The Hindu Business Line : Textile and apparel sector — `Revival of supply chain key to be competitive in post-quota regime'

TAKING a fresh look at the country's textile and apparel sector, a recent study conducted by KSA Technopak reveals that there is potential for 35 per cent cost reduction across the value chain, which can be effectively harnessed through strategic collaboration between all the links in the chain.

Come January 1, 2005, and 49 per cent of the global textile and apparel trade will be free of quota restrictions. In addition to the loss of assured global markets, the domestic textile and apparel firms will also find their margins under pressure since almost all the categories that are expected to go off quota, have witnessed a 10 per cent to 20 per cent fall in sourcing prices in the past year. Therefore, the entire supply chain needs to reinvent itself to remove hidden cost elements and become competitive.

The KSA Technopak study defines textile and apparel as a `buyer-driven' value chain. Though the chain spans across fibre supply, yarn manufacturing, fabric weaving, processing, apparel making, aggregators, retailers, the clout is in the hands of the front-end. The maximum value add in the supply chain happens at the retail stage (almost 50 per cent) and marketers and merchandisers, therefore, play a pivotal role.

Commenting on the study, Mr Arvind Singhal, Chairman, KSA Technopak said, "This is a first of its kind research which scrutinises the entire supply chain, from yarn to apparel. The advantages of collaboration in the textile apparel chain go beyond simply de-risking the business to fulfilling other goals, including reduced inventories, higher capacity utilisation, optimised logistics and lower product development expenses. Therefore, strategic partnerships among trade partners can create and preserve value in the supply chain."

Supply chain relations are high on the strategic agenda of most retailers, who are now seeking collaborations with channel partners for increasing efficiency and containing costs.

The key elements in this collaboration are: production capacity dedicated to a buyer, transparent cost accounting system, collaborative product development, standardised processes and control, optimise logistics and routing, and exchange of POS data for planning purposes.

Business process, including planning, sampling, administration and other overheads, account for a high percentage (35 per cent) of the costs at the retail stage. Collaboration among members of the value chain facilitates business process optimisation that can make the supply chain more efficient. Also, retailers prefer to partner with suppliers who have gone ahead and implemented processes and systems that enable collaboration.

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