Mr. Amit Gugnani- Senior Vice President, Fashion- Textile & Apparel at Technopak
Mr. Kanti Prakash Brahma- Senior Consultant, Fashion- Textile & Apparel at Technopak
The global economy has started showing signs of recovery after a relatively long period of uncertainty in the wake of the 2008 financial crisis. However, this slowing down has adversely impacted all industries and trade, with textile manufacturing and trade not being n exception. The compound annual growth rate (CAGR) for the global Textile & Apparels trade between 2007 and 2012 was only 4%, while the corresponding figure for the period 2002-2007 was as high as 10%. With the decline in economic growth accompanied of higher unemployment, and greater economic uncertainty, the consumer consumption was at a low rate, the share of T&A in global merchandise trade fell from 5.5%, in 2002, to 4.2%, in 2007, and to 3.8%, in 2012. As a consequence, players across the T&A value chain, from fiber to retail, are being compelled to rethink their business methods. The focus has shifted from low-cost manufacturing, intensive machine utilization, and operational efficiency to the broader dimensions of value-addition in manufacturing, collaborations across the value chain, and innovative business models.
Players along the textiles value chain need to adopt a holistic approach towards value-addition, via a meticulously drafted framework which takes into account all aspects of manufacturing, from consumer trends to the procurement of basic raw material. Given that each stakeholder in the value chain has a different understanding of value, this framework should encompass value-creation, and retention, along the entire supply chain, instead of solely focusing on the stronger components, in order to harness the full potential of value-addition. Thus, an entire set of values, including financial value, social value, and strategic value, should be addressed.
The competitiveness of both countries and individual corporations can improve though value-creation, achieved through sure way for value addition, either adding to the existing value proposition or on eliminating the negatives within the ecosystem. Of these, the latter is perceived to be the easier option.
The elimination of negatives includes minimizing manufacturing costs, business process costs, and logistics costs. Within the textile value chain, spinning and weaving already operate at very high levels of efficiency; a level of 90-95% in spinning, and 85-90% in weaving, is not uncommon. This limits the scope of reducing manufacturing costs through the improvement of operational efficiency in these areas. However, downstream activities like chemical processing such as dyeing, printing, finishing, apparel manufacturing, and apparel designing offer much room for value-addition through the deployment of better technology and sophisticated machinery, especially in developing countries like India. Chemical processing also plays a pivotal role in inculcating environmental and social values by tackling such issues as energy consumption, water treatment, greenhouse house gas emissions, etc. Similarly, in apparel manufacturing, the deployment of modern operations management concepts like the use of best practices, efficient quality protocols, continuous training and development of operators, etc. has the potential to improve efficiencies by 15-20%, resulting in ~10% reduction in manufacturing costs.
BUSINESS PROCESS OPTIMISATION
Cost reduction through business process optimization throws up a plethora of opportunities for players in the textiles industry. Collaborations between the various stakeholders in the value chain have been discussed for a long time; however, at the ground level, there remains much to be implemented. The new business world is characterized by highly agile, networked enterprises wherein the sharing of knowledge and information, investing in shared resources, and building long-term relationships based on mutual trust have the potential to reduce the total cost of manufactured products. Such collaborations have the potential to mitigate the risk exposures of various players in the value chain, optimize inventory holding and carrying costs, reduce product and process development costs, optimize transport and logistics costs, and minimize time to launch or replenish products. Advanced technologies like Collaborative Planning, Forecasting and Replenishment (CPFR) technology, vendor managed inventory (VMI), electronic data transfer (EDI), product lifecycle management (PLM), etc. also provide opportunities for reducing costs across the value chain.
IN HOUSE EFFECTS
Value creation through additions to existing value propositions, though more difficult than cost reduction, provides long-term strategic value to industry players. Innovating products and services can generate additional business as consumers are often prepared to pay a premium for products that are superior and novel and provide a solution for their core needs. Unlike the electronic or telecommunication industry which registers a fundamental shift in products every few years, the T&A industry lacks any radical change in product offerings. Improvements in functionalities e.g. wash effects in denims, advanced finish application, etc. are the only innovations that the industry has witnessed in recent times. Investments in research and development and leveraging the latest developments in machinery, chemicals, and technology will make such product and process innovation more rapid and regular.
However, the shifting of textiles manufacturing to developing countries has made the supply chain more global and complex, thus providing scope for value-addition in terms of supply chain management. Fashion retailers are interested in offloading more of their responsibilities to T&A manufacturers who in turn need to provide more value in order to gain a substantial edge over their competitors. This requires an end-to-end understanding of the global supply chain and the associated trends, from raw materials to consumers, and, sometimes, recycling as well. Similarly, the use of data analytics tools has opened up opportunities for diving deeper into the granularities of inventory management, manufacturing costs, vendor performance evaluation, logistics, and lead time management. Comprehensive data are increasingly seen as the new frontier of productivity, for all kinds of business operations.
The textiles industry has always been linked to issues of environmental pollution. Thus, investing in building a socially- and environmentally-responsible value chain is a credible opportunity for manufacturers. In recent times, it has been seen that consumers’ perception of brands, retailers, and manufacturers associated with sustainable business processes and eco-friendly textiles has sharpened. Consequently, there is more demand, and production, of organic textiles, recycled garments, etc.
Ingredient branding contributes substantially to the perceived value of T&A products. Value-addition through branding also provides a long-term, strategic advantage to e.g., some component brands like COTTON USA, Gore-Tex, Lycra, YKK, etc. have managed to make a long-lasting impression on the minds of T&A consumers.
The blurring distinction between the products offered by the various functional elements within the textiles value chain forces manufacturers to bank upon weaving additional services and improved solutions into their core value proposition. In order to remain competitive in this highly globalized industry, players have to factor in the constantly evolving business dynamics in their attempts at value-addition. For a long-term, competitive edge, it is critical to revisit the value provided by the company vis-à-vis its competitors and the solution required by the customer on a regular basis and realign the value added with that offered by the industry and/or required by customers. At the industry level value-addition is largely about creating a culture of innovation through mutual collaboration so that the consumer can benefit through availing better products and services. While conceptualizing newer options of value-addition within the textiles value chain, it is imperative to keep in mind its effect on the entire value chain and to ensure that the value created will be nurtured and sustained beyond short-run benefits.
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