The Textile and Apparel Supply Chain

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

(see Figure 1). 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

3

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

weaving,processing)

(spinning,

Stand-Alone

Weaving(midsize)

Powerlooms

(small)

Handlooms

Figure 1: The Textile and Apparel Supply Chain

Grey

Yarn

Cloth

Cone

Hank

Cloth

4

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.

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. According to our estimate,

the total value of production in the garment sector is around Rs.1,050–1,100 bn of which about

81 per cent comes from the domestic market. The value of Indian garments (eg. saree, dhoti,

salwar kurta, etc.) is around Rs.200–250 bn. About 40 per cent of fabric for garment production

is imported – a figure that is expected to rise in coming years.

The weaving and knits sector lies at the heart of the industry. In 2004-05, of the total production

from the weaving sector, about 46 per cent was cotton cloth, 41 per cent was 100% non-cotton

including khadi, wool and silk and 13 per cent was blended cloth. Three distinctive technologies

are used in the sector – handlooms, powerlooms and knitting machines. They also represent very

distinctive supply chains. The handloom sector (including khadi, silk and some wool) serves the

low and the high ends of the value chain – both mass consumption products for use in rural India

as well as niche products for urban & exports markets. It produces, chiefly, textiles with

geographical characterization (e.g., cotton and silk sarees in Pochampally or Varanasi) and in

small batches. Handloom production in 2003-04 was around 5493 mn.sq.meters of which about

82 per cent was using cotton fibre. Handloom production is mostly rural (employing about 10

million, mostly, household weavers) and revolves around master-weavers who provide designs,

raw material and often the loom.

5

Weaving, using powerlooms, was traditionally done by composite mills that combined it with

spinning and processing operations. Over the years, government incentives and demand for low

cost, high volume, standard products (especially sarees and grey cloth) moved the production

towards powerloom factories and away from composite mills (that were essentially full line

variety producers). While some like Arvind Mills or Ashima transformed themselves into

competitive units, others gradually closed down. In 2003-04, there remained 223 composite

mills that produced 1434 mn. sq. mts. of cloth. Most of these mills are located in Gujarat and

Maharashtra. Most of the woven cloth comes from the powerlooms (chiefly at Surat, Bhiwandi,

NCR, Chennai). In 2005, there were 425,792 registered powerloom units that produced 26,947

mn. sq. mts of cloth and employed about 4,757,383 workers. Weaving sector is predominantly

small scale, has on an average 4.5 power looms per unit, suffers from outdated technology, and

incurs high co-ordination costs. Knits have been more successful especially in export channels.

Strong production clusters like Tirupur and Ludhiana have led to growth of accessories sector as

well, albeit slowly. The hosiery sector, on the other hand, has largely a domestic focus and is

growing rapidly.

The spinning sector is perhaps most competitive globally in terms of variety, unit prices and

production quantity. Though cotton is the fibre of preference, man-made fibre (polyster fibre

and polyster filament yarn) is also produced by about 100 large and medium size producers.

Spinning is done by 1566 mills and 1170 Small and Medium Enterprises (SME). Mills, chiefly

located in North India, deploy 34.24 mn. spindles and 0.385 mn rotors while the SME units

produce their yarn on 3.29 mn spindles and 0.119 mn. rotors producing 2270 mn kg of cotton

yarn, 950 mn kg of blended yarn and about 1106 mn kg of man-made filament yarn every year.

Worsted and non-worsted spindles (producing woolen yarn) have also progressively grown to

0.604 mn and 0.437 mn respectively. Spinning sector is technology intensive and productivity is

affected by the quality of cotton and the cleaning process used during ginning.

The processing sector, i.e., dyeing, finishing and printing is mostly small in scale. The largest

amongst these would dye and finish about 5000 m/day. The remaining are independent process

houses (or part of composite mills) that use automated large batch or continuous processing and

have an average scale of about 20,000 m of cloth daily. About 82.5 per cent or 10,397 units are

6

hand processors who dye cloth or yarn manually and dry in open sunshine. Of the remaining

(and these use automated and semi-automated equipment), 2076 are independent process houses.

Cotton remains the most significant raw material for the Indian textile industry. In 2003-04,

3009 mn kg of cotton was grown over 7.785 mn acres. Other fibres produced are silk (15742

tonnes), jute (10985000 bales), wool (50.7 mn kg) and man-made fibres (1100.65 mn kg).

Cotton grows mostly in western and central India, silk in southern India, jute in eastern and wool

in northern India. Significant qualities of cotton, silk and wool fibres are also imported by the

spinning and knitting sectors. (Except for garments, all data in this section was obtained from

OTC 2004 and Texmin 2005.)

Managing such a complex supply chain requires coordination through excellent managerial

practices, technology and facilitating policies.

The Textile and Apparel Industry in India

Introduction

The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade between nations

since 1962, expired on 1 January, 2005. It is expected that, post-MFA, most tariff distortions

would gradually disappear and firms with robust capabilities will gain in the global trade of

textile and apparel. The prize is the $360 bn market which is expected to grow to about $600 bn

by the year 2010 – barely five years after the expiry of MFA. An important question facing

Indian firms is whether their capabilities and their diverse supply chain are aligned to benefit

from the opening up of global textile market?

The history of textiles in India dates back to the use of mordant dyes and printing blocks around

3000 BC. The diversity of fibres 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 2

generates 1/5

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 (Texmin

2005).

nd largest employer),th of the total export earnings and contributes 4 per cent to the GDP thereby making

Globalization Effects In Apparel Industry

TABLE OF CONTENTS
TABLE OF CONTENTS 1
ABOUT THIS DOCUMENT 1
APPAREL INDUSTRY IN GLOBAL WORLD 1
Apparel Industry Overview 1
Lifestyle Industry Overview 2
Globalization Trends 3
Globalization - Integration of Functional Activities 4
FORECAST & PREDICTIONS 5
5-year Horizon 5
10-year Horizon 5


ABOUT THIS DOCUMENT
The pervasiveness of retailing in the western world leaves the industry open for careful analysis. This document is intended to expertly address global effects onto a single sub-industry of retail – specialty apparel. To do so, I will acquire perspective by considering all recent global developments in the industry.
First, this document captures the current environment of the mall-based lifestyle apparel retail industry and unifies these findings to highlight globalization effects on the industry.
Second, the document projects the future landscape of the industry over 5 - 10 years horizon; and states actual choices firms should embrace to better align with the industry's global environment.
APPAREL INDUSTRY IN GLOBAL WORLD
Apparel Industry Overview
As of 2004, the global apparel industry was valued at $768 billion dollars, and the United States made up $172.8 billion or nearly 22% of the total.   The competition for these consumer dollars has accelerated with lifting of import quotas on textiles and apparel from most World Trade Organization (WTO) members in January 2005 . Absence of these quotas enables apparel makers to procure high quality merchandise from most reliable suppliers regardless of their country of origin. Nevertheless, many apparel retailers and their suppliers will probably want to maintain diversity of sourcing to avoid being hurt by so called safe-guard, protectionist agreements (e.g. U.S. limits apparel imports from China growth to 7.5% annually). Therefore, in-depth knowledge of global import quotas and duties present another competitive advantage opportunity - creation of more efficient global sourcing capabilities....

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Urkish Textile And Apparel Industry

TURKISH TEXTILE AND APPAREL INDUSTRY
Market Overview
Textile and Apparel industry has a great contribution to the Turkish economy. The industry is considered as the locomotive of the Turkish Economy for years. The industrialization efforts in the 60's and 70's gave birth to the modern textile industry in Turkey. At the beginning, this sector was operating as small workshops. But the sector showed rapid development and during the 1980's began exporting. Today, Turkey is one of the important textile and clothing producers and exporters in the world.
Turkey's textile and clothing manufacturers began relocating production in Eastern Europe and Central Asia. In the recent years, Turkish textile and apparel companies faced raising difficulties after the quota system ended on January 1, 2005. The end of the quota regime has created fears of job losses around the world, including in Turkey, whose own textiles and apparel exports stand at around $20 billion a year.
Current

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scenario of Textiles and Apparels in Turkey
The textile sector continued to be one of the major contributors to the Turkish economy, being one of the fastest growing sectors in the 1990s with an average 12.2% annual growth, while the Turkish economy had an average growth of 5.2% per year. Textile industry started out in the 1960s in small workshops, have rapidly developed and transformed Turkey into a global competitor.
The total number of firms in the sector, dominated (95%) by the private sector, number around 44,000 and 25% of them are active exporters. The apparel industry is constituted mainly (80%) of small and medium sized firms whereas the technology-intensive textile production has been undertaken by large-scale companies. Today, around 20% of Turkey's 500 largest companies are involved in the textiles and apparel sector.
Low labor costs, a qualified workforce, relatively cheap raw materials have played an important role in the significant growth of the sector; as well as a liberal

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•  

 

Cotton Textile

Cotton is a fiber that grows from the surface of seeds in the pods of a bushy mallow plant. It is composed of a substance called cellulose.

American upland cotton constitutes over 99% of the United States cotton crop. Upland cotton fibers are generally fairly white, strong and dull.

It is grown in Texas, New Mexico, Arizona and Southern California. The cotton fiber is strong, lustrous, silky and creamy brown-white in color.

These cotton fibers are light brown, fine, strong and 32-38 mm in length.

Asiatic cotton are produced in India, China, and the near east. These are coarse fibers less than 25mm in length.



Textile is the premier industry now reckoned among the top few in the world. 65% of Pakistan’s export is related to cotton. The most important producers of cotton are:-

1. China 2. U.S.A 3. India 4. Pakistan 5. Egypt

In recent years, the textile industry of Pakistan has grown very rapidly. This is mainly due to the demand of yarn, fabric and of finished garments. The countries where

Germany's Textile Industry

A 5 page paper discussing Germany's chosen focus in its textile industry. There is no question that Germany is perfectly capable of producing its own textiles to avoid importing as much fabric and finished goods that it does. Production costs are prohibitively high, not only in labor but also in agricultural production of raw materials. Land is at a premium and too costly for field crops to be profitable in Europe's most populous country. Manufacture and export of textile machinery allows Germany to remain a world leader in the industry in an area more suited to Germany's physical limitations, while allowing Germany to further exercise its engineering expertise and leadership. Three figures. Bibliography lists 9 sources.

Indian Textile Industry-Porter's Five Foreces

One of the worst hit sectors during the skyrocketing interest rate scenario in the late 90s and early 2000s, the debt-laden Indian textile industry has spun many turn-around stories since then. Aided by lower interest rates, restructuring packages from financial institutions and the recent dismantle of quotas, the sector is today well poised to capture growth opportunities. In 2005, the sector contributed 20% to industrial production, 9% to excise collections, 18% of employment in industrial sector, nearly 20% to the country's total export earnings and 4% to the GDP. The textile sector employs nearly 35 m people and is the second highest employer in the country. Infact, it is estimated that one out of every six households in the country directly or indirectly depend on this sector. Here we analyse the sector's dynamics through Porter's five-factor model. 

Bargaining power of customers (demand scenario)

Global textile & clothing industry is currently pegged at around US$ 440 bn. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. With the dismantling of quotas, global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ 650 bn by 2010 (5 year CAGR of 10%). Although China is likely to become the 'supplier of choice', other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. The two-fold increase in global textile trade is also likely to drive India's exports growth. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn, capturing a market share of close to 8% by 2010. India, in particular, is likely to benefit from the rising demand in the home textiles and apparels segment, wherein it has competitive edge against its neighbour. Nonetheless, a rapid slowdown in the denim cycle poses risks to fabric players. 

Bargaining power of suppliers (supply scenario)

India is...

Factors behind increasing competition in Indian textile industry and strategically approach to gain competitive advantage globally.

The textile industry plays a pivotal role in the Indian economy. The country has produced legends such as Dhaka muslin, which was woven so fine and light that it could pass through a finger ring. But what is significant today is that this sector contributes substantially in providing employment and earning foreign exchange. The country is rich in natural resources such as cotton, jute and silk. The textile industry is the second largest employer, after agriculture, with a total workforce of around 35 million. India is next only to China among the world's largest producers of textiles and garments. The industry is the largest foreign exchange earner, as the import content is insignificant compared with those of other major export products. Its contribution in exports is nearly 20 per cent. How many of us know that 85 per cent of the handlooms in the world are produced in India? The number of handlooms in the country is four million. The activities in textiles range from the production of natural raw materials such as cotton, jute, silk and wool to the manufacture of quality products such as cellulose fibre, synthetic filament and spun yarn. This is, perhaps, the only industry that is self-reliant and complete in value addition — from raw materials to the highest value-added products (Warrier, 2007).

The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture. Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. Its vast potential for creation of employment opportunities in the agricultural, industrial, organised and decentralised sectors & rural and urban areas, particularly for women and the disadvantaged is noteworthy (www.economywatch.com).

Against all these merits, an expert’s lament goes: "It is difficult to find such a large-scale industry in the country that is so disorganised as the Indian textile industry". The industry is often plagued by obsolescence, unhealthy regulations and problems of labour. This emphasises the need for strengthening the management mechanism in the industry, to face the emerging international challenges. Common sense administration has its in-built constraints in a world where scientific management decides the destiny of industries in the modern global scenario (Warrier, 2007).

The textile industry in India will face intensified competition in both their export and domestic markets. However, the migration of textile capacity will be influenced by objective competitive factors and will be hampered by the presence of distorting domestic measures and weak domestic infrastructure in several developing and least developed countries (www.economywatch.com).

The challenges from global competition demand a scientific approach from properly trained management professionals who have specialised in this sector. Sickness and inter-sector contradictions that are a bane of the industry have to be solved through a wise approach and well-calibrated steps, to ensure healthy growth. Managers who are trained in traditional management disciplines will take a long time to get themselves familiarised with the special problems of the textile scene. A strong and competent cadre of trained mangers will help the continuous upgrading of knowledge and skills, fulfilling the need for maintaining a cutting edge in the world of intense competition (Warrier, 2007).

AIMS AND OBJECTIVES

The proposed research intends to examine the increasing competition in Indian textile industry by focusing on the factors that have led to intense competition in the industry and formulate strategies that would help firms in the industry to gain competitive advantage at the global level.

The key objectives of the research are identified as following:

• to identify the factors that have increased competition in Indian textile industry;
• to examine the nature of competition in Indian textile industry;
• to develop competitive strategy and provide recommendations to firms in Indian textile industry, so as to sustain the competitive edge in the global market.

LITERATURE REVIEW

Competitiveness: Definition

"Competitiveness is a widely used term and there are many definitions of it. The approach taken to competitiveness in this report is a pragmatic one, with the general idea that competitiveness means success in markets that translates into general increases in welfare"(National Competitiveness Council Secretariat, 2006, p.1). The main concerns with respect to competitiveness arise from the developments of world markets. The main tendencies in international trade include rapid growth, globalisation, the growth of regional blocks, and the growth of foreign direct investment (National Competitiveness Council Secretariat, 2006).

For the company, competitiveness is the ability to provide products and services as or more effectively and efficiently than the relevant competitors. In the traded sector, this means sustained success in international markets without protection or subsidies (Porter, 1990).

India's competitiveness

Over a decade has passed since India embarked on liberalisation. There has been no dearth of fervent declarations affirming India's determination to acquire the capabilities that will add to its competitiveness and enable it to be counted among other recognised global players (Gupta, 1998). However, has India been able to cash on inherent and acquired advantages in terms of competitiveness? Three different bodies assign three different grades to India:

• The 1999 World Competitiveness Year Book, compiled by the Switzerland-based International Institute for Management Development (IIMD), shows that India's ranking in international competitiveness, evaluated by applying 287 criteria, has gone up by two points from being 41st out of 46 countries in 1998 to 39th out of 47 countries in 1999 (Nancy, 1999).
• The survey conducted by the Geneva-based World Economic Forum (WEF) for 1999 puts India in 53rd position of 59 countries in its Global Competitiveness Report, down from 50 in 1998, and 45 in 1997 and 1996. It uses 179 indicators under eight heads (openness, government, finance, infrastructure, technology, management, labour and civil institutions).
• The World Bank, which appraised the competitiveness 46 countries in 1999, places India in the 40th rank.

In all these three evaluations, the rankings on certain specific parameters are more worrisome than the overall figures. India's weakest areas in all the surveys include: uncertainty in government policies; infrastructural deficiencies; unsatisfactory corporate and financial management of both private and public sector enterprises; inept corporate boards; insufficient attention to human development; low productivity; undependable quality; inadequate customer orientation; and negligible investment on R&D, with special reference to information technology.

India is the fifth largest country in terms of gross national product (GNP) and purchasing power parity (PPP). It constitutes one of the fastest growing markets in the world and is counted among the richest with regard to cheap skilled labour, scientific and technological resources, and entrepreneurial talents. Therefore, the above image of India is quite enviable.

To improve the competitiveness of Indian organisations on product design, quality and on-time delivery it has become necessary for them to look for innovations that produce maximum efficiency both within and beyond their operations (Sahay, 2000). Supply chain management is an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer. It is the management of upstream and downstream relationships – both within and beyond their operations – with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole. Effective supply chain strategies for creating competitiveness revolve around the on-time delivery of competitive quality goods and services, at a reasonable cost, involving the right business partners (Easton, 2002).

India Textile Industry

India Textile Industry is one of the leading textile industries in the world. Though was predominantly unorganized industry even a few years back, but the scenario started changing after the economic liberalization of Indian economy in 1991. The opening up of economy gave the much-needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world.

India textile industry largely depends upon the textile manufacturing and export. It also plays a major role in the economy of the country. India earns about 27% of its total foreign exchange through textile exports. Further, the textile industry of India also contributes nearly 14% of the total industrial production of the country. It also contributes around 3% to the GDP of the country. India textile industry is also the largest in the country in terms of employment generation. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors. India textile industry currently generates employment to more than 35 million people. It is also estimated that, the industry will generate 12 million new jobs by the year 2010.

Various Categories

Indian textile industry can be divided into several segments, some of which can be listed as below:

• Cotton Textiles
• Silk Textiles
• Woolen Textiles
• Readymade Garments
• Hand-crafted Textiles
• Jute and Coir

The Industry

India textile industry is one of the leading in the world. Currently it is estimated to be around US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The current domestic market of textile in India is expected to be increased to US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile export of the country was around US$ 19.14 billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2007-08. The share of exports is also expected to increase from 4% to 7% within 2012. Following are area, production and productivity of cotton in India during the last six decades:

Year	Area in lakh hectares	Production in lakh bales of 170 kgs	Yield kgs per hectare
1950-51	56.48	30.62	92
1960-61	76.78	56.41	124
1970-71	76.05	47.63	106
1980-81	78.24	78.60	170
1990-91	74.39	117.00	267
2000-01	85.76	140.00	278
2001-02	87.30	158.00	308
2002-03	76.67	136.00	302
2003-04	76.30	179.00	399
2004-05	87.86	243.00	470
2005-06	86.77	244.00	478
2006-07	91.44	280.00	521
2007-08	94.39	315.00	567
2008-09	93.73	290.00	526

Though during the year 2008-09, the industry had to face adverse agro-climatic conditions, it succeeded in producing 290 lakh bales of cotton comparing to 315 lakh bales last year, yet managed to retain its position as world's second highest cotton producer.

Strengths

• Vast textile production capacity
• Large pool of skilled and cheap work force
• Entrepreneurial skills
• Efficient multi-fiber raw material manufacturing capacity
• Large domestic market
• Enormous export potential
• Very low import content
• Flexible textile manufacturing systems

Weaknesses

• Increased global competition in the post 2005 trade regime under WTO
• Imports of cheap textiles from other Asian neighbors
• Use of outdated manufacturing technology
• Poor supply chain management
• Huge unorganized and decentralized sector
• High production cost with respect to other Asian competitors

Cotton Exports from India

Year	Quantity (in lakh bales of 170 kgs)	Value (in Rs./Crores)
1996-97	16.82	1655.00
1997-98	3.50	313.62
1998-99	1.01	86.72
1999-00	0.65	52.15
2000-01	0.60	51.43
2001-02	0.50	44.40
2002-03	0.83	66.31
2003-04	12.11	1089.15
2004-05	9.14	657.34
2005-06	47.00	3951.35
2006-07	58.00	5267.08
2007-08	85.00	8365.98
2008-09	50.00	N.A.

Year	Quantity (in lakh bales of 170 kgs.)	Value (Rs./Crores)
1996-97	0.30	56.42
1997-98	4.13	497.93
1998-99	7.87	772.64
1999-00	22.01	1967.92
2000-01	22.13	2029.18
2001-02	25.26	2150.01
2002-03	17.67	1789.92
2003-04	7.21	880.10
2004-05	12.17	1338.04
2005-06	5.00	695.77
2006-07	5.53	752.29
2007-08	6.50	986.33
2008-09	7.00	N.A.

Current Facts on India Textile Industry

• India retained its position as world’s second highest cotton producer.
• Acreage under cotton reduced about 1% during 2008-09.
• The productivity of cotton which was growing up over the years has decreased in 2008-09.
• Substantial increase of Minimum Support Prices (MSPs).
• Cotton exports couldn't pick up owing to disparity in domestic and international cotton prices.
• Imports of cotton were limited to shortage in supply of Extra Long staple cottons.