Significance of Supply Chain Management for Brand Development
There is a pressing need of inspiring thinking amid the industry managers and policy drafters so as to facilitate them to produce a well-calculated all-embracing strategy and an action plan for their sustainable development and gainful operations. The concept of creating a powerful "Made in India" brand has been suggested as one of the important strategic initiative by several stakeholders.
The present article aims to underline key sources of problems for the industry and explains all the challenges the industry is facing and likely to face. It also brings up significant matters for competent supply chain management in the textile-apparel-retail network and the function it can perform to overcome all the major barriers to make them competitive worldwide and add largely to develop a high brand impression for the country.
What is happening in the Industry?
The Indian textile and apparel sectors have not only contributed to the national economy regarding direct and indirect employment creation but also raised net foreign exchange earnings. The textile and apparel industry makes up 18 per cent of employment in the industrial sector, 20 per cent of industrial production, 9 per cent of excise duty collections and more than 30 per cent of Indian's total exports.
Because of ample stock of cotton, low-cost labour and flourishing mill sector, India had few competitors in the expanding international textile business during the post-independence decades of the 50s and 60s. But our trade failed to resist the rising competition from some new industrialist nations in a widening world economy and consequently lost market share during 1970s. The 1980s proved a colourful decade in terms of fast evolution for Indian apparel exports, which were assessed at Rs 6500 million in 1981 and Rs 8500 million in 1985. Since exchange value of rupee decreased in 1991 and export-oriented plans were enacted, value of apparel exports escalated to Rs 62823 million in 1991-92, Rs 183896 million in 1998-99 and Rs 254799 million in 2000-01.
Opportunities
Indian apparels made up a small part of less than 3 per cent of total world export of apparel; this indicates ample growth opportunity. India is able to offer a vast local market to its apparel producers. The study of McKinsey reveals that the market size is of Rs 20,000 crores, but only Rs 4,000 crores is dealt with by branded apparel. Therefore, Indian apparel manufacturers have Rs 16,000 crores market, which has been dealt with by the disorganized small size units. The developed nations, which are the landing places for Indian textile products, use textiles in the form of apparel. If Indian apparel manufacturers wish to consolidate their position in markets and capture larger values of the chain, they must move their target to the efficient performance of textile-apparel supply chain system and not look at textile industry separately.
Risk Factors
Indian textile industry was supposed to be influenced by several regulatory, technological and marketing modifications over the next few years. Under the WTO, the export quotas would be discontinued from January 1, 2005. This will launch a fierce competition in this industry from countries like China, Sri Lanka, Thailand, Indonesia, Bangladesh and Vietnam.
For a product line described by fluctuating demand system and seasonality on one hand and highly labours demanding on other, it is essential to have complaisance to maintain stability of the labour force employment from time to time.
Though India has advantages of more than enough low-priced workers, reduced production cost, accessible raw material and a huge domestic market, there are some aspects like infrastructure and government plans that have brought about a wide divide in the economic progress between India and other nations for textile industry in particular.
Strong Points
In proportion to other industries of India, the textile sector is more competitive worldwide. Most of the inputs needed for this sector are available from domestic supplies and necessity of imports and valuable foreign exchange is little.
The Indian apparel-production industry was broadly broken up as knitted hosiery and yarn-dyed, woven apparel. Only 6 percent units out of total firms have more than 50 machines, while 80 percent units are working with 20 machines. The acute decentralisation helped manufacturers keep away from labour issues and the labour associated laws, as well as seasonal variations in business. Even operations became flexible and it gave competence in production.
From the middle of 1990s, production units of larger strength with advanced technology, mainly in association with a joint venture partner were set up. During the same phase, Indian customers could notice easy access of international brands in domestic market, which were produced by Indian garment manufacturers. This aroused the expectancy of intelligent clients and apparel industry did not have any option but to better its functioning for this group of demanding customers. Importers of Indian apparels were by and large happy with price and passionate about the knack to source small production amounts. International garment companies introduce new designs, new craftsmanship, ultra-modern scientific management and also the marketing policies in India. These all can make the competition machinery stronger in order that the industry might obtain more capital for developing new products, new brand names, technology enhancement and human resource training so that market competitiveness can be increased.
Weak Points
The small production units were not fortified with high-level strategy and information structure and did not succeed to offer economy of scale. The present-day labour policy in some respects enfeebles Indian apparel units to establish large manufacturing units and to realize economies of scale. According to Indian criteria, a large-scale unit could be the minute in size in the rival countries like China, Indonesia, Thailand, Bangladesh, and Sri Lanka.
The challenge Indian apparel exports have to face is the decreasing average unit value realisation, which has reduced to $ 3.70 in 2000 from $ 4.44 in 1994. This openly indicates the Indian exporters' incapability to accelerate the value chain and the hazards of being branded as supplier of low end products in the international apparel market. This creates the question of whether it is sensible to endorse the brand image that exists presently or overcome all the shortcomings significantly before we consider extra promotion.
Buyers were disappointed by distribution and production lead times, the lack of large sized garment producers, and problems linked with freight managing. The buyers of finished textile goods and apparels face what appears the most critical problem of long and indeterminate lead times. Some times products are not delivered on time, losing a season completely. In such circumstances, buyers generally expect discounts, meting out airfreight expense or full payment of the airfreight, and in worst case cancel the order.
The lack of concerns of garment manufacturers to mill made fabrics was due to rigid attitude, absence of product range, long lead times, bureaucratic organisation, snail-paced initial product evolution and sampling. Thus the well-structured mill industry has failed to grab the chance of a large potential market. The two sectors namely power loom and handloom are prepared to provide broad range of design and texture in smaller lot size. But they are deficient in giving the promise of excellence and reliability.
The world market for apparel has volatile demand and short-lived products as its trademarks. Since demand of fashion apparel is dominated more by taste than impartial consumer requirements, future predictions are likely to be extremely unreliable. Fashion garments, shoes, sportswear are the products whose demand is remarkably seasonal, variable and often difficult to foretell. Thus resultant scarcities (stock outs) stand for lost sales opportunities and excesses result in lost revenues consequent to succeeding decreases (price reductions), often to a point below the cost of production. Thus, the major success elements for any supplier country are "first time right quality", timely and continual distribution of small lot sizes with a short lead-time.
Globalisation and Competitiveness
Michael E Porter (1990) discovered a new theory that recommended going above comparative benefit to the competitive gain of a nation. It expressed a productive idea of competition that embraced compartmentalised markets, distinguished products/services, technology variations, and economics of scale. This new idea had gone past cost and justifies why companies from some nations are better than others at creating benefits based on quality, features, market reaction, speed and product improvement.
Because some of the factors of cost benefits, the Indian apparel sector provided relative gain for the low-end price point products. But it could not realise those benefits that could have supplied this sector the necessary competitive lead. A nation can maintain her successful high-income status only by racing with unique, discriminated products or services and that is what helps in creating the image for nation. It is the growing impact of the performance of organizations that promotes the brand image for a country. Moreover, distinguished, contemporary products are less responsive to price rises. Indian textile and apparel sectors were found to expand diversely when it could move its pricing southwards, either due to rise in government financial aids or driven by currency devaluation, which are neither extraordinary nor sustainable.
As far as the international economy remains comparatively open, countries will progressively involve highly focused performance in a worldwide production chain. With a view to choosing specific kinds of products and techniques of doing things, nations are inclined to promote capability in their companies and public institutions.
Chrysler and Daimler-Benz undertake almost all of their production at home, and they are distinguished by very exclusive management techniques and capabilities. Daimler-Benz displays the natural German forte in production engineering. Chrysler demonstrates standard American talents in dealing with new product promotion. There is no cause why the united companies fail to carry on business on large national lines and reap benefit of each partner's potential.
In the same fashion, with the intention of sourcing and production, creative design houses of Paris, New York and Italy joined hands with Indian apparel production companies having competitive benefit; this could prove profitable for both.
Output Enhancement
When productivity is over-stressed, the eagerness to make huge investments in thoroughly new process technology gets lost. Performance in customer care, distribution, lead times, quality, and assets turns become less important. The perseverance for productivity is paradoxical. The more it is chased, the more puzzling it would become. A craving for cost reduction may result into a confined vision.
The productivity method of manufacturing management is not just sufficient to bring competitive climate back (companies cannot reduce expenses acutely enough to restore competitive strength), it actually harms as much as it helps. Manager is engrossed by a natural reply and it averts his/her attention from more competent manufacturing method.
In today's competitive atmosphere, most important operational sources benefits include quality, committed supply chain, short lead times, customer care, and fast product launch, flexible capability and effective capital deployment. These are obviously recognised as the important forces of the Indian textile industry for its competitiveness in the global perspective. An efficient harmonised delivery chain management is expected to react positively to most of these drivers.
Contemporary issues of putting the production unit into a more striking place to function are not new. They are the direct results of the 150-year history of an institution based on productivity. Since cost and competence are the basic criteria of factory success, the manufacturing unit would carry on to keep many talented and innovative people away.
IIt is crystal clear that the textile industry in India is heading for fierce competition. The market is expected to be over-peopled with distributors and price pressures will escalate. It is likely that only those who are receptive to change will subsist.
Since the last two or three years India has failed to make its mark in textile and apparel exports. It seems that the textile industry has not been successful in utilising its competitive benefits altogether. Decisively, it can continue as a distributor of quantity of products, competing basically on prices, to large local market having lower level demand on quality, creativity and pliability. But all they need is change if they wish to seize a sizeable portion of large and rising international market of textile products. To gain the lion's share of the international market, each company has to choose which part of the value chain it should compete. Their choice will essentially be influenced by the capacities and confidence of the relevant organisation and what policy it takes on to be a winner, with regards to the brand image our nation possesses in the minds of target customers.
The industry players require to outline their future competitive policies on the ground of their competitive benefits, merits and demerits and also on the global developments in the market situation. A magnified picture for the country of origin can perform a significant function in influencing the consumers positively and that in turn can affect the global brands, suppliers, retailers and bulk buyers.
Organisations with efficient policies would adopt one or a combination of the following strategic choices:
.Sell to the most genuine and demanding buyers and channels.
.Look for the buyers with the most complex requirements.
.Set standards surpassing the most challenging regulatory obstacles or product criteria.
.Source from the most leading and international native suppliers.
An analytical study of these choices reveals that if an organization wants to put one or more of these alternatives into practice and bring about sustainable development and profitability, it has to make its supply chain highly unified and well-managed. A country with a large number of such well functioning networks in a specific industry can ultimately develop a great brand out of these unbeaten networks. Communication with well-coordinated action can only do it.
Questions that come to our mind are as follows:
Would the genuine requirement for garments also generate genuine requirement for the Textile industry? Would the Indian textile industry be asking for genuine buyers to be catered by them?
Made in India brand image
It has been experienced that luxurious products (for example Perfume, wine, etc) fare better when they are produced by French companies. In the same way, customers prefer cars, cameras, VCR's etc manufactured by Japanese companies. German products are favoured in particular slot of engineering machinery goods.
For example, nationalistic advertising can influence the image of a brand and may fetch some genuine customers. On the whole, research appears to mention that the tag of native-made has an effect on the brand image. The image can be tarnished (as it occurred to the image of US-made products in Japanese perceptions) or enhanced (as in Japanese image in the eyes of the consumers all through the world) over a period of time. Therefore, Indian textile companies should recognise the distinguishing capability, which, with an attempt, can possibly make a place for India in the minds of global buyers and consumers of textile products, over a period of time, if not instantly. But it is feasible to establish a positive image for 'made in India' products or services with a strategy for the next decade.
Brand personality is the total of all the major tangible and intangible property that a brand owns. Brand Image is the consumer's perception of the brand. If brand personality is the reason, brand image is the effect.
In order to improve the international market image of the Indian textile and apparel manufacturers, it is essential to exert earnest attempts both in the market place as well as within the industry to assure & supply value to international consumers and then raise our country image through a promotion campaign, accordingly assisted by sufficient fund. An effort was made by Indian apparel industry in this direction in 1998/99 without much progress.
Supply Chain Management: Challenges and Impacts
Keeping delivery dates and long lead times appear to be key factors hampering Indian textile and apparel industry from setting up a positive image of 'Made in India' brand.
The industry must work in cooperation with all those ambitious suppliers and distribution outlets/small traders in the downstream in well-synchronised methods to better the general performance of the network.
The future will show the competition among the organisations' networks. Knowledge of the idea of integrated supply chain management can help these industries to obtain much advanced level of performance in cutting down and meeting the lead time promise, customer choices through quick new product expansion, decreasing their level of inventory at different levels in the supply chain network. When consumers are changing the course from apparels made of one type of fibre to another, with such integrated network the message can get to the fibre producers, spinning factories to bypass clogging of valuable working capital in the products which are expected to more slower than earlier.
In the same way, when customers change their minds and prefer trousers of denim to khaki twill fabric, the weaving factories have to think of slow shifting towards newly required fabrics and stop the production of denim fabric with a view to avoiding overstock of non-moving/slow moving inventory.
The significance of bunches in global competition is due to the competitive benefit in local hinges such as knowledge, relations, inspiration, which are not for the distant competitors to correspond. In India, such bunches could be developed in and around Bombay, Bangalore, Delhi and Ahmedbad for the textile industry. These cities already enjoy competitive benefits. For the success of these bunches, they need advanced retail channel, which consequently can generate demand for sophisticated garments and also high-class co-operation and co-ordination among the supply chain associates, through well-integrated information sharing structure.
Having demanding clientele of various products as per their preferences and quality requirements enable the industry to cope with altering demands from customers and learn to be receptive. As a result, demand for sophisticated products requires improvement of technical expertise in textile and apparel industry. The development is wanted not only for producing quality of superior standard but also for output and customer responsiveness.
It appears that supply chains are truly about aptitude of people, not technology, to a greater extent when the intricacy of market is ever growing. Most challenging job is to get people work in union and utilise their skills as a team. Establishing efficient partnerships among companies is difficult. Internal relations can be even more complex to deal with. Though it's long proven that working silos hamper communication and competence, but many companies still fight to demolish the walls.
With globalisation, both the supplier and customer base are expected to change suddenly, not just with regards to where they live but also who they are and how they function. That gives birth to a different kind of supply chain demand. The greatness of companies does not rely upon their concentration on cost or adaptability or speed but on their capacity to carry out changes - altering market pictures, developing technology, diverse needs as product shifts through its life cycle. The companies that have the capacity to become accustomed will be proved horses of long race. Few such intricate but unbeaten networks in a country can improve its image and win the confidence of buyers.
Supply chain has turned out a much more significant calculated and competitive variable. It influences all of the shareholder value strategic means - cost, customer care, asset productivity, and revenue generation. Still there is a rising gulf in performance between the exceptional and the average companies. The most excellent are going improved and faster than the average companies across almost every industry. For example from 1995 to 2001, Wal-Mart upgraded its inventory turns from 5.23 to 8.34. Its nearest rival over that same time advanced from 4.01 to just above 5.
Sharing of information with one another in the value chain with an honest mind reveals innovation from the suppliers. Customers are bound to identify the influence of suppliers' innovation on their competitive benefit.
The following strategic selections and action plans are taken into account and assessed by the Indian textile and apparel industry for regaining their previous prestige in the present perspective.
'Be different' - as pointed out by Mr. Jack Trout during his speech in Mumbai 2001 that in the current competitive realm it would be essential for companies to be distinctive.
'Everything for everyone' is a trick. One has to give up some to get some. The significance for these industries is to create calculated selections for separation on the fields like product variety, technology, market coverage, and alliance with associates and customer closeness.
Being special in one or more of these facets helps the country make individuality for itself and be recognised and remembered. It seems that to be an outstanding player in any of these strategic selection fields, the precondition is well-organised and efficient supply chain management through collaboration among the supply chain associates and stakeholders.
Overcrowdedness is taken into account as an origin of competitive benefit, we can train or improve the abilities of many people especially of weaker sections of the society as well as woman work force therefore they can get a chance to earn their bread and butter as well as be an important factor in the nation's economic growth.
The industry and research organizations can work together for recognising a collection of products, which needs unique blue-collar skills, and offers products with excessive Indian aesthetic value to the discriminating consumers.
Comments