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Supply chain of Indian textile and apparel sector

Paper Type: Free Essay Subject: Marketing
Wordcount: 5408 words Published: 1st Jan 2015

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The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning facilities, spinning and extrusion processes, processing sector, weaving and knitting factories and garment (and other stitched and non-stitched) manufacturing that supply an extensive distribution channel as shown in fig. This supply chain is perhaps one of the most diverse in terms of the raw materials used, technologies deployed and products produced.

This supply chain supplies about 70 per cent by value of its production to the domestic market. The distribution channel comprises wholesalers, distributors and a large number of small

Cotton

(Farms)

Jute/Wool/Silk

(farms)

Polymers

(Petrochemical Plants)

Ginning

Spinning

Processing/

Finishing

Garments & Accesories

Other Textile Products

Distribution Channel

(Export & Domestic Markets)

Man-Made:

Filament Extrusion Process

Composite Mills (spinning, weaving,processing)

Stand-Alone Weaving(mid-size)

Powerlooms (small)

Handlooms

Knitting

The Textile and Apparel Supply Chain

Grey

Yarn

Cloth

Cone

Hank

Cloth

retailers selling garments and textiles. It is only recently that large retail formats are emerging thereby increasing variety as well as volume on display at a single location. Another feature of the distribution channel is the strong presence of ‘agents’ who secure and consolidate orders for producers. Exports are traditionally executed through Export Houses or procurement/commissioning offices of large global apparel retailers.

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It is estimated that there exist 65,000 garment units in the organized sector, of which about 88 per cent are for woven cloth while the remaining are for knits. However, only 30-40 units are large in size (as a result of long years of reservation of non-exporting garment units for the small scale sectors – a regulation that was removed recently). While these firms are spread all over the country, there are clusters emerging in the National Capital Region (NCR), Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana employing about 3.5 mn people.

Definition of supply chain management as developed and used by The Global Supply Chain Forum (3): Supply Chain Management is the integration of key business processes from end user to original suppliers that provides products, services, and information that add value for customers and other stakeholders.

The above definition is reflected in the configuration of a typical apparel supply, shown in fig-2. As evident, the entire apparel supply chain consists of every organization starting from initial fibre supplier to consumer purchasing apparel products for final consumption. Each organization comprises various functional domains, as manufacturing, planning, marketing etc. as shown in the fig-2. Effective supply chain manages flow of demand and supply, which are moving in the opposite direction to each other, in an efficient way at every node of supply chain.

 

Apparel Supply Chain

Manufacturing process

Domestic apparel market can be divided into three different categories

“Fashion” products, with a 10{week product life (approximately 35 percent of the market).

“Seasonal” products, with a 20{week product life (approximately 45 percent of the market).

“Basic” products, sold throughout the year (approximately 20 percent of the market).

Men’s and children’s merchandise usually fall into the basic category, while women’s merchandise dominates seasonal and fashion categories, showing the importance of fashion and resulting frequent design changes in the women’s market.

Companies involvement in apparel manufacturing vary. Traditional manufacturers are responsible for all phases of manufacturing. But most of the industry is organized in the form of jobbers and contractors, jobbers being responsible for the design, cutting and marketing and contractors being responsible for the sewing and assembly.

Design

Design is either completed in house or commissioned to smaller design companies. The first step in design is analyzing the consumer which the company is targeting. Some apparel companies also use fashion consulting services, which go out into the streets to find out the emerging styles. More important is the feedback gained from the sales of the similar products that were developed earlier, which requires collaboration between the retailers and the manufacturer. These tasks take considerable amount of time. The design process usually starts while the previous garments are still retailed. The design process in India starts as early as 40 weeks before the season. The company’s goal is to take down to 17 weeks, the average for fast turnaround companies like Zara. Responsiveness may be greatly enhanced by reducing the time required for design development. Computer Aided Design (CAD) systems are recently being used for such reduction efforts. Besides reductions in the actual design time, CAD systems also reduce the time for making the pattern and enable electronic storage of the design which makes later modifications and transmissions easy. Recently emerging Product Lifecycle Management (PLM) technologies are targeting to improve communications throughout the supply chain during the product development process. The primary benefit of these new technologies is to shorten concept{to{production cycle time which is taking on the average 26 weeks for the apparel and footwear industry according to a research study by Deloitte and Touche (Daily News Record 2005)

Production of samples and order collection

The next step after the design in the fashion calendar is the production of samples. At Indian apparel companies first samples are produced and approved 5 month before the delivery to the retailer. After 10 weeks is usually the time that companies checks to see whether the cumulative orders in each style exceeds minimum production quantities. Rarely, Companies has to cancel the orders, if the cumulative demand in am particular style is not enough to carry out a cost efficient production. Trading off the cost of such cancellations against the cost of failing to capture enough market share, Manufacturer has to plan its initial merchandise assortment (samples to be shown to the retailers) very carefully. Note that the customer (and thus the retailer) preferences are highly unpredictable when Manufacturer decides its assortment and starts to collect its customer orders.

As a result of capacity constraints in peak periods and recent trend of retailers willing to order much closer to and even during the selling season, some other companies have to commit themselves to some or all of their production volume prior to gathering all their actual orders.

Production

A strategic question for the apparel producers at this point is where to carry out the manufacturing operations. Some companies operate their own facilities for manufacturing. Some others use contractors. The trade offs for this decision are typical of any manufacturing operation. When the collection of orders is com-

plete, cumulative orders in each style is assigned to manufacturing contractors. The assignment is usually based on the production volume of each style. For these factories the production and transportation lead time is about 3 months. The furnished merchandise is delivered to retailers.

Distribution

Assembled garments are labeled, packaged and usually shipped to a warehouse. The garments are then shipped to the retailers’ warehouses. In an effort to compress the time from placement of the retailer order to the consumer’s purchase of the apparel, several practices are gaining popularity.

Retail operation

A retailing organization is responsible for the following tasks:

buying merchandise for sale in stores

operating stores for the selling of merchandise

operating warehouses and trucks for receiving, storage and transshipment of merchandise

in addition to the usual tasks such as finance, marketing and personnel management. Most large retailers are organized in a way that these three tasks are separated; a general merchandise manager responsible for buying, a manager of stores responsible for store operations and an operations manager responsible for logistics

Push Supply Chain

Push oriented supply chain caters to stable demand of homogenized products. In this type of supply chain, production and distribution decisions are based on long-term forecasts, as demand is stable. Push supply chain was characteristic of apparel organizations during the period from 1950 to 1970, when they had vertical organization structures and optimized activities focused on functions as companies were manufacturing oriented in a demand surplus environment of mass-products (4).

Arvind Mills Ltd.

However, many present apparel organizations still have push oriented supply chain. Arvind Mills Ltd., one of the largest denim manufacturers in the world, has configured its supply chain based on push system. Typically, Arvind manufactures denim sorts based on monthly forecast to stock at various warehouses. As Arvind Mills pushes its products (sorts) to ware-houses, actual selling takes place on an ongoing basis with the sold sorts being replaced subsequently. Push system operates under make-to-stock environment.

While the system works efficiently at Arvind for years, it becomes difficult for a company to follow the same where high fluctuation in market demand exists. A Push-based supply chain accumulates excessive inventory (cycle stock and work-in-process) by the time it responds to the changing demand. In addition, since long-term forecast plays an important role, it is difficult to match supply with variable demand. Push supply chain also entails larger production batches, incompatible for catering demand of short quantity.

Moreover, the push supply chain generates more buffer/safety stock at every node of supply chain due to bull whip effect. This is due to inability of individual manufacturer of fibre, yarn, fabric and garment to access the actual demand. The bull whip effect shows increasing demand variability in the upstream direction of supply chain. Due to poor visibility of actual demand by respective manufacturers in the apparel supply chain, each tries to build buffer against unforeseen demand-variability. As each member superimposes its own guess on the demand forwarded by its immediate next organization, this amplifies the demand variability in a progressive manner in the upstream direction of supply chain.

Pull Based Supply Chain

In the timeframe from 1970 to 1990, corporations were of both vertically and horizontally aligned, but apparel companies increasingly oriented towards market to sustain increasing competition. With the emergence of more volatile market-demand and powerful retailers, like Wal-Mart, K-Mart, apparel organizations unable to supply competitively small orders that seldom repeat. Long forecast-based production results into huge stocks piling up at every stage of supply chain. This accumulation of inventory is further aggravated due to bullwhip effect.

To survive in this competitive scenario, organizations fine-tune their production and distribution as per actual demand given by customer in a pull oriented supply chain. This enables reduction of unnecessary buffer stock, improvement in service level to supply what consumer wants, not what company makes.

Raymonds Ltd.

Raymond Ltd., the prominent apparel organization in India, has configured its supply chain based on pull system. The customers pull what they want from the manufacturing-base of Raymond through dealer-based distribution network. Entire supply chain of Raymond, which has vertically integrated composite network of different operations, produces only as per demand of customers.

However, as the entire supply chain is driven by actual demand, the time to market becomes long, depending on type of supply chain and number of players involved in it. Typical cycle time from order to market is 60 to 90 days in a pull or make-to-order system. This long lead-time fails to address the other challenge of the market, i.e. quick response to customer demand. Also in a pull strategy, it is not possible to get advantage of economies of scale, since batch production or truckloads are hard to achieve. Another disadvantage is proliferation of product mix. Moreover, as consumers demand drives manufacturing, it is normal for management to introduce as many variants as possible to capture market share. However, increasing product diversity spawns significant operational problems and reduces the responsiveness of the supply chain.

Push-Pull is also termed as synchronous supply chain. In this strategy, the initial stages of the supply chain are operated based on Push system, and the final stages are operated on Pull strategy. The interface between the Push-based stages and the Pull-based stages is referred as the Push-Pull boundary.

Push-Pull is also termed as synchronous supply chain. In this strategy, the initial stages of the supply chain are operated based on Push system, and the final stages are operated on Pull strategy. The interface between the Push-based stages and the Pull-based stages is referred as the Push-Pull boundary.

Postponement, or delayed differentiation, in product design is also an excellent example of a Push-Pull strategy. In postponement, the firm designs the product and the manufacturing process so that actual product differentiation can be deferred as much as possible down the pipeline when actual demand is known. Thus, the portion of the supply chain prior to product differentiation is typically based on push strategy, and the portion of the supply chain starting from the time of differentiation is based on Pull system. Postponement can be done based on time, place and form.

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Consider the case of Morarjee Brembana Ltd., the leader in 100 percent cotton high-value shirting fabric manufacturer, which out-sources greige yarn based on forecast, and weaves and processes to produce qualities as per actual demand of customers. This implies that supply chain of Morarjee Brembana is divided into two parts. The Push part is the part of the Morarjee supply chain prior to weaving, while the Pull part is the part of the supply chain that starts with weaving and is based on actual customer demand. Indeed, demand for yarn is an aggregation of demand of all finished products that use this component. Since aggregate forecasts are more accurate, uncertainty in component demand is much smaller than uncertainty in finished goods demand. This, of course, leads to safety stock reduction.

Following insights are arrived at from the above discussions:

Design of supply chain configuration depends on clock-speed of organization. Clock-speed of organization is the speed with which the product-portfolio and process change in response to market demand. So, organization having low clock-speed, i.e. with relatively stable demand may have push oriented supply chain. On the other hand, a high clock-speed organization with variable market demand may have pull oriented supply chain.

In the Push portion of a Push-Pull supply chain strategy the focus is on cost while in the Pull portion of the strategy, the focus is on service levels.

In a Push-Pull strategy, the Push part is applied to the portion of the supply chain where long-term forecasts have small uncertainty and variability. On the other hand, the Pull part is applied to the portion of the supply chain where uncertainty and variability are high and therefore decisions are made only in response to real demand.

In a Push-Pull supply chain, inventory is minimized as it is designed to eliminate the safety stock by make-to-order and long cycle-time is reduced by pre-arranging/ pre-manufacturing part of the supply.

It is found that management of apparel supply chain moves from push to pull and finally to synchronous system. However, all three kinds of supply chain management co-exist in apparel industry as appropriate supply chain strategy depends on the industry, the company, and individual products. The higher the uncertainty in customer demand, the better to manage that part through Pull strategy

 

Internet and related technology bring apparel manufacturer closure to actual consumer, with a need to cater individual choice in short time. This coupled with the variable demand of consumer makes it mandatory for organization to handle single item in short quantity in place of multiple items each in large quantity. This shift also increased the importance and the complexity of reverse logistics to efficiently handle customer-return.

Supply chain efficiency is about minimizing inventory, while responsiveness is about increased customer service. In a volatile market driven by flickering consumers moods, these two dimensions of supply chain management are often irreconcilable. Conflict between efficient supply chain and responsive supply chain has driven the evolution of supply chain configuration to better addresses both inventory and serviceability issue. By choosing right kind of supply chain with respect to market demand, infrastructure etc., apparel organization can address both issues effectively and maximize the value offering.

The way apparel organization embraces superior serviceability in shaping its appropriate supply chain configuration, will determine value of future business. Supply chain management deals with not only supply from manufacturers, but also demand from consumers filtered through various agencies. More than efficiently manage the supply chain, apparel organizations need to effectively manage the entire supply chain keeping both optimization of inventory level and fast responsiveness to market demand in mind.

Collaborative Product Development

Collaborative product development (CPD) is to collaboratively develop, build and manage products throughout the entire lifecycle, no matter what tools they used, no matter where they are located geographically or within the supply chain. In apparel manufacturing context it is about sharing colour, texture and other details while developing range.

The major benefits of CPD for apparel companies include:

· Accelerating time-to-market provides improved customer satisfaction, greater profit potential, and gains in market share.

· Improved management of frequent specification changes

· CPD yields higher quality products and reduces costly design flaws.

· Automatic tracking and notification of key milestones and improved scheduling between multiple layers of suppliers.

· Effective data sharing “anytime, anyplace” keeps everyone on the same page, eliminating costly errors and delays.

Collaborative Product Development in India

In Indian apparel export environment product development process involves one or more different players. CPD primarily applies development of raw materials during sampling. For example While developing ranges/samples with buying office, one may share colour swatches with thread supplier. Thread supplier should be kept informed about all changes in colourway and approximate quantity. Thread supplier will be responsible for all developments of thread need to be done to match the garment (not only color but fastness, finish etc.). Once the sample is finalized and sOkayed for production, thread supplier will start production of compatible thread. Bulk fabric lot and compatible thread will arrive to manufacturer simultaneously (contrary to current practices of searching for correct thread once bulk fabric arrived).

However “developing” often means actually “sourcing”. There is a great deal of difference in times of expertise required for “development” and “sourcing”. While there are two important parameters of product development, namely “cost of development” and “time of development”, actual product development may be classified into the following four categories:

Developing fabrics (the texture, design & colour)

Fabric development primarily takes place either by specific fibre composition, special yarn effect, special weaves or knit effect special surface print, special wash effect or any other means

Developing the body (the silhouette)

Developing new silhouette primarily means new pattern development. It is observed that as majority does not follow the concept of pattern development by altering basic block rather developing new patterns every time, this activity consumes lot of time

Accessories

Common accessories used are button, thread, zipper etc. Developing new types of such accessories are rare, in majority of the cases sourcing of the right type of accessories (at most dyed to match colour) from a set of vendor base is common practice.

Wash

Sometimes the finished merchandise requires special texture, which is achieved by special wash (and/or other mechanical treatment) at fabric or garment stage.

While product development and product sourcing are both followed in Indian garment industry, people tend to follow two different models of operations. Manufacturer’s involved in product development generally follows direct sourcing model, where manufacturer himself is directly involved with numerous vendors. Manufacturer’s involved in sourcing generally follow indirect sourcing model, where manufacturer is directly involves with one (or more) sourcing organizations, who intern are networked with numerous vendors to source (or develop) and offer the total package to the manufacturer.

Raw material sourcing

Direct Sourcing

 

Indirect Sourcing

Primarily developing or sourcing of products and services are carried out in two forms, either manufacturers source or develop raw materials and accessories from different vendors and buying office only approves the quality or buyer develop or source raw materials from “set of vendors” and approve quality. The manufacturers source accessories from those “set of buyer approved vendors”. In Indian export manufacturing industry CPD virtually leads to “buyer approved vendors” scenario, which has several perceived advantages and disadvantages.

EXAMPLE If your company produces many products, which have different customers, suppliers and delivery methods, how do you deal with the complexity of your supply chain? One approach used is to pick a specific product, like a men’s nylon parka and trace all the process steps for the product from raw materials to its purchase by a consumer. The graphic below depicts the findings of a team made up of the retailer, an apparel manufacturer, 2 textile mills, and 2 fiber suppliers involved in the production.

In this supply chain, the total time from the nylon fiber to the consumer buying the jacket was 45 weeks. There was 9 weeks of process time and the actual assembly (cutting and sewing) of the parka took only 55 minutes. Why did it take so long for the raw materials to reach the consumer in a product? The primary reasons are due to the uncertainty in the retail forecast. There was a lot of “just in case inventory” in the supply pipeline. From the fiber supplier to the retailer, none of the players wanted to disappoint their immediate customer. In addition, there were 15 inspections, 10 transportation steps and the goods spent 24 days in trucks. The supply chain in total was not synchronized and only a few business processes between companies were integrated. In addition, it is not unusual for companies in the supply chain to be changed because of better service or pricing from a competitor.

Illustration

A large buying agent wanted to place huge order of yarn dyed T-shirt. The buying agent decided to place order with three different manufacturers in Delhi and Ludhiana. The buying agent collaborated with a textile mill to book total yarn quantity. The textile mill collaborated with the buying agent during dying approval. Once agent approves the dye lots then garment manufacturers are advised to source yarns from the “approved” yarn supplier. These types of collaborative practices are becoming very common these days. In one hand colour and quality consistency increases and simultaneously developmental (approval!) lead-time reduces. This is only possible while the quantity is large, either initiative from buyers/buying agencies (due to consolidation of orders) or large manufacturers can initiate the change. Textile mill will not be interested to collaborate with small buyer or manufacturer simply because of volume!

Illustration

A large buying agency wanted to place order of a special enzyme washed programme. Getting the wash effect developed through individual manufacturer is time consuming and lacking expertise. The buying agency contacted a enzyme supplier to develop the receipe with a promise to guarantee business provided wash effect is approved. While the sampling and fit approvals were going on with manufacturer the enzyme supplier developed and approved the wash effect. Now buying agency directs all the manufacturers to source the enzyme from developed source. Saving time and energy for both manufacturer and agency as well consistency in product quality.

In line with above examples many buyer and manufacturers are now developing partnership in global level. For example Gap Inc. shares their season forecast colours with Coats worldwide for development of embroidery thread. All Gap vendors are further directed to source all their embroidery thread need from local coats suppliers. No question of approvals!

Objective 2

Lead Time Theory

Today’s customers around the globe demand product as they want it, when they want it, and at the best possible price. In today’s highly competitive global marketplace they are placing greater value on quality and delivery time. Manufacturers similarly have begun to place more value on quality and delivery time and companies are trying to gain a competitive edge and improve profitability through cutting cost, increasing quality and improving delivery. However it is safe to say that the more competitive the industry, the more shortened lead times will help. In competitive industries, short lead time will differentiate a company from its competitors, leading to increase sales (Charies J. Murgiano, CPIM).

Lead time is one of the main competitive factors among companies. The ability to deliver quickly influences export, sales and thereby revenue. The definition of lead-time can vary, depending on what part of the company is focused upon. It normally includes all activities from start to end. Leadtime begins with the first receipt of a customer order and ends with customer receipt of the product or service. Everything in between is the lead-time (2004, elsmar.com). Lead-time refers to the time lag between placing an order and receiving it (Li, 2000). In this study lead-time is defined as the time it takes from getting order from a customer and received the delivered product by that customer(Azad, 2004).

Total lead-time is made up of time devoted to processing orders, to procuring and

manufacturing items, and to transporting items between the various stages of the supply chain.

However, lead times can often be reduced if items are transported immediately after they are

manufactured or arrive from suppliers (David Simchi et al., 2000). Lead-time typically includes two components: Information lead times (i.e., the time it takes to process an order) and Order lead times (i.e., the time it takes to produce and ship the item). Information lead time can be reduced by using very sophisticated and modern communication system while Order lead time can be reduced through efficient supply chain management (Simchi-Levi, David, 2000)

A researcher named Marc Smith explained lead time in two ways (www.elsmar.com, 2004).

First, Customer lead time, which refers to the time span between customer ordering and customer receipt. Second, Manufacturing lead time, which refers to the time span from material availability at the first processing operation to completion at the last operation. In his paper Marc Smith developed theories for the reduction of lead time in the equipment manufacturing company specially in vehicle manufacturing company. It is also applicable to the RMG sector. In the lead time reduction process, identifying the beginning of the process and walking through the process is very important. In the RMG sector after order confirmation the process begins by sending information to the suppliers for raw materials (fabrics + accessories) and the process run through shipment of final product and received by the buyers. The whole of this process is comprised of the following steps – order submission, scheduling & sequencing, manufacturing and distribution. A manufacturer may be able to reduce lead time by taking some strategic measures in all of these four stages.

From the above theory it is clear that the total lead time is customer lead time. Therefore we can

write that;

Customer lead time = [{Information lead time} + {Order lead time}]

Total lead time = [{Information lead time} + {(manufacturing lead time) + (shipping time for

import fabrics) + (Shipping time for export final product)}

(Note that, Shipping time for import includes shipping time, unloading time and transport time from port to manufacturing point. Shipping time for export includes manufacturing time for final products and shipping time for export)

Study shows that lead time in China ias 30 days(source: Nuruzzaman, Ahasanul Haque “Lead time management in garment sector of Bangladesh: An avenues for survival & growth”, European Journal of Scientific ResearchISSN1450-216X Vol.33 No.4 (2009), pp.617-629). while in India lead time is 45-60days(source: Sameer Kumar, A. Samad Arbi, (2007) “Outsourcing strategies for apparel manufacture: a case study”, Journal of Manufacturing Technology Management, Vol. 19 Iss: 1, pp.73 – 91).

China requires only 30 days due to their textile and other backward linkage facilities as well as export friendly management and supporting policy.

The apparel cluster in Delhi-National Capital Region (Delhi NCR) includes locations across four states, and accounts for about twenty five percent share in the country’s current apparel exports. Within India, Delhi holds a position of prominence and can play a significant role in capturing additional value within the country. As a sourcing destination and as a gateway to the rest of India’s textile and apparel sector, Delhi provides unique value in product development and design, and a tremendously flexible supply base.

A garment manufacturing unit located in Delhi NCR region and fabric manufacturing unit located at Ahemdabad (Gujrat), so total lead time can be divide in following parts.

Total lead time = [{Information lead time}+ {(Order lead time)}]

Or, = [{Information lead time} + {(time to manufacturing fabrics) + (time to shipment of

Fabrics)+(time to unloading)+time to sample approval and production of final product)+

Time to shipment to retailers)}]

46 days=2+6+15+1+12+10

From the analysis it is clear that the impact of information lead time is very negligible on total

lead time. It contributes only 6%. However, order lead-time has a great

 

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