Vol. No. 028 - July, 2012
Pakistan Hosiery Manufacturers and Exporters Association
PHMA MAGAZINE I n f o r m a t i o n - Yo u r E x p o r t P a r t n e r
Inside this Magazine Editorial Apparel sector‟s share in global market Textile Industry of Pakistan: Applied Level of Engineering and Technology Ten Strategies to Improve Profitability in Apparel Business News Corner Japan Fashion Week – Tokyo Global Clothing & Textile Industry Call for Write up
Editorial Note
Strengths Turning Into Weaknesses
The statistics released by Federal Bureau of Statistics reveal that exports of country registered 4.71% decrease over the last year. This is alarming because the wheel of our economy seems to be moving on reverse gear. Textile sector has always been admitted and recognized as backbone of economy as besides being the largest foreign exchange earning sector; its backward and forward linkages pose visible impact on the economy. Talking particularly of the value added knitwear garments, it earned U.S. $ 1.974 billion during fiscal 20112012 as against U.S. $ 2.306 over the last year showing 14.37% decrease. Similarly woven garments sector earned U.S. $ 1.635 compared with U.S. $ 1.774 during the said period with a decrease of 7.84%. Knitted and woven garments sectors taken together are the largest employment generators of economy but the chronic load shedding of electricity and gas are working as rival forces against their growth efforts. An article appeared in Business Recorder of 26th July 2012 tells that Bangladesh has exported garments this year worth U.S. $ 19 billion that makes more than 5 times of Pakistanâ€&#x;s. They expect to triple it by the year 2020. With all the realities of preferences enjoyed by Bangladesh, do we ever think of preparing ourselves for this race? The economic managers and the state institutions entrusted with this task do not seem to have this item on their agenda. God knows when they would wake up and realize their duties. With present state of mindset, our strengths will only go on to turn into weaknesses.
MOHAMMAD AYUB Secretary PHMA (NZ)
Apparel Sector’s Share in Global Market Razi Syed Pakistan‟s apparel sector is losing its share in the $400 billion global textile market as its share has declined by $1.26 billion or 10 percent to $9.24 billion in fiscal year 2011-12 as against $10.5 billion in fiscal year 2010-11. The observed reasons are; Increase in cost of production Worst law and order situation and Continuous power and gas load shedding.
Apparel sector’s share in global market falls 10% Increase in cost of production, worsening law and order situation and continuous power and gas load shedding drag down share of local apparel sector to $9.24 billion in FY 2011-12 from $10.5bn in 2010-11
The value-added textile exports of Pakistan have gone down by 9.8 percent in February 2011-12 to May 2011-12, whereas exports of competitors like India have gone up by 23.87 percent, Bangladesh 7.86 percent and China 2.05 percent. it looks that doing business at high cost , the government wants to push this huge foreign exchange earning industry to the wall and drive the orders away to Bangladesh where gas price is 64 percent lesser as well as many more attractive incentives exist as compared to Pakistan. Current tariff of Bangladesh is six cents per cubic metre whereas in Pakistan it is 17 cents, which is 183 percent higher than in Bangladesh. After increase in cess of Rs 100 per million British thermal unit (mmbtu), gas tariff in Pakistan will be 19 cents per cubic metre, which is 216 percent higher than in Bangladesh. The government should make sure adequate gas and power at competitive price is made available to the textile industry instead of such frequent increase in gas prices. Consequently the end result would be that Bangladesh will be quite competitive and we will be out of competition in the world market, he added. The situation is other apparel trade market is as;
China is representing around 45 percent of global trade; China‟s rising costs and perceived risks are creating more opportunities for other low cost countries. India represents around 20 percent and Pakistan, Vietnam, Cambodia and Bangladesh are relying on their low manufacturing costs due to cheap labour available, thus, they are building up more capacity in textile manufacturing. India is the second most preferred country after China for textile and apparel sourcing. Its apparel industry is touching an export target of more than $25 billion. Turkey closely connected to Italy, is fast emerging as a critical regional player. Turkey and Brazil are the emerging markets for investment by apparel manufacturers and traders. Bangladesh has emerged as a key player in Ready Made Garment (RMG) sector. Seventy-six percent of its total textile and clothing export earnings comes from the apparel industry. Eastern European countries have suffered a slight set back due to their growing costs. As a result they are rapidly refocusing and repositioning on higher market segments. The apparel industry supply chain can be broadly categorised into five major components as 1. Raw materials 4. Export chains
2. Textile plants 5. Apparel manufacturers
3. Apparel plants
The apparel industry is estimated to grow at very high pace and will provide employment to a large number of people all across the world. Developing countries in Asia continue expanding their textile garment industry due to their very-low-cost production. Apart from China, the true gainers of the post-quota period are India, Bangladesh, Cambodia and Vietnam. It is also assumed that global textile production has started growing and by 2014, it would be 50 percent from current 30 percent growth. Source Acknowledged: http://www.dailytimes.com.pk/default.asp?page=2012%5C07%5C07%5Cstory_7-72012_pg5_8
Textile Industry of Pakistan: Applied Level of Engineering and Technology Dr. Mushtaq Mangat The contribution of Pakistan textile industry in the economy of Pakistan is appreciated. But it also seems difficult to deny the fast growth of our neighboring countries, particularly Bangladesh. Pakistan along with sufficient resources stands behind in the queue. One simple example is price of cotton yarn and spandex yarn. The price of spandex is 10 times higher than cotton yarn. We are producer of cotton yarn and earning justfew cents. Whereas, developed countries are in the production of man-made yarn and earn in dollars. Our main exports are composed of T –Shirts and denim with quite low price. The paper shed light on the three issues as ;
Role of education and technology. Role of R&D institutes.
Application and utilization of technology in industry with reference to textile machinery imports.
The importance of academic institutions cannot be denied for the development of the Import of Textile nation. In 1927, the first Weaving and Finishing Institute was established in Shahdrah Lahore by Government of India. The institute offers just offered diploma course of Machinery in Pakistan one to three years.Unfortunately this institute does not have any role in the research Year Value (US $ and development because institute does not provide any advance education. Million) National Textile University is the second oldest institute for the provision of textile 406.9 education in Pakistan developed in 1959. This university did not get any patent in last 2001-02 50 years. Moreover, this university did not provide any solution to industry. 2002-03 531.9 Nevertheless, research activities have been started in last few years. They purchased 2003-04 598.0 many new testing machines. But previous record shows that the role in research and 2004-05 928.6 development is quite limited in the past. Third oldest institute is Textile Institute of 771.0 Pakistan. All Pakistan Textile Mills Association (APTMA) initiated Textile Institute 2005-06 503.0 of Pakistan Karachi and established this institute in 1994 and got affiliated with 2006-07 Clemson University, USA. Their website shows that there is no master degree 2007-08 438.3 program in this institute. It is worth to note that research and development work start 2008-09 212.0 from master degree. There is no significant role of this institute in research and 2009-10 297.4 development. Pakistan Engineering Council (PEC) provides accreditation to 456.2 university. This accreditation I slinked with the level of facilities and teaching staff 2010-11 1 Pakistan qualification. It is surprising to note that today (May 22, 2012) , website of PEC tells Source: that none program of textile department of any university of Pakistan is accredited Bureau of Statistics with PEC. There are textile departments in the following universities as 1) Mehran University of Engineering and Technology 2) Baluchistan University of Information Technology 3) BahauddinZakariya University, Multan, Pakistan and 4). NED University Karachi. The private universities offered textile education are; 1)University of Management and Technology 2).University of Faisalabad and 3). Hajveri University. We have one institute of textile education Synthetic Fibre Development & Application Centre . It shows that no university fulfills the criteria of minimum standards for engineering education. Nevertheless, many universities got accreditation in previous years for some specific period. It is quite amazing that today all textile graduating programs are being run without accreditation with an apex body. More amazing that seven
1
http://www.pec.org.pk/schedule_first.aspx (May 22, 2012)
universities, which once got accreditation could not keep it intact. It shows that they could not maintain the standard. it is obvious that our universities do not focus on research, which is basic need to divert industry for the adoption of high technology and produce high value added products or technical textile. Research and Development Institutes Can someone believes that today there is no textile research and development institute throughout the Pakistan. We have just cotton research institute which mainly works for better cotton crop. It is nothing to do with textile industry. There is no possibility to enter in the high technology market without a strong homework. Who neglected it? It is the responsibility of government to facilitate industry. R&D is so expensive and private sector cannot bear its load. Keeping it in view, we should not expect from industry to produce high technology products. Throughout Pakistan, there is no lab where we can test thermal parameters of textile products. We have only quality testing machines to ensure that basic parameters of our textile production.There are numerous R&D institutes in India, even in Sri Lanka. Keeping it in view, I do not see any window to go for the production of technical textile and high value products. Technology Level and Textile Industry Pakistan textile industry relies Textile Machinery Imports (Sector wise) on import of high tech Sector 2008-09 2009-10 2010-11 (P) machines in all fields. It Amount Share % Amount Share % Amount Share % Spinning 88.4 41.70 101.3 34.06 159.6 34.98 includes, ginning, spinning, 46.4 21.89 70.4 23.67 109.5 24.00 weaving, wet processing and Weaving Knitting 32.8 15.47 56.9 19.13 86.7 19.00 stitching. According to my Finishing 36 16.98 60.6 20.38 91.2 19.99 personal observation, life of Others 8.4 3.96 8.2 2.76 9.2 2.02 technology is not more than 5 Total 212 100.00 297.4 100.00 456.2 100.00 years. After five years, there is Source: Pakistan Bureau of Statistics a need to replace the old technology with new one, which is definitely much efficient and productive. The above two table depict that against export of more than 10 Billion US $ annually, textile industry of Pakistan imported only 514 Million US $ annually in ten years. The most important thing is that more than one third import is in spinning sector. The role of spinning sector in value addition is quite limited. The main value addition is in the wet processing and clothing-manufacturing sector. Conclusion Pakistan is at cross road. There is a need to develop a long-term plan. Such plan should be comprehensive and based on facts. Pakistan can go for high value products. This needs latest technology in shape of production machines and testing equipments, along with human resources having most modern knowledge. It is not possible without a huge investment and long term planning. It may take more than 10-20 years to enter in high tech clothing market. Second option is to follow China, Bangladesh, India and Sri Lanka model. In this model, we have to rely on our cheap labor and producing goods for low-end market. In this market, competition is too high, profit margins are thin. In current scenario, when government is failing to provide finance and energy at competitive rates, it looks very difficult. I still believe that our industrialists have the muscles to compete in international market if he gets un-interrupted power supply at same rates, which is available in neighboring countries along with cheap financial support to upgrade obsolete machinery and improve cash flow.
Ten Strategies to Improve Profitability in Apparel Business M.S. Pradeep and Abhishek Kumar
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Widen up product portfolio Vertical integration of business Improve service and on time in full (OTIF) Responding to the challenges and enter in domestic market Improve work environment to drive revenue growth Setting up of planning department or strengthen existing one Minimize Style Changeover Time Develop a Lean team with proactive approach Checklist – an effective tool Elimination of overtime work
The first five points are considered as mid to long term strategies that can be implemented in one to two yearsâ€&#x; time frame. 1. Widen up product Portfolio: Companies who already have a business in some product categories have to move up to more complex products. There are number of companies who are producing casual shirts and trousers but few who are into products like premium formal shirts, dress pants, lingerie, suits etc. Basic products make sense for a company who is new to the business but existing companies need to make the transition by getting into high value products and replace high cost production bases in Europe and America by offering an irresistible value proposition of costs and services. To be able to offer these, companies either need to set up separate dedicated factories or a factory-in-factory with separate cutting, sewing and finishing, catering to such orders with dedicated teams. 2. Vertical integration of the business: A forward or backward integration plan for the external processes of the current business is become essential to move next level of business. By integration there is a cost advantage and a lead time advantage. The bigger garment companies need to invest in processing and weaving/knitting while textile companies need to quickly get into value added garment exports, rather than just yarn or fabrics exports. The medium sized companies can look at integration with process houses or weavers/knitters/converters by either a formal arrangement of committed production off-take or investing capital by picking up an equity stake. The funds thus available can be used by smaller companies to finance their working capital and/or technological up gradation. Classic examples of vertically integrated companies are Li & Fung and Esquel.
Li & Fung Ltd., Hong Kong Product Development and Supp. Chain Management.
The Esquel Group – Hong Kong
Vertically Integrated Diversified Product Base Turnover: US$ 600 Mn
3. Improve Service and On Time In Full (OTIF) Building trust with buyers goes beyond answering their e-mail queries on time. The buyers has to be won over by his having to invest very little time on production follow ups and wondering if he will get his order in full and on time (OTIF- On Time In Full). Manufacturing or infrastructure can be replicated but great service is very difficult to copy. This can become a truly distinguishing feature for Indian companies if they put their heart and mind to it. If the buyer can‟t be provided with online access to his order status, then needs to be updated on all relevant information without them asking for it. No last minute surprises should be sprung upon them! Companies need to set the benchmark and have self-belief that they can actually deliver 100% of the orders on time and in full. Apparel companies should move up from providing just a product to a product plus service bundle which can take up a large part of what the buyer has to do. This can include pre-production pattern making, prototype development, production monitoring, in house inspection and testing including shipment audit. 4. Responding to the challenges and enter in domestic market: Apparel exporters need to focus on the domestic market also, as there is huge growth in domestic apparel retail (Indian market). Exporters can give a much better product at a lower cost. This will help them mitigate and diversify their risks; spare capacities can be used more effectively. Another aspect which merits serious considera tion is going for two shifts. Needless to say that production can be almost doubled while cost per unit would come down. Factories should look at forming alliances with other factories in a particular region so that spare capacities can be effectively utilized. So a particular factory which has an order booking more than its capacity can utilize the capacity of another factory which may be facing a shortfall of orders. The important thing is that factories should be running at peak capacities throughout the year. 5. Improve work environment to drive revenue growth: Apparel companies should look at novel human resource practices to make their organizations a place which attracts the brightest young talents of the country. The work atmosphere should be such that it helps a person be at his creative best rather than a culture of getting work done through stick alone. Also senior management should give a patient hearing to these youngsters who may be brimming with radical ideas which could provide an innovative new method or even a breakthrough. Everyone needs to be respected no matter how low they are in the organizational hierarchy. (The following five strategies can be classified under immediately addressable areas 3-6 months‟ time frame).
6. Setting up of planning department or strengthen existing one: Production planning and control (PPC) is a key area in the entire manufacturing cycle but perfection in this area is still lacking. This could be because of a mindset that “anyway fabric will get delayed so why to bother about planning accurately”. We need to get away from this mindset and plan every little activity and trim to the smallest detail. Nothing can and should be left to chance. Last minute changes in the name of flexibility may be accepted in some orders but not in majority of the cases. At times buyers may have to be told “No” for any changes in the specs, once production has started. There has to be a senior person heading PPC at the factory level as this function has a critical bearing on factory efficiencies and OTIFs. 7. Minimize Style Changeover Time: Changeover losses need to be minimized and one way could be to set the line the previous evening so that there aren‟t any days of zero production because of style changeovers. Again the key is proactive planning. Supervisors should be aware of the details of the next style that‟s going to hit the line including outsourcing operations. PPC has a key role to play here again in terms of blocking capacities with sub-contractors on special operations and give clear input and output dates. If external operations like embroidery and washing can be brought in-house this would lead to reduction in set-up time, cycle time, cost and wastage. 8. Develop a Lean team with proactive approach: Line allocation should be kept tight as per operation bulletin without buffer. Combining of operations should be an ongoing exercise with the Industrial Engineering (IE) department constantly looking at methods improvement. Too often IE is caught up in post event analysis where the need of the hour is to be able to demonstrate to the operator and the supervisors the correct method at the correct pace at acceptable quality levels. The IE‟s need is to master in sewing skills. They need to change from a reactive approach to a proactive approach. 9. Checklist – an effective tool: Basic planning tools like checklist should be widely adopted and people trained on this to ensure they don‟t miss any activity or parts. Though the apparel business is complex, it can be simplified by training people about their job responsibilities in detail and ensuring they are able to do a certain set of activities, day in day out, error free. Sounds simple but there any number of cases where insufficient fabric was ordered because somebody forgot to add shrinkage allowance to the base pattern and this happens even in the „Good‟ factories. 10. Elimination of overtime work: Last but not the least is the controversial topic of overtime. In peak season there is at least some justification for doing overtime to be able to do 110% or 120% of capacity but where the justification in the lean season is or where factory efficiency is 40% to 45%. Overtime in such cases only encourages inefficiency and a false sense of more time available. When people on the floor know that overtime will not be allowed for any reasons, no matter what (usually it is to meet a delivery date, otherwise the dreaded air shipment!) and management backs this up with actually sticking to their words, the impact can be quite significant. One could go on and on but even if few of these mid to long term strategies and immediately addressable areas are looked at, apparel companies would definitely stand to gain.
Source with thanks http://www.onlineclothingstudy.com/2012/01/ten-strategies-to-improve-profitability.html
News Corner
Integrated Textile Parks in India Public private partnerships drive worldclass facilities in India The textile and clothing industry is the second largest employer in India and a vital component of the nationâ€&#x;s economy. In 2005, the Government of India introduced the Scheme for Integrated Textile Parks (SITP), designed to strengthen infrastructural facilities in potential textiles growth areas. The concept of clustering related businesses for critical mass and efficiency is a well-known strategy, applied to export processing zones, industrial parks and informal associations of entrepreneurs in business corridors. What sets this Indian case apart? First, the financial model is innovative. It combines government subsidies, loans from financial institutions, and equity participation from the firms that benefit from the arrangement. Second, the pro-poor orientation is unique. The public-private partnership targets job creation that benefits women and poor communities. Tens of thousands of new jobs have already been created since the project began in 2005. Third, although the programme runs throughout 2012, it is already being reviewed as a replicable model, both in India and elsewhere. Given the dwindling fortunes of the sector, modernization became imperative. The Government believes the SITP is the right way forward. Its 11th Five Year Plan (20072012) envisages India securing a 7% share in the global textiles trade by 2012. Source with thanks: http://www.intracen.org/BB-2012-03-19Creating-integrated-textile-parks-in-India--Part1/
Clothing and Textile Production Capacity in Bangladesh and the United States Garment, Knitwear Makers Get $53.44m Export Orders from US Show
Bangladesh Garment and knitwear manufacturers and exporters got export orders worth 53.44 million US dollars from the Magic Sourcing Show-2012 held in the United States (US), according to the Export Promotion Bureau (EPB).Bangladesh has become the second destination for apparel outsourcing in the world as the country enjoys a high competitive edge in terms of skilled labour and competitive price. Of the total garment export from Bangladesh, 56 per cent goes to European countries, 25 per cent to the USA, five per cent to Canada and the remainder to the rest of the world, according to Bangladesh Garment Manufacturers and Exporters Association (BGMEA). The country has set a target to export RMG items valued $20.36 billion for 2011-12 fiscal. Source with thanks:
http://www.reportlinkernews.com/n032379032/Garment-knitwear-makersget-53-44m-export-orders-from-US-show.html
Trends in US Textile and Clothing Imports US textile and clothing imports fell in volume in 2011 representing the third decline in four years, although imports were still at their second highest level. As many as five major supplying countries suffered declines in volume terms, namely Bangladesh, El Salvador, Honduras, Mexico and Pakistan. Imports from Members of the Association of Southeast Asian Nations (Asean) appeared to have fared the best -- particularly Cambodia, Vietnam and Indonesia. Nevertheless, China continued to be by far the leading supplying country. Source with thanks:
http://www.businesswire.com/news/home/201207 03005673/en/Research-Markets-Trends-TextileClothing-Imports-2012
JAPAN FASHION WEEK - TOKYO TDAP is participating in the captioned fair to be held in Tokyo - Japan from 23-25 January 2013.Interested members may get their names registered directly with TDAP under intimation to this Association.
Global Clothing & Textile Industry The world clothing and textile industry - encompassing clothing, textiles, footwear and luxury goods - reached almost $2,560 trillion in 2010, according to MarketLine. The apparel, luxury goods and accessories portion of the market, which accounts for over 55% of the overall market, is expected to generate $3,180 billion in 2015, with a yearly growth rate in excess of 4%.The market uses intelligent bar codes to track products in a system called radio-frequency identification (RFID). According to IDTechEx, the apparel market will call for 20 billion FTID tags a year from 2021, at a cost of $1 billion. Market Outlook The global clothing and textile industry has been affected by the economic recession, with consumer spending and confidence in the West being reigned in. In Asia, consumer spending continues upward curve. With cost cutting an essential practice in the industry, companies will continue to optimize energy use and other resources. Many textile manufacturers are reviewing their processes and input streams to cut down on demand for energy to boost competitiveness.The future may hold changes for regional markets should Pakistan be granted dutyfree access to the EU, which is under consideration. Duty-free access, under the Generalized System of Preference in the EU, has been opposed by other emerging country rivals including India, and the European Apparel and Textile Confederation.EU demand for clothing and textiles will likely remain relatively weak through 2015 due to the debt crisis. Regional Market Share According to textile Intelligence report the clothing imports in the EU exceeded $91 billion in June 2011. This represents an 18% rise, which was mainly due to a 13% rise in average import prices as import volume grew less than 5% to just over 4.4 million tons. Average import prices reached a nine-year high in 2011, mainly due to raw materials prices. Key Market Sector: Glimpse The world children‟swear market is expected to exceed $186 billion in 2014, marking a 15% increase in five years. Americaholds under 40% of global market. The world bridalwear market is expected to reach almost $57 billion by 2015. The market is driven by a trend toward making weddings more and more exceptional, with the wedding dress a focal point. The world menswear industry is expected to exceed $402 billion in 2014 representing over 14% expansion in five years. The leading market sub segment is clothing and footwear, with over 58% of the market. Americahas a 35% stake in the overall market. The world women‟swear industry is expected to exceed $621 billion in 2014representing over 12% yearly growth. The leading market sub segment is clothing retailers, with over 64% of total market value. The EU has a more than 37% stake in the world market, which is relatively fragmented and highly competitive. The global smart fabrics and interactive textile market is expected to reach almost $2 billion by 2015.Market will be driven by economic recovery, new product offerings and a rising degree of consumer confidence. Product innovation will partly concern new generation fibers, including hybrid materials and nanofibers. The world technical textile market continues to record strong growth. Technology usage is on the rise due to technical textiles and demand for better quality products using materials such as wool and fiber. As new high-tech fibers are more complex than traditional fibers, the production process calls for more research and qualified engineers. The world market for textiles made from organically grown cotton was worth over $5 billion in 2010. US and EU clothing imports and China‟s exports grew in value in 2011. Companies that recorded increased revenue include: Benetton, Levi Strauss, H&M, Gap, Marks and Spencer, GildanActivewear, TJX and Perry Ellis. In the EU, the clothing market is predicted to show almost 5% yearly growth from 2010 to 2015. Source with thanks: http://www.reportlinker.com/ci02115/Clothing-and-Textile.html
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