By M.S. Pradeep and Abhishek Kumar
Any discussion on the apparel business invariably steers towards the fact that how do you not only survive in a highly competitive marketplace but keep improving so that you are at a stage where you can choose your customers and not the other way around. Thanks to the quotas imposed on China till 2008, a lot of suppliers in India, as well as other parts of the world had got a breather, but now apparel manufacturers have to look beyond so that they can build a truly sustainable business. Here are some long term and short term strategies that could be adopted. These ten strategies would help them to keep the competition at bay. Some of these may sound simple but it takes meticulous planning and consistent efforts to implement these.
Ten strategies
1. Widen up product Portfolio
Companies that already have a business in some product categories have to move up to more complex products. There are number of companies who are producing casual shirts and trousers but few who are into products like premium formal shirts, dress pants, lingerie, suits etc. Basic products make sense for a company who is new to the business but existing companies need to make the transition by getting into high value products and replace high cost production bases in Europe and America by offering an irresistible value proposition of costs and services. To be able to offer these, companies either need to set up separate dedicated factories or a factory-in-factory with separate cutting, sewing and finishing, catering to such orders with dedicated teams.
2. Vertical integration of the business
A forward or backward integration plan for the external processes of the current business is become essential to move next level of business. By integration, there is a cost advantage and a lead time advantage. The bigger garment companies need to invest in processing and weaving/knitting while textile companies need to quickly get into value-added garment exports, rather than just yarn or fabrics exports. The medium sized companies can look at integration with process houses or weavers/knitters/converters by either a formal arrangement of committed production off-take or investing capital by picking up an equity stake. The funds thus available can be used by smaller companies to finance their working capital and/or technological up-gradation. Classic examples of vertically integrated companies are Li & Fung and Esquel.
Li & Fung Ltd., Hong Kong
Product Development and Supply Chain Management
The Esquel Group – Hong Kong
3. Improve Service and On Time In Full (OTIF)
Building trust with buyers goes beyond answering their e-mail queries on time. The buyers have to be won over by his having to invest very little time on production follow-ups and wondering if he will get his order in full and on time (OTIF- On Time In Full). Manufacturing or infrastructure can be replicated but great service is very difficult to copy. This can become a truly distinguishing feature for Indian companies if they put their heart and mind to it. If the buyer can’t be provided with online access to his order status, then needs to be updated on all relevant information without them asking for it. No last minute surprises should be sprung upon them! Companies need to set the benchmark and have self belief that they can actually deliver 100% of the orders on time and in full. Apparel companies should move up from providing just a product to a product plus service bundle which can take up a large part of what the buyer has to do. This can include pre-production pattern making, prototype development, production monitoring, in house inspection and testing including shipment audit. An example in this category is TAL Apparel
Case Study: Buyer Centric Approach - TAL Apparel
Started in 1947, TAL Apparel is one of the largest apparel manufacturers with revenue of US$ 650 Million in 2003. Today TAL Group has factories in 9 countries with an annual capacity of 41 Million Tops, 8 Million trousers, 1.5 Million Outerwear and 130,000 sets of tailored suits.
Over the years the company has moved from commodity supplier to a full fledged service provider by delivering value proposition beyond usual concerns of cost, quality and delivery.
TAL has developed capabilities to create new products, manufacturing techniques to move ahead of the competition.
Through close collaboration with its buyers TAL has been able to synchronize its demand and supply to a new level of performance:
Buyer synchronization has also helped to create innovative products like pucker-free seams and wrinkle-free 100% cotton shirts.
4. Responding to the challenges and enter in the domestic market
Apparel exporters need to focus on the domestic market also, as there is huge growth in domestic apparel retail (Indian market). Exporters can give a much better product at a lower cost. This will help them mitigate and diversify their risks; spare capacities can be used more effectively.
Another aspect which merits serious consideration is going for two shifts. Needless to say that production can be almost doubled while cost per unit would come down. Factories should look at forming alliances with other factories in a particular region so that spare capacities can be effectively utilized. So a particular factory which has an order booking more than its capacity can utilize the capacity of another factory which may be facing a shortfall of orders. The important thing is that factories should be running at peak capacities throughout the year.
5. Improve the work environment to drive revenue growth
Apparel companies should look at novel human resource practices to make their organizations a place that attracts the brightest young talents of the country. The work atmosphere should be such that it helps a person be at his creative best rather than a culture of getting work done through stick alone. Also senior management should give a patient hearing to these youngsters who may be brimming with radical ideas which could provide an innovative new method or even a breakthrough. Everyone needs to be respected no mater how low they are in the organizational hierarchy.
The following five strategies can be classified under immediately addressable areas (3-6 months time frame).
6. Setting up of the planning department or strengthen the existing one
Production planning and control (PPC) is a key area in the entire manufacturing cycle but perfection in this area is still lacking. This could be because of a mindset that “anyway fabric will get delayed so why to bother about planning accurately”. We need to get away from this mindset and plan every little activity and trim to the smallest detail. Nothing can and should be left to chance. Last minute changes in the name of flexibility may be accepted in some orders but not in majority of the cases. At times buyers may have to be told “No” for any changes in the specs, once production has started. There has to be a senior person heading PPC at the factory level as this function has a critical bearing on factory efficiencies and OTIFs.
7. Minimize Style Changeover Time
Changeover losses need to be minimized and one way could be to set the line the previous evening so that there aren’t any days of zero production because of style changeovers. Again the key is proactive planning. Supervisors should be aware of the details of the next style that’s going to hit the line including outsourcing operations. PPC has a key role to play here again in terms of blocking capacities with sub-contractors on special operations and give clear input and output dates. If external operations like embroidery and washing can be brought in-house this would lead to a reduction in set-up time, cycle time, cost and wastage.
8. Develop a Lean team with a proactive approach
Line allocation should be kept tight as per operation bulletin without buffer. Combining operations should be an ongoing exercise with the Industrial Engineering (IE) department constantly looking at methods improvement. Too often IE is caught up in post event analysis where the need of the hour is to be able to demonstrate to the operator and the supervisors the correct method at the correct pace at acceptable quality levels. IE’s need is to master sewing skills. They need to change from a reactive approach to a proactive approach.
9. Checklist – an effective tool
Basic planning tools like checklist should be widely adopted and people trained on this to ensure they don’t miss any activity or parts. Though the apparel business is complex, it can be simplified by training people about their job responsibilities in detail and ensuring there are able to do a certain set of activities, day in day out, error free. Sounds simple but there any number of cases where the insufficient fabric was ordered because somebody forgot to add shrinkage allowance to the base pattern and this happens even in the ‘Good’ factories.
10. Elimination of overtime work
Last but not least is the controversial topic of overtime. In peak season there is at least some justification for doing overtime to be able to do 110% or 120% of capacity but where the justification in the lean season is or where factory efficiency is 40% to 45%. Overtime in such cases only encourages inefficiency and a false sense of more time available. When people on the floor know that overtime will not be allowed for any reasons, no matter what (usually it is to meet a delivery date, other wise the dreaded air shipment!) and management backs this up with actually sticking to their words, the impact can be quite significant.
One could go on and on but even if few of these mid to long term strategies and immediately addressable areas are looked at, apparel companies would definitely stand to gain.
Any discussion on the apparel business invariably steers towards the fact that how do you not only survive in a highly competitive marketplace but keep improving so that you are at a stage where you can choose your customers and not the other way around. Thanks to the quotas imposed on China till 2008, a lot of suppliers in India, as well as other parts of the world had got a breather, but now apparel manufacturers have to look beyond so that they can build a truly sustainable business. Here are some long term and short term strategies that could be adopted. These ten strategies would help them to keep the competition at bay. Some of these may sound simple but it takes meticulous planning and consistent efforts to implement these.
Ten strategies
- Widen up the product portfolio
- Vertical integration of business
- Improve service and on time in full (OTIF)
- Responding to the challenges and enter in the domestic market
- Improve the work environment to drive revenue growth
- Setting up of the planning department or strengthen the existing one
- Minimize Style Changeover Time
- Develop a Lean team with a proactive approach
- Checklist – an effective tool
- Elimination of overtime work
1. Widen up product Portfolio
Companies that already have a business in some product categories have to move up to more complex products. There are number of companies who are producing casual shirts and trousers but few who are into products like premium formal shirts, dress pants, lingerie, suits etc. Basic products make sense for a company who is new to the business but existing companies need to make the transition by getting into high value products and replace high cost production bases in Europe and America by offering an irresistible value proposition of costs and services. To be able to offer these, companies either need to set up separate dedicated factories or a factory-in-factory with separate cutting, sewing and finishing, catering to such orders with dedicated teams.
2. Vertical integration of the business
A forward or backward integration plan for the external processes of the current business is become essential to move next level of business. By integration, there is a cost advantage and a lead time advantage. The bigger garment companies need to invest in processing and weaving/knitting while textile companies need to quickly get into value-added garment exports, rather than just yarn or fabrics exports. The medium sized companies can look at integration with process houses or weavers/knitters/converters by either a formal arrangement of committed production off-take or investing capital by picking up an equity stake. The funds thus available can be used by smaller companies to finance their working capital and/or technological up-gradation. Classic examples of vertically integrated companies are Li & Fung and Esquel.
Li & Fung Ltd., Hong Kong
Product Development and Supply Chain Management
- Vertically Integrated
- Diversified Product Base
- Turnover: US$ 600 Mn
3. Improve Service and On Time In Full (OTIF)
Building trust with buyers goes beyond answering their e-mail queries on time. The buyers have to be won over by his having to invest very little time on production follow-ups and wondering if he will get his order in full and on time (OTIF- On Time In Full). Manufacturing or infrastructure can be replicated but great service is very difficult to copy. This can become a truly distinguishing feature for Indian companies if they put their heart and mind to it. If the buyer can’t be provided with online access to his order status, then needs to be updated on all relevant information without them asking for it. No last minute surprises should be sprung upon them! Companies need to set the benchmark and have self belief that they can actually deliver 100% of the orders on time and in full. Apparel companies should move up from providing just a product to a product plus service bundle which can take up a large part of what the buyer has to do. This can include pre-production pattern making, prototype development, production monitoring, in house inspection and testing including shipment audit. An example in this category is TAL Apparel
Case Study: Buyer Centric Approach - TAL Apparel
Started in 1947, TAL Apparel is one of the largest apparel manufacturers with revenue of US$ 650 Million in 2003. Today TAL Group has factories in 9 countries with an annual capacity of 41 Million Tops, 8 Million trousers, 1.5 Million Outerwear and 130,000 sets of tailored suits.
Over the years the company has moved from commodity supplier to a full fledged service provider by delivering value proposition beyond usual concerns of cost, quality and delivery.
TAL has developed capabilities to create new products, manufacturing techniques to move ahead of the competition.
Through close collaboration with its buyers TAL has been able to synchronize its demand and supply to a new level of performance:
- TAL’s delivery time for yarn dyed garments has reduced to 60 days.
- TAL has direct visibility to point of sales (POS) data for retailers like J.C Penney thus helping to reduce cycle time and inventory cost.
- TAL has formed close collaboration with its key buyers. The company designs shirts for JC Penney and Dillard’s private label.
Buyer synchronization has also helped to create innovative products like pucker-free seams and wrinkle-free 100% cotton shirts.
4. Responding to the challenges and enter in the domestic market
Apparel exporters need to focus on the domestic market also, as there is huge growth in domestic apparel retail (Indian market). Exporters can give a much better product at a lower cost. This will help them mitigate and diversify their risks; spare capacities can be used more effectively.
Another aspect which merits serious consideration is going for two shifts. Needless to say that production can be almost doubled while cost per unit would come down. Factories should look at forming alliances with other factories in a particular region so that spare capacities can be effectively utilized. So a particular factory which has an order booking more than its capacity can utilize the capacity of another factory which may be facing a shortfall of orders. The important thing is that factories should be running at peak capacities throughout the year.
5. Improve the work environment to drive revenue growth
Apparel companies should look at novel human resource practices to make their organizations a place that attracts the brightest young talents of the country. The work atmosphere should be such that it helps a person be at his creative best rather than a culture of getting work done through stick alone. Also senior management should give a patient hearing to these youngsters who may be brimming with radical ideas which could provide an innovative new method or even a breakthrough. Everyone needs to be respected no mater how low they are in the organizational hierarchy.
The following five strategies can be classified under immediately addressable areas (3-6 months time frame).
6. Setting up of the planning department or strengthen the existing one
Production planning and control (PPC) is a key area in the entire manufacturing cycle but perfection in this area is still lacking. This could be because of a mindset that “anyway fabric will get delayed so why to bother about planning accurately”. We need to get away from this mindset and plan every little activity and trim to the smallest detail. Nothing can and should be left to chance. Last minute changes in the name of flexibility may be accepted in some orders but not in majority of the cases. At times buyers may have to be told “No” for any changes in the specs, once production has started. There has to be a senior person heading PPC at the factory level as this function has a critical bearing on factory efficiencies and OTIFs.
7. Minimize Style Changeover Time
Changeover losses need to be minimized and one way could be to set the line the previous evening so that there aren’t any days of zero production because of style changeovers. Again the key is proactive planning. Supervisors should be aware of the details of the next style that’s going to hit the line including outsourcing operations. PPC has a key role to play here again in terms of blocking capacities with sub-contractors on special operations and give clear input and output dates. If external operations like embroidery and washing can be brought in-house this would lead to a reduction in set-up time, cycle time, cost and wastage.
8. Develop a Lean team with a proactive approach
Line allocation should be kept tight as per operation bulletin without buffer. Combining operations should be an ongoing exercise with the Industrial Engineering (IE) department constantly looking at methods improvement. Too often IE is caught up in post event analysis where the need of the hour is to be able to demonstrate to the operator and the supervisors the correct method at the correct pace at acceptable quality levels. IE’s need is to master sewing skills. They need to change from a reactive approach to a proactive approach.
9. Checklist – an effective tool
Basic planning tools like checklist should be widely adopted and people trained on this to ensure they don’t miss any activity or parts. Though the apparel business is complex, it can be simplified by training people about their job responsibilities in detail and ensuring there are able to do a certain set of activities, day in day out, error free. Sounds simple but there any number of cases where the insufficient fabric was ordered because somebody forgot to add shrinkage allowance to the base pattern and this happens even in the ‘Good’ factories.
10. Elimination of overtime work
Last but not least is the controversial topic of overtime. In peak season there is at least some justification for doing overtime to be able to do 110% or 120% of capacity but where the justification in the lean season is or where factory efficiency is 40% to 45%. Overtime in such cases only encourages inefficiency and a false sense of more time available. When people on the floor know that overtime will not be allowed for any reasons, no matter what (usually it is to meet a delivery date, other wise the dreaded air shipment!) and management backs this up with actually sticking to their words, the impact can be quite significant.
One could go on and on but even if few of these mid to long term strategies and immediately addressable areas are looked at, apparel companies would definitely stand to gain.
| About the Authors M.S. Pradeep and Abhishek Kumar are Management Consultants specializing in the Apparel and Fashion Industry. Between them they have a combined experience of 24 yrs in the industry.
M.S.
Pradeep and Abhishek Kumar have been working with Apparel companies in most of
these areas, to help them improve their profitability and growth.
|