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Textiles & Apparel Operations

www.technopak.com
a q u a r t e r l y r e p o r t b y t e c h n o p a k | J une 2012
Contents
Author:

01 03 05
Amit Gugnani
Sr. Vice President I [email protected] I +91-9871755992
Nikhil Sunny
Consultant I [email protected] I +91-9717720276 Textile & Apparel Trade: India: Key Sourcing A Comparative Analysis
Global and Indian Indicators of Key Drivers

Design & Development

Bharat Kaushik
Sr. Manager-Design I [email protected] I +91-9811661493
Arvind Sundriyal
09
India:
11
About
Assistant Manager-Design I [email protected] I +91-9910493934 Key Elements Technopak
June 2012 | India’s Attractiveness as a Key Sourcing Destination

Textile & Apparel

Trade: Global and
Indian
The Global Textile and Apparel, or T&A, Trade is too much investment in new apparel manufacturing Indian Textile and Apparel exports have been steadily for the future, and provides a cushion against global
expected to grow to USD 1 trillion by 2020. However, plants. It is therefore important to analyze if India is still growing over the years, from a cumulative figure of USD turbulences, thus making a case to build-up and
with growth slowing down in developed markets, the an attractive source for apparel exports. 11.5 billion in 2000 to more than USD 24 billion in leverage capacities.
dynamics of the global fashion market are expected 2010.
Exhibit 2: India Textile & Apparel Exports Growth (USD bn)
to change dramatically. Emerging economies, namely Exhibit 3: Indian Textile and Apparel Exports Successful sourcing implies developing long-term
Brazil, Russia, India & China, along with a few other 90
80
relationships with partners who are capable of
Trends 1990 2000 2005 2008 2009 2010
Southeast Asian countries, are seen as the major growth 80 consistently fulfilling contract conditions and delivery
drivers. 70 25 Global T&A schedules and who have the potential to provide a full
60 Trade (USD 213 353 486 612 510 600
range of services (such as design and full integration with
50 45 bn)
Additionally, in the recent past global apparel markets the supply chain of sourcing companies).
40 India’s T&A
have seen a paradigm shift, moving towards increased 30 25
16
Exports 4.7 11.5 17 21.3 21.1 24.1
50
product differentiation, and catering to a diverse, 20 15 11 (USD bn) Those sourcing apparel need to assess which country
11.4 25
aware, and demanding customer base. Retailers have 10 4.6 4
5
11 India's
has the greatest potential for developing such long-term
1.9 2 8
thus gravitated towards demographic shifts, societal 0 2
6
1 2 3 4 5 share (%) of relationships and look beyond short-term trading.
2.2% 3.3% 3.5% 3.5% 4.1% 4.0%
and economic influences and environmental concerns. 1985 1990 2000 2005 2010 2015 (P) 2020 (P) World Trade
Textiles Apparel Home Textiles Total (T&A) There is little doubt that, apart from the Chinese, the
Exhibit 1: Global Textile and Apparel Business (USD bn)
Source: WTO, UN Comtrade & Technopak Analysis Source: WTO, UN Comtrade & Technopak Analysis Indian companies offer the greatest potential for such
1200
1000
A detailed analysis of India’s performance in the US and partnerships, given their wide-ranging expertise and
1000 EU apparel markets substantiates the forecasts - China India’s growth has been steady and continuous in past capabilities.
800
800 and India are the principal beneficiaries of market years and there have been many key drivers for this
600 529
586 612
510
650 enlargement arising from the dismantling of quotas. growth: Also, if the Global Textile & Apparel trade is poised to
500
Further, China’s exports grew faster than India’s in most • Ingrained factors make it an independent & self- reach around USD 800 billion by 2015, and around
400 355 346 362
309 310 clothing categories. USD 1 trillion by 2020 and manufacturing is expected to
198 reliant industry.
200
250 300 350 shift further from the West to the East (read Asia), then
157 220 240 200 • Abundant raw material availability that helps industry
0 Despite the strengths that China possesses in the apparel the region is probably headed for a textile revolution.
2000 2006 2007 2008 2009 2015 (P) 2020 (P) sector, inflation and labor supply challenges have control costs and reduces lead time across operations. If China has to reduce its exposure to the sector due
Textiles Apparel Total hampered the global competitiveness of the sector. As • Availability of low cost skilled manpower has provided to a multitude of factors, space for the sector has to be
Source: WTO, UN Comtrade & Technopak Analysis such, it may not be prudent for those sourcing apparel competitive advantage to the industry. The recent wage created in countries like India, Pakistan, Bangladesh,
Stagnating growth and restricted consumer spending in to put all their eggs in the Chinese basket. increases have been dampers, but not to a significant Indonesia, Vietnam and Cambodia. Other than China,
developed economies, is exerting pressure on retailers. extent. only India and Pakistan have relative supply chain
Under such conditions the global apparel value chain There are many uncertainties involved in sourcing and integration from fiber to garment. All other countries
• Indian apparel industry has manufacturing flexibility
has shown a distinct shift both at the front- and supply- importing clothing, relating not only to such economic are mostly dependent on imports.
that aids catering to demand across various fashion
end. factors as variations in cotton production which affect
categories.
the pricing of inputs, but also political factors such as
India’s Textile and Apparel trade witnessed a quantum the imposition of safeguard quotas on Chinese textiles • India’s domestic demand has been growing at a fast
leap in the post quota era. The apparel trade from India and apparel exports by the USA and the EU in 2005. pace. The size of domestic consumption in 2011
crossed USD 11 billion in 2010 and has the potential of From the viewpoint of long-term risk management, was close to USD 50 billion, as against an exports
growing to about USD 50 billion by 2020. The industry therefore, it would be advisable for even those who basket of USD 25 billion. This growth also accounts
has been witnessing closures of units for the last couple have sourced large amounts of apparel from China to for continuous shift from an unorganized to an
of years. Entry barriers have been rising as India has seen cultivate alternative suppliers. organized industry. This in itself is a big opportunity

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June 2012 | India’s Attractiveness as a Key Sourcing Destination

Exhibit 5: Efficiency (%) Analysis 1. Processing: Processing is the weakest link in the supply
57% chain today and adequate focus on the same will
60%
48% 46% help in strengthening the industry. The Ministry of
50% 43%
39% 40% 39% Textiles, Government of India has recently announced
40%

India: Key Sourcing

21 textile parks. Another set of such parks focused on
30%
processing will be a great boost.
20%
10% 2. Synthetic apparel production: India has been focused
0% on the manufacturing of cotton-based apparel.
India Bangladesh Vietnam Indonesia Pakistan Cambodia China However, global demand will largely shift towards

Indicators
Source: Technopak Analysis such synthetics as polyester, viscose, blends etc. in the
coming years, for which apparel manufacturers should
[*Efficiency is the measure of the output as compared to a be equipped..
particular input (factor of production), or a combination of
all the factors of production. In the context of the apparel 3. Efficiencies: Efficiency can be a game changer. While
industry, it is the ratio of total work produced in minutes bigger organizations have already incorporated a
against the total minutes spent, as a percentage.] focus on improvement of processes which can lead
to improved efficiencies, in other organizations
Textile Hubs This remains favorable even when considered in terms of there is still a need for improvement.. There should
purchasing power parity. As per United Nations Labor Other Factors be a continued effort in all organizations towards
The abundance of raw materials is a big advantage for Wing data, “The average minimum monthly wage in improving their supply chain and manufacturing
India due to its beneficial impact on cost and operational Bangladesh in Purchasing Power Parity terms is USD 58. The recent flattening trend in the Indian Apparel industry efficiencies.
lead time. The country has a supply base for almost The corresponding minimum wage in Vietnam and Laos, reflects the challenges faced in sustaining growth, despite
the nearest competitors to Bangladesh, is USD 84. In India, ingrained advantages. Such challenges include: 4. Shift to low cost centers: Traditional manufacturing
all manmade and natural yarns and fabrics, including
it is USD 121, China USD 173, Sri Lanka USD 93 and centers like Delhi NCR, Bengaluru, and Chennai
cotton, polyester, rayon and others. India is one of the • Rise of alternate employment opportunities due to
Afghanistan USD 89”. Thus, India is at the median range. do not present a viable option for reducing costs.
largest exporters of yarn in the international market and substantial GDP growth in recent times. Automobiles, Therefore, the industry will have to shift to low cost
contributes around 25% of the global trade in Cotton Telecom, IT and Retail, among others, today offer
Minimum Wages Analysis (USD) centers.
Yarn. Exhibit 4:
better employment prospects.
200 180
• Rise of minimum wage to USD 100-130 per month
China with the abundance of vertical supply chain
150 has had a negative impact on the labor-intensive and
integration and raw material availability has been able 130
price sensitive apparel industry. Most of the Industry
to offer cost advantage and reduced lead times. Again, 100 97
100
80
90 has typically grown around the metros, where the cost
China is the only nation in the world which has
of living is high. The overall industry is yet to see a full
indigenous OEMs for the technological needs of the 50 37
grown shift from a high cost center to a low cost center
industry.
0 within the country.
Bangladesh India Vietnam Indonesia Pakistan Cambodia China
On the other side, Pakistan also has an excellent raw • Lack of ‘Economies of Scale’: The Indian apparel
Source: Technopak Analysis
material base being the fourth largest producer of industry is highly fragmented, and lacks overall scale.
cotton. From a product profiling perspective, Pakistan’s Technology Smaller set-ups pose more challenges in meeting the
textile industry’s main strength has been and continues overall requirements of the customer, who seeks to
Labor wages are directly proportional to the appetite work with lesser suppliers and in the process reducing
to be home linens and denim.
for technology. Thus, in countries where wages are low, supply chain costs.
motivation towards technological advancement is also
All other countries like Bangladesh, Vietnam, Indonesia • There are few exporters who have built manufacturing
low. In the recent past, countries like China, India,
and Cambodia are struggling to keep pace with the facilities with vertical integration. In the longer term,
and Indonesia have developed an inclination for better
textile hubs in their homes. These countries are giving globally competitive countries will have a significantly
technology. Countries like Bangladesh, Vietnam and
a tough time to major players in apparel exports but are consolidated supply chain. For instance, competitors
Indonesia are still working with conventional methods
facing supply chain constraints due to being product- like Korea, China, Turkey, Pakistan and Mexico have a
of manufacturing, leading to greater usage of labor and
centric and having unresponsive lead times. consolidated supply chain. In contrast, most activities
less dependence on technological advances.
like weaving, processing, made-ups and apparel
Wages manufacturing are found to be fragmented in India.
Efficiency
However, even with the above challenges, there is
The minimum wage in India is about USD 100 per In the apparel industry, efficiency* is considered to be tremendous optimism in the sector. Government
month. In comparison, Pakistan pays a minimum the key indicator for measuring any manufacturing unit’s support coupled with industry initiatives can make a
of around USD 80, Vietnam around USD 97 and performance. Technopak analysis suggests that countries significant impact on growth, with the following areas
Indonesia pays around USD 130 per month to its T&A like China, India and Pakistan are producing goods at requiring focus:
industry workers. The minimum wage in Bangladesh is a higher rate of efficiency compared to Bangladesh or
close to USD 50, one of the lowest in the world. Vietnam (as mentioned in Exhibit 5).

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June 2012 | India’s Attractiveness as a Key Sourcing Destination

Alternatively, India with its vast supply chain and strong design capability emerges as an ideal location for sourcing
these products.
Even in terms of delivery time, India fares better than its competitors with average delivery in 12 weeks.

A Comparative Analysis
Exhibit 7: Competition Analysis in Terms of Delivery Time

Garment made by country India Bangladesh China Pakistan Cambodia

Fabric Source India China China Pakistan China
Fabric Production Time 4 4 4 4 4

of Key Drivers Delivery Time Fabric

Making up Operations
Garment Shipment Time
Total Delivery Cycle
1
2
5
12
3
2
5
14
1
2
3
10
1
2
5
12
3
2
4
13
Source: USAID Report

The following analysis combines export trends, With an hourly wage of USD 0.60, India ranks fourth Transaction costs in India
production input costs, product benchmark data and off- on labor costs in our five-country sample. Bangladesh
balance-sheet transaction costs to provide information has the lowest hourly wage (USD 0.25). India’s higher The following table compares the performance of all competitors on time and costs associated with exporting a
on the competitive standing of India’s textile and apparel efficiency, strong supply chain base and stable political standardized shipment of goods. India ranks 2nd in shipment time and 4th in shipment cost.
exporters. This analysis was carried out using standard climate appear to neutralize the cost effect of higher Exhibit 8: Competition Analysis in Terms of Transaction Cost
specifications taken from various suppliers in different wages. India Bangladesh China Pakistan Cambodia
Export Procedures
countries. While at this point in time, the results have Day USD Day USD Day USD Day USD Day USD
been analyzed and presented for a particular category, Product Benchmark data Documents Preparation 8 350 14 290 14 250 11 96 14 220
the attractiveness may not generically apply to all Customs Clearance and Technical Control 2 120 3 120 2 70 3 200 3 262
categories. Preliminary findings showed that India loses Data relating to men’s 100% cotton t-shirts reflect
Ports and Terminal Handling 3 175 5 420 2 85 4 115 3 100
attractiveness in bottoms-wear to Bangladesh, outer- India’s cost-competitiveness in the region. The hitherto
common assumption of Bangladesh’s low cost gets Inland Transportation and Handling 4 300 3 140 3 95 4 200 2 150
wear to Indonesia and China, formal-wear to Taiwan
challenged if one looks at the costing of t-shirts exported Comparative Rank 1 4 4 5 2 1 3 2 3 3
and China, etc. We feel that, in the near future, countries
will further develop their own niches. from competing countries. The cost of exporting the Source: USAID Report

product from India comes extremely close to that Exhibit 9: Production Input Cost
Judging by these measures, India’s Textile and Apparel of Bangladesh. In fact, the same analysis reveals that
Cost Unit India Bangladesh China Pakistan Cambodia
sector has a positive outlook. Product benchmark data sourcing products from Pakistan is similar to sourcing
Labor Cost USD / Hour 0.60 0.30 0.90 0.50 0.47
are positive but input cost data are average, and export from Bangladesh in cost terms.
Hours Worked
levels have risen but recently leveled off. The cost of doing
The low labor wages of Bangladesh are offset by low Hours per Operator 8 10 8 8 8
business in India, particularly labor wages, is an emerging
efficiency and the price of the fabric that it sources from Hours per Week 48 48 48 49 42
factor that will influence sustained competitiveness.
China. In fact, it may be cheaper for Bangladesh to National Holidays per Year 17 10 11 18 18
source fabric from India than from China. If sourcing Total Working Hours 2280 2336 2328 2324 1960
Production Input Cost Comparison
decisions were based on cost alone, Pakistan would Electricity Cost USD / KWh 0.11 0.04 0.07 0.05 0.11
be the best alternative for these products. However, Source: Technopak Analysis
Exhibit 6 presents a snapshot of India’s position in
the internal security situation in Pakistan and also
relation to Pakistan, China, Bangladesh, and Cambodia Comparative costing of T-shirt manufacturing
Bangladesh’s inexperience in manufacturing high
in six categories: labor cost, labor hours, electricity cost,
fashion products, in addition to its mediocre product
ocean transport, land transport, and building cost. Exhibit 10: Comparative Costing for Destination USA
development capabilities, reduces the range of products.
Garment made by country India Bangladesh China Pakistan Cambodia
Exhibit 6: Production Input Cost Ranking Fabric Source India China China Pakistan China
Cost Category 1 2 3 4 5 Main Fabric
Labor Cost Bangladesh Cambodia Pakistan India China Fabric Cost per kg (USD) 6.95 7.11 6.90 6.81 7.04
Labor Hours Bangladesh China Pakistan India Cambodia Fabric Shipping Cost per kg (USD) 0.00 0.06 0.00 0.00 0.07
Fabric Usage per Garment (kg) 0.24 0.24 0.24 0.24 0.24
Electricity Cost Bangladesh China Pakistan India Cambodia
Fabric Waste (%) 2% 2% 2% 2% 2%
Ocean Transport cost China Bangladesh/Cambodia Pakistan India Main Fabric Cost per Garment 1.67 1.72 1.66 1.63 1.71
Land Transport Cost Bangladesh Pakistan India China Cambodia Trim Cost per Garment (USD)
Building Cost China Bangladesh Cambodia India Pakistan Thread 0.10 0.10 0.10 0.10 0.10
Source: USAID Report
Labels, Tag 0.04 0.04 0.04 0.04 0.04

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June 2012 | India’s Attractiveness as a Key Sourcing Destination

Garment made by country India Bangladesh China Pakistan Cambodia Exhibit 11: Comparative Costing for Destination Europe
Fabric Source India China China Pakistan China Garment made by country India Bangladesh China Pakistan Cambodia
Packaging per Garment Fabric Source India China China Pakistan China
Plastic Polybag 0.02 0.02 0.02 0.02 0.02 Main Fabric
Cardboard Box 0.01 0.01 0.01 0.01 0.01 Fabric Cost per kg (USD) 6.95 7.11 6.90 6.81 7.04
Total Material Cost per Garment 1.84 1.89 1.83 1.80 1.88 Fabric Shipping Cost per kg (USD) 0.00 0.06 0.00 0.00 0.07
Labour Hour USD Cost per Garment 0.60 0.30 0.90 0.50 0.47 Fabric Usage per Garment (kg) 0.24 0.24 0.24 0.24 0.24
SAM for Cut, Make and Finish 6.12 6.12 6.12 6.12 6.12 Fabric Waste (%) 2% 2% 2% 2% 2%
Efficiency (%) 60% 55% 65% 60% 55% Main Fabric Cost per Garment 1.67 1.72 1.66 1.63 1.71
Labor Cost per Garment 0.20 0.14 0.25 0.18 0.19 Trim Cost per Garment in USD
Rejections 0.06 0.08 0.04 0.06 0.06 Thread 0.10 0.10 0.10 0.10 0.10
Manufacturing Overheads per Garment 0.07 0.06 0.09 0.05 0.07 Labels, Tag 0.04 0.04 0.04 0.04 0.04
Inclusive of Electricity, Rent, Indirect Labor Packaging per Garment
Sales and Admin Cost (5% on Labor) 0.010 0.007 0.013 0.009 0.009 Plastic Polybag 0.02 0.02 0.02 0.02 0.02
Total Cost per Garment- Fabric, Labor, Overheads (USD) Cardboard Box 0.01 0.01 0.01 0.01 0.01
Sales and Administration 2.185 2.178 2.226 2.105 2.203 Total Material Cost per Garment 1.84 1.89 1.83 1.80 1.88
Factory Gate Cost per Garment 2.18 2.18 2.23 2.11 2.20 Labour Hour $ Cost per Garment 0.60 0.30 0.90 0.50 0.47
Shipping and Insurance to Long Beach, CA (TEU) SAM for Cut, Make and Finish 6.12 6.12 6.12 6.12 6.12
Land Transport Cost to Port (USD) 400.00 250.00 470.00 300.00 600.00 Efficiency (%) 60% 55% 65% 60% 55%
Ocean Freight from X to Long Beach Mumbai Dhaka Shanghai Karachi Sihanoukville Labor Cost per Garment 0.20 0.14 0.25 0.18 0.19
Ocean Transport Cost per Container incl. Insurance in USD 2100.00 1900.00 1800.00 2000.00 1900.00 Rejections 0.06 0.08 0.04 0.06 0.06
Units per Container 18000.00 18000.00 18000.00 18000.00 18000.00 Manufacturing Overheads per Garment 0.07 0.06 0.09 0.05 0.07
Transport and Insurance Cost per Garment (USD) 0.14 0.12 0.13 0.13 0.14 Inclusive of Electricity, Rent, Indirect Labor
Total CIF Cost per Garment incl. C.I.F. (USD) 2.324 2.298 2.352 2.233 2.342 Sales and Admin Cost (5% on Labor) 0.010 0.007 0.013 0.009 0.009
Tariff % (Import Duty to US) 16.1 16.1 16.1 16.1 16.1 Total Cost per Garment- Fabric, Labor, Overheads (USD)
Tariff per Garment (USD) 0.374 0.379 0.379 0.359 0.377 Sales and Administration 2.185 2.178 2.226 2.105 2.203
Full Landed Cost per Garment Duty Paid (USD) 2.70 2.67 2.73 2.59 2.72 Factory Gate Cost per Garment 2.18 2.18 2.23 2.11 2.20
Above figures are for destination of goods being USA, where Bangladesh doesn't enjoy duty benefits Land Transport Cost to Port (USD) 400.00 250.00 470.00 300.00 600.00
Ocean Freight from X to Long Beach Mumbai Dhaka Shanghai Karachi Sihanoukville
Source: USAID Report, Technopak Analysis
Ocean Transport Cost per Container incl. Insurance (USD) 2100.00 1900.00 1800.00 2000.00 1900.00
Units per Container 18000.00 18000.00 18000.00 18000.00 18000.00
Transport and Insurance Cost per Garment (USD) 0.14 0.12 0.13 0.13 0.14
Total CIF Cost per Garment incl. C.I.F. (USD) 2.324 2.298 2.352 2.233 2.342
Tariff % (Import Duty to EU) 12 0 12 12 12
Tariff per Garment (USD) 0.28 0.00 0.28 0.27 0.28
Full Landed Cost per Garment Duty Paid (USD) 2.60 2.30 2.63 2.50 2.62
Above figures are for destination of goods being Europe, where Bangladesh enjoys duty benefits
Source: USAID Report, Technopak Analysis

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.

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June 2012 | India’s Attractiveness as a Key Sourcing Destination

Cotton Productivity and hence opting for vertically integrated companies, or

Though India is one of the major producers of cotton companies with larger operating scale. Thus, there is a
yarn and fabric, the productivity of cotton as measured need for integrating operations and expanding the scale
by yield has been found to be lower than many and capacity.
countries. The level of productivity in China, Turkey

India:
and Brazil is over 1 tonne/ha while in India it is only Improving in-house process capabilities
about 0.6 tonne/ha. In the manmade fiber sector, India The fragmented production manufacturing units should
is ranked at fifth position in terms of capacity. Cotton is focus on improving the in-house capabilities, helping
a key supply chain ingredient, and availability of cotton them take up bigger and higher-value work. This would
also help in keeping track of the quality of the processes

Key Elements
directly results in easier and better business.
in the supply chain.
Technology Induction in Raw Materials Exhibit 12: Sourcing Clusters
Level of technology in the Indian weaving sector is
Cost Minimum
low compared to other countries. The percentage Man
per Wages
of shuttleless looms to total looms in India is 8% as Product Efficiency to
Particulars SAM (in USD
Profile (%) Machine
compared to 10% in Indonesia, 14% in China and 29% Ratio
(in US per
in Mexico. Cents) month)
India’s success in addressing some of its key challenges scheme. The Government has also enhanced subsidy
National High
and its innate strengths can make it an attractive sourcing allocation for modernization of the textile industry for
Cost Components Capital Fashion
destination. Therefore, the following aspects are worth the current Plan ending 2012. 36-42% 1 : 2.3 9.8 125
Apart from low cost labor, other factors that impact final Region of Knit &
evaluating: Delhi Woven
consumer cost are relative interest cost, power tariff,
Scheme for Integrated Textile Parks (SITP) Ludhiana Knit 40-45% 1 : 2.2 8.9 108
structural anomalies and productivity level (affected by
Supply Chain The Scheme for Integrated Textile Parks (SITP) was Basic &
technological obsolescence). A study by International Bengaluru
approved in July 2005 to create new textile parks of Fashion 40-45% 1 : 2.1 9.4 110
Textile Manufacturers Federation revealed high power & Chennai
In addition to the general support of successive international standards at potential growth centers. Woven
costs in India as compared to other countries like Brazil,
governments, a strong supply chain structure has kept Development of additional textiles parks against the Tirupur Knit 42-50% 1 : 2.1 8.8 90
China, Italy, Korea, Turkey and USA. However, power
the fundamentals of Indian exports strong. Being one backdrop of successful implementation will facilitate
as a percentage of total cost is not a decisive operations Source: Technopak Analysis
of the largest producers of cotton, and having a robust additional investment, employment generation and
increase in textile production.
driver. The availability of power supply is more Conclusion
infrastructure of manmade fibers, India enjoys strong important.
supply chain integration with a capacity of more than Global trade shifts and expanding domestic markets give
3 billion kilograms, or kgs, of cotton, 1.5 billion kgs of State Aids for Setting up Textile Parks Integration the Textile & Apparel industry in India an opportunity
polyester yarn and 60 billion square meters of cotton and Certain states are providing impetus to the growth of Supply chain in this industry is not only highly to grow.
synthetic fabrics, apart from a strong base of accessories, textile industry through benefits for investments in fragmented but is beset with bottlenecks that could very • Identifying key sourcing locations within India which
packaging and other support industries. textile parks. Maharashtra and Tamil Nadu governments well slow down the growth of this sector. As a result are low cost and therefore a more viable destination
have provided a grant of USD 2 million to set up textile the average delivery lead times (from procurement to than cities where the apparel industry is currently
Cost Competitiveness of India’s garment parks in certain regions. Maharashtra also provides an fabrication and shipment of garments) still takes about present
additional interest subsidy for investments in these 35 to 50 days. With international lead delivery times
export industry parks. • India needs investment in modern weaving and
coming down to 30 to 35 days, India needs to cut down
the production cycle time substantially to stay in the in processing which have been the weak links in
When global textile and apparel quotas were eliminated Measure to increase cotton security the Textile supply chain. Processing has been weak
in 2005, supply chains realigned to reflect the importance market.
The Ministry of Textiles imposed a limitation on cotton due to environmental regulations and high costs of
of competition in such factors as the cost of materials, fiber and yarn exports in 2010 in order to curb the rising Infrastructure setting up effluent treatment plants. These need to be
labor, electricity and rent. Competitiveness is also costs. Erratic supply of power and water, availability of adequate incentivized in the long term to improve the overall
influenced by worker skills, infrastructure, productivity road connectivity, inadequacies in port facilities and capacity.
and costs of doing business. These initiatives can further help the sustainable growth other export infrastructure have been adversely affecting • On the garment manufacturing front, integration of
of the Indian textile industry in the short term as well the competitiveness of the Indian textile sector. People, Process and Technology is required to drive
Government Intervention and Initiatives as the long term. cost effective and competitive, “Lean” manufacturing
Aggression
with the objective of reducing wastage, shortening lead
The growth of Indian textile industry has been driven A detailed understanding of the sector brings us to There has been a large shift of trade from China to smaller
times and improving efficiencies to ensure business
by private entrepreneurs investing in the industry, a mixed bag of capabilities, opportunities, support countries. India being armed with size and infrastructure
profitability.
supported by progressive Government policies. The systems, and also limitations and challenges. With the should focus on leveraging this opportunity rigorously.
Ministry of Textiles continues to support the textile set of advantages, the Textile and Apparel industry Grabbing most of the trade shift, India should focus on • India still has an opportunity to create attractiveness in
industry through such schemes as: should grow and improve its share in the global trade. being the main gainer in this regard. additional categories apart from women’s wear/ some
Some of the key challenges that need attention in order bit of knit-wear etc. by developing large scale facilities
Technology Upgradation Fund Scheme (TUFS) Scale for say Outer-wear, Formal-wear, innerwear etc.
to improve the performance of the sector, and help in
The Union Budget for 2011-12 has provided an Internationally, trading in the T&A sector is
achieving geometric growth are:
allocation of approximately USD 600 million for the concentrated in the hands of large retail firms, with
most of them looking for a few vendors with bulk orders

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June 2012 | India’s Attractiveness as a Key Sourcing Destination

About
Technopak
India’s leading management consulting firm with more than 20 years of experience in working with organizations
across consumer goods and services.

Founded on the principle of “concept to commissioning”, we partner our clients to identify their maximum-value
opportunities, provide solutions to their key challenges and help them create a robust and high growth business
models.

We have the ability to be the strategic advisors with customized solution during the ideation phase, implementation
guide through start-up and a trusted advisor overall.

Drawing from the extensive experience of more than 175 professionals, Technopak focuses on six major divisions,
which are Fashion & Textile, Retail & Consumer Goods, Healthcare, Education, Food & Agriculture and Leisure
& Tourism.

Our key services are:

Business Strategy. Assistance in developing value creating strategies based on consumer insights, competition
mapping, international benchmarking and client capabilities.

Start-Up Assistance. Leveraging operations and industry expertise to ‘commission the concept’ on turnkey basis.

Performance Enhancement. Operations, industry & management of change expertise to enhance the performance
and value of client operations and businesses.

Capital Advisory. Supporting business strategy and execution with comprehensive capital advisory in our industries
of focus.

Consumer Insights. Holistic consumer & shopper understanding applied to offer implementable business solutions.

11 12
 For further dialogue, please contact:

Amit Gugnani
Sr. Vice President
[email protected]
Mobile: +91 9871755992

www.technopak.com

Technopak Advisors Pvt. Ltd.

4th Floor, Tower A, Building 8, DLF Cyber City, Phase II, Gurgaon 122 002 (National Capital Region of Delhi)
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