Management Cover

How EWA helps textile manufacturers

When the textile quota regime was scrapped on January 1, 2005, Indian textile manufacturers got the opportunity to tap the global market unhindered by tariff barriers. Akhtar Pasha says that EWA will help them in their endeavours

Think of the textile and apparel industry, and the last thing you imagine would be high-tech robotic equipment and automated factory floors. Instead, antiquated looms, armies of unskilled labourers and decades-old manual processes are what spring to mind when you think of Indian textiles. That’s all about to change as the coming WTO regime brings a brave new world of opportunity to Indian shores. The industry is being forced to finally open its eyes to the information age. Increased commoditisation of mainstream garments and global competition from China and other countries is putting pressure on textile and apparel companies to reduce their cost of production. At the same time, they need to innovate if they are to stake out new markets.

It’s a defining moment, a moment of truth for India Inc. With world trade quota restrictions being scattered to the winds last month, pundits predict that there will be a big rise in India’s annual exports of textiles (from the current base of four percent). In fact, India is expected to be a close second to China. For this to happen, the government has to accelerate the pace of reform, and local manufacturers must adopt technology with a vengeance—so says a quarterly 2004 special edition report from McKinsey.

China is likely to capture almost all of the resulting growth in global exports. Regardless of whether the United States and the European Union allow brand owners and retailers to buy freely, or impose transitional safeguard mechanisms and increase duties, Asian countries that want to increase exports will have to take market share from one another and from countries outside Asia.

Taking on the dragon

India’s garment industry has many advantages: competitive labour costs, abundant raw materials (we are the world’s third-largest producer of raw cotton), local textile production, and skilled designers. That said, McKinsey finds that our exporters’ productivity is only 35 percent of American levels compared to the 55 percent achieved by Chinese exporters. Worse, the overall productivity of the Indian apparel industry, including tailors and domestic manufacturers, is just 16 percent of what the US industry has achieved. With full-blown reforms, McKinsey estimates that Indian exports can increase by 15-18 percent annually. This expansion will help India win five percent of the global apparel-exports market by 2008, and garner $25 billion-$30 billion of sales by 2013.

Says Srinivas Rao, director-sales for mid-size business, SAP India, “The removal of quota restrictions in January has created new opportunities as well as new challenges. Indian manufacturers not only have to compete domestically, but also fight it out with Chinese manufacturers.” This is going to drive Indian textile and apparel manufacturers to revamp their IT set-ups as large importers such as Walmart and Carrefour will look for large manufacturers who have transparent systems (materials that are used in the finished product, certain specific dyes, no child labour, etc) that offer total order tracking.

Intense competition

National Clothing Company (NCC) is a Rs 50 crore entity that supplies casual and outer wear to large brands such as MotherCare, GAP, Primark, Hennes and Mauritz, and Marks & Spencer. The company says that because of removal of trade restrictions it is going to face intense competition from other players, especially Chinese. The heat is on in terms of meeting customer deadlines and ensuring on-time delivery at lower prices without compromising on quality. Notes Abbas Raja, the company’s chief information officer, “The removal of the WTO regime on textiles was one of the reasons why we chose to invest in an IT platform (within IT, investment in a SAP application). IT is the backbone of our industry, and we wanted to have the necessary infrastructure in place before we faced the open market. We cannot achieve this without having a proper IT infrastructure, and especially without enterprise applications.”

Notes Muthuswamy P, chief information officer, Jupiter Knitting, “We are facing stiff competition from Chinese manufacturers whose finished products are 20-30 percent cheaper than ours. (This is the case with all Indian apparel and footwear manufacturers.) To compete with the Chinese we need to have systems in place to drive our sales (business) from production planning to execution in order to meet delivery schedules and handle more orders when sales ramp up.” He reveals that his company handles 200 orders per month, and deals with 15 merchandisers. It of course depends on people to execute work orders and production schedules. The absence of a single person can have a chain reaction effect. For example, wrong order labelling and re-ordering without the knowledge of the management used to take place—a costly waste. Having an enterprise application ensures that users cannot re-order without the permission of the management. Even leftover supplies such as cotton and fabric can be re-used for subsequent orders—further reducing wastage. A balance sheet cannot be analysed unless real-time data is available. For reasons like these, enterprise wide applications (EWA) are essential for textile firms.

Accurate planning

Indian manufacturers not only have to compete domestically, but also fight it out with Chinese manufacturers Srinivas Rao Director-Sales Sap India	Post-implementation of mySAP AFS, order execution has climbed from 75 percent to 92 percent N P Singh Vice-president, IT Madura

Raja of NCC points out, “If we are unable to meet the customer’s delivery date we incur losses to the extent of Rs 10 lakh-Rs 15 lakh per order. Hence a proper planning process has to be in place to take care of order tracking, procurement, capacity planning and material availability at the factory. Accordingly, we had to plan our inventory.” He cites an example: assuming a delivery date of January 30, the company needs to make the order by Jan 25; if there is any delay in material procurement, the company loses out. Even if it reaches well before time, the company’s working capital is still locked up. Once an enterprise application is in place, textile and apparel requirements can be clearly planned, and the order tracking system helps capacity planning, bill of materials generation and inventory control. All these help the company stay a lean manufacturing concern and get the right material at the right time. Adds Raja, “Before investing in SAP we had to follow ISO standards. SAP offers neat documentation processes which need to be followed strictly, thus leading to better quality standards.”

Legacy systems hurdle

Before investing in mySAP Apparel and Footwear Solution (AFS), NCC’s management was not able to track the status of orders, and no post-mortem was possible as the data required to analyse the same was not available. (A post-mortem was required whenever an order was closed to rectify any problem in order execution.) NCC was using an in-house FoxPro application for production, export documentation and dispatch, while Tally was used as a financial tool. But these were not integrated, leading to non-availability of data in real-time, stopping the company from taking business-critical decisions, and affecting its market position and profitability.

Madura Garments (a division of Indian Rayon) was using a warehouse application written in COBOL. Its factory applications—fabric inwards, quality, inspection, Goods Receipt Note (GRN)—used in production to dispatch were written in FoxPro. This led to the creation of islands of data. For a long time the company had wanted to consolidate these islands into a cohesive MIS. Says N P Singh, vice-president, information technology, Madura, “Because of legacy applications not providing real-time data, our order execution (order fulfillment) was 75 percent, and lead-time from Work Order (WO) to Finished Goods (FG) was 22 days. Post-implementation of mySAP AFS, order execution has increased to 92 percent, and lead-time from WO to FG has reduced to 14 days. Similarly, dormancy (six-month-old stock) has been cut from 4.23 percent to 3.65 percent, thus reducing wastage. This clearly indicates the RoI in enterprise applications.”

Madura Garments has contract exports to big brands such as Marks & Spencer, Tommy Hilfiger, Marco Polo and Arrow; Domestically it sells to brands such as Louis Philippe, Van Heusen, Allen Solly, SF, Byford and Peter England.

Short shelf-life

Explains Singh, “Generally, clothing has to sell through within three months of its manufacturing date because by then new designs hit the market. Fashion cycles are shorter, and we need to reduce the time required from designing the cloth to the finished product. This involves complex processes such as studying the design trend and preparing a blueprint of the design after consulting with agents and their key customers who buy in bulk, freezing the design, and then sending it to the mills for production. Production in turn takes anywhere from 10-11 months—that’s the lead time. The design cycle has to be reduced to bring garments to the marketplace before they go out of fashion.

Beyond EWA

As consumers change their tastes, textile companies must necessarily be extra nimble in pumping out products, which explains why textile manufacturers are not stopping at EWA. While some textile and clothing companies are actually making an attempt with analytics to identify buyers’ buying patterns at the tertiary level, others such as Madura plan to deploy a virtual digital design library wherein swatches made can be tried on virtual models with 3D viewing for buyers before closing the deal.

akhtar@expresscomputeronline.com