The global apparel market was estimated at US$ 1,800 billion in 2017 and India’s contribution to it was ~US$ 67 billion, which accounted for 4% of the global apparel market. India’s apparel market has grown at a CAGR of 10% in the past decade and is expected to grow at an even faster pace of 12% CAGR in the next decade. The Indian garment industry is passing through an important phase today. On one hand, changing consumer trends and growing disposable incomes are leading to high demand and a shift from tailor-made to readymade clothing. While on the other hand, Central and State Government’s dedicated incentives for garment manufacturing are making investments a lucrative proposition.
Albeit, the presence of such favorable ecosystem, garment manufacturing is considered as one of the most complex businesses to run. It involves simultaneous functioning of multiple factors to make it a profitable business. Even small gaps in the supply chain could lead to a delay in shipment and result in serious losses to the company. It also involves a cut-throat competition against the cost-competitive countries such as Ethiopia, Bangladesh, etc. Hence, the operations of an garment factory require a pre-emptive approach towards early identification and rectification of the problems and delays.
“Prevention is better than cure”. But How?
Even with stiff competition, there are ways to excel the business. One such approach is to avoid making the common mistakes which can seriously hamper the company’s profitability. This article details the seven most common mistakes that an apparel investor makes.
1. Flawed Factory Design and Machinery Layout
Creating factory layout is one of the most critical parts of setting up an garment manufacturing unit. The layout is not just a representation of the shop floor in terms of infrastructure and machinery but is also important for planning of material and manpower movement. With the ever changing orders and requirements of the buyers, the manufacturers resort to changing line sizes, machines and material movement to suit the product being manufactured.
The development of an efficient plant layout results in smooth work flow across the production process, improved production efficiency and ensures 10-12% space saving. A well-developed layout also incorporates international compliance requirements such as Safety, Health and Environment (SHE) norms and is a visually appealing factory.
2. Ignorance of Modern Industrial Engineering and Quality Control Methods
The primary benefit of modern industrial engineering is to make work as easy as possible while keeping the overall cost factors to minimum. Once the work is simplified for the workers it has a domino effect on the entire organization. The workers may be able to do more work in the same time as they did without the application of IE, thus increasing the overall productivity of the work.
In addition to the modern industrial engineering, the presence of an efficient quality control system is necessary to maximize the results. It is a continuous process that touches everything from purchasing to manufacturing to distribution and requires attention at all the processes in the value chain to meet the product standards. An absence of a decent quality control system and industrial engineering can lead to an inconsistent production and a fall in the productivity.
3. Over or Under Investment in Technology
The machinery used for apparel production usually has a long shelf life and requires minimal maintenance when compared to other manufacturing industries. This makes the selection of correct machines a really important task as improper machinery selection can lead to over investment and product quality issues.
The machinery involved in garment manufacturing till the late 20th century was not complex in nature as there were limited technologies. However, the turn of the century has seen emergence of a large number of machinery manufacturers and various updated technologies. The industry has been introduced to various automates such as auto cutting, 3-D modeling & pattern making, automatic sewing machines, advanced material handling systems etc. These technologies make manufacturing an easy and more systematic process.
4. Wrong Hiring, Poor Training and Overstaffing
Garment manufacturing requires extensive workforce involvement and this makes the segment highly reliant on the performance of the staff & workers. Moreover, in the assembly line nature of the modern production systems, a shortage in efforts of a single worker could lead to a fall in the overall productivity. As the workers are directly involved in the processes and add value to products, the skill gap of workers is an important issue that needs to be addressed.
The training of workers should not only be seen in isolation as a boost to productivity, but it also helps in developing a right work culture in line with a long term vision. As a result, companies are benefited by lower absenteeism, lower labor turnover, higher production levels and more motivated staff & workers.
Another major issue with apparel manufacturers in India is overstaffing of manpower due to the low individual efficiencies. Although, the wages for skilled workers are higher than un-skilled workers, the difference made through their efficiencies generally are higher than the money invested in hiring them. However, there is a lack of abundant workforce skilled for apparel production in India. To tackle this issue, the Government of India and several State Governments have launched their skill initiatives to increase the skill levels of the youth in the country. To support such initiative, the manufacturers should also undertake training of their workforce for skill upgradation.
5. Excessive Working Capital due to Poor Planning
Apparel manufacturing, across the supply chain, involves various external input factors which may not be under the control of the manufacturer. These include fabrics, embroidery, labels, buttons, packaging material etc. A delay in even one of these input factors would result in an overall delay in production and could lead to a cascading effect across the manufacturing chain. With all the inputs being exposed to unforeseeable delays and defects, manufacturers need to maintain a certain level of inventory. In such a scenario, any shortcoming in planning results in excessive inventory and thus high working capital, escalating the entire manufacturing cost.
With the concept of On Time in Full (OTIF), manufacturers need to invest in planning of the entire production value chain. This could include inventory management and ERP software or simple planning tools like time and action calendar. This will assist in timely shipments and thus controlled inventory levels.
6. Absence of Information Capture and Communication
As discussed above, garment manufacturing involves co-working of various factors and hence requires a system for continuous coordination between the different departments in the organization. It becomes necessary for the companies to have a communication system in place to inform and update the various entities across the process flow regarding any delays or changes. Implementing a Production Control/ ERP/ MIS/ Project Management solution in the company helps in easy communication and early detection of such delays.
In our industry, recorded information is not necessarily structured, and the flow of information is often delayed due to physical movement of data through files and folders. This results in gaps in the information flow which results in delayed shipments. For example, if the fabric procurement manager doesn’t communicate a delay in fabric delivery to the cutting manager, the cutting manager would continue with his existing production plan. However, as the fabric has not been received as per the planned time, it would lead to increase in the idle time of the cutting floor and eventually a delay in the subsequent processes.
7. Absence or Underutilization of the Right Software
Today, information technology has become an integral part of garment industry. The data collected on a shop floor can be fully utilized only if it is analyzed properly to arrive upon strategy-defining results. Modern software provide manufacturers with the ability to monitor and control almost all the aspects of their business from anywhere in the world. Some of these technologies include Radio Frequency Identification (RFID), Smart Operating Solution Smart Ops, and Point of Sale (POS) etc. However, most of the apparel manufacturers either do not have these IT tools or have them underutilized because of poor implementation or wrong selection of systems. This underutilization is due to the lack of proper assessment of the requirement of such solutions available in the market. The manufacturers need to identify the need for these software and try to embed them into their production systems to maximize their profits.
As per Wazir’s estimates, a 250 sewing machines factory can lose approx. 2.5 lakh pieces in production and Rs. 2.5 crores in profits every year due to these mistakes. It thus becomes important for any apparel manufacturer to assess the above points before setting-up a new factory. Also, these issues can be resolved for any garment manufacturing set-up irrespective of the age of the manufacturing unit through the process of factory re-engineering. Under re-engineering, companies can focus on technology upgradation and implementing right systems and processes.
Wastra, an initiative by Wazir Advisors helps clients avoid these mistakes and establish an engineered factory or re-engineer the existing factories to bring it closer to an engineered one. We believe in establishing a set-up with trained manpower, optimum technology, ideal infrastructure and rationally designed processes. Given the supportive government policies and India’s strengths as an apparel manufacturer, we strongly believe that the opportunity for apparel manufacturers is beyond question. It is just a matter of manufacturing with an efficient system.