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Backward integration advisable in textile sector – experts

28
Dec '10
With raw cotton prices more than doubling from a year ago, along with which cotton yarn prices too have shot up through the roof and also thereby putting a big question mark on the ease in supply of yarn, it makes sense, to go in for backward integration for those in the downstream sectors of the textile value chain, aver experts.

“Vertically integrated operations help organizations to control price at various points of supply chain. The yarn prices going up significantly in the last year or so has put pressures on suppliers to sometimes, even sustain the profitability at which the orders were booked at”, says Mr Amit Gugnani, Associate Vice-President at Technopak Advisors.

Mr Gugnani has over 14 years experience in apparel manufacturing. His key skills include consulting with domain expertise in apparel operations, with on-the-ground experience in India, Sri Lanka, Bangladesh, Pakistan and China.

Mr P Natraj, MD, KPR Mills is of the opinion that, “Considering the growing demand for yarn, both in the domestic and international markets, investment in backward integration is advisable. The integrated manufacturing operations, enables provision of optimal levels of quality and service to the customers in an effective and cost-efficient manner.

Through vertical integration, one is well placed to realize the efficiencies of scale, quality control and better margin at each stage of the manufacturing process. Further, it enables better customization of products to the specifications of the customers and provides assurance to them that they will receive consistently high quality products”.

KPR Mills, a Coimbatore-based textile company with revenues of Rs 8 billion, today operates four spinning mills as a part of its backward integration plan, alongside its knitwear plants.

Mr Gugnani adds by saying, “Besides, improved controls on the overall supply chain, will help the industry retain and attract customers at various price points, which will increase the business coming into India leading to an overall growth of the industry. Since, backward integration is capital intensive there is a smaller segment of exporters who can actually afford the same. In these circumstances, most small and medium enterprises will continue to be challenged by the pressures on increased input costs”.

Fibre2fashion News Desk - India


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