Impact on Indian Textile and Clothing Industry

By this time in the current year, it is abundantly clear that the Indian economy is facing a severe challenge in terms of maintaining a respectable growth. What is not so clear to some - as yet - is that even as our Government and various Economic think-tanks suggest at GDP growth rate that is still likely to be 5%+, there are serious imbalances in this growth across various sectors. Worst affected sectors are Manufacturing and Agriculture and poor performance in these sectors has resulted in an alarming slowdown in employment as well as available discretionary spending income.

Worse, the overall sentiment of business as well as consumers on the prospects in the near future appears to be turning to downright pessimistic. This lack of confidence in future creates a very disturbing vicious circle of reduced intention to spend at the consumer level, and further reducing intention to invest at the business level reduced spending - both at consumer as well as business levels create further weakening of overall demand for goods and services leading to further erosion of confidence in the future!

On a macro-economic level, one can only hope that the Government of India recognizes the gravity of the situation and takes urgent steps to restore the general confidence of the consumer and business and for giving the long needed stimulus to the economy. On a micro level, the Indian Textile and Clothing industry must bootstrap itself with some determined measures to last out this weak phase. For long, the Indian textile and clothing industry (with a few notable exceptions, of course) has taken an almost perverse view when it comes to reengineering its decades old business practices. There has been little emphasis on most of the core success factors of modern business activity namely:

1. Benchmarking with best practices across Indian and International industry, and continuous attention and investments for improvement of productivity, efficiency and lowering of production costs per unit of output.

2. Development of Human Resources - be it at the R&D and Production Level or at the Product Innovation and Commercial Levels.

3. Investment in Design, Innovation and New Product Development

4. Customer Service Orientation

It is therefore no surprise that even compared to other Industrial sectors e.g. FMCG, Automobile, and Consumer Durables - the organized Indian textile industry is woefully behind the local best practices. It is a fact that with economic slowdown in the country, and steady decline in creation of new jobs (with the financial dailies announcing each day about more job-attrition through VRS and closure of facilities rather than setting up of new capacities), the available discretionary spending with bulk of the population is shrinking. The immediate impact is bound to be felt by the textile and clothing sector where many can defer purchases, and even if purchases are still made, it could be “one shirt instead of two” and “one sari instead of two”. Repeatedly, it has been recommended at many fora that the Indian textile and clothing industry has to look at innovative and determined efforts to stimulate consumption of fabric at the grass root level. Unfortunately, for all the seminars and presentations by industry experts, consultants and business leaders, the sector is marked by a near absence of such an effort (a Stencil or a Ruf & Tuf or a Peter England kind of commendable effort not withstanding).

If Amul can break the mould and launch Pizzas at Rs 20, no less than the FMCG giant Hindustan Lever an ice cream cone at Rs 5, and Tata Coffee acquire a significant stake in the coffee chain Barista - all in order to stimulate primary demand at the consumer level for their products, why can’t some of our leading Yarn and Fabric companies strive to launch a good shirt at Rs 300 (or even less) and an appealing Salwar Suit at Rs 450 at Retail prices? Sure - this will take a totally fresh look at the entire “value-chain” from yarn to the retail but it can be done - albeit with an “out-of-the-box” thinking.

At the upper end of the market, innovation - especially on the front of development of new fabrics and new finishes - both at fabric as well as garment end - is essential to encourage consumers to give in to impulse purchases when they see such products attractively displayed in leading retail outlets. Seeking design and product development talent from within India and outside is a must, and should be sought without any further delay.

Apart from determined efforts at stimulating domestic demand, the local industry has to dis-passionately look at mergers / sell-offs in order to achieve economies of scale both in terms of production as well as in terms of distribution and promotion. The industry in India is extraordinarily fragmented and needs urgent consolidation - be it at the spinning level or weaving or processing or garment production.

As far as Export demand is concerned, both the Government of India as well as the Exporters have to acknowledge that notwithstanding the current slow down in the USA and the likely domino effect on select European economies in the coming months, the global trading environment for Textile and Clothing products has undergone a fundamental shift in the last few years, and will see some more shifts in the coming years.

Competitiveness has to be against global benchmarks, with decreasing protection due to Quota’s as well as significant reduction in the direct and indirect fiscal incentives from the Government. Here again, economies of scale, top quality human resource development, adherence to global standards of quality, responsiveness and price efficiencies are the only way Indian companies can dream to maintain or grow their export business. In addition, India has no choice but to look at making strategic acquisitions in the EU, USA and South America so as to get toe-hold in these markets and serve the needs of the customers in these countries like a “local” company.

On the whole, the coming months and years are likely to pose a very strong challenge to most players in the industry. Unless radical steps are taken by such companies to become more competitive, responsive, creative and consumer / market oriented, most are likely to get marginalized in a very short time. Therefore, it is time to act and make things happen rather than waiting for something to happen!

Arvind K. Singhal

Garment Wet Processing in Indian: The Human Angle ( Jan - Mar'03 Issue )

The Indian textile and apparel industry has been long characterized by a high degree of fragmentation with limited linkages within the supply chain. This has led to resistance to technological inputs and limited efforts to value-add. Within this overall sphere of activity, the garment sector has a greater degree of fragmentation and a lesser degree of technological embracement vis-à-vis the textile sector.

The Indian Apparel Sector is replete with its own share of structural and systems inadequacies. These include:

• Low innovation in terms of design & style

• Poor process orientation

• Systems not in place

• Poor resource productivity

• Long product life cycles

In order to successfully manage and overcome the above stated deficiencies, a multitude of issues come to mind, including absorption of technology, infrastructure, innovation, etc. However, a key parameter to ponder over is the Management of Mind-Set. Examples of companies, which have overcome most of the above deficiencies to emerge successfully, are evidence of the importance of Mind-set management as a harbinger for overall change.

What does emerge from the analysis of the inadequacies is a thread of commonality between all the factors, viz. inadequate support for Human Resource Development. While significant noise levels are made for the inadequate investments in technology and machinery in the area of garment manufacturing, very little is discussed about the near-absence of a concerted effort for human resource up gradation.

Garment Wet Processing: Historical Baggage

While the garment sector in general has traditionally been part of the unorganized sector, the wet processing sector has been further relegated due to its low importance in the initial years of garment manufacturing in the country. Even till date, garment exporters continue to accord this department lowest priority, which can be seen from the fact that the laundry is either manned by “masters” or on contract basis, unlike other departments.

Since the early nineties, there has been some amount of active interest from the government and ably supported by the industry on the need for having educational institutes to train individuals in various areas of garment manufacturing, designing and merchandising. The formation of the National Institute of Fashion Technology was thus a welcome step. This filled a crying gap for professionals in this emerging industry. However, the focus on wet processing has been conspicuous by its absence in any of the garment technology institutions.

To understand the need for formal education in garment wet processing and to get professionals into this trade, one must look at certain facets of the activity. Washing, as the jargon goes, though started off merely as a back-end, cleaning operation has matured into a highly technical and value-addition sector. If one were to look at any casual wear product category – be it shirts, trousers, jeans, T-shirts, etc – garment wet processing plays a pivotal role in adding value to the garment and is today the key differentiator between one garment and the other in the category.

Garment washing is a blend of techniques/skills and technical knowledge. In the Indian scenario, laundry technicians, by and large, have a high skill level but an abysmally low knowledge level. The high level of skill has ensured that lack of technological competencies do not form an immediate impediment in churning out quality stuff. There is lack of wash development updates or courses available and the academic institutes too have chosen to ignore this area. Given the fact that garment washing was never accorded importance by garment factory owners, the need for deploying professionals was never felt. One of the brighter workers who learnt the tricks of the trade faster was promoted as a “master” and the knowledge that he had was resident within him alone. This made the entire laundry dependent solely on the master and made him virtually indispensable.

Lack of basic education was a big hurdle for such masters to upgrade themselves either through reading or being open to ideas. Often when machine or chemical suppliers would try to provide technically more efficient options of working, these were not accepted.

Action Steps

The question that needs to be first answered is - does garment wet processing really need a focused human resource approach and if so in which way. If we are to see the garment exports trends in the last 5 years, the share of garment washing has been on a continuous rise within the entire basket of casual clothing export. More so, higher value-addition processing is being sought for both in exports and domestic market to include finishes such Wrinkle Resistant, Water/Oil Repellent, UV Resistant, Moisture Management, Anti-Ozonate, Anti-Microbial, Laser, Coatings, Variations in Dyeing, etc. A number of these are effectively executed if there is a basic understanding of the chemistry so as to be able to fundamentally conceptualize the process. More so, the laundries are becoming technologically superior and hence a flair for technology is a pre-requisite.

In the competitive scenario, the key differentiator for Indian companies would not be on the basis of costs (since there are a number of countries in the South East Asian region which have better economies of scale, higher productivity and efficient use of automation to reduce costs) but on the basis of innovation. Here, product development is the starting point to be able to demonstrate to its clientele about its innovative superiority. For this, individuals with a creative flair and technical capabilities are required.

Despite automations (and more so in the absence of it), garment wet processing has a large component of manual intervention that is required for its efficient running. Apart from product development, the production facilities need trained technicians to understand the inter-linkages between machine-material-chemical. Further, despite sophisticated control instrumentation, a number of online quality checks are in the form of visual or tactile testing and hence necessitate the requisite training.

Finally, with laundries becoming increasingly important in the scheme of things for most garment factories, these should be looked at as independent profit centers. Emergence of large independent contract laundries is a case in point towards this. Such facilities need strong and professional managerial talent, which too needs to be bred. While technical competencies will ensure a good product, better systems and improved productivity, a effective managerial pool will lead to the overall growth of the laundry and keep it in trend with market requirements.

The few “professionals” that the Indian garment laundries have churned out are so much in demand that most find opportunities in better laundries in South East Asia or the Middle East, further creating the vacuum. This brings us to the issue that the industry should realize and commit itself to HR initiatives in the area of garment processing. The first step for the industry would be to communicate internally about its HR philosophy and take steps to develop individuals. Simultaneously, it should pursue with academic institutes to focus on garment wet processing as a specific training program (probably this will shortcut the chicken-egg argument between industry and academic institutes about having courses for garment washing). Also, the industry chiefs should have the realization that laundries form an extremely critical department in their factory and needs to be recognized accordingly. Only once the basic need for human resources is catered to, can one look forward to human resource development.

Summing Up

People are the biggest asset in a number of business environments; and apparel wet processing is no exception to this. It is imperative for industry to start investing in people – not merely masters. Technicians should be trained on fundamentals of fabrics, chemistry and the action on one over the other. Such formal training will form a firm foundation for the individuals, who will then be equipped to handle diverse situations too.

Apart from technical personnel, managerial talent should be bred within this industry. Garment wet processing is an industry by itself and should be treated as an independent profit center, wherein the need for managers is but natural to manage personnel, customers, resources and capital.

Thus the key human resources to develop for Laundries include:

• Garment Wet Processing Technicians

• Product Development (wet processing) “Designers”

• Managerial Talent

In order to enable the industry to have a pool of trained individuals, academic institutes should actively come forward (along with industry) and design courses to suit the industry’s needs. A small beginning has been made in the last couple of years, with sporadic workshops being conducted more as refresher courses. Closer industry-academia interaction will go a long way in establishing better-trained workforces. Separately, industry interactions by way of seminars and conferences will provide a platform for discussing common issues.

It is often said that amongst all resources available to us in business, Human Resources are the most important (Minds do move Mountains). However, we often tend to overlook this aspect in real life. If we re-dedicate ourselves in the area of garment wet processing to proper deployment and development of Human Resources, we would emerge winners in the near future.

Team S&A

Professionalism, Not Quota, For Textile Industry ( Jan - Mar'03 Issue )

We, in India are still in the process of creating awareness about the aftereffects of the end of Quota regime, which is almost after 5years of signing of the agreement. It shows how much prepared are we to face the challenges after 2004. We should have thought & discussed about these things well before signing the agreement, at all levels (Govt.& the industry as well). It is, therefore, not surprising that with elimination of textile quotas, our exporting industry will face an adjustment problems in the international market.

As we know that the textile industry in India remained protected from imports by the government, the rate of growth of this industry was very low & the competitiveness with the other nations was never the focus area. Now, an increasing number of exporters both in textile & garments believe that they are not capable enough to face the emerging free market. Although it is not clear that whether this feeling has come up because of quota free market or it is a general feeling because we have always been protected by the government & now we are no more competitive. However there is a general agreement that we need urgent measures that could help us to grow & face the challenges which are bound to be there in the free market.

So, all of us have to make a coordinated effort to organize this most unorganized sector, so that we could make ourselves competitive in the domestic market by 2004, then only we can face the world market. We need to think today, what will happen to the domestic market? The changes in the domestic market are bound to be more drastic. The removal of import quotas has already led to a big increase in textile imports. The mediocrity is going to fail, we need to take ourselves towards excellence, then only we can generate competitive exports as well as healthy domestic market.

We have to understand our strengths & make our joint efforts to work on our weaknesses, so that the opportunities which are definitely there, could be grabbed by us. We have the potential to provide the services, for which there are huge demands. We need to share the information, provide feedbacks & suggestions to the government, mend our system & fight corruption, make the industry more professional & find the ways to integrate the whole sector, right from spinning to the garment. Neither WTO nor foreign technology is going to help us in this regard, only we have to make the joint effort to work on these basic issues.

Mere statements of good intentions are not going to help this industry. The government also has to transform the policies into action through clear roadmap. The government should come up with certain scheme to encourage the large corporations to takeover the non performing units. So that those units could also be made competent by technological up gradation. In addition to this, labor discipline & training, infrastructural inadequacies, non availability & cost of electricity, roads & ports have also been affecting productivity, profitability & leading to delays & transaction cost.

The removal of import restrictions & export quotas have nothing to do with above issues. They have to be tackled in any situation. We need to take urgent actions to achieve competitiveness & this could be done through investment where government has to play a major role to create the investment friendly atmosphere. Serious efforts are also required to make loans available on reasonable terms to the viable ones among the existing units for modernization & for new entrepreneurs to establish modern production units Huge investments are also required in processing & garment manufacturing sectors because garments are going to be the flag bearer of textile industry in the years to come.

So, at the end we have to understand that we desperately need political will backed by entrepreneurial drive to face the new market scenario which is going to come after 2004.

Team S&A

Business, A Changed Outlook ( Jan - Mar'03 Issue )

Business in the information age is experiencing a complete transformation. The revolution is two-fold. First, the use of Internet and Intranet has created a new way of making and selling products. Second, corporate policies towards a whole range of stakeholders (employees, consumers, suppliers, investors, community, and society) have become an essential element of the company’s long-term growth.

While most companies are aware of the new situation, very few have fully integrated it into the way they are conducting business. For many, the use of the Internet is limited to advertising a corporate page instead of tailoring the product to each customer, and the relationship with stakeholders is viewed as secondary rather than essential.

The leaders of the new economy will be the ones who will successfully integrate both the new communication technology and the new relationship with stakeholders into their business practices. Fear of the unknown is the greatest obstacle, as businesses face a new situation with contradictory information and sometimes-serious misconceptions. Here is some thought process that goes in to explaining the new relationship with stakeholders, clarifying its importance and its different approaches.

Clearly a business’ primary objective is to deliver its business plan. In this age of increasing reliance on brand value and reputation, if bad news hits, then the business’ future can be at risk from media attack and consequent revenue and share price falls. The way in which you deal with the issue then can in itself impact your ability to meet your plan. The standards that you set therefore become strategically important, setting standards that are not only socially tenable, but locally practicable.

With the opening up of all countries to free trade with the end of quota regime, the distinction between the domestic and export markets will no longer be valid. There will be only one market, i.e., global market. Apart from price competitiveness, the compliance of the industry & trade to various voluntary and/or mandatory international standards governing the quality, environment and social accountability issues will largely define the new era of competitiveness and market access in future.

There are broadly two sets of factors, which determine a company’s competitiveness.

A) Internal factors like Quality, Productivity, HRD, Work Ethics, Labor, Environmental, Community, Human Rights etc.

B) External factors like Fiscal policies, Trade regulations, etc.

Unlike the external factors, companies can always exercise influence and control on the internal factors. It is necessary that each company looks at the internal factors more closely and attempts to improve the efficiency of each of the operational elements, while industry associations and the Government address the external factors.

This is particularly relevant to the Small and Medium Enterprises (SMEs) in weaving, processing, knitting and garmenting sectors. Though they form the backbone of the Indian textile industry, the systems adopted by many of these units are far from scientific and modern. Unless these sectors quickly adopt and incorporate the “quality culture” as part of organizational philosophy, it would be difficult for them to survive and compete with others.

The identification of all the operational elements needs to be listed before translating once “The NXT Generation” business plan. However, it will become increasingly complex to study each group of stakeholders separately. Stakeholders have to be considered as a whole, because their concerns are not limited to the defense of their immediate interest. As a result, while working on the components of a company’s Social Policy (Ethics, Labor, Environmental, Community, Human Rights, etc.), and for each subject, the Social Auditor will analyze the expectations of all stakeholders.

The scope of the audit generally includes the following policies:

* ETHICS: values the company vows to respect. Policies include the pledge not to participate in (nor engage in business with people involved in) a series of activities that are deemed offensive. This list of unacceptable activities often includes exploitation of children, unethical treatment of animals, damage to the environment, and dealings with undemocratic regimes or with “bad guy” industries (fur, tobacco, guns, etc.).

* LABOR: creation of a working environment allowing all employees to develop their potential. Policies include training, career planning, remunerations and advantages, rewards linked to merit, balance between work and family life, as well as mechanisms that ensure non-discrimination and non-harassment.

* ENVIRONMENT: monitoring and reduction of the damage caused to the environment. For instance, policies of reduction of emissions and waste.

* HUMAN RIGHTS: making sure the company does not violate human rights nor appears as supporting human rights violators.

* COMMUNITY: investment in its local community. Policies include partnerships with voluntary local organizations, with financial donations, donations in kind (computers for education, food and clothes for the poor), and employees involvement. The company may initiate or participate to a major project such as the regeneration of a poor neighborhood plagued with unemployment, poverty, low education and racial tensions.

* SOCIETY: investment or partnership beyond the community. For instance, Cause Related Marketing (partnership with a charity to market a product while giving a small percentage of the sales to the charity).

* COMPLIANCE: identification of all legal obligations and of the means to comply. Policies must deal with changing rules related to its work force (Labor), its products (Health, Environment, Intellectual property, Specific regulations), its administration (Business, Tax) its dealings (Supplier and Customer liability, Criminal actions).

A rule that clearly depends on the specific situation of the company is the Communication rule. Many Social Audits present communication as a necessary first step. According to this view, the company should advertise the work in progress and ask each stakeholder to bring its input in the building of the Social Policy. One of the success stories often mentioned is The Body Shop case. Having chosen communication and transparency since the beginning, The Body Shop enjoys the full benefits of its well-prepared Social Policy. While communication of the Social Policy is an essential element of its success, communication during the early stages of its creation is a decision that must be carefully weighted, as the company must decide if it is ready to face the increased expectations and scrutiny from stakeholders.

Finally, a situation with no satisfying rule is the case of conflict between Western values. In the case of conflict between Western and non-Western values, the rule is clear. Western values (which are based on the protection of individual rights) must always be chosen, for many reasons: they are the values of the most important stakeholders for the company, they are safer (usually won’t lead to boycotts or trials), they are the basis for all international conventions, and they could be presented as a contribution to the enlightenment of other cultures (for instance, improving the life and status of women in Islamic or tribal cultures). In the case of conflict of values between members of the Western world, there is no rule.

Team S&A