Acknowledgement

The fulfilment of any this mini project report is in consequence of integrated effort of our team members. This project report has been possible only through the guidance of our faculty Mr. Manoj K. Srivastava. We hereby take an opportunity to express our sincere thanks to our faculty for his guidance and learning he has imparted between us during the course.

1. Introduction
Indian Textile and Garment Industry is estimated to be US$ 89 billion in 2011, constituting 4% of Indian GDP and 14% of industrial output, has come a long way since 1962 when it was just US$ 1.8 million and has been growing in leaps and bounds, lagging only to China. In 2011, India garment export to world market is US$ 14 billion, 3.5% of world demand and ranked 5th largest exporter as per WTO data(2011) trailing Bangladesh, Hong Kong, EU-27 and China. After abolishment of quota regime in 2004, India has emerged as a major supplier for buyers from all over the globe. Next only to Agriculture, Indian Textile and garment sector is catering to 35 million direct employment, 2nd largest provider in which garment sector contribution is 25% in 2011 (Source: Office of Textile Commissioner, India). USA and EU are the dominant markets for Indian exports of apparel accounting for 70% of the value in export. US is the single largest importer of Indian garments accounting one-fourth of export. Indian Garment industry is mainly driven by its abundant availability of cotton, vertically integrated textile industry (Indian ranks 3rd in world, 2011), local suppliers of yarns and fabrics, cheap labor, and its flexibility. Other major export destinations are U.A.E., Saudi Arabia, Canada, Egypt, Australia etc. Major hubs of exporters are located in NCR, Mumbai, Bangalore, Tirupur, and Ludhiana. Although after end of quota regime in 2004 and liberalized trade policies by developed countries, Indian garment export industry has grown but at the same time there is fierce competition from other Asian countries like Bangladesh, Vietnam, Thailand, Indonesia, Sri Lanka, Korea due to availability of cheap labor. Asia is the biggest exporter to USA accounting 56% of its import but Indian share is only 3% compared to South-east Asian countries in spite of vast resource of raw material, labor and land. In India, garment exporters are primarily Cut, Make and Trim (CMT) manufacturers for global clients and very small in size. This is also due to government SSI reservation policy which has prevented modernization, quality investments, scale adoption, and change in product mix. In a dynamic environment where product life cycles are very short, demand is uncertain and significantly seasonal, competitiveness is very high. To sustain in this fierce competition, it is desired to have an efficient logistics and supply chain. Manufacturer works on very tight delivery schedule due to shorter product life cycle, and fast changing consumer behaviour. The Indian garment industries have one of the longest and most complex supply chains in the world, leading to longer lead time as well as adding costs. Now with the allowing FDI in retail sector, global retail giants like Wal-Mart, Marks & Spencer making the domestic market also highly competitive, but also expected to grow in terms of technological advancement, developing designing capability and specification, and matured supply chain thus reducing cost.

2. Economics and Trade:

Globalization has established two types of international networks; one is Producer driven and the other Buyer driven. In producer-driven value chains, large, usually transnational, Manufacturers play the central roles in coordinating production networks (including their Backward and Forward linkages). Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries. This pattern of tradeled industrialization has become common in labour-intensive, consumer-goods industries such as garments. Tiered networks of third-world contractors that make finished goods for foreign buyers carry out production. Large retailers or marketers that order the goods supply the specifications. The companies that develop and sell brand named products have considerable control over how, when and where manufacturing will take place, and how much profit accrues at each stage. Garment is an ideal industry for examining the dynamics of buyer-driven value chain. The apparel value chain is organised around five main parts: raw material supply including natural and synthetic fibres manufactured by textile companies; production network of garment factories including domestic and overseas subcontractors; export channels established by trade intermediaries; marketing and distribution networks at retail level.

Typical Cost Structure of Garments

Raw Material Fabrication Overheads Finishing 55% 22% 15% 9%

a) Factor Cost: Despite technological advancement, garment sector remain labor intensive globally, and hence manufacturing is shifting from HCC to LCC. Due to its labor intensiveness, labor cost assumes great significance in production cost.

b) Cost of Raw material: Indian garment industry is mainly dependent upon domestics textile industry for raw material like yarns and fabric as it is mainly dependent upon cotton. Only 1.5 % of raw material required is imported. This gives a cost advantage to Indian garment industry. But due to longer and complex supply chain, with as many as 15 intermediaries this cost advantage is diminished to nil. c) Scale of economies: Indian garment manufacturer are fragmented, small in size, and does not have capacity to fulfil large orders and thus not able to achieve economies of scale compared to China, where exporter have huge capacity and raw material supplier are integrated nearby.

Hence, Industry would need to develop efficient SCM, and rationalise the cost at every link of supply chain.

3. SCM in Garment Industry:

The Garment industry stands out one of the most globalized industries in the world and it is a supply chain commodity chain led by a combination of retailer, contractors, subcontractors, merchandisers, buyers, and suppliers; each plays an important role in a network of supply chains which spans from fibres to yarn, to fabrics, to accessories, to garments, to trading and to marketing. The peculiar characteristics of garment supply chain are short life cycle, high volatility and low predictability and high impulsive purchasing behaviour of consumer.

Supply Chain Management Frameworks (Source: Appelbaum and Gereffi, 1994)

The Indian garment industries have one of the longest and most complex Supply chains in the world, with as many as 15 intermediaries between the farmer and the final consumer. Each contributes not only to lengthening of lead times, but also adding to costs. The supply chain in India is extremely fragmented chiefly due to the government policies and lack of coordination between industry and relevant trade bodies. It is noteworthy that the countries that are globally competitive are the ones who have a significantly consolidated supply chain. It is also noteworthy that among some of the countries which are not as fragmented -such as Korea, China, Bangladesh, Turkey, Pakistan and Mexico- are Indias close competitors in global market for exports. The Garment manufacturing is a pure make to order (MTO) production scenario unless production houses have their private labels. Typical business process in this industry include style development, sampling, customer order management, Fabrics & trims Procurement, Inventory Management, Production Planning, Material and factory Capacity planning, Sub-contracting in overload scenarios, Raw Material distribution between warehouses, Production, Finishing & Packing, Shipment, and other non engineering process. Following is the flow of operation in garment manufacturing: Style Development or Style Design from Buyer Sample Making and approval from Buyer Salesman samples for market testing Bidding and negotiations of Capacities Customer Order and Final Style approval Fabric bulk booking, fabric testing & approvals. Pre production sample approval Production (Cutting, sewing, finishing, packaging) Garment inline and final inspection Shipping and Invoicing

Challenges in Supply Chain Biggest Challenge Indian garment manufacturers facing today are to meet delivery expectations and price pressures from foreign buyers. Supply chain planning in a garment industry is quite complex with numerous factors contributing towards it. One, Garments are highly seasonal goods. Every season has new style. This makes demand forecasting a big challenge given the relevant demand history is not available. Second, each style has size, dimensions, colours, and fabric attributes that lead to numerous SKUs for single style. This demands to deal with huge amount of styles & SKUs in planning and operations. Third, supply chain of medium to big players in industry are truly global wherein sourcing of fabrics and yarns done from different countries, manufacturing happens in different countries and products are shipped to and sold in big markets such as America, Japan, Europe etc. In few cases even manufacturing of one garment happens in different countries due to rules, regulation and restrictions. Fourth, overall demand and supply lead-time is one of

the longest compared to that in many other discrete goods industries. Fifth, the garment manufacturers are actually in business of selling factory capacities and not selling garments. Production capacity management is thus a key in meeting buyers expectations in terms of delivery and price. With the help advanced collaboration systems available in the market, big brands and retailers follow VMI and CPFR model to reduce the investments in inventory and transaction costs by sharing latest forecast and sales data with vendors and relying on them to replenish the inventory in regular basis. This adds to complexity, as not all customers of a firm want to follow this model. But engaging in VMI and CPFR model with retailers gives manufacturers competitive advantage over similar suppliers due to potential of long term relations and shared vision.

4. KEY PLAYERS Aditya Birla Nuvo

Aditya Birla Group is in the league of Fortune 500. It is Anchored by an extraordinary force of 100,000 Employees, belonging to 25 different nationalities. In India, the Group has been adjudged "The Best Employer in India and among the top 20 in Asia" by the Hewitt-Economic Times and Wall Street Journal Study 2007.The apparel business of Aditya Birla Nuvo dominates the premium and popular segments of the Indian lifestyle market with its companies, Madura Garments Lifestyle & Retail and Peter England Fashions & Retail.

Aditya Birla Nuvo Brands:

Esprit Peter England Allen Solley Van Heusen Louis Philippe

Raymond
A 100% subsidiary of Raymond Limited, Raymond Apparel Ltd. (RAL) ranks amongst India's largest and most respected apparel companies. RAL entered into the ready-to-wear business with the introduction of Park Avenue in 1986 catering to the men's formal wear market. Parx Was launched in 1998 to address the growing trend of smart casuals. In 2000, Manzoni, a luxury lifestyle brand was launched offering a super-premium formal range of men's shirts, suits, trousers, jackets, ties and leather accessories. Raymond identified the vacuum for a high end, casual wear brand and hence decided to acquire ColorPlus as a part of strategic expansion plan for their ready-to-wear business. Notting Hill was

launched in 2007 to cater to the popular price segment. In addition to this, Raymond Apparel has also ventured into the kids wear segment with its exclusive brand Zapp.

Raymond Brands
Raymond Finely Crafted Garments Manzoni Park Avenue Park Avenue Woman ColorPlus ColorPlus Woman Parx Notting Hill Zapp!

Arvind Mills
Arvind Mills was established in 1931. It was founded by Kasturbhai Lalbhai, one of the leading families of Ahmedabad. Arvinds brand portfolio includes: Lee , wrangler, nautical, Jansport, Kipling, Tommy, Flying Machine, Excalibur, Arrow, US Polo , Izod, Pierre Cardin , Palm beach ,Cherokee, Gant, Hart Schaffner, Marx, Sanabelt. It manufactures denims, shirting, khakhis, knits, and garments. The company has a turnover of approx $500 million and is a part of over 100 years old Lalbhai group. Arvind entered into exports of garments setting up shirts factories in Bangalore 2001. This modest beginning has quickly grown to a capacity of around 4.50 million shirts, annum and the list of customers includes dockers, gap, next, Espirit, FCUK, Osh, Kosh and many others. The lalbhai group subsidiary Arvind Mills said recently that it temporarily suspending expansion plans for two apparel brands, Rider and Hero, which the company had jointly developed with the US based branded lifestyle apparel player VF Corporation. The two companies had signed the JV agreement in 2006 establishing the VF Arvind Brands to design market and distribute VFs branded lifestyle apparel in India.

Arvind Millss Brands

Flying Machine Newport Ruf & Tuf Excalibur Arrow Lee

Practices among key players

Store Name Product Range Aditya Birla Nuvo Mens, Womens & Kids wear
Esprit Peter-England Van Heusen Allen Solly Louis-Philippe Presence in all Segments Many International Players- Louis Philippe, Van Heusen etc. Print, electronic, hoardings, In store Different quality in different brands For Some Brands

Raymond Mens & Womens wear

Park Avenue ColorPlus Parx Notting Hill Zapp! High End All company hold brands

Arvind Mills Mens, Womens & Kidswear

Lee Wrangler Nautica Jansport Kipling Tommy Presence in all segments Many International Players- Wrangler, Nautica, etc. Print, electronic, hoardings, In store Different quality in Different brands For Some Brands

Brands

Positioning Tie Ups

Media Used for promotion Quality Loyalty Program

Print, electronic, hoardings, In store, High Quality No

5. Potential challenges and Issues:

Post-MFA Scenario The Multi-Fiber Agreement (MFA) had been forced in India since 1962, governing the textile trade between various countries. It was later abolished in 2005. When the MFA was abolished, it was expected that tariff distortions, which were prevalent earlier, would gradually disappear, facilitating global trade of textile and apparel. The readymade garments segment benefited the most with the abolishment of the quotas. The Indian Garment industry lacks total information sharing across the supply chain, which results in inefficiency at various links of supply chain.

a) Upstream Side Post MFA Indian textile industry has grown and exports in textile have increased enormously. But Indian textile industry is mainly cotton based which provides the raw material for garment industry. There is no innovation in terms of synthetic fibres by textile companies, in view of global demand garment manufacturers have to

import synthetic fibre or rely on cotton industry. This gives a disadvantage to garment manufacturers, and they do not compete to their competitors where special fibres are to be used. It has been found in various surveys that the raw material textile industry and Garment industry are not working together to fulfil the change in demand and shifting trends. There is no collaboration at industry level nor there do any long term relationship between garment manufacturers and raw material supplier so that they can develop fibres as per customer demand and preference. There is a total disconnect between the suppliers and garment manufacturer. Their relationship goes only up to purchase and supply and no true collaboration and development. Garment industry has not developed like Automobile where the car manufacturers help and encourage their suppliers to built factories nearby so that to work on JIT. There is lot to learn for garment industry in terms of supplier relationship management. b) Internal Side The production lead-time is highest in world and takes 15-30 days compared to other countries. The low productivity is due to less technological advances, poor operation management, high inventory level, also low capacities due to government SSI reservation. Low efficiency in production due to less mechanisation in production and highly labour intensive manufacturing process, lack of planning in production, a low utilization of rate of equipment, capital is invested only in current technology and no new technology has been brought to enhance productivity, poor coordination within the factory. Loss of control in monitoring and removing bottleneck in production steps in the line, there is no measuring tools or standards which actually display the workers performance. The Indian garment manufacturers are mainly of CMT type and do not work on development of design even though availability of large pool of globally renowned designers and only rely on design provided by customers and do not develop their own design which will help them in standardization of processes. All this has increased the cost of manufacturing and reduced their competitiveness in the global market place. c) Downstream Side The design has been developed and approved by customer; this activity itself takes 15-30 days. This increases the lead time of order management. The trend is there is less sharing of information from customers to manufacturers which makes the process of manufacturing more complex and tedious. Also after completion of manufacturing due to poor logistics infrastructure in the country make the delivery difficult. Indian ports are congested and also do not favour the speedy delivery which is the essence of the supply chain. It takes one week to a month for consignments at

ports to get cleared for export. Indian garment manufacturers depend on Colombo or Singapore airport for the export and due to poor infrastructure at ports feeder vessel does not arrive at time to catch main vessel at Colombo or Singapore port. This makes the delay in delivery, also increase the cost of shipping for exporters. All these factors contribute to less competitiveness of Indian garment industry in global market and they are losing business to other low cost Asian countries like Bangladesh, Sri Lanka and Vietnam.

6. Balance Score Card:

Balanced Scorecard (BSC) was developed by Robert S. Kaplan and David P. Norton in 1992 (Kaplan and Nortan, 1992). BSC recommends use of executive information systems (EIS) that track a limited number of balanced metrics based on the following four perspectives: financial, customer, internal process, and learning and growth, which are closely aligned to strategic objectives. Financial perspective (e.g., cost of manufacturing and cost of warehousing) Customer perspective (e.g., on-time delivery and order fill rate) Internal business perspective (e.g., manufacturing adherence-to-plan and forecast errors) Innovative and learning perspective (e.g., APICS-certified employees and new product development cycle time).

Sample Balance Score Card for Garment Industry : Table I