply chain relationships with apparel
manufacturers and to siphon off profits from innovations introduced by apparel firms
(Abernathy, et al
...

Organizational relationships within the apparel industry are even more complex
...
6)
...
Because they have little capital, no design capability, and experience
volatile demand and chronic excess capacity, contractors have the least market power in the
entire supply chain
...

Product Differentiation and Supply Chain Structure
Apparel products are typically classified into broad categories, such as basic commodity
products (knit underwear and socks), fashion-basic products (dress shirts, casual slacks, and knit
sportswear), “better” fashion (moderately priced dresses and suits), “bridge” fashions (higherpriced ready-to-wear fashion products), designer collections (high quality and expensive readyto-wear fashion products) and custom-made haute couture (Abernathy, et al
...
These
fashion categories are often portrayed in a “fashion pyramid” in which products are arrayed

4

according to factors such as fashion content, length of product life cycle, quality, and price (see
Figure 1)
...
Fashion-basic and commodity products are marketed
through a wide range of retailers, but particularly by mass merchandisers (like Wal-Mart),
variety stores (like J
...
Penney), and specialty chains (like the Gap)
...

Figure 1

The Fashion Pyramid
Haute Couture
Collections

More Fashion Content
More Product Differentiation

Designer

Greater Demand Uncertainty

Collections

Higher Quality Fabric
Higher Price
Shorter Product Cycles
Shorter Production Runs

Bridge
Fashion
Collections
_________________________
Better Fashions

Fashion-Basics

Basic Commodities
_______________________________________________

As products move up the fashion pyramid from commodity and fashion basics to
designer and haute couture collections, designs and fabric become more differentiated, markets

5

become smaller and more specialized, and demand is less and less sensitive to price
...
It is at this stage that the domestic jobber-contractor system
becomes more involved in the supply chain
...
Laurent, select the fabrics and create the designs for coordinated
collections that are manufactured in small quantities in their own “craft workshops”, and
typically sold in designers’ showrooms and independent fashion boutiques
...

Product Calendars and Cycles
Different types of products also have distinctive product calendars and product cycles
...
Apart from haute couture where product development times are variable,
roughly 3-4 months are devoted to design, 2-3 months for getting fabric and making samples, 2-3
months for marketing and receiving orders, and 2-3 months for production
...
Commodity apparel products have an indefinite design life and
remain in production for several years with relatively little seasonal variation
...
When fashionable products are in vogue,
manufacturers and contractors are the main suppliers, there is less mass production and
department and specialty stores are the more prominent retail outlets
...

Efficiency, Speed, and Flexibility
Product differentiation and market size control the efficiency tradeoff between flexible
and inflexible production techniques and the speed with which a product can be produced
...
The most efficient mass production technique is the
“progressive bundle system” (PBS), which was developed during World War II when product
variety was severely limited (Disher, 1947, p
...
It is based on such extreme specialization and
division of labor that any single task takes only seconds to perform and the total labor content of
a garment is measured in minutes
...
A pair of pants requiring 40 operations can take 40 days to
move through the assembly line, even though the average direct labor time is only about 24
minutes (Dunlop and Weil, 1996, pp
...
, 1999)
...
This means that initial orders have to
be large enough to meet an entire season’s demand and that retailers have to carry large
inventories and absorb demand uncertainty through end-of-season markdowns (Disher, 1947, pp
...

Conversely, efficiency in small production runs requires far less specialized labor
...
In the extreme case, a single skilled
worker assembles an entire garment
...
S
...
Fashion
products were quickly and flexibly produced by craft shops and by relatively small
manufacturers and contractors, following a seasonal product cycle
...

The introduction of the PBS system during World War II and the growth of mass
retailing, however, shifted production towards large manufacturers in the early post-war period
by virtue of their control over branded product designs and their ability to supply large quantities
of product at relatively low prices
...

Once retailers controlled product design, they were able to substitute imported products,
carrying their own house brands, for those produced by domestic manufacturers
...
S
...
As a result, mass retailers who
sourced offshore grew in size and gained market share at the expense of domestic manufacturers
and contractors
...
S
...
al
...
358; Abernathy et al
...
The four largest
department store chains, for example, accounted for about two-thirds of department store sales in
2002, up from 39% in 1972, and the corresponding figures for women’s specialty shops are 30%
and 11%
...
S
...

As brand manufacturers lost market share, they began to imitate large retailers by
developing their own offshore suppliers
...
S
...
Women’s dress
manufacturers, for example, increased their share of in-house production by 55% (from 31% to
48%) between 1972 and 1987, men’s suit, and coat manufacturers by 23% (from 56% to 69%)
and there were corresponding declines in production shares among their sub-contractors
...
By the mid1980s, the American system of mass production apparel manufacturing had largely moved
offshore
...
The production that remains in the United States largely involves
small manufacturers and contractors serving highly uncertain fashion markets and other niche
markets where order sizes are too small for mass production to be efficient
...
S
...
Brand manufacturers set the stage for
these strategic choices by opting for the efficiencies of mass production methods at the end of
World War II
...

The cost-savings from this system are extraordinary
...
3 times (American Apparel and
Footwear Association, 2002)
...
Moreover, the
market dominance of large retail chains creates barriers to the entry of alternative models of
supply chain models, unless they support mass fashion markets
...
In an
attempt to stimulate sales and expand market share, large U
...
retailers increase the variety of
clothing styles, colors, and sizes
...
191)
and another reported a rise in “short-cycle” products with a planned sales period of 5 to 10
weeks (Rothstein, 1989, p
...
Greater product variety and shorter product cycles, however,
meant larger inventories, greater uncertainty of demand for particular products, and more
markdowns
...
Large
domestic supply chains, however, were slow to respond to this new market for just-in-time

9

products because just-in-time supply methods were incompatible with their slow mass
production practices while small-scale suppliers lacked the production and coordination capacity
to meet the demand for just-in-time products
...
Price incentives were used to reward
quick and accurate fulfillment of orders and there were cost penalties for failure to meet supply
targets
...
1995, 1999)
...
7% to 25% of
sales in the same period (Abernathy, et al
...
78, 176)
...
S
...
It appeared that speed advantages would
protect new just-in-time markets against competition from imports because long lead times for
production and delivery would limit low-cost countries to specializing in “slow” mass
production for products delivered at the start of the season (Abernathy, et al
...


By the mid-1990s, the most technologically and

organizationally advanced just-in-time suppliers reported substantially higher operating profits
than traditional suppliers and they experienced faster growth in sales (Abernathy et al
...

However, the promise of comparative advantage based on quick and flexible production
has not been sustained
...
These methods were gradually imitated by low cost suppliers located
in Mexico and various Caribbean Basin countries with relatively short transportation times to
U
...
markets
...
Our recent interviews with manufacturers, jobbers,
and retailers in New York City further confirm that these nearby low-cost supplying countries
are able to approximate the speed advantages of flexible domestic production at lower costs
...
S
...

What distinguishes this new consolidation is that it involves a shift towards small and mediumsized firms, particularly those with fewer than 20 employees (Tables 2 & 3)
...

The standard explanation of this trend is that comparative advantage and rising imports
are forcing large firms to downsize and to specialize in design and commercial activities where
the United States has a comparative advantage
...
In the future, it will consist of a core of large capital
intensive producers of basic commodity products, such as socks and underwear, along with a
group of domestic “manufacturers” that will contract production offshore while retaining the
skill and capital intensive components of the supply chain – designing products, buying fabric,
making patterns and cutting parts, and marketing (Mittelhauser, 1997)
...

There is some validity to this conclusion
...
S
...
Our recent field research confirms that many of the firms that survive
are small-scale and they serve a fragmented set of niche markets, many of which are declining
...

At the same time, however, the New York City garment industry is reemerging as a

11

center of specialization in women’s wear
...
Even more important, New York City’s
share of domestic women’s wear production has been increasing in the late 1990s (Table 5)
...
However, there are also small manufacturers and contractors that are serving market
niches that are too small or too time sensitive to be outsourced
...
The common element among these niche markets is that the need to respond
quickly to the rapid pace of style change necessitates a high degree of quality and the direct
collaboration among, designers, producers and retailers that is only possible where there is a
concentration of small and medium sized producers in close proximity to fashion markets
...
With the exception of uniforms,
this set of niche markets share in common the need for supply speeds that cannot be achieved by
offshore flexible mass production, or even by large and flexible domestic suppliers
...
al, 1995) and our field research suggests comparable supply
speeds are currently available from Mexico and the Caribbean basin
...

While large firms and global supply chains cannot match the speed, flexibility, and
capacity for quality among the small suppliers that survive in New York City, our surveys show
that many of small contractors are not capturing the full advantages of these qualities
...


12

Figure 2
UNITE Contract Shops

90
77

80
70
60

55

53

50

42
36

40

30

30

24

21

26

28

20
9

10

6

er
es
ig
ne
C
r
C
ol
le
ct
P
io
n
C
ol
le
ct
io
n
D

gn

es
i
D

C

P

ge
Br
id

P

Br
id
ge

tte
r

C

Be

P

tte
r

e

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er
at

C

e
M
od

er
at
P

dg
et
C

M
od

Bu

P

C

Bu

dg
e

t

0

C = Current Production Quality, P = Potential Production Quality
Partly this reflects the continued shrinkage of many of the City’s mid-range niche
markets as large retailers move their orders for just-in-time replenishment production to Mexico
and the Caribbean where costs are lower
...
In short, there is a “hollowing out” in the quality of product
demand, rather than a decline in the productive capacity of the industry
...

Structural Barriers To Entrepreneurial Behavior and Collaborative Networks
Our surveys revealed a noticeable lack of entrepreneurial talent among small contractors
...
However, our interviews also show that

13

highly dependent relationships that contractors have with manufacturers and jobbers are also a
problem
...

Manufacturers rely on a core group of contractors for garment assembly
...
By sharing work among
their core contractors, they have created conditions of chronic excess capacity that induce
contractors to cut costs and increase their productivity in hopes of securing more work
...
These dependent relationships are in marked contrast to the
collaborative relationships and greater scope for innovation among contractors and
manufacturers that characterize the “full package” design and production networks found in the
most successful small-scale garment districts in Europe (Courault and Parat, 2000, Bigarelli,
2000, Bigarelli and Crestanello, 2004)
...
When large U
...
retailers developed their lean retailing
model, they could have built highly flexible and very fast domestic supply chains by mobilizing
the large numbers of small contractors in urban garment districts that have an absolute advantage
in speed of production
...
Instead, large retailers opted for creating
large- scale quick-response supply chains, coordinated through information technologies and
preferred supplier partnerships, and limited to fashion-basic products
...
However, the presence of an installed base
of information technologies for retail inventory management and the established sourcing
relationships with large U
...
manufacturers also framed the way in which large retailers
approached the problem of developing new quick response supply chains (See Kahneman, 2003
for a discussion of such framing)
...

The choice of large-scale just-in-time supply chains also led to a “design bias” towards
fashion-basic products that further hastened the decline of small-scale supply chains
...
Even though
some large just-in-time suppliers adopted more flexible versions of mass production, just-in-time
supply was also accomplished by shipping from supplier inventories produced using traditional
mass production methods
...
As a result, large retailers reinforced their
fashion-basic product design strategy by promoting fashion-basic brand images built around
advertising concepts such as “lifestyle” clothing and “value for money”
...
The continued presence of
small retail chains, independent retailers, and somewhat less centralization of buying decisions
also helped the small-scale sector to survive in Europe
...
We estimate

15

that as many as half the contractors in New York City are redundant under present circumstances
and that current output could probably be sustained with far fewer workers
...
There
is insufficient demand to sustain the current number of workers and firms and excess capacity
persists among the small manufacturers that are well positioned to provide full package products
...

The only long run solution is to generate market growth for the types of apparel products
for which New York City has a comparative advantage -- products where production runs are
short, supply schedules are urgent, and design and quality are important
...

One can imagine a number of possible scenarios for the future of the New York garment
district
...
However, products that are in trouble
elsewhere are not likely to be a long-term source of growth for New York City
...
S
...
While these efforts may generate more production and employment in the short run,
they are also likely to allow the industry to postpone further the substantial reforms in supply
chains that are needed to reinforce the special strengths of New York City
...

What is needed instead are solutions that focus on developing new domestic markets and
constructing new types of supply chains that specialize in producing small orders of high valueadded products very quickly
...


16

Quick-Response For Fashion Replenishment
One such potential market is the replenishment of fashion products that are now supplied
only once a season
...
What is needed is to
promote the idea that initial inventories of fashion products can be reduced by establishing the
same type of inventory replenishment capacity that mass retailers created for fashion-basic
products in the 1990’s
...

Just-in-time Supply Chains For Flexible Retailers
A second option is to provide just-in-time supply chains for the new type of “flexible”
retailers who specialize in short-cycle, reasonably fashionable products that are continually
being replaced
...
S
...
The appeal of
these chains for consumers is that they offer a rapidly changing product mix that is regularly
updated with the latest fashions
...

However, rather than supplying these short-cycle products through equally quick shortcycle supply chains, these chains follow a relatively traditional design and manufacturing
calendar
...
It also manufactures “grey” good
so that it can make minor alterations in styles during manufacturing and delay final dying and
finishing operations so that prints and colors can be changed shortly before new products are
shipped
...

A reliable just-in-time supply capability in New York City would offer these chains an
opportunity to respond more quickly and accurately to that part of the U
...
apparel market that is
more concerned with up-to-date fashion than with price and the somewhat higher production
costs could be offset by lower transportation costs, leaner inventories, and fewer markdowns
...
Our surveys of these young designers suggest that a major
barrier to the development independent designer boutiques is access to suppliers that are willing
and able to manufacture small orders at a competitive cost
...
Young designers often lack operating
capital to meet minimum order sizes for clothing
...
However, these problems are not insurmountable
...

“Fast Fashion” Supply Chains
A fourth option is to develop markets for new “fast fashion” products, which are know in
Europe as “quick” fashion” or “street fashion”
...

The key ingredient of fast fashion is the ability to track consumer preferences quickly and
to identify potentially popular new designs through daily proximity to fashion markets, fashion
images, and fashion makers
...
In the Sentier garment district in Paris, for example, the time
from concept to delivery for street fashions can be as little as two weeks by using fabrics that are
available locally
...
Samples can be produced in
a day, small orders for market testing are produced in less than a week, and major specialty
chains in France, such as 123 and Camaieu, test market products for a week in a single store
...
As long as demand is growing, products are replenished in larger
quantities and production can be halted as soon as demand slows
...
1
Fast fashion products are an ideal market for the New York City garment district because
they can draw upon new designers as an inexpensive source of product innovation, they only
need relatively small amounts of the types of fabric that are often available locally, and the order
sizes are suitable for small contractors
...
The existing clusters of small manufacturers and contractors can acquire fabric, provide
fast manufacturing, and broaden their market contacts, but innovative quick design capabilities
need to be added to these capabilities along with a willingness to invest in promoting the “fast
fashion” concept with retail clients
...
Unlike France and Italy where independent boutiques and small regional
chains are still important, or among large chains in the UK and France where there is still some
decentralization of retail buying decisions, large retail chains with centralized buying offices
dominate U
...
markets at all levels of the fashion pyramid
...

Figure 3

The Quick Fashion Product Development Cycle

MAKE 30

1

TEST

MAKE 30

Italy has a variant of street fashion, known as pronta moda, which was initially used in the mid
SALES
SAMPLES
SAMPLES
1980s for quick response replenishment production and was later used for relatively low quality
1 and marketed 1-2 months before the start of the season and
products that were designed WEEK
1 DAY
1 DAY
delivered mid-season to supplement traditional seasonal collections
...
Small flash collections are designed andMAKE 30monthly
introduced at
MAKE
TEST
intervals throughout the season on a cycle from design to delivery of about six months
...
S
...
S
...
These are qualities that are present in New York City and one or two other urban
garment districts in the United States and which are unlikely to survive much longer without
substantial supply chain reforms
...
After all, maybe fashion products are not
replenished for good reason, consumers appear to prefer basic fashion products at low prices,
financing young designers may be prohibitively risky, and large U
...
retailers may be so
successful with their current supply chain practices that there is no need to experiment with
European-style design, speed, and flexibility
...
When large firms with market power are part of these systems, profit shifting can also
reduce competitive pressures for change
...

There is corresponding evidence from New York City in the 1920s and 1930s of a highly
successful industry build around small firms serving fast fashion markets
...
There was “a frantic
insistence upon immediate deliveries when orders are finally placed” (Teper, 1937, p
...
13-14, 24)
...
20)
...
Nevertheless, there is some prospect
that this flexible retailing model can be revived
...
A
second is that there may be a growing “marketing crisis” caused by consumer boredom with the
very similar products available from large specialty chains, which accounts for the success of
chains such as Zara that offer clothing products with shorter life cycles and greater variety of
choice
...
Our surveys of large
retailers and manufacturers in New York City finds a firm conviction that their current control
over large-scale global supply chains coupled with centralized buying and product
standardization among stores is the most efficient approach to serving their markets products
...
The European experience, however, shows
that such obstacles can be overcome when industry development organizations exist to provide
business assistance, to foster supply chain networks, and to promote entrepreneurial behavior
and the introduction of new ideas
...
, J
...
Dunlop, J
...
Hammond, and D
...
S
...
, J
...
Dunlop, J
...
Hammond, and D
...

American Apparel Manufacturers Association, Focus: An Economic Profile of the Apparel
Industy,, various years, Arlington, VA: American Apparel Manufacturers Association
...
, E
...
Bailey and A
...
“The Performance Effects of Modular
Production in the U
...
Apparel Industry”, Industrial Relations, Vol 35 (No
...
), pp
...

Bigarelli, D
...

Courault and P
...
), Les Dynamiques de PME: Approches Internationales, (Paris:
Presses Universitaires de France, 2000)
...
and P
...

Bryner, E
...

Carpenter, J
...
Competition and Collective Bargaining in the Needle Trades, 1910 - 1967
...

Courault B
...
Parat, “Les PME de l’habillement Roanne et Cholet, Une Dynamique de
l’emploi à Rebours de l’histoire”, in B
...
Trouve, Les Dyamiques de PMEs,
Aproaches Intenationale, Presses Univeritaires Francaises, Paris, 2000
Crean, S
...
Dalla Libera, “The Delocalization of Production Abroad: The
Case of the Fashion Industry of Vicenza”, mimeo (Istituto Poster,Vicenza) Conference on
“Clusters, Industrial Districts, and Firms: The Challenge of Globalization”, Modena Italy, Sept
...
L
...
Lester and R/ M
...

Disher, M
...
, American Factory Production of Women’s Clothing, London: Devereaux
Publications, Ltd
...
T
...
Weil
...
“Diffusion and Performance of Modular Production in the U
...

Apparel Industry”, Industrial Relations, Vol
...
3, July):334-355
...
B
...
New York: Columbia University Press
...

Helpman, E
...
R
...
, Industry Planning Through Collective Bargaining: A Program for Modernizing the
Dress Industry, New York: International Ladies’ Garment Workers’ Union
...
, “A Psychological Perspective On Economics”, American Economic Review

22

(Proceedings), 93:2, 2003, 162-168
...
, “Employment Trends In Textiles and Apparel, 1973-2005”, Monthly Labor
Review (August):24-35, 1997
Murray, L
...
1995
...
Monthly Labor
Review, Vol
...
8, August):62-72
...
Twenty-five Years of Retailing, 1911-1936, New York:
National Retail Dry Goods Association, 1936
New York Times, “Apparel Making Regains Lost Ground” (January 13, 1998) p
...

Palpacuer, F
...
Unpublished doctoral thesis,
Universite Montpelier I
...
Keeping Jobs in Fashion: Alternatives to the Euthanasia of the U
...
Apparel
Industry
...
C
...

Teper, L
...
New York: International Ladies’ Garment Workers’
Union
...
S
...
Annual Survey of Manufactures
...
Washington, DC: U
...
Government Printing Office
...
S
...
Census of Manufactures
...
C
...
S
...

U
...
Department of Commerce, Bureau of the Census
...
Census of Retail Trade
...
C
...
S
...

U
...
Department of Commerce, Bureau of the Census
...
Various years
...
C
...
S
...

U
...
Department of Commerce, Bureau of the Census
...
Washington, D
...
: U
...
Government Printing Office1975
...
S
...
Employment and Earnings
...
C
...
S
...

U
...
Department of Labor, Bureau of Labor Statistics
...
Washington, D
...
: U
...
Government Printing Office
...
S
...
S
...


819
1,080
1,098
1,196
1,067
1,079
944
869
772

9
...
2
9
...
8
8
...
2
7
...
9
6
...
7
542
4
...
8
420
3
...
2
* = beginning of NAICS series
351
2
...
2%

24
...
1%

9
...
4%

1
...
0

22
...
0

10
...
7

1
...
8

17
...
7

7
...
6

0
...
2

15
...
0

6
...
1

0
...
1

18
...
3

5
...
0

1
...
1

14
...
3

4
...
2

0
...
8%

14
...
8%

28
...
6%

12
...
6

13
...
5

27
...
3

14
...
1

12
...
8

27
...
5

15
...
6

13
...
0

25
...
4

18
...
6

14
...
9

23
...
9

19
...
3

16
...
8

23
...
9

15
...
2
11
...
1
10
...
3
10
...
7
9
...
3
9
...
4
8
...
4
8
...
0
8
...
5
9
...
5
9
...
7

2001*

50,025

11
...
3

*Beginning of new NAICS series

% of National
Women’s Wear
Employment
16
...
0
17
...
6
16
...
2
17
...
5
16
...
1
17
...
8
17
...
1
17
...
2
19
...
8
21
...
8
23

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