Hong Kong shapes up as a smart supply-chain hub
Hong Kong has evolved from a low cost apparel manufacturing base into a vibrant sourcing centre. The next phase in its reinvention is set to see the city emerge from the Covid-19 crisis as a digital supply-chain services hub.
Hong Kong has been the centre of the global garment industry for the past 40 years. It’s where the buying offices are located, where the agents are located, and where the main offices of the transnational factory groups are located.
The city has taken on major roles in every link of the manufacturing chain, from product design and development to the delivery of goods to consumers. And it is continuing to transform as the coronavirus crisis shakes up the clothing sector.
One of the biggest impacts of the pandemic has been a renewed focus on the use of 3D design, fit and virtual sampling tools to keep product development on track despite travel restrictions.
Supply chain shifts are also underway as the industry wakes up to the need for more diverse supply chains. And the rising role of e-commerce is transforming how people buy, and what they buy.
All of which play to Hong Kong’s strengths, according to a new report on the ‘Future of Sourcing: 2021 and Beyond.’
“The industry’s brains are still in Hong Kong. For Hong Kong to burnish its competitive appeal, it needs a new mindset, including being able to react faster to the impact of new technologies.” - Roger Lee, CEO of Ho, TAL Group
Produced by KPMG for InvestHK, it notes that digital supply chains depend on next generation data analytics, artificial intelligence (AI) and automation. Successful e-commerce strategies also require new digital technologies to track and analyse changing consumer behaviours and spending patterns.
“With a high concentration of sourcing talent, Hong Kong is the ideal regional and global sourcing hub to manage supply chains,” the research says. The city is also positioned to benefit as a centre for professional services, especially in the areas of environmental, social and governance (ESG) matters and sustainability.
"Hong Kong is in a unique situation amid so much change," says Anson Bailey, partner, head of consumer and retail, ASPAC, KPMG China. "We do see digital adoption taking shape in this new era of innovation, with product and material developments happening seamlessly across a more agile workplace.
“Long-standing strengths of Hong Kong as a regional sourcing hub include its sound financial, legal, and commercial structures. Talent development is at the core as we see the need for an internationally-minded workforce to drive the origin and manner of production across a more complex supply chain."
Hong Kong is a Special Administrative Region (SAR) of the People's Republic of China and home to more than 7.5m people. Based on the 'One Country, Two Systems' governance, the city has its own economic and administrative systems distinct from those of Mainland China.
Measures aimed at boosting innovation and technology development include more resources for R&D, pooling together technology talent, providing investment funding, opening up government data, a technological research infrastructure, and enhanced procurement arrangements. Hong Kong's dynamic start-up ecosystem has seen 199% growth from 1,065 start-ups to 3,184 in just six years.
A new mindset
Christophe Roussel, executive vice president of international sourcing and production for speciality clothing retailer Gap Inc, believes the impact of Covid-19 will further accelerate change in sourcing and supply chains. "As we start to see digital platforms emerge, the days of companies sending so many buyers here are over. Instead, virtual samples will enable us to be both faster and more responsive."
Roger Lee, CEO of Hong Kong-based garment manufacturing giant TAL Group, adds: “The industry's brains are still in Hong Kong. From a brand point of view, Hong Kong has always been the sourcing centre. It's so convenient and dense that in a one week stay you can visit representatives from more than 30 suppliers."
However, while Hong Kong's international mindset is crucial for its future, it must also establish a more diverse talent pool in order to create the future-ready workforce – skilled at working with data analytics, blockchain and AI tools – its supply chain sector will require.
“Talent development and upskilling our people is critical for future survival with more innovative thinking required to stay ahead of the curve,” the report notes.
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