Strategy for recovery of textile & apparel industry
Our strategy should be focused on conquering the larger pie of the textiles and apparel segment in the international market, writes Avinash Mayekar of Suvin Advisors.
Post COVID-19 would be a differentiating factor by itself! It is not just the working styles or needs of individuals that have changed across the world but changes much beyond the trivial changes that have taken place. Requirements of human beings along with quality standards and technical parameters of all the textiles, not just the medical textiles are undergoing a sea change. More stringent control factors from the point of hygiene compatibility have surfaced on all the products that are in direct human contact. It has introduced many new practices and norms for the assessment of textile products worldwide. These new reforms are said to be operational until a permanent solution to the COVID-19 is found. It may take six months or even extend for more than two years, so it is better to introduce these changes considering their lasting implications.
With the scenario around, devising strategy post-COVID needs a different spectrum of approaches. Post pandemic, the entire Indian textile industry needs a turnaround change in its strategy. Our strategy should be focused on conquering the larger pie of the textiles and apparel segment in the international market. It should be a well-devised and unique strategy for which we need to study and gather answers for the following:
We need to carry out a detailed investigation as far as marketing conditions across the globe is concerned. We need to map the evolution of markets especially from a country’s political standing perspective with respect to us (India). Detail study is needed in our friendly countries. We need to bifurcate countries based on their favorability with us e.g. if a country is in favour of trade with the Indian textile industry or in favor of continuing their trade with China – our major competitor in the world textiles market.
We should identify countries that are bound to give us leverage over China in the coming era. We need to study the products that were earlier sourced by these countries from China, the pricing and quality factors involved, and accordingly, be ready with a strategy to fill in the void that the pandemic opportunity has created. This will also help us to study the various factors through which we can be quality and cost competitive against China. Similarly, we should also study the countries that are currently not sourcing textile products from us, the major issues involved for trade with us in the past, the products that they source from our competitors and create a strategy to enable us to export the products demanded by these countries.
All said and done, if we are not able to achieve the cost competitiveness then it would lead to issues that will hamper our chances of acceptance over China, despite the political pressure. So we need to be cautious about our quality, quantity, price factors and take advantage of the political pressure building up. These crucial factors will act as distinguishing factors to develop long term trade agreements with other countries.
At the same time, we need to understand our own, distinguishing factors that will help us or will ensure an upper hand over all the competing countries like Cambodia, Bangladesh, Sri Lanka, Pakistan, etc. for specific categories of cotton products. So the challenge ahead is to score the winning run over other countries on the quality and price parameters. The homework would be clearing the past image of our country for lagging in terms of commitments of deliveries. Hence our focus should be on carving out our name in the market as a reliable partner possible with digital indexing and overall control and monitoring over the entire supply chain management to meet the delivery schedule.
Consistency on the quality of raw materials will play a vital role in re-branding India’s name in textiles and apparel sourcing partners. The cost of raw material should be at par with the international market. It is also important to study our conversion ratios. This will help us in corrections needed at our end on the cost of raw material, power, labour, automation, or technology used in vis-a-vis China. So a study to compare ourselves with China is needed, we must observe our weaknesses, and then take corrective steps to come out with better solutions/ideas and better propositions to develop a strategy that will help us successfully grab the share from mighty China.
India is a country with a large geological area, which is the reason for our logistic issues. We need to understand the role of each state in this value chain of textiles. Let us take an example of polyester. It is getting produced in certain states from where the fiber is transported to some other state where it is converted into yarn. Then again transported to different states for fabric conversion thereafter to a different location for fabric processing and finally, the fabric is converted into garments in some other State.
If we analyse this value chain, the cost involved in logistics and the overall time required for certain processes will result in overheads piling up. The entire value chain is taking place in totally different locations, which are at times as far as 1,000 km from each other thereby causing huge time loss in transportation and additional cost of logistics. If we study China’s textile model from this perspective, it is observed that they have certain locations earmarked for a particular product and the entire value chain is being developed in the same location easing the process and reducing logistic cost and time. In addition to this, they have huge quantities at a time.
From India’s perspective, efforts were made to adopt the same model with the development of textile parks a few years back but no proper results are achieved from the logistic cost point of view. As the parks were not utilised the way it was envisaged to be utilised by exploring the functional aspects of the processes. The scheme was a good first step towards improvement, however, it saw the other side of politics where a few politicians tried to utilise this opportunity to grab the land parcels. The scheme is still active and now is the right time to develop parks with more focus on developing mini product cities like a shirt city, denim city, technical textile hub, etc. This result is value-focused parks thereby resulting in an overall reduction of logistic cost, duties on the products and transit time.
These parks must be introduced considering a particular state having in-house raw material backing. So states with the availability of natural fibre or developing man-made fibres should have a park developing the complete value chain of products manufactured from those fibers. This will reduce the cross-boundary issues in-between states. This procedure will also reduce the overall duties that build upon the final product as duties are applied individually on yarn, fabrics, etc. while transportation between different States.
The biggest aspect to consider in the recovery strategy is focusing on technical textiles. This is the segment where we will take share from top countries like the USA and EU with a 75 per cent share dominating the market, followed by China with a 13 per cent market share where India’s share is only 4 per cent. Even if an additional three to four per cent share is shifted to us, it will lead to a 100 per cent utilisation of our current production capacity. So we need to study the technical textiles segment and evaluate:
This is the segment where we have a negligible contribution and therefore our main focus must be on capturing this market. In a nutshell, our recovery strategy should be more focused on developing technical textile products along with other focus areas. We have all seen the flying colors in medical textiles in a span of 6 months during the pandemic demand. We are a country with great potential and can easily capture the remaining technical textiles segments just like the medical textiles. We must develop three to four segments from the vast product basket of 12 segments and develop a strategy accordingly that maps our strengths with global opportunities.
There is no doubt that India would increase its share in the global textile trade. Technical textiles are the products required for developing countries like us. However, from vast segments of technical textiles, we need to select a product basket that complements our strengths and current businesses. It is different for different entrepreneurs. Hence Every Entrepreneur needs to find answers to general questions like:
Only by researching answers to all these questions, an entrepreneur will be able to choose the right product basket for his business. In addition to this, we are always a phone call away or just a text message or email away from you, almost for the past 10 years…
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The article is authored by Avinash Mayekar, MD and CEO Suvin Advisors. To know more visit www.suvinindia.com or WhatsApp @Avinash +919322906199