FACTOR AFFECTING THE GROWTH OF SUPPLY CHAIN MANAGEMENT IN INDIAN APPAREL INDUSTRY

Minor Project

Submitted By:
AKHILESH KUMAR FMS - 0724

2007 DEPARTMENT OF FASHION MANAGEMENT STUDIES

NATIONAL INSTITUTE OF FASHION TECHNOLOGY
GH-0 ROAD, NEAR INFO CITY, GANDHINAGAR 382007 GUJARAT

ACKNOWLEDGEMENT

In order to choose and carry out any research with a successful execution requires personal liking, interest, support, and most important guidance. I would like to take this opportunity to thank and I am highly indebted to my guide Dr. Benaya Bhushan Jena, course coordinator, PGFMS for his neverending support and suggestions throughout the project, giving me direction and molding my minor project into final stage. I would like to mention the support, patience and help of my classmates, without which the execution of this project would have been difficult.

Akhilesh kumar FMS 0724

ACKNOWLEDGEMENT.............................................................................................................................2

INTRODUCTION..........................................................................................................................................3

Chapter 1

INTRODUCTION
Supply Chain Management or SCM as its popularly known seems to have become the all important focal point for business success. It has gained enormous importance and continues to be a buzzword in the Industry as well as in the IT & the student community. Today, people are increasingly realizing that in the intensely competitive world, one has to keep the chain lean and responsive. Is it just something made popular by the consultants and a few people or is it really significant for the industry? And, what really does supply chain mean and why has it been in the limelight? Is it something new that was non-existent earlier or is it just another buzzword which will fade away giving way to something new. In my view, supply chain as a concept is

definitely here to stay and it implies a new way of looking at things by questioning the existing boundaries. Earlier one would take at supply chain in parts, i.e. marketing, manufacturing, purchase, distribution, transportation and so on. Each function had a different set of people working with a particular objective in their minds. This objective was not necessarily common across people and led to very little interaction across functions. People were encouraged to be experts in their own functions and this helped in achieving functional excellence. You could hear somebody say that company X excels in manufacturing where as company Y excels in distribution or purchasing. Being excellent in even one of these functions could give a company an edge over competition. However, a further improvement in any of these functions wilt no longer yields substantial business benefits. Therefore, a time has come to integrate all functions with a view to achieve overall excellence. Probably this is why supply chain has suddenly become an allimportant arena where all the action is. Simultaneously, advances in technology have fuelled the growth of supply chain solutions

WHAT EXACTLY IS SUPPLY CHAIN?

There are various ways to look at supply chain. One can say that it starts from the raw material vendor and ends with the consumer; thus, it includes purchasing, marketing and even consumer buying the product. Therefore all the processes involved in the entire spectrum from demand generation to demand satisfaction can be called as supply chain management. Today, in some advanced companies supply chain extend right from the vendor procuring his raw material to the point of sale where the last sale of the product takes place. This implies that there is transparency and information flow in the entire chain resulting in appropriate action at each point. This action by each entity contributes to the smooth functioning of supply chain. In some companies supply chain could only be internal i.e. across the manufacturing facilities to company owned depots. One can

always choose a part of the supply chain that is most relevant and focus resources to achieve increased productivity. The benefits of supply chain could vary from organization to organization. Key benefits could be achieving higher channel partner satisfaction by reducing inventory, reducing inventory levels, reducing stock out situations planning by balancing inventory, reducing through transportation, and storage and damage/expiry costs, meeting delivery lead times and achieving greater accuracy in the process automation.

Why is Supply Chain in the Limelight?

This recent popularity of supply chain is a simple result of advances in technology and competition. In todays world barriers across countries have become almost invisible as far as trade and technology are concerned. Today, the industry is facing immense competition and also has access to the advanced world-class technology. This coupled with the sky-high expectations of the company stakeholders calls for a new way of doing old things. The emergence of the concept of supply chain is a result of this external pressure.

Supply chain focus possible without technology

The data that was available earlier say only say once in a month is available online today. And not only are that, all those complex calculations done using paper and pencil just a matter of seconds. One no longer needs to spend energy on getting and correcting data but correct information is available online as per requirements. Also, by just one click one can do calculations that would probably have taken say a day earlier. The results could also be far superior due to the sheer number of permutations that a human mind may not be able to comprehend and also eliminates possibility of human error at various instances. Also, the system facilitates usage of advanced planning or optimization algorithms to achieve a very high quality output.

However, this can be made possible only if one begins to appreciate the huge implications of a supply chain project and invites the change by working towards building a system that fulfills the organizational needs. Even though it may sound clinched, the concept of supply chain comes as a tool or rather a weapon to fight out all the inefficiencies and give real business benefits in measurable numbers. One can rise above the mundane activities as they can be easily left to the system and give a higher share of mind to more productive activities that include modeling and using the system inteiiioentiy to add value to the company.

What does a Supply Chain journey imply?

The above holistic perspective is extremely essential when any organization wants to move towards a supply chain approach. Supply chain is after all a way of thinking.... Just doing the same old things in a new way. However, having said the above, I would also like to add that supply chain is not as rosy or as simple as it appears. Supply chain implies everything right from re-looking at the organization structure to changing peoples mindsets across levels. It could also need an advanced technology like an APO or an i2 but this in itself can help an organization only a small way. It also includes empowering people with new skills on aH fronts, technological inputs, analytical inputs etc. Various training sessions could be required along with change management inputs as this not only calls for learning, mastering and LIKING a new complex system but it also means changing attitudes for which beliefs need to be changed! Over the years, people have formed and arrived at a set way of working which is considered to be the best. Thus, working with a new system which is complex initially and which calls for new learning can face a lot of resistance. A tot of drive and commitment from the top management witi be required in the initial phase if the entire organization has to succeed on this supply chain journey. And believe me, it will not be easy at all... it will be really tough as one not only has to cope with the day to day business performance pressures but also the pressures of the new way of working.

Thus, till everyone becomes comfortable with this new way of working... the support wif! be required across ivies. Along with this, it could also call for a change in the Key Performance Indicators across the organization. A lot of questions may be raised about whether the system was required at all and also about the credibility of the system. These questions/doubts need to be addressed in order to ensure that a lot of positive energy is generated. It could also lead to some undercurrents that need to be managed tactfully. If issues are not managed well, this could shake the confidence of the entire organization in the system benefits and derail the supply chain journey. In order to avoid any jolts midway, a proper homework is absolutely essential on the functional as well as the people front. Once the organization has very thoroughly and logically decided on commencing a supply chain journey and achieved a true consensus within the organization, the likelihood of any stumbling blocks on the way is highly unlikely. The benefits as well as the steps should be clearly shared and agreed among all involved or impacted by the journey. This will give a strong foundation to the project that will go a long way in ensuring success. Needless to say, along with good homework, constant moral boosting and appropriate support at every step will be required.

Chapter 2

LITERATURE REVIEW

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. The term supply chain management was coined by consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 19821 Supply chain management must address the following problems:

Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers. Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking, pull or push strategies, third party logistics. Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation etc.

Inventory Management: Quantity and location of inventory including raw materials, work-in-process and finished goods.

Supply chain execution is managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

COMPILED FROM MENTZER T, JOHN ;SUPPLY CHAIN MANAGEMENT

T extile

M anufacturing Exporter and M anufacturer Buying houses

R etail Direct exporter Indirect exporter

R aw material

Fabric

W oven Knitted

M erchant Exporter

Buying office Importer Agent

Sub -contractor Or job w orker

Supply chain management is a cross-functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end-consumer. As corporations strive to focus on core competencies and become more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively. The effect has been to increase the number of companies involved in satisfying consumer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity Supply chain business process integration

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers, and attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows, which in turn assist to achieve the best product flows. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are: Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management One could suggest other key critical supply business processes combining these processes stated by Lambert such as: Customer service management

Procurement Product development and commercialization Manufacturing flow management/support Physical distribution Outsourcing/partnerships Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers.Customer service provides the source of customer information. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. Successful organizations use following steps to build customer relationships: determine mutually satisfying goals between organization and customers Establish and maintain customer rapport produce positive feelings in the organization and the customers

b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a winwin relationship, where both parties benefit, and reduction times in the design cycle and product development is achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkages

to transfer possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers. This requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage and handling and quality assurance. Also, includes the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research to new sources or programmes. c) Product development and commercialization Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: coordinate with customer relationship management to identify customer-articulated needs; select materials and suppliers in conjunction with procurement, and develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes, and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers). f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, to manage and control this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including

Cost Customer Service Productivity measures Asset measurement, and Quality. External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardisation 2. Postponement 3. Customisation

PROBLEM DEFINITION
Indias fashion supply chain management is performing below its actual potential.

RESEARCH GAP
Historically, the three fundamental stages of the supply chain, procurement, production and distribution, have been managed independently, buffered by large inventories. Increasing competitive pressures and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs. To remain competitive, these firms must reduce operating costs

while continuously improving customer service. With recent advances in communications and information technology, we are still lacking behind the other countries, in this we would try to study the problem or factors affecting in managing the supply chain in India.

OBJECTIVE OF STUDY
The objective of the study is to trace out the various factors that are affecting the growth of fashion supply chain in Indian apparel industry. The supply chain of India apparel industry is greatly affected by various internal and external factors, such as high transportations cost, government policies and other factor which is affecting growth of SCM in India.

RESEARCH METHODOLOGY
The research strategy, or method, can be seen as the mental bridge between a problem raised and the empirical field of interest. The method chosen shall be suitable for dealing with the problem addressed, but it can also be argued that the problem of interest (the research question) directs the choice of method. In other words, the character of the problem influences the way the researcher approaches the empirical field to be studied. This chapter is, therefore, closely linked to chapter two, in which research gaps were identified and research objective were framed. There are two general ways to conduct research. The first way is to use induction, this means to begin with research and then conduct a theory. The other way is to use deduction, this implies to begin with a theory and then conduct Research. To use a deductive method is to follow the way of conformation. An existing theory determines

what information to collect and how to interpret that information, and finally how to relate the results to the existing theory. To use an inductive method implies to follow the way of discovery. The researcher can study an object without first establishing the study in existing theory. One risk with conducting inductive research is that the conclusions are based on an empirical material that could be specific for certain situations, certain people, and certain things The dynamics of supply chains are dependent on the following key issues: Dependable infrastructure and distribution of: a) Power b) Communication facilities c) Transportation by air, rail, road, inland waterways and shipping through high seas Levels of automation Macrolevel support from the government Access to sophisticated supply-chain capabilities Purchasing power of the customers Industrial climate of the country Availability of technology Quality of labour and management Security of systems and normal law and order situation Global outlook

 Corruption-free environment Bureaucratic barriers and hassle-free systems and procedures Healthy and hygienic environment Customer satisfaction is the mantra of supply management Since the customers have multiple choices at their doorsteps, it has become all the more important to add value, cut costs, respond to sudden change in demand and enhance the value delivery to them to maintain ones market share. The customer will always look for an easy solution to his problems instead of a cumbersome process. The integration of supply chain with the customers will improve the logistics as well as create confidence in the customers about the after sales service and maintenance of the products as and when troubleshooting is needed. Supply-chain techniques have played a vital role in creating a competitive force for the marketability of products, by expanding the production base and market share. The companies of developing economies have realized that an efficient supply management is an effective tool to achieve corporate objectives. In order to create a successful customer-centric supply-chain cycle, the business enterprises must endeavour to synchronize their supply-chain planning whether it is 3PL, 4PL and/or Managed Supply Chain Operations (MSCO) with the product development, procurement, materials, handling, transportation (inbound/outbound) and manufacturing. In view of the liberalization and globalization of developing economies, the supplychain solutions face several challenges. Some of the developing nations, including India, may emerge as an important manufacturing hub in the near future for a number of

industries due to knowledge capital and strong technological and industrial capabilities in several sectors. The key factor for any developing country and particularly India would be the creation of dependable facilities for movement of goods and services for indigenous and international operations. Business enterprises are having frequent interfaces with their suppliers and customers to retain their business presence in the market due to a tough competitive environment. Business revolution has already taken place in China and today China is leading the developing nations in FMCG markets all over Europe and America. South Korea, Thailand, Taiwan, Malaysia and Indonesia are not far behind. By the way, China being the most populated nation in the world is converting the liability of overgrowth into an asset by providing good basic education with technical knowledge and putting a tight cap on the further growth of population whereas we in India are still struggling to evolve a consensus to control and regulate the supply chain of population and how to make the best use of our existing human resources. A safe and sound infrastructure is the foundation of an efficient and effective supply chain. All the big brains of India agree that India needs the big bucks to upgrade the existing infrastructure such as roads, rails, sea ports, airports energy and telecom networks to world standards to improve its image and economy. Dr Manmohan Singh, The Honble Prime Minister of India in his address to the New York stock exchange during his recent visit to the USA has stated that India may need approximate USD $150 billion for investment in infrastructure requirements. The civil aviation sector may need $45 billion, railways $10 billion, power and telecom sectors would be $75 billion and $25 billion respectively as a breakup of USD 150 billion. But mobilizing adequate resources for investment in the infrastructure sector is the need of the hour which will give agreat fillip to smoothen the supply chain constraints.

 Since the commitment of the domestic private sector and foreign investors has not been very encouraging in the infrastructure sector, the Government has to step in with an innovative approach to boost the confidence of the investors. Out of a total of $23 billion of FDI that has flowed into the country in the last 13 years, only $7.66 billion has come for infrastructure sectors like power, telecommunication and transportation. Why the development of supply-chain infrastructure should be every developing nations top priority is because within the next 20 years half the worlds manufacturing exports could come from developing countries. As regards transportation for the movement and distribution of goods and services, which is the backbone of any supply-chain process the less said the better. Let us take the example of our own country in regard to the vision, planning investment and implementation and networking of various infrastructure systems. The MNCs are certainly exploring India as a great outsourcing hub for products and components for global markets. In order to attract foreign investors to set up a manufacturing business, the country must develop investor-friendly infrastructure. With power you can work 24 hours. But most of the developing economies are still struggling to provide adequate power to maintain the desired growth in the industrial and service sectors. Communication connects the five factors of production namely men, money, machines, materials and management facilitating the flow of information and knowledge, which is vital for a supply-chain success. In underdeveloped nations, it lacks the push from the government channels. The issues of timing, care and safety can often cause nightmares when small but highvalue consignments of life-saving medical supplies, other highly perishable items and items with expiry date restrictions are not delivered in time either due to transportation

problems or improper handling and procedural delays at the port of clearance. As such the quality of infrastructure is important for such critical and time-bound deliveries. The logistics firms which offer supply-chain services for transportation, storage, distribution, packaging, temperature controlled storage facilities, tracking and service support cannot afford any goof-ups in such cases. The growth and progress of the economy of a nation is reflected by the number of air flights it operates in and out of the country. Air transportation is the leading mode of logistics for movement and transfer of sensitive and bulk cargo to and from India. There is hardly any airport of international standards for passengers and cargo handling in India. We are still debating and deliberating on the FDI cap for the development and improvement of our airports infrastructure. Due to sustained growth in air traffic, both domestic as well as international, since the 1990s, there is virtual choking of all major airports in the country. Finding a parking lot for a night halt at Delhi or Mumbai which are the industrial hubs for the movement and distribution of air cargo is virtually impossible and airlines would soon be compelled to move out to nearby airports or wait endlessly. The cost-effectiveness of road transportation is washed away as soon as the rainy season begins. The upkeep and maintenance of infrastructure is far from satisfactory. It affects the bottom line of the business enterprises as well as the overall growth of the national economy. It is also an inhibiting factor for attracting the investment opportunities from foreign countries. As regards modernization and upgradation of the existing network of Indian Railways, expansion of capacity on key routes to handle additional freight and passenger traffic, addressing safety concerns, etc., it is said that it is time for a surgery for Indian Railways. Despite being an eco-friendly, cost-effective and fuel-efficient mode, the inland water

transport system carries only 0.17 per cent of the total inland cargo in the organized sector. With regard to sea transportation of imports and exports, in the 15 November edition of India Today under the Business and Economy feature there is a pathetic report on the clogged ports about the abysmal infrastructure and surging traffic which cripples Indias container trade gateway at JNPT and exporters losing crores of rupees due to bottlenecks in the movement of export cargo. A garment exporter airlifted a shipment to the US at the cost of Rs 30 lakh which was more than the value of the consignment in order to retain his customer. We have segmented attempts to improve particular modes of transport without realizing the impact of such efforts on other modes. Instead we need an integrated approach of the transport infrastructure which will minimize energy use and emissions while maximizing competitiveness of the domestic industry with a paradigm shift in the supply-chain process. A practical approach is required to manage the flow of goods, services and information from various sources based on the physical and financial resources available with each developing country to manage the show. In order to achieve a sustained superior performance in the supply-chain process, a developing country must strive and evolve an appropriate strategy and execution plans keeping in view the internal capabilities and understand the fundamental needs of the business organizations, which will ultimately give an impetus to their sales, revenues and profits. With rapid economic growth in the manufacturing as well service sectors as foreseen for the future, people cannot be denied the fruits of prosperity due to inadequate resources to support and improve the fundamentals of supply-chain infrastructure.

 The administration responsible for the allocation of resources must listen to the signals of the emerging demands of the industry to accord priority to the supply-chain systems which can facilitate the growth of business and commerce. It is not due to dearth of resources but lack of willpower, poor administration, corrupt systems, self in the forefront and the interest of nation on the back, which leads to failure of purpose. Besides the competition on cost, quality and value addition, today the one with the best supply chain will walk away with the customers. Ultimately it will be the vision of the nation and its leadership at the macrolevel and its style of functioning coupled with the leadership of business organizations and the cultural ethos of the employees which will make a difference between the have and have-not markets.

SCOPE AND NATURE OF STUDY

Nature: Research is elaborated to understand the present state of Indian supply chain, competition which India is facing in the global market & relatively less growth of the Indian textile industry in the market as compared to other countries Scope: This research will help to find out the lacunae in the present supply system of Indian textile and apparel industry, and will help in implementing the corrective measures which will strengthen the Indias position in the global market.

HYPOTHESIS

Government Policy and regulation affects Indias supply chain management. Perceived quality affects Indias supply chain management. Infrastructural issues affect Indias competitiveness in supply chain.

REFERENCES
1. Supply chain management by John T. Mentzer 2. www.iima.com 3. Fashion Buying and Merchandising by Sidney Packard Textile Exporter and Manufacturer Retail Direct exporter Indirect exporter

Raw material

Fabric

Woven Knitted

Buying houses Merchant Buying office Exporter Importer Agent Sub-contractor Or job worker