An

Assignment
On
“Apparel Industry“
For the subject of
Sales And Distribution Management
Submitted to : Mr.Snehal Bhatt , Faculty of AIM
Submitted by : shreyas parmar , MBA – III
Roll No :- 51
Anand Institute Of Management
Affiliated to Gujarat Technological University

APPAREL INDUSTRY
Introduction:-

The textile and apparel industry is one of the leading segments of the
Indian economy and the largest source of foreign exchange earnings for
India. This industry accounts for 4 percent of the gross domestic product
(GDP), 20 percent of industrial output, and slightly more than 30 percent of
export earnings. The textile and apparel industry employs about 38 million
people, making it the largest source of industrial employment in India. The
study identifies the following structural characteristics of India’s textile and
apparel industry.

India has the second-largest yarn-spinning capacity in the world (after

China), accounting for roughly 20 percent of the world’s spindle capacity.
India’s spinning segment is fairly modernized; approximately 35 to 40
percent of India’s spindles are less than 10 years old. During 1989-98,
India was the leading buyer of spinning machinery, accounting for 28
percent of world shipments.

India’s production of spun yarn is accounted for almost entirely by the

“organized mill sector,” which includes 285 large vertically-integrated
“composite mills” and nearly 2,500 spinning mills. India has the largest
number of looms in place to weave fabrics, accounting for 64 percent of the
world’s installed looms. However, 98 percent of the looms are accounted
for by India’s power loom and handloom sectors, which use mostly
outdated equipment and produce mostly low-value unfinished fabrics.
Composite mills account for 2 percent of India’s installed looms and 4
percent of India’s fabric output.

The handloom and power loom sectors were established with

government support, mainly to provide rural employment. These sectors
benefit from various tax exemptions and other favorable government
policies, which ensure that fabrics produced in these sectors are price
competitive against those of composite mills.

The fabric processing (dyeing and finishing) sector, the weakest link in
India’s textile supply chain, consists of a large number of small units
located in and around the power loom and handloom centers. The
proliferation of small Processing units is due to India’s fiscal policies, which
favor small independent hand- and power-processing units over composite
mills with modern processing facilities.

The production of apparel in India was, until recently, reserved for the
small-scale industry (SSI) sector, which was defined as a unit having an
investment in plant and machinery equivalent to less than $230,000.
Apparel units with larger vi investments were allowed to operate only as
export-oriented units (EOUs). As a result, India’s apparel sector is highly
fragmented and is characterized by low levels of technology use.

The history of textiles in India dates back to the use of mordant dyes
and printing blocks around 3000 BC. The diversity of fibers found in India,
intricate weaving on its state-of-art manual
Looms and its organic dyes attracted buyers from all over the world for
centuries. The British colonization of India and its industrial policies
destroyed the innovative eco-system and left it
Technologically impoverished. Independent India saw the building up of
textile capabilities, diversification of its product base, and its emergence,
once again, as an important global player.

Today, the textile and apparel sector employs 35.0 mn people (and is
the 2nd largest employer), generates 1/5th of the total export earnings and
contributes 4 per cent to the GDP thereby making it the largest industrial
sector of the country. This textile economy is worth US $37 bn and its
Share of the global market is about 5.90 per cent. The sector aspires to
grow its revenue to US $85bn, its export value to US $50bn and
employment to 12 million by the year 2010.

Despite substantial growth, comparing to the international readymade

garment market of nearly 183mn USD, the Indian readymade garment
market is still in a budding phase. Due to the higher the introduction cost of
brand in India for the foreign players, domestic players have no fear of any
outside competition. The main obstacle to the organized players is the
huge unorganized scenario of the market. In a move to compete, the
organized players have rolled out their own strategy of standardizing the
goods.
India’s imports of apparel are very small, largely because of import
restraints and other market access barriers. Almost all of the $9 million in
imports of clothing and accessories in 1998 consisted of apparel parts and
trimmings, which were imported duty-free by export-oriented units for use in
the production of garments for export.

India’s major export markets for textiles and apparel are the United
States and EU, which accounted for 46 percent of its textile exports and 74
Percent of its apparel exports in 1997 (see tables 4-5 and 4-6, figures 4-1
and 4-2). However, India’s export shares in the U.S. and EU markets have
declined since 1994, which Indian industry sources have attributed to
tighter quotas in these markets for products in which they are competitive
and formation of preferential trade agreements by the United States and
the EU.

In an effort to expand its exports, India has diversified its export

markets to no quota countries and, in some instances, relocated production
to neighboring countries such as Nepal and Mauritius which, at that time,
had few quotas.111 Apparel accounted for just over half of India’s exports
of textiles and apparel in FY 1994-95 and FY 1998-99 (see table 4-7 and
figure 4-3). India’s exports of yarn grew rapidly during this period, with their
share of India’s textile and apparel exports increasing by nearly 4
percentage points to 16 percent. Slightly more than 80 percent of India’s
yarn exports consisted of cotton yarn; India now supplies about 20 percent
of world exports of cotton yarn. Made-up textile articles also increased their
export share from 13 to 16 percent, while the export shares for fabrics
dropped by 3.5 percentage points to 17 percent.

Market:-

India is the world’s fourth-largest economy, the third-largest in Asia, and

the second-largest among emerging nations.88 The Indian market reflects
considerable diversity in income levels and lifestyles. Although India’s per-
capita GDP is one of the lowest among the developing countries, a
significant segment of the population (an estimated 200 million people) has
significantly higher income. A 1998 study by the National Council of Applied
Economic Research (NCAER) projects that India’s middle class will expand
to include nearly half the country’s total population by 2006.89 the same
study projects that the rich and the middle income class together will
increase from 29.6 million households in 1997-98 to 97.1 million
households in 2006-07. According to a recent article in The Strategist,
Indian consumer credit is growing by 35 to 40 percent annually; new
cardholders are increasing by 25 to 30 percent annually.90 Buying has
become a year-round phenomenon in India; seasonal demand has
gradually disappeared from the Indian market in just the past 5-10 years.

The Indian market for domestic readymade apparel is estimated at $5.5

billion (Rs200 billion) to $8 billion (Rs300 billion) annually.101 Trade
sources estimate that menswear accounts for 25 percent of the readymade
apparel market (by quantity); women’s wear, 48 percent; and children’s
wear, 17 percent.102 Approximately 20 percent of the apparel produced in
India consists of branded ready-to-wear garments.103 Brands are more
prominent in menswear, particularly shirts, trousers, and jackets.104 Most
national and regional brands are supplied by the large organized apparel
firms.

Major Players :-

- Mayur
- Siyarams
- Raymond
- Raid n Taylor
- Vimal
- Dinesh
- Grasim
- Gwalior
- Mafatlal
Competitiveness of Indian Textile & Apparel Industry:-

India is one of the few countries that own the complete supply chain in
close proximity from diverse fibers to a large market. It is capable of
delivering packaged products to customers comprising a variety of fibers,
diverse count sizes, cloths of different weight and weave, and panoply of
finishes. This permits the supply chain to mix and match variety in different
segments to deliver new products and applications. This advantage is
further accentuated by cost based advantages and diverse traditions in
textiles. Indian strength in spinning is now well established – on unit costs
on ring yarn, open-ended (OE) yarn as well as textured yarn, Indian firms
are ahead of their global competitors including China.

Same is true on some woven OE yarn fabric categories (especially

grey fabrics) but is not true for other woven segments. India contributes
about 23 per cent of world spindles and 6 per cent of world rotors (second
highest in the world after China). Fifty five per cent of total investment in
Technology in the last decade has been made in the spinning sector. Its
share in global shuttle less loom, however, is only about 2.8 per cent of
world looms (and is ranked 9th in the world).

The competitiveness in the weaving sector is adversely affected by low

penetration of shuttle less looms (i.e., 1.69 % of Indian looms), the
unorganized nature of the sector (i.e., fragmented, small and, often, un-
registered units, low investment in technology & practices especially in the
power loom, processing, handloom and knits) and higher power tariffs.

There is, however, a recent trend of investment in setting up hi-tech,

stand-alone mid-size weaving companies focusing on export markets. India
also has the highest deployment of handlooms in the world (handlooms are
low on productivity but produce specialized fabric). While production and
export of man-made fiber (and filament yarn) has increased over the years,
Indian industry still lags significantly behind US, China, Europe, Taiwan etc.
Challenges facing Indian Textile and Apparel Industry:-

Textile supply chains compete on low cost, high quality, accurate

delivery and flexibility in variety and volume. Several challenges stand in
the way of Indian firms before they can own a larger share of the global
market:

Scale: Except for spinning, all other sectors suffer from the problem of
scale. Indian firms are typically smaller than their Chinese or Thai
counterparts and there are fewer large firms in India. Some of the Chinese
large firms have 1.5 times higher spinning capacity, 1.25 times denim (and
2 times gray fabric) capacity and about 6 times more revenue in garment
than their counterparts in India thereby affecting the cost structure as well
as ability to attract customers with large orders.

The central tendency is to add capacity once the order has been won
rather than ahead of the demand. Customers go where they see both
capacity and capabilities. Large capacity typically goes with standardized
products. These firms need to develop the managerial capabilities required
to manage large work force and design an appropriate supply chain. For
the size of the Indian economy, it will have to have bigger firms producing
standard products in large volumes as well as small and mid size firms
producing large variety in small to mid size batches (the tension between
the organized and un-organized sectors will have to be addressed first,
though). Then there is the need for emergence of specialist firms that will
consolidate orders, book capacities, manage warehouses and logistics of
order delivery.

Skills : Three issues must be mentioned here : (a) there is a paucity of

technical manpower – there exist barely 30 programmers at graduate
engineering (including diploma) levels graduating about 1000 students –
this is insufficient for bringing about technological change in the sector;
(b) Indian firms invest very little in training its existing workforce and the
skills are limited to existing processes (Chandra 1998); (c) there is an acute
shortage of trained operators and supervisors in India. It is expected that
Indian firms will have to invest close to Rs. 1400 bn by year 2010 to
increase its global trade to $ 50 bn. This kind of investment would require,
by our calculations, about 70,000 supervisors and 1.05mn operators in the
textile sector and at least 9 112,000 supervisors and 2.8mn operators in the
apparel sector (assuming a 80:20 ratio of investment between textiles and
apparel). The real bottleneck to growth is going to be availability of skilled
manpower.

Cycle Time: Cycle time is the key to competitiveness of a firm as it

affects both price and delivery schedule. Cycle time reduction is strongly
correlated with high first pass yield, high throughput times, low variability in
process times, low WIP and consequently cost. Indian firms have to
dramatically reduce cycle times across the entire supply chain which are
currently quite high (Chandra, 2004). Customs must provide a turnaround
time of ½ day for an order before Indian firms can they expect to become
part of larger global supply chains. Indian firms need a strong deployment
of industrial engineering with particular emphasis on cellular manufacturing,
JIT and statistical process control to reduce lead times on shop floors.
Penetration of IT for improving productivity is particularly low in this sector.

Innovation & Technology: A review of the products imported from

China to USA during January–April 2005 reveals that the top three
products in terms of percentage increase in imports were Tire Cords & Tire
Fabrics (843.4% increase over the previous year), Non-woven fabrics
(284.1% increase) and Textile/Fabric Finishing Mill Products (197.2%
increase) (FICCI, 2005).

None of these items, however, figure in the list of imports from India
that have gained in these early days of post-MFA. Entry into newer
application domains of industrial textiles, nanotextiles, home furnishings
etc. becomes imperative if we are to grow beyond 5–6% of global market
share as these are areas that are projected to grow significantly. Synthetic
textiles comprise about 50 per cent of the global textile market. Indian
synthetic industry, however, is not well entrenched. The Technology Up
gradation Fund of the government is being used to stimulate investment in
new processes. However, there is little evidence that this deployment in
Technology has accompanied changes in the managerial regimes – a
necessary condition for increasing productivity and order winning ability.

Domestic Market: The Indian domestic market for all textile and
apparel products is estimated at $26 bn and growing. While the market is
very competitive at the low end of the value chain, the mid or higher ranges
are overpriced (i.e., ‘dollar pricing’). Firms are not taking advantage of 10
the large domestic market in generating economies of scale to deliver cost
advantage in export markets. The Free Trade Agreement with Singapore
and Thailand will allow overseas producers to meet the aspirations of
domestic buyers with quality and prices that are competitive in the
domestic market. Ignoring the domestic market, in the long run, will peril
the export markets for domestic producers. In addition, high retail property
prices and high channel margins in India will restrict growth of this market.
Firms need to make their supply chain leaner in order to overcome these
disadvantages.

Institutional Support : Textile policy has come long ways in reducing

impediments for the industry – sometimes driven by global competition and,
at other times, by international trade regulations. However, few areas of
policy weakness stand out – labor reforms (which is hindering movement
towards higher scale of operations by Indian firms), power availability and
its quality, customs clearance and shipment operations from ports, credit
for large scale investments that are needed for up gradation of technology,
and development of manpower for the industry.

These are problems facing several sectors of industry in India and not
by this sector alone. In conclusion, competitive strategies are developed by
sector level firms and it’s their individual and collective initiatives that
secure higher market share in global trade. While one has to be ever
vigilant of non-tariff barriers in the post MFA world, the new market will be
won on the basis of capabilities across the supply chain. Policy will need to
facilitate this building of capabilities at the firm level and the flexible
strategies that firms will need to devise periodically.

Distribution:-

India has a large family-owned and fragmented sales and distribution

network, with centralized purchasing for chain stores and supermarkets
only a recent (5-10 year) phenomenon. There are over 1 million market
intermediaries—wholesalers, stockiest, transporters, and retailers—
involved in the distribution of consumer goods, including apparel. While
urban areas have outlets ranging from supermarkets to small neighborhood
retail stores, villages are served by smaller stores.

Since the distribution channels are largely independently owned and

supply multiple brands, dealer development is of the utmost importance in
both urban and rural areas. There are six types of commercial distributors
in the market: importers, indenting agents, wholesalers, commission
agents, retailers, and dealers. Because the Indian market was completely
closed to textile and apparel imports prior to April 1995, the distribution
structure for imported textile products is not well developed.

Importers generally handle a broad portfolio of goods rather than

specializing in a specific textile or apparel product. For shirt fabrics, bed
sheets, towels, and other home furnishings, retailers typically source from
wholesalers who, in turn, source from importers. However, retail stores play
an important marketing role in home furnishings, vis-a-vis commercial
offices, designers, architects, and furnishers, and tend to seek an exclusive
arrangement for these products.106 In industrial fabrics, specialized
dealers, rather than retailers or wholesalers, work directly with importers.

Transportation and Communication:-

Railways, road, and air are the principal means of transportation in

India. India has one of the largest railway networks in the world–almost
63,000 kilometers (km) with more than 7,000 stations. India also has a
fairly developed trucking system, with many private-sector firms providing
freight services; the road network extends to 2.7 million km and links all
towns and over 50 percent of the villages. There are 5 international airports
and 88 domestic airports linked by private- and public-sector airlines.

In addition, 11 major and 139 minor ports along India’s nearly 7,000
km coastline provide links between the coastal towns and villages, although
poor development of ports and inadequate docking facilities cause delays
and other shipping problems. An expansion of the courier business, with
the entry of global leaders like DHL and Federal Express during the 1990s,
has greatly enhanced the reach of Indian marketers. Telecommunication
services have improved substantially during the past 5 years with new
policies promoting private-sector participation.

Consumer Finance:-

India has about 300 commercial banks with more than 61,000
branches. Over half the branches are located in rural areas.107 Consumer
financing has become an accepted method of marketing consumer
durables. Several nonbanking financial intermediaries are engaged in
leasing and hire-purchase activities which help sales of consumer durables.
The credit card business is growing rapidly, with the number of credit card
holders doubling since 1997 to 2 million. All standard international cards, as
well as cards offered by 21 domestic banks, are accepted in the country.

Product Range and Geographic

Distribution:-

A limited fabric base and lack of product specialization are major

weaknesses of the Indian apparel sector. India’s production of apparel for
Export is dominated by cotton. The predominance of cotton apparel reflects
the fact that Indian cotton traditionally has been much less expensive than
Synthetics and cotton blends. In addition, India’s customs and excise taxes
on synthetic fibers, yarns, and fabrics have been significantly higher than
those on cotton.126 Few exporters in India have concentrated their efforts
on product specialization.

Almost all offer a wide range of garments.127 This lack of product

specialization has limited the growth of many Indian exporters in the global
market.128 Quality problems are another deterrent to expanding export
shares in the global market. The majority of fabrics made in India are of low
quality and limited varieties, which limits the product range and tends to
lower the unit value realized in dollar terms.129 Further, India has
historically concentrated on exporting apparel to the EU and U.S. markets;
most Indian exporters are too small to deal with buyers from diverse, non-
English speaking countries.