Mona Gupta suggests business continuity plan and action for companies in the Indian textile, clothing and fashion industry
By now each one of us would have been inundated with substantial information and global data on the current crisis and the future of business. Hence it would only be both logical and imperative to take a few steps back and a few steps into the future for a diverse perspective on how to approach the predicament with respect to the textile, clothing and fashion industry that is hanging by the thread.
A quarter of a year down 2020, we are staring at a desolate future perhaps worse than 2008, which was a purely economic crisis subsequently managed by monetary and fiscal measures. As we navigate through an unchartered territory of a humanitarian-cum-socio-economic crisis without ruminating on the state of affairs, soliciting government support, somber statistics and predictions, what is certain is that economic recovery is linked to obliteration of an unknown opponent and saving human lives and livelihoods. The gravity of the situation and force majeure conditions get magnified in the textiles, clothing and fashion industry because profits have been a function of over consumption and over production largely based on high man-to-machine ratios.
The $1.4-trillion garments industry was already at the cusp of investing millions of dollars per year in new technology and new processes, as shifts in consumer demand reshape the sector. The days of fast fashion are coming to an end, replaced by a new model of ‘faster fashion’, which favors speed, precision, traceability and adaptability, for example to the most recent post on Instagram.
To adjust, suppliers have been reshoring and near-shoring closer to infrastructure, raw materials and their eventual markets, allowing them to reduce their turnaround times. Factories in Europe are now increasingly serving Europe, investing heavily in automation and digitisation vis-a-vis the traditionally cheap labor-based production that had sustained the industry from off-shoring. This changing dynamics was already being seen as affecting those countries in South and Southeast Asia that have positioned themselves mainly as hubs for the most basic elements of the garment supply chains barring a few exceptions.
There have been several other arguments in favour of automation and digitalisation and reducing the man-to-machine ratio. Even within the Asian sub-continent, the voracious demand for speed had already begun to overturn the supply chains that apparel companies spent the past few decades building. On a relentless drive to cut costs, suppliers restlessly shifted their manufacturing bases within and between Asian nations in a continual search for lower wages and cheaper land. The search for cheap workforce, though, always had a human cost. Poor wages and working conditions have long been a scar on the garment supply chains, and have occasionally surfaced into the consciousness of consumers.
Corporate soul-searching that followed led to catalysing a shift toward higher-technology manufacturing, even in Bangladesh. After the Rana Plaza accident, some buyers demanded that their suppliers invest in technology to improve productivity and traceability, although many lacked the capital to do so. Knitwear manufacturing in Dhaka for European and American clients who had to invest in automated knitting machines mentioned how the man-to-machine ratio of 1:1 changed to 1:5 i.e. while previously, one operator operated a machine, now one operates five machines. In India this ratio averages at 1:3.
These stretched supply chains were situated over huge geographic distances, thousands of kilometres away, weeks away from their final destination by ship. The journey of a well-known global brand could well traverse almost 4,000 km beginning in a farm in India, a textile plant in Vietnam and a clothing factory in Bangladesh.
The model worked well enough when retail stores dictated trends and operated in clearly delineated seasons and fairly predictable buying seasons. But soon retailers needed to respond to instant trends and fierce competition and differentiate; the labour-intensive model created a daunting barrier as skill enhancement was not a priority and was seen as an encumbrance.
Hence there was a need for automation and innovation. According to many global textile and apparel manufacturers, technology and automation is the answer to smart production and intelligent systems are needed to address speed and growing costs of energy, labour and technology. These companies invest millions of dollars every year on new technology. A case in point is SoftWear Automation, a US robotics company that claims its ‘Sewbots’ can produce a T-shirt in 22 seconds or a shoe upper in 26 seconds. Some of the world's largest suppliers of clothing announced that they would enter a strategic partnership with this company as part of its ‘supply chain of the future’ initiative.
Were the phenomena of automation of the textile, clothing and fashion supply chain was to continue across the board and at a faster pace, it would have already potentially ended a seven-decade-long global race to the bottom on wages and also the guilt associated with it, as full or near automation drastically changes how the industry turns a profit -- even though it would have seen the closure of most small and medium companies and displaced millions of low-skilled workers around the world, barring a few exceptions.
Once again in the present-day scenario, we are drawn to look at technology and automation as a panacea to this crisis. So while companies that have already automated (even partially) their shop floors and digitalised their buying and retailing businesses stand a better (if not complete) chance to spring back into action and restart operations in accordance with the new forms of demand.
Suppliers and retailers who have not would have not done so due to prohibitive capital costs of investment in human skills, seasonality of their product ranges, uncertainties presented by global trade negotiations, fast-changing consumer behaviour and absence of skilled workforce to handle the new technology. This could be seen as the end of the road, specially the small and medium enterprises and those operating in the informal sector. However, the silver lining exists even in this adversity only if one rises to this occasion and presents itself with an alternative business continuity road map that has historically proven itself.
India’s textile and clothing industry comprises 70 per cent MSME and informal sector is nearly a clich as on date. Yet thinking of automation, closures, layoffs and in the process destroying the historically nurtured and resilient supply chain links, we would not only have to bear the guilt of displacing millions of migrant workers and contract labourers, we would not be solving anything in the near future.
Technology cannot easily solve all problems. Design, sourcing, raw material uncertainties, the fragility of global shipping (as evident today) are not only due to absence of automation and digitalization but also due to weak linkages and infrastructural lacunae in the supply chains, trade barriers and also due to basic geographical distance and differences. As the garment industry moves toward speed and efficiency, the physical distance between the components of the supply chain takes on greater significance. To solve this, companies are starting to reverse the decades-old trend of fragmented supply chains; they are clustering production centres to reduce time lost in transit. Here lies our clue.
Clustering and producing closer to demand are not new for India. The sector has been one of the strongest and most resilient pillars of the Indian economy. For example, khadi survived the freedom struggle catering to the nationalists’ demands when all other forms of textile businesses, including exports to the United Kingdom, had suffered a setback. It should be explored whether this can be improvised today along with the age-old trend of clustering the supply chain close to demand, keeping in view the example of Inditex, which solved the problem of fast fashion by moving production closer to its consumers.
Fast fashion is here to stay, getting faster in pace and trends, with the brands emphasising short selling period, focusing on small production amount and quick reaction to the market. Therefore, being closer to the market is sound business acumen.
So what was the quick reaction to the current market situation: order cancellation or postponement till governments, the industry and the upstream and downstream stakeholders started pleading fervently for honouring work in progress and shipments.
Here is an upside though: no more unconscious capitalism, no more rampart consumerism and a somber outlook for luxury and fashion markets redefined.
The trend of moving closer to the markets implies focusing on the domestic and neighbouring markets first. With unforeseen and untimed disruptions in shipping, logistics, e-retail, transport and brick-and-mortar retail, it would only make good business acumen to redirect production and business toward domestic demand till exports pick up once again. This is also the need of the hour. Fortunately, for the Indian textile and clothing industry, the country itself is a large consumer market that has seen a remarkable transformation in choices, fashion consciousness and a fervent demand for fashion lifestyle products.
It is also important to differentiate between the need and the race for automation as there is often a misconception that automation is solely about reducing production costs. In most cases, it is about shortening lead time and improving the speed to market.
A prudent balance between productive and cost-effective automation considering the wealth of human skills is a comparative cost advantage existing in our own sub-continent, which should not be overlooked. Should automation take indiscriminate root in the sector, it could displace millions of jobs in Asia and close off a vital route to economic development followed by decline in consumption.
The International Labour Organisation said in a 2019 report that as many as 80 per cent of the more than 60 million jobs in the sector could be at risk as automated cutting and sewing robots take over factory floors. It, however, noted that the speed of job losses will depend on the pace of adoption of new technologies.
So is unfettered acceleration of artificial intelligence, technology and digitalisation the answer as is being touted by several nations and many industries globally? We need to contemplate on how will this impact the human race. Does not loss of jobs and work also translate into near-zero incomes, and ultimately, to a shrinking consumer base for the very same products made through automation. Automation versus labour intensiveness is definitely a zero-sum game when we account for both the supply and demand side together, which needs to be turned into a win-win situation for the complete value chain.
While labour rights and living wages were continually a question mark, there is now an added dimension of ‘right to livelihood’ and a ‘universal basic income’. Traditionally apparel and textile sector jobs have been considered as good for development, particularly in South Asian economies. Apparel production will stay in Asia and will continue to be largely done by human beings. However, these garment workers may need to work with more sophisticated machines and software to better meet customers' demand locally and globally for faster delivery. They will have more flexibility and agility in production. That doesn't mean garments won't have a future role in industrialisation but unless they remain nimble and deploy technology smartly, the overall life spans of these industries and their supply chains may be shorter in the coming decades.
In a country like India with a sizeable skilled population, it is prudent to optimise and capitalise on our inherent factors of production and hence plan a human-centred work environment.
The industry is already undertaking workforce planning, inventory management, and perhaps even contemplating plant closures (under extreme conditions). Considering there is uncertainty and little knowledge of the extent and time period of the lockdown and its consequences, what is known and certain can define companies’ business continuity plan and action.
Here are a few pointers:
Statistical surveys have shown a fall in sales and production, layoffs and closures in all markets, particularly the EuropeanUnion (EU) and the United States, the two mainstays of India’s exports. ForIndia, this may not translate into a new demand post the COVID-19 crisis depending on the resilience of the manufacturing units. Hence in both scenarios, the focus should be on optimisation of limited resources, not on operations and scale.
An export restriction has been announced for masks, personal protective equipment (PPE) and related textile raw material during March 2020,and that is a pointer to the demand challenge facing the country. A move addressing the domestic demand for protective clothing, accessories and footwear is not only stepping up in the right direction as a corporate responsibility but as a business case as well. We may take a clue from luxury brands like LVMH, Prada, H&M and Mango who have already taken centre stage in the EU.
Fall in inward movement of raw material hitherto sourced from other countries is likely to continue even after graded lockdowns are lifted. It will take a while before maritime protocols by the United Nations Conference on Trade and development (UNCTAD) can be universally implemented for all cargo. Therefore, creating new and alternative domestic sourcing channels and redirecting research and development efforts in clustering the supply chain, especially in the categories that were being imported, is the need. This would also sustain cotton growers who may not be able to export raw cotton fora while and demand would remain feverish.
Similarly, a fall in import of finished apparel facilitated by trade agreements creates an opportunity for local manufacturers to fill a gap as the lockdown eases. Pent up demand for basic categories of apparel and accessories will be the first to open up.
A focus on reality versus design will be needed as a strategic move in the non-woven category, which will increase as the demand for technical textiles in the protective category increases. It is similar to how the demand for fire-retardant clothing witnessed a hike in the early 19th century.
There have been channel shifts. Going forward creating channel-ready products from production to consumption, preceded by consistent information flow across production channels will be a good business strategy.
Up-skilling the key labour force on artificial intelligence and digital platforms alongside staggered shifts and working hours to manage shop floor challenges, work in progress, cash flow continuity and creating digital retail channels as part of the action plan is a call of times to come.
While there is no rule book to go by, how we respond today will certainly determine the ability of the textile, clothing and fashion industry to survive the Covid-19 impact and restart operations once a new world order is in place.