Performance is very broad in its meaning and thus difficult to define and describe in a clear manner. Performance is some time confused with the productivity. This confusion causes a conceptual problem in understanding in its real sense. As a matter of fact the productivity is the output or volume of any product or service in a given time, but the performance is a broader term, which also include productivity as a part but also consist of other factors like quality consistency and so on. Effectiveness of an industry or organization depends upon the use of resources and the outcome of that usage in different manners. Some commonly used frameworks to gauge the industrial/organizational performance and effectiveness are stakeholders approach, system resource approach, competitive value approach and goal approach.
Performance measurement factors:
The other way to measure performance was financial measures like return on investment (ROI) and return on equity (ROE). Till early 1990's main focus was on financial measures. But very soon, it was realized that financial measures only covers the monitory values of any industry or organization and many other important factors like continuous improvement and innovation are not covered by these measures (Kaplan & Norton, 1992). Moreover, financial measures were also been criticized as their focus is towards the past activities based on previous transactions and they are unable to guide towards any creativeness regarding present and up coming actions (Kaplan & Norton, 1992). The KSA report (1996;1998) discusses that for SME's, the benchmark of monitory measures was the centre of attention. Hence, the cost is very basic measure to evaluate the performance but this not all about cost. For example, an organization could be successful in working at very low cost but its lead time, productivity and customer satisfaction may not going well. Bagchi (1996) also discussed the comparison of modern and traditional measures. Where as the traditional measures are about the function based and the modern measures are value-based.
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Due to these barriers in 1990's, the experts started looking for a system to measure performance based on cost and the customer responsiveness. Kaplan & Norton (1996a) in their next research paper presented balance score card perspective. According to this performance measurement system, different priorities are allotted different weight age and than analysis is done keeping in view the scores achieved in different categories. Additional factors of non-financial measures such as capability of time and resource utilization, flow of information, performance of supplier and risk management were involved in performance measurement (Beamon 1999). Beamon also describes the elements for the performance systems like all the information required to measure, their versatility (in different situations), and their practicality for measurement. So the right sequence to provide us an initial outline for performance measurement system can be stated as follows.
First we need to identify the performance measures, than classify them in their respective groups and develop a system to measure the performance.
Gunasekaran et al. (2001) discussed the performance measurement system from different point of view. Firstly they discussed the performance measurement system in the value chain. They said that performance can be measured at different functional levels like at planning and product design stage, at production stage, at the time of delivery. This should also be measured with respect to the customer feed back and even from supplier side as well. They also looked it at different levels for example at strategic level and functional level.
When we talk about the industry performance, than we have to consider the things at macro level. An industry is a bunch or group of organization offering/producing similar products or services. If we intend to discuss of an industry's performance in the context of a specific country than we will measure that industry's contribution in GDP, its earning from foreign trade in terms of foreign exchange and the number of jobs associated with that industry (for skilled and unskilled workers to share country's employment percentage).
Pakistan's textile industry has a historical heritage. The Indus valley, situated in Pakistan has an ancient background regarding garments. Almost 3000 BC, people in this valley used to grow, spin and weave cotton into garments. But these activities were being done on smaller scale like cottage industries. Only two textile mills were existed, when Pakistan came into being. But after the independence, the textile sector showed tremendous progress and development was made in almost every field of textile.
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Especially garments industry is rampart for the economy of Pakistan. Almost sixty percent of the foreign reserves are generated through textile and 46 percent of GDP consists of textile while using 40 percent of total investment through financial institution of the country. Pakistan is fourth largest producer and third largest consumer of raw cotton. Thirty eight percent of the country's labor force is associated with the textile. Textile sector's dominance prevailed for years in the country but during the last two decades this industry as a whole and garment sector specifically is facing some serious challenges domestically and internationally. Pakistan's garment industry is lacking behind due to its low concentration towards adopting latest and efficient technology to get more productivity and a competitive edge. Garment manufacturing process starts from growing cotton, ginning, spinning, weaving/knitting, dyeing, washing (any special treatments and processes), cutting, sewing, finishing and packing. We have outdated techniques in at some stages especially in backward integrations. Pakistani cotton producers do not concentrate on picking the cotton flower from plants and too many contaminations like hair, jute, dust are mixed o lower down the cotton quality. A little care at the time of picking can improve the quality of cotton dramatically. Man-made fibers have better outputs due to non-cotton product, but have less demand as compare to cotton products world over. An other example is at ginning stage, where Pakistan is producing 8 bales in an hour where as in developed countries this number is 60 bales per hour. At spinning and weaving stages, although latest and modern machines have been introduced in some well established textile companies, but our mass production still dependent on the old and less efficient machines for example power and auto looms (Islam 2006). Pakistan's garment industry is in trouble due to some severe problems in competing the other rival countries and has no or less competitive advantage as well (Johri & Qazi, 2007).
There are 23 to 28% losses on average have been observed in shape of rejection and wastages from knitting to dyeing, finishing, cutting till stitching (Altaf 2008). Different other factors also influence the performance of garment industry of Pakistan. From recent years, floods have been destroyed the major portion of cotton as there are no dams to store and control the excess water during rain season. And we have to import cotton to match the domestic demands. During session of 2007-2008 Pakistan was second largest country to import cotton (Salam 2008).
In recent past years, there are new regional competitors entered in competition like China, Bangladesh and Sri Lanka in addition to India, Vietnam and Thailand in garment industry. Now it is time to build a strategic relationship with the customers to stop them looking for other substitutes. Needs is to adopt customer's preferences in shape of flexibility and convenience to provide better service. Pakistani companies are not focusing to obtain knowledge and information about customer's preferences to produce value added garments to achieve customer satisfaction (Riaz 2008). New markets should be explored to enhance the volume to get awareness of new trends for domestic and off shore markets (Rehman & Ali 2008). At present, international buyers are hesitant to build a long term strategic relationship with Pakistani suppliers because of uncertainty regarding the fulfillment of their orders due to energy crises. No buyer will tolerate to put its retail customers in danger, who believe in JIT (just-in-time) system, where as our industry is based on traditional styles to deal with the customers (Lang, 2009). As a result most of the business is shifting to our neighboring countries, which are more steady, innovative and competitive. Other regional countries are offering better prices and broader product line as compare to Pakistan in garments and apparel (Naqvi et al, 2010;Haider, 2011).
Low tendency of exporting value addition is a normal trend in Pakistan. There is no doubt that if we export raw materials like cotton, yarn and fabric, we will loose a major
Garments industry has one more constant feature of product diversification due to its nature of use. Rapidly changing fashions and seasonal requirements make this sector ever changing. Where as, Pakistani garments manufacturers prefer to go after routine garments like denim and tee shirts. There is need of product diversification and to expand the product line to capture the broaden export markets and to get maximum customer retention. Ahmed (2010) points out that Pakistan's 88 percent exports are in regular men's wear, but women clothing retains more share as compare to men's clothing in the global market. Arifeen (2010) also expresses same views that Pakistan is the only country which exports other textile items rather than garments and thus looses a handsome amount of revenue. All other competitors are generating most of their revenues from the export of apparel.
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With the revolutionary developments in technology, means of transportation and growing trends of trade agreements have boosted the international trades to that level, as it was never before. Setting the universal standards in quality, currency exchange and trade laws have stimulated the process in full pace. Garments and textile, being a universal commodity have shown a steady growth during last two decades. Clothing and textile volume which was $212 billion in 1990 got a rise of $613 billion till 2008. Pakistan was also able to increase its exports in the era of 1990 till 2005, but with a very low pace. However, export numbers show that Pakistan's share in international trade reduced from 2.23 in 2005 to 1.81% in 2008 (Ahmed, 2010; Siddiqi et al, 2012).
Garment manufacturing unit requires very less funds as compare to the heavy investments for spinning and weaving mills. Returns are very low from spinning and weaving sector due to larger amount of investments. Garments as value added item have much better returns from financial point of view. Pakistan, being a major cotton growing country made having investments in spinning and weaving sectors. On the other hand, countries like Bangladesh, Vietnam and Thailand invested in establishing garments manufacturing units and imported yarn from Pakistan. By the passage of time, those countries shifted to new sources of yarn with better rates and reliability. Now Pakistan is not justifying the poor returns on heavy investments in spinning and weaving sectors (Khan & Khan, 2010).