Factors Affecting the Shifting In Sourcing Destination

Apparel sourcing decisions can make or break an apparel business. Balancing

cost, capacity, and compliance, while maintaining navigation volatility, is not an
easy task. Apparel businesses run in a fast-changing and highly demanding
environment. Apparel sourcing in such a scenario can become the key to
survival. Right apparel sourcing decisions offer greater process efficiencies and
flexibility along the complete supply chain.
Today, apparel buyers are shifting their focus towards lower-cost offering
countries, where alongside, some traditional low-cost countries are also losing
their sheen. But the cost is not the only factor. Agility, proximity sourcing, and
re-shoring are also the factors that have come into play.

Factors Affecting Apparel Sourcing

Trade policies and politics
Policies are one of the major contributors to the product cost. Trade politics, and
thus the resulting trade policies are one of the key determinants of the decisions
relating to the choice of suppliers. This is especially valid in the global sourcing
scenario of the apparel industry.

“If you are a sourcing director you need to be a student of United States
trade policy, and you need to act on the information.” Senior V.P. of
J.C. Penny, USA-ITA and AISA trade, and Transportation
Conference.
A prime example of the effect of trade policies on sourcing decisions can be
seen through the effect of the Trans-Pacific trade pact (with the US) resulting in
the exponential growth of the Vietnam’s apparel industry.

Changing market environment

Price fluctuations, changing requirements with different market segments,
market-specific security and customs compliance, customer value and
consolidation, and the ethical values pertaining to the markets all define the
choice of supplier countries.
How Sourcing Decisions Affect Businesses?
Costs are increasing steadily, compliance is gaining more importance and
awareness, compliance laws are tightening due to multiple unfortunate incidents
apparel industry has seen recently, and buyers are continuously looking for new
markets. These factors have made apparel sourcing much more complex. With
an increasing demand for transparency in the supply chain and growth of multi-
channel markets, the impact of apparel sourcing decisions has much wider span
now.

There are multiple layers in choosing the right suppliers. Sourcing decisions not
only affect the cost and profits a business gets, but also the product’s quality,
order lead times, supply chain responsiveness, sales volume and the value
system of the company. Good sourcing decisions also lead to long-term supplier
relationships which further add many advantages to the list.

How Apparel Sourcing has changed over time?

Over the last 20 years, the fashion industry has significantly evolved. The
advent of the concept of ‘throwaway’ or fast fashion has forced buyers to look
for lower lead times, lower costs, and a better design, quality, and speed to
market flexibility. Procurement officers in apparel industry have always focused
mainly on the cost advantages, but now many other factors are taken into
consideration. Cost, quality, capacity, speed, and risk are the five main criteria
that dominate sourcing decisions. Corporate social responsibility and
sustainability are the “buzzwords” which are also factoring in.

These conditions have brought about two major changes in apparel sourcing
today, i.e. exploration of new markets and the degree of digitization.

New Markets
Rising labor and energy costs in China and the series of tragic accidents in
Bangladesh’s garment factories have led apparel players to explore new
sourcing markets. Bangladesh is still one of the top choices, but rising attention
to the working conditions in the factories is pushing buyers to move part of their
operations elsewhere. Hence, countries in Southeast Asia like Vietnam and
Cambodia, and Sub-Saharan counties like Ethiopia, are gaining more
importance. Their free trade agreements and lower labour costs are attracting
more and more buyers.
Digitization
Digitization is another big change that apparel sourcing is experiencing. Like
any other industry, apparel sourcing also needs to become more customer-
centric and transparent across the supply chain. Although apparel industry is
still at the beginning of its digitization journey, companies have started thinking
along the lines of filling the gaps between sourcing and product development
silos. Digitization is helping sourcing managers to get better supply chain
visibility, and thus reduce their lead times, costs and manage sustainability.

3D design and prototyping

While talking of digitization, one of the recent technologies in the process of
product development is 3D design and prototyping. These technologies can
unlock far-reaching innovation in design. Many big players who have
implemented 3D design and virtual sampling have observed a reduction of 2
weeks or more in the process of sampling along with cost-cutting. By
integrating the fabric with these new technologies, companies can also integrate
real-life costing into the process. For Example, Some solutions link the 3D
sample directly to the marker efficiency.

3D design and prototyping also enable a manufacturer to have a closer

collaboration between functions throughout the product development process as
well as with the suppliers. Brands like Hugo Boss and PVH have gone way
further by including these technologies into their sell-in processes.

Potential Of Blockchain
Blockchain technology is another opportunity to look upon when one talks
about digitization. The blockchain technology has the potential to increase the
transparency across the supply chain by transforming the way information and
transactions are captured, owned, stored and shared. In addition, it can enable
much easier end to end tracking of products along the value chain.

Proximity Sourcing
Proximity sourcing is an intriguing concept that looks to balance cost and
service, with going green or sustainability also increasingly playing a role in the
decision-making process.

For example: currently, in the apparel industry, where many companies use
Asian countries to make more mature, stable products but choose closer
sourcing locations, such as Central America, for newer, fashion SKUs,
accepting higher unit costs to gain speed and flexibility. This allows “the supply
network to act more quickly to the more unpredictable nature of the
demand”.

Re-Shoring and the apparel industry

Reshoring is the practice of bringing manufacturing and services back to the
U.S. from overseas. It’s a fast and efficient way to strengthen the U.S. economy
because it helps balance the trade.

The benefit of localization or producing near consumers is an important piece of

a supply chain these days. Today’s world of fast fashion demands supply chain
optimization which is easily facilitated through reshoring and domestic
sourcing.

Today many global brands are considering reshoring since it makes good
economic sense, is a smart branding strategy and saves time.

Upcoming Sourcing Destinations in Apparel

Manufacturing:
To engage more with their suppliers, apparel companies are not only working
on improving productivity but also on compliance. For instance, more than 150
companies from 20 different countries have signed the Bangladesh Accord on
Fire and Building Safety. Hence, gradually apparel buyers are working towards
developing industry standards that ensure transparency and compliance. This is
making compliance a top criterion, along with costs, capacity and supplier’s
proximity to US and European markets in the evaluation of sourcing markets.

The Future of Apparel Sourcing:

Balancing cost and compliance with the other factors, and managing the rise in
globalization in apparel market are making sourcing much more complex than it
already is. To add to this, multiple retail channels and greater visibility demand
more from sourcing managers than ever before. Digitization is a factor that can
take sourcing into the desired directions, but along with that the way business is
done has to be changed. Sourcing professionals and merchandisers need to
develop new skills aligned to the changing requirements of the industry.

The future of apparel sourcing lies in instilling new skill set amongst sourcing
professionals, who possess product knowledge, business acumen, consumer-
centric focus, Omni-channel perspective and design and engineering
capabilities. Empowerment of sourcing staff in companies, meaningful
professional development opportunities, opportunities of cross-pollination
among functional departments and better talent management can help in the
development of a talent pool like that.

Emerging Destination for Apparel Manufacturing and Sourcing:

Emerging apparel manufacturing destinations like Ethiopia,

Myanmar and Cambodia are impacting the ‘sourcing strategies’
of the global retailers and brands. However, the established
garmenting hub such as Vietnam, India and Bangladesh still
has the edge over the budding apparel clusters.

Vietnam is evolving as an attractive sourcing destination for

clothing and footwear retailers, even against the broader
shift to “near shoring” for speed to market. Drapers finds out
why

Although mainland China is still the most established market for the
UK for clothing imports, accounting for £4.1bn in 2016, it is cooling
as labour and operating costs rise.

As brands and retailers diversify their production resources,

neighbouring Vietnam is becoming more appealing as an
alternative to its rivals in Asia. Since the south-east Asian country
joined the World Trade Organization in 2007, it has steadily
expanded its export capabilities in clothing manufacturing.

A free trade agreement with the European Union is set to take

effect in 2019, so sourcing from the region will inevitably accelerate.
Its stable economic and political environment, and relatively clean
record on compliance with safety and other corporate social
responsibility (CSR) obligations could give it an edge on nations
such as Bangladesh and Turkey.

H&M, Uniqlo and Marks & Spencer are among the retailers to
have turned to Vietnam for their core suppliers. It is a relatively new
market for M&S, which opened a direct sourcing office in Vietnam in
2015, focusing on footwear and tailoring.

In March M&S reported it employed around 41,800 workers across

21 Vietnamese factories for clothing, footwear and accessories. Its
clothing and home suppliers employ a total of 766,717 workers in
960 factories globally.

Vietnam has long been a key sourcing market for US retailers. The
UK shares deeper ties with India, Bangladesh and Pakistan, but
Vietnam is starting to gain ground. In the UK Fashion and Textile
Association’s (UKFT) first clothing import rankings in 2016, Vietnam
was 13th with a value of £492m. Figures previously reported by
Drapers put the value of the country’s imports at £435m in 2015,
growing from £226m in 2010.

Vietnam is entrepreneurial and seems

to have a stable government:
UKFT international business development director Paul Alger
predicts it will climb further up the top 20 this year: “Retailers will
seek the cheapest possible option,” he says, observing that
businesses have been turning to Vietnam in particular for finer work
such as bridalwear and occasionwear.

“Sourcing from Vietnam in the UK has been coming along over the
past five years as other countries, namely China, have become
increasingly expensive. It also seems to be more flexible than
China, which is more of a volume player and not as good with
smaller orders. Vietnam is entrepreneurial and seems to have a
stable government.”

Nevertheless, its population of around 90 million and relatively

underdeveloped infrastructure means Vietnam has a way to go
before it can compete with China and India on scale and efficiency.
“Vietnam’s capacities are limited compared with China and India,”
says Alger. “While it has expanded exponentially, it’s not a big
country. Other challenges are transport and logistics costs: it
doesn’t fit with the near-shoring agenda.”

Ethical appeal
A renewed ethical focus is also starting to make Vietnam relatively
attractive as a sourcing destination. After a string of high-profile
scandals, including the 2013 Rana Plaza factory collapse in
Bangladesh, western brands and retailers are profoundly aware of
the need for thorough CSR and compliance policies at production
sites.

Only China has more factories requesting accreditation for

compliance from US-based independent certification programme
World Responsible Accredited Production (WRAP) than Vietnam.

Laura Morroll, senior manager at Berkhamsted supply chain

consultancy LCP Consulting, says although the scales are tipping
towards Europe as the pace quickens on near-shoring, Vietnam
remains “a sensible bet” for retailers’ core product ranges with
predictable demand profiles, where speed to market might not be
as much of a factor.

“In terms of the criteria for apparel retailers in deciding where to

source from, price is key, but so is the capability and ability to
manage production and risk,” she notes. “From a CSR point of
view, Vietnam is a fairly safe and established market to source from
– it’s a safe pair of hands compared with other emerging markets.”

The UKFT’s Alger agrees: “I can see UK brands and retailers

looking at Vietnam and wondering if it will solve their problems, as
concerns over ethical issues in Bangladesh continue.”
 Increasing labour rates may have
implications in rising costs in Vietnam:
Laura Morroll, LCP Consulting
Social and business compliance, however, carries a premium, and
labour costs in the country are set to rise. Vietnam’s National Wage
Council announced in August that the minimum wage may rise by
6.5% in 2018 to VND2.76m-VND3.98m (£92.10-£132.93) per
month.

One boss at a supplier that sources textiles from Vietnam also

suggests certain “political difficulties” have led to higher-than-
expected costs: “Businesses had turned to Vietnam in recent years
for cheaper prices, on the promise that there would be 0% [import]
duty rates, but that hasn’t happened,” says the source, who does
not wish to be named.

Morroll believes this will not deter retailers, as the cost increase will
be offset by the benefits made from government-led investment in
transport links and infrastructure, on top of foreign investment in
new plants and manufacturing facilities. Improved infrastructure
would also help to reduce the longer lead times caused by the
market’s need to import most raw materials to cut and sell.

“Increasing labour rates may have implications in rising costs in

Vietnam, but as a country it is making significant investment in
technology and infrastructure, so the increase in labour rates would
be balanced with this efficiency gain,” she says.

US sourcing gains:

Vietnam is now second only to China for garment sourcing in the

US. It grew by 18% to account for $1.1bn (£842m) of US clothing
imports in January 2017, and by 17% to $495m (£379m) in
footwear imports, the US Department of Commerce’s Office of
Textiles and Apparel reports.

US manufacturing trade show Sourcing at Magic chose Vietnam as

its focus country for its latest edition in August, citing its rapid export
growth, and showcased more than 40 Vietnamese manufacturers.

Sourcing at Magic president Christopher Griffin says: “We see

tremendous quality, great needlework and attention to detail. The
entrepreneurial spirit is robust, especially in the south and Ho Chi
Minh City.”

Griffin adds that for the US, Vietnam is particularly strong in

producing footwear and clothing for the burgeoning athleisure
market.

Despite the US’s well-documented withdrawal from the Trans-

Pacific Partnership free trade agreement earlier this year, which
dampened Vietnam’s hopes for a meaningful export boost, Griffin is
confident that Vietnam will remain a key global sourcing player. He
argues its position on compliance has played a significant part in
ensuring its competitiveness.

“Looking at the safety record of [factories in] Vietnam, the facts

speak for themselves,” he says. “In Bangladesh in particular, there
are issues with worker safety where the industry has tried to band
together and address them, but they continue.

“And for any brand, even without the human aspect regarding
safety, it’s a PR nightmare to have tags in a factory that isn’t safe.
Statistically, Vietnam has been proactive on compliance and safety
issues, so it hasn’t been caught in this.

“Vietnamese sourcing can be quite bureaucratic and a bit slow. But

when you weigh out the risks, Vietnam represents a very evenly
balanced market.
“It has low domestic strife, is stable, has an established base in the
south and is growing in the north. I believe more brands and
retailers will look at it in the short term. Its momentum shows no
signs of slowing.”

The Drapers verdict:

Businesses should factor in growing concerns

surrounding transparency in Vietnam when it comes
to subcontracting, as manufacturers continue to seek
ways of offsetting rising wages. As with most
developing markets, detecting illegal subcontracting
or unethical practices could prove tricky.

Aside from this, businesses must balance the need

for the most affordable option with the assurance of
compliance, as well as relative political security and
reduced risk of civil unrest among other key factors.
With this in mind, Vietnam’s sourcing market could
offer a more compelling solution than its competitors.

Ethopia:

However, the hub fell short of the targeted growth by 50 per

cent as stated by Bantihun Gessesse, who is
Communications Affairs Director in Ethiopian Textile Industry
Development Institute.
“Inadequate supply of inputs, lack of managerial and
technical professionals, failure to meet international
standards and the shortage of skilled manpower were the
major factors the exports of textile and clothing did not meet
the projected growth,” said Gessesse.
In order to meet the projected growth in the coming months,
the Ethiopian Government is diversifying exports from
agricultural products to textile and clothing manufacturing in
the country and, for this, approximately 10 industrial parks
have been planned.
It’s pertinent to mention here that the textile and clothing
industry in Ethiopia has noted an average growth of 51 per
cent over the last 5 years and more than 65 international
textile investment projects have been authorised and licensed
to attract FDI during the period. The country is steadily
becoming a favourite amongst various leading textile and
apparel manufacturers to set up their base there, thanks to
policies and incentives that the country has to offer.

MUMBAI: Even as the Modi government aggressively pushes its

'Make in India' programme, a host of home-
grown apparel makers are putting in millions of dollars
in Ethiopia, a promising sourcingdestination for global
manufacturers. The Ethiopian government is offering attractive
incentives to draw foreign investors, such as land on decades-
long lease, cheap power and duty-free exports to key markets
like the US and Europe.

Indian enterprises, both large and mid-sized, have taken note of

the benefits and are setting up manufacturing facilities in Africa's
oldest independent country. Fabric-to-apparel
maker Raymond will be investing $100 million over the next two-
three years for a garmenting unit in Awasa, a lake-side city, which
will be one of its largest facilities.

"There are two major manufacturing costs - labour and

power. We looked at various options including Ethiopia,
Vietnam and Myanmar, and decided to go for Ethiopia
because of its favourable political and economic climate,"
said Sanjay Behl CEO, Raymond. Behl explained that labour
costs in Ethiopia are 50% cheaper compared to India and
power tariffs one-third.

Arvind, another Indian textiles major, will set up a six-million-

piece garment plant in Ethiopia. Its director and CFO Jayesh
Shah pointed out that, among various factors, the long-term
lease for factories that the Ethiopian government offers is
one of the main attractive propositions for the company's
decision to invest in this east African nation. There is also
single-window clearance for industrial projects. Kanoria
Textiles, too, is setting up a project there.

Ethiopia is emerging as a favoured low-cost destination for

apparel makers on the lines of Vietnam, Bangladesh and
India. It is not only Indian textile companies that are making a
beeline for Ethiopia - companies from China, Korea and
Turkey too are investing in this African nation.

Aditya Rao, partner, PWC Advisory Services, said, "While

foreign investors like Saudi Arabia, US, China, India and
Turkey continue investing in agriculture, deep interest has
developed in textiles. With its value proposition similar to
that of Bangladesh which includes large population, cheap
and young labour, Ethiopia also offers cheap power and a
highly committed government. Ethiopia, without doubt, is set
to be the epicentre of textiles across Africa."
here are two major manufacturing costs - labour and power.
We looked at various options including Ethiopia, Vietnam and
Myanmar, and decided to go for Ethiopia because of its
favourable political and economic climate," said Sanjay Behl
CEO, Raymond. Behl explained that labour costs in Ethiopia
are 50% cheaper compared to India and power tariffs one-
third.
India:Textile & Apparel Trade: Global and Indian
The Global Textile and Apparel, or T&A, Trade is expected to
grow to USD 1 trillion by 2020. However, with growth slowing
down in developed markets, the dynamics of the global
fashion market are expected to change dramatically.
Emerging economies, namely Brazil, Russia, India & China,
along with a few other Southeast Asian countries, are seen as
the major growth drivers. Additionally, in the recent past
global apparel markets have seen a paradigm shift, moving
towards increased product differentiation, and catering to a
diverse, aware, and demanding customer base. Retailers
have thus gravitated towards demographic shifts, societal
and economic influences and environmental concerns.
Stagnating growth and restricted consumer spending in
developed economies, is exerting pressure on retailers.
Under such conditions the global apparel value chain has
shown a distinct shift both at the front- and supplyend.
India’s Textile and Apparel trade witnessed a quantum leap
in the post quota era. The apparel trade from India crossed
USD 11 billion in 2010 and has the potential of growing to
about USD 50 billion by 2020. The industry has been
witnessing closures of units for the last couple of years. Entry
barriers have been rising as India has seen Textile & Apparel
Trade: Global and Indian too much investment in new
apparel manufacturing plants. It is therefore important to
analyze if India is still an attractive source for apparel
exports. A detailed analysis of India’s performance in the US
and EU apparel markets substantiates the forecasts - China
and India are the principal beneficiaries of market
enlargement arising from the dismantling of quotas. Further,
China’s exports grew faster than India’s in most clothing
categories. Despite the strengths that China possesses in the
apparel sector, inflation and labor supply challenges have
hampered the global competitiveness of the sector. As such,
it may not be prudent for those sourcing apparel to put all
their eggs in the Chinese basket. There are many
uncertainties involved in sourcing and importing clothing,
relating not only to such economic factors as variations in
cotton production which affect the pricing of inputs, but also
political factors such as the imposition of safeguard quotas
on Chinese textiles and apparel exports by the USA and the
EU in 2005. From the viewpoint of long-term risk
management, therefore, it would be advisable for even those
who have sourced large amounts of apparel from China to
cultivate alternative suppliers. Indian Textile and Apparel
exports have been steadily growing over the years, from a
cumulative figure of USD 11.5 billion in 2000 to more than
USD 24 billion in 2010.
India’s growth has been steady and continuous in past years
and there have been many key drivers for this growth:
• Ingrained factors make it an independent & self-reliant
industry.
• Abundant raw material availability that helps industry
control costs and reduces lead time across operations.
• Availability of low cost skilled manpower has provided
competitive advantage to the industry. The recent wage
increases have been dampers, but not to a significant extent.
• Indian apparel industry has manufacturing flexibility that
aids catering to demand across various fashion categories.
• India’s domestic demand has been growing at a fast pace.
The size of domestic consumption in 2011 was close to USD
50 billion, as against an exports basket of USD 25 billion.
This growth also accounts for continuous shift from an
unorganised to an organized industry. This in itself is a big
opportunity for the future, and provides a cushion against
global turbulences, thus making a case to build-up and
leverage capacities. Successful sourcing implies developing
long-term relationships with partners who are capable of
consistently fulfilling contract conditions and delivery
schedules and who have the potential to provide a full range
of services (such as design and full integration with the
supply chain of sourcing companies).
Those sourcing apparel need to assess which country has the
greatest potential for developing such long-term
relationships and look beyond short-term trading. There is
little doubt that, apart from the Chinese, the Indian
companies offer the greatest potential for such partnerships,
given their wide-ranging expertise and capabilities.
Also, if the Global Textile & Apparel trade is poised to reach
around USD 800 billion by 2015, and around USD 1 trillion by
2020 and manufacturing is expected to shift further from the
West to the East (read Asia), then the region is probably
headed for a textile revolution.
If China has to reduce its exposure to the sector due to a
multitude of factors, space for the sector has to be created in
countries like India, Pakistan, Bangladesh, Indonesia, Vietnam
and Cambodia. Other than China, only India and Pakistan
have relative supply chain integration from fiber to garment.
All other countries are mostly dependent on imports.
India: Key Sourcing Indicators :
Textile Hubs The abundance of raw materials is a big
advantage for India due to its beneficial impact on cost and
operational lead time. The country has a supply base for
almost all manmade and natural yarns and fabrics, including
cotton, polyester, rayon and others. India is one of the
largest exporters of yarn in the international market and
contributes around 25% of the global trade in Cotton Yarn.
China with the abundance of vertical supply chain integration
and raw material availability has been able to offer cost
advantage and reduced lead times. Again, China is the only
nation in the world which has indigenous OEMs for the
technological needs of the industry. On the other side,
Pakistan also has an excellent raw material base being the
fourth largest producer of cotton. From a product profiling
perspective, Pakistan’s textile industry’s main strength has
been and continues to be home linens and denim. All other
countries like Bangladesh, Vietnam, Indonesia and Cambodia
are struggling to keep pace with the textile hubs in their
homes. These countries are giving a tough time to major
players in apparel exports but are facing supply chain
constraints due to being product centric and having
unresponsive lead times.
Wages:
The minimum wage in India is about USD 100 per month. In
comparison, Pakistan pays a minimum of around USD 80,
Vietnam around USD 97 and Indonesia pays around USD 130
per month to its T&A industry workers. The minimum wage
in Bangladesh is close to USD 50, one of the lowest in the
world. This remains favourable even when considered in
terms of purchasing power parity. As per United Nations
Labor Wing data, “The average minimum monthly wage in
Bangladesh in Purchasing Power Parity terms is USD 58. The
corresponding minimum wage in Vietnam and Laos, the
nearest competitors to Bangladesh, is USD 84. In India, it is
USD 121, China USD 173, Sri Lanka USD 93 and Afghanistan
USD 89”. Thus, India is at the median range.
Technology:
Labour wages are directly proportional to the appetite for
technology. Thus, in countries where wages are low,
motivation towards technological advancement is also low. In
the recent past, countries like China, India, and Indonesia
have developed an inclination for better technology.
Countries like Bangladesh, Vietnam and Indonesia are still
working with conventional methods of manufacturing,
leading to greater usage of labor and less dependence on
technological advances.

Efficiency :
In the apparel industry, efficiency* is considered to be the
key indicator for measuring any manufacturing unit’s
performance. Technopak analysis suggests that countries like
China, India and Pakistan are producing goods at a higher
rate of efficiency compared to Bangladesh or Vietnam (as
mentioned in Exhibit 5).

[*Efficiency is the measure of the output as compared to a

particular input (factor of production), or a combination of all
the factors of production. In the context of the apparel
industry, it is the ratio of total work produced in minutes
against the total minutes spent, as a percentage.] Other
Factors The recent flattening trend in the Indian Apparel
industry reflects the challenges faced in sustaining growth,
despite ingrained advantages. Such challenges include:
• Rise of alternate employment opportunities due to
substantial GDP growth in recent times. Automobiles,
Telecom, IT and Retail, among others, today offer better
employment prospects.
 • Rise of minimum wage to USD 100-130 per month has had
a negative impact on the labor-intensive and price sensitive
apparel industry. Most of the Industry has typically grown
around the metros, where the cost of living is high. The
overall industry is yet to see a full grown shift from a high
cost center to a low cost center within the country.
• Lack of ‘Economies of Scale’: The Indian apparel industry is
highly fragmented, and lacks overall scale. Smaller set-ups
pose more challenges in meeting the overall requirements of
the customer, who seeks to work with lesser suppliers and in
the process reducing supply chain costs.
• There are few exporters who have built manufacturing
facilities with vertical integration. In the longer term, globally
competitive countries will have a significantly consolidated
supply chain. For instance, competitors like Korea, China,
Turkey, Pakistan and Mexico have a consolidated supply
chain. In contrast, most activities like weaving, processing,
made-ups and apparel manufacturing are found to be
fragmented in India. However, even with the above
challenges, there is tremendous optimism in the sector.
Government support coupled with industry initiatives can
make a significant impact on growth, with the following areas
requiring focus:
1.Processing: Processing is the weakest link in the supply
chain today and adequate focus on the same will help in
strengthening the industry. The Ministry of Textiles,
Government of India has recently announced 21 textile parks.
Another set of such parks focused on processing will be a
great boost.
2. Synthetic apparel production: India has been focused on
the manufacturing of cotton-based apparel. However, global
demand will largely shift towards such synthetics as
polyester, viscose, blends etc. in the coming years, for which
apparel manufacturers should be equipped..
3.Efficiencies: Efficiency can be a game changer. While
bigger organizations have already incorporated a focus on
improvement of processes which can lead to improved
efficiencies, in other organizations there is still a need for
improvement.. There should be a continued effort in all
organizations towards improving their supply chain and
manufacturing efficiencies.
4.Shift to low cost centers: Traditional manufacturing centers
like Delhi NCR, Bengaluru, and Chennai do not present a
viable option for reducing costs. Therefore, the industry will
have to shift to low cost centers.

The impact of the cost heads discussed above on the final

sourcing cost is as follows:
 Material Fabric & Trims cost remains consistent in the global
scheme; however, lead times and quality are the key drivers
for sourcing fabric and trims.
Manufacturing Cost Although labor cost is a key element, it
should be understood as a multiplier of labor cost,
productivity and process losses.
Cotton Productivity:
Though India is one of the major producers of cotton yarn
and fabric, the productivity of cotton as measured by yield
has been found to be lower than many countries. The level of
productivity in China, Turkey and Brazil is over 1 tonne/ha
while in India it is only about 0.6 tonne/ha. In the manmade
fiber sector, India is ranked at fifth position in terms of
capacity. Cotton is a key supply chain ingredient, and
availability of cotton directly results in easier and better
business.
Technology Induction in Raw Materials :
Level of technology in the Indian weaving sector is low
compared to other countries. The percentage of shuttleless
looms to total looms in India is 8% as compared to 10% in
Indonesia, 14% in China and 29% in Mexico.
Cost Components :
Apart from low cost labor, other factors that impact final
consumer cost are relative interest cost, power tariff,
structural anomalies and productivity level (affected by
technological obsolescence). A study by International Textile
Manufacturers Federation revealed high power costs in India
as compared to other countries like Brazil, China, Italy, Korea,
Turkey and USA. However, power as a percentage of total
cost is not a decisive operations driver. The availability of
power supply is more important.
Integration;
Supply chain in this industry is not only highly fragmented
but is beset with bottlenecks that could very well slow down
the growth of this sector. As a result the average delivery
lead times (from procurement to fabrication and shipment of
garments) still takes about 35 to 50 days. With international
lead delivery times coming down to 30 to 35 days, India
needs to cut down the production cycle time substantially to
stay in the market.
Infrastructure:
Erratic supply of power and water, availability of adequate
road connectivity, inadequacies in port facilities and other
export infrastructure have been adversely affecting the
competitiveness of the Indian textile sector.
Aggression :
There has been a large shift of trade from China to smaller
countries. India being armed with size and infrastructure
should focus on leveraging this opportunity rigorously.
Grabbing most of the trade shift, India should focus on being
the main gainer in this regard.
Scale:
Internationally, trading in the T&A sector is concentrated in
the hands of large retail firms, with most of them looking for
a few vendors with bulk orders and hence opting for
vertically integrated companies, or companies with larger
operating scale. Thus, there is a need for integrating
operations and expanding the scale and capacity.
Improving in-house process capabilities:
The fragmented production manufacturing units should
focus on improving the in-house capabilities, helping them
take up bigger and higher-value work. This would also help in
keeping track of the quality of the processes in the supply
chain.

Conclusion :
Global trade shifts and expanding domestic markets give the
Textile & Apparel industry in India an opportunity to grow.
 • Identifying key sourcing locations within India which are
low cost and therefore a more viable destination than cities
where the apparel industry is currently present
• India needs investment in modern weaving and in
processing which have been the weak links in the Textile
supply chain. Processing has been weak due to
environmental regulations and high costs of setting up
effluent treatment plants. These need to be incentivized in
the long term to improve the overall capacity.
• On the garment manufacturing front, integration of
People, Process and Technology is required to drive cost
effective and competitive, “Lean” manufacturing with the
objective of reducing wastage, shortening lead times and
improving efficiencies to ensure business profitability.
• India still has an opportunity to create attractiveness in
additional categories apart from women’s wear/ some bit of
knit-wear etc. by developing large scale facilities for say
Outer-wear, Formal-wear, innerwear etc.