Distance, technology and innovation in the case of fashion – the Observer

The digital technology should make geographical distance irrelevant. The companies that have to manage the distance turn to the support of digital technologies, but at the same time to stimulate the innovation, companies often have to reduce the distance. In the european industry of fashion, we find companies that manage a portfolio of complex multiple locations.

After a long and strong wave marked by the offshoring in countries with a low cost, such as China, have emerged limitations to this model: the hidden costs in logistics, quality, and coordination, counterfeit, negative impact on the environment, poor working conditions and the acceleration in the change of trends. A recent study conducted by the Boston Consulting Group shows a reduction of the gap between the cost of labour in China and in the United States, due to an increase in labour costs in China and the productivity in the USA. The programme is expected therefore, a wave of reshoring in various industries.

at The same time, the development of technologies came to simplify significantly the global communications. There were those who even would have predicted that digital technology would become irrelevant to geographical distance. The cloud, as well as innovation platforms online are becoming the offshoring simple.

we Can find arguments in favour of the reshoring, as well as elements which show that the technology is making it easier to work from a distance. What is the best strategy in a perspective of innovation? What is the role played by technology?

by focusing on The innovation capacity of enterprises, the offshoring has been perceived as a challenge. In the fashion industry, for example, the product innovation is directly linked to the production process. As a consequence, the design should not be separated from the production. For this reason, it is recommended co-locating the two activities, which for many means the maintenance of the production process in the country of origin. In this sense, innovation is more an argument in favor of reshoring. An in-depth study of 20 european companies that operate in the area of fashion, conducted by CATÓLICA-LISBON and ESCP Europe Lectra Chair, shows a more complex scenario. In the first place, more than a clear change to reshoring or offshoring, the fashion companies in europe are adopting what we call the "multi-shoring", that is, a portfolio of complex multiple origins, according to the products and their level of innovation. One of the com panies, for example, conducts a third of its production in Europe (including Portugal) and two-thirds in Asia, and in some cases the same product is manufactured in Europe in small series at the beginning and for the replenishment at the end of the season, and in Asia in large volumes, during the season.

in Conclusion, the fashion industry shows that the distance between the design and the production to an innovation optimized, can be managed in different ways, be it through effective reduction of the geographical distance, or of the use of technology to minimize the effects of distance, and many times, both. These strategies can serve as an example for other industries that want to use offshore, without compromising on innovation.

Associate Professor, Católica-Lisbon School of Business & Economics