Operations Research Report

8/8/2019 Operations Research Report

http://slidepdf.com/reader/full/operations-research-report 1/30

OPERATIONS RESEARCH

INTRODUCTION

Indian textiles and Clothing Industry

Indian economy is one of the largest economy in producing and exporting inthe Textile and garments. But recent down trend made Indian TextileIndustry to become one of the sufferers in the world.

Indian textile industry is multi-fiber based, using cotton, jute, wool, silk andmane made and synthetic fibers. In the spinning segment, India has aninstalled capacity of around 40 million spindles (23% of world), 0.5 millionrotors (6% of world). In the weaving segment, India is equipped with 1.80

million shuttle looms (45% of world), 0.02 million shuttle less looms (3% of world) and 3.90 million handlooms (85% of world).

The organized mill (spinning) sector recorded a significant growth during thelast decade, with the number of spinning mills increasing from 873 to 1564by end March 2004. The organized sector accounts for production of almostall of spun yarn, but only around 4 percent of total fabric production. In otherwords, there are little over 200 composite mills in India leaving theproduction of fabric and processing to the decentralized small weaving andprocessing firms. The Indian apparel sector is estimated to have over 25000domestic manufacturers, 48000 fabricators and around 4000 manufacturer-exporters. Cotton apparel accounts for the majority of Indian apparel exports.

PGP/SS/09/11/FINPage 1



OPERATIONS RESEARCH

CATEGORIES OF TEXTILES & GARMENTS PRODUCEDIN INDIA

Indian textile industry can be divided into several segments, some of which

can be listed as below:

• Cotton Textiles• Silk Textiles• Woolen Textiles• Readymade Garments• Hand-crafted Textiles• Jute and Coir

India textile industry is one of the leading in the world. Currentlyit is estimated to be around US$ 52 billion and is also projected to be around

US$ 115 billion by the year 2012. The current domestic market of textile inIndia is expected to be increased to US$ 60 billion by 2012 from the currentUS$ 34.6 billion. The textile export of the country was around US$ 19.14billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2007-08. Theshare of exports is also expected to increase from 4% to 7% within 2012.Following are area, production and productivity of cotton in India during thelast six decades:

Glimpse of the Indian Textile Industry

India produces a wide range of home furnishings, household linen, curtaintapestry and yardage made with different textures and varying thickness. The Handloom industry mainly exports fabrics, bed linen, table linen, toiletand kitchen linen, towels, curtains, cushions and pads, tapestries andupholstery's, carpets and floor coverings, etc. The Handloom industry hasadopted various measures and techniques to provide high quality and eco-friendly products to the world market. The manufacturers in India are wellaware that AZO free colors and dyes should be used. India has discarded theusage of banned materials in the dyeing process with safe substitutes, toensure eco-friendliness of the products manufactured by the industry.

India’s Handloom Production

The Handloom industry mainly exports fabrics, bed linen, table linen, toiletand kitchen linen, towels, curtains, cushions and pads, tapestries andupholstery's, carpets and floor coverings, etc. The Handloom industry hasadopted various measures and techniques to provide high quality and eco-friendly products to the world market.




OPERATIONS RESEARCH

In the world of handlooms, there are Madras checks from Tamil Nadu, ikatsfrom Andhra and Orissa, tie and dye from Gujarat and Rajasthan; brocadesfrom Banaras, jacquards form Uttar Pradesh. Daccai from West Bengal, andphulkari from Punjab.

The Surat tanchoi based on a technique of satin weaving with the extra weftfloats that are absorbed in the fabric itself has been reproduced in Varanasi.Besides its own traditional weaves, there is hardly any style of weaving thatVaranasi cannot reproduce. The Baluchar technique of plain woven fabricbrocaded with untwisted silk thread, which began in Murshidabad district of West Bengal, has taken root in Varanasi. Their craftsmen have also borrowedthe jamdani technique. In the deportment of Woolen textiles, Woolen weavesare no less subtle. The Kashmiri weaver is known the world over for hisPashmina and Shahtoosh shawls. The shawls are unbelievably light andwarm.

The states of Kashmir and Karnataka are known for their mulberry silk. Indiais the only country in the world producing all four commercially known silks -mulberry, tasser (tussore), eri and muga. Now gaining immense popularity inthe U.S.A. and Europe Assam is the home of eri and muga silk. Muga isdurable and its natural tones of golden yellow and rare sheen becomes morelustrous with every wash. The ikat technique in India is commonly known aspatola in Gujarat, bandha in Orissa, pagdu bandhu, buddavasi and chitki inAndhra Pradesh.

Cotton in India

Cotton is the most famous textile material associated with the IndianSubcontinent. The export of fast dyed cotton cloth to Europe revolutionizedthe garment and furnishing fashions, agricultural practices and the textilemanufacturing industries of the seventeenth and eighteenth centuries.Cotton has been cultivated within the Indian Subcontinent for themanufacture of textiles since 1750 BC, the date ascribed to the Mohenjodarofragments of the Indus Valley Civilization. The perennial form of cotton plantis a slow growing and warmth and water demanding shrub. Itscultivation in the north was therefore limited.

Production of Cotton




OPERATIONS RESEARCH

Today cotton is produced in many parts of the world, including Europe, Asia,Africa, America and Australia using cotton plants that have been selectivelybred so that each plant grows more fiber. In 2002, cotton was grown on330,000 km² of farmland in Texas. 47 billion pounds (21 million t) of rawcotton worth 20 billion US dollars was grown that year. The cotton industry

relies heavily on chemicals such as fertilizers and insecticides, although somefarmers are moving towards an organic model of production, and chemical-free organic cotton products are now available. Historically, one of the mosteconomically destructive pests in cotton production has been the boll weevil.Most cotton is harvested mechanically, either by a cotton picker, a machinethat removes the cotton from the boll without damaging the cotton plant, orby a cotton stripper which strips the entire boll off the plant. Cotton strippersare generally used in regions where it is too windy to grow picker varieties of cotton and generally used after application of a defoliant or naturaldefoliation occurring after a freeze. Cotton is a perennial crop in the tropicsand without defoliation or freezing, the plant will continue to grow. Cotton is

a close relative of okra and hibiscust. The logistics of cotton harvesting andprocessing have been improved by the development of the cotton modulebuilder, a machine that compresses harvested cotton into a large block,which is then covered with a tarp and temporarily stored at the edge of thefield.

SILK:

Silk is a natural protein fiber that can be woven into textiles. It is obtainedfrom the cocoon of the silkworm larva, in the process known as sericulture.

Today, silk is cultivated in Japan, China, Spain, France, and Italy, although

artificial fibers have replaced the use of silk in much of the textile industry. The silk industry has a commercial value of $200-$500 million annually. Onecocoon is made of a single thread about 914 meters long. About 3000cocoons are needed to make a pound of silk. To gather silk from cocoons, boilintact cocoons for five minutes in water turning them gently. Remove themfrom water. And using a dissecting needle or similar tool, begin to pick upstrands. When you find a single strand that comes off easily, wind the silkonto a pencil. Several of these strands are combined to make a thread.

The beautiful and expensive golden-colored "wild" silk called "Muga" isproduced only in the Brahmaputra Valley - mainly Assam and adjoining parts

of Burma. This silk has always been highly prized - not only for its beautifulnatural golden sheen, which actually improves with aging and washing - butfor the fact that it is the strongest natural fiber known. Garments made of itoutlast those made of ordinary silk - commonly lasting fifty years or more.Kancheepuram, Tanjore and Kumbakonam, which are the important pilgrimcenters, are also important textile centers of Tamil Nadu. Sangarneddy and




OPERATIONS RESEARCH

Dharmaswaram in Andhra Pradesh, Kolegal and Molkalmoru in Mysore arealso famous silk-weaving centers.

Tanjore specialized in weaving the all over gold-work saris used for

weddings and for offering to temples. These carried rich broad borders ingold work and pallus with patterns derived from temple frieze. The youli, thestylized lion form, the hamsa, swan, and the shardul, tiger were commonmotifs. Molkalmoru in Mysore had its own distinctive tradition of simple ikatweave, combined with a rich silk or gold border carrying stylized motifs of parrots. The ikat was always in white.Care of your silk garment It is best todry clean your silk garment either by individual or bulk method, in order tomaintain the characteristic of the silk.

TEXTILES AND GARMENTS EXPORTS FROM INDIA

The share of textiles and garments exports in India’s total exports in the year2003-04 stood at about 20 percent, amounting to US $ 12.5 billion. The quotacountries, USA, EU and Canada accounted for nearly 70 percent of India’sgarments exports and 44 percent of India’s textile exports. Amongst non-quota countries, UAE is the largest market for Indian textiles and garments;

UAE accounted for 7 percent of India’s total textile exports and 10 percent of India’s garments exports.

In terms of products, cotton yarn, fabrics and made-ups are the leadingexport items in the textile category. In the clothing category, the major itemof exports was cotton readymade garments and accessories. However, interms of share in total imports by EU and USA from India, these products holdrelatively lesser share than products made of other fibers, thus showing therestrain in this category.

Critical Factors that Need Attention

Though India is one of the major producers of cotton yarn and fabric, theproductivity of cotton as measured by yield has been found to be lower thanmany countries. The level of productivity in China, Turkey and Brazil is over 1tonne/ha., while in India it is only about 0.3 tonne/ha. In the manmade fibersector, India is ranked at fifth position in terms of capacity. However, thecapacity and technology infusion in this sector need to be further enhanced




OPERATIONS RESEARCH

in view of the changing fiber consumption in the world. It may be mentionedthat the share of cotton in world fiber demand declined from around 50percent (14.7 mn tons) in 1982 to around 38 percent (20.12 mn tons) in2003, while the share of manmade fiber has increased from 44 percent(13.10 mn tons) to around 60 percent (31.76 mn tons) over the same period.

Apart from low cost labour, other factors that are having impact on finalconsumer cost are relative interest cost, power tariff, structural anomaliesand productivity level (affected by technological obsolescence). A study byInternational Textile Manufacturers Federation revealed high power costs inIndia as compared to other countries like Brazil, China, Italy, Korea, Turkeyand USA. Percentage share of power in total cost of production in spinning,weaving and knitting of ring and O-E yarn for India ranged from 10 percent to17 percent, which is also higher than that of countries like Brazil, Korea andChina. Percentage share of capital cost in total production cost in India wasalso higher ranging from 20 percent to 29 percent as compared to a range of

12 to 26 percent in China.

In India, very few exporters have gone in for integrated production facility. Itis noted that countries that would emerge as globally competitive would havesignificantly consolidated supply chain. For instance, competitor countrieslike Korea, China, Turkey, Pakistan and Mexico have a consolidated supplychain. In contrast, apart from spinning, the rest of the activities like weaving,processing, made-ups and garmenting are all found to be fragmented inIndia. Besides, the level of technology in the Indian weaving sector is lowcompared to other countries of the world. The share of shuttle less looms tototal loom age in India is 1.8% as compared to Indonesia (10%), Bangladesh

(10%), Sri Lanka (12%), China (14%) and Mexico (29%).

The supply chain in this industry is not only highly fragmented but is besetwith bottlenecks that could very well slow down the growth of this sector. Asa result the average delivery lead times (from procurement to fabrication andshipment of garments) still takes about 45-60 days. With international leaddelivery times coming down to 30-35 days, India needs to cut down theproduction cycle time substantially to stay in the market. Besides, erraticsupply of power and water, availability of adequate road connectivity,inadequacies in port facilities and other export infrastructure have beenadversely affecting the competitiveness of Indian textiles sector.

The handloom sector was a very vibrant industry in Kerala, till just a fewyears ago. But various factors, of which government neglect tops, amongstthe reasons for the dismal state of affairs in the Kerala handloom industry.About five years ago, there were around 510,000 weavers, which has nowdropped down to just 195,000. The handloom weaver’s cooperativessocieties have also fallen by a sharp 50 percent in the same period.




OPERATIONS RESEARCH

The Agreement on Textiles and Clothing

ATC is a transitory regime between the MFA and the integration of trading intextiles and clothing in the multilateral trading system. The ATC provided fora stage-wise integration process to be completed within a period of ten years

(1995-2004), divided into four stages starting with the implementation of theagreement in 1995. The product groups from which products were to beintegrated at each stage of the integration included (i) tops and yarns; (ii)fabrics; (iii) made-up textile products; and (iv)Clothing.

The ATC mandated that importing countries must integrate a specifiedminimum portion of their textile and garment exports based oln total volumeof trade in 1990, at the start of each phase of integration. In the first stage,each country was required to integrate 16 percent of the total volume of imports of 1990, followed by a further 17 percent at the end of first threeyear and another 18 percent at the end of third stage. The fourth stage

would see the final integration of the remaining 49 percent of trade. After theexpiry of Multi Fiber Agreement in 1st January 2005, the share of Indian Textiles exports in imports of USA is decreased from 5% to 4%. The share of Indian Textiles exports in imports of EU is decreased from 7% to 5%.

Global Trade in Textile and Clothing

World trade in textiles and clothing amounted to US $ 385 billion in 2007, of which textiles accounted for 43 percent (US $ 169 bn) and the remaining 57percent (US $ 226 bn) for clothing. Developed countries accounted for littleover one-third of world exports in textiles and clothing. The shares of

developed countries in textiles and clothing trade were estimated to be 47per which is very low when compared with the previous year records

IMPORT TRENDS AFFECTING INDIAN TEXTILEEXPORTS

Import Trends in USA affecting Indian Exports

In 1990, restrained or MFA countries contributed as much as 87 percent (US$ 29.3 bn) of total US textile and clothing imports, whereas Caribbean BasinInitiative (CBI), North American Free Trade Area (NAFTA), Africa Growth andOpportunity Act (AGOA) and ANDEAN countries together contributed 13percent (US $ 4.4 bn). Thereafter, there has been a decline in exports byrestrained countries; the share of preferential regions more than doubled toreach 30 percent (US $ 26.9 bn) of total imports by USA.




OPERATIONS RESEARCH

The composition of imports of clothing and textiles by USA in 2007 was 80percent (US $ 71 bn) and 20 percent (US $ 18 bn), respectively. Asia was theprincipal sourcing region for imports of both textiles and clothing by USA.Latin American region stood at second position with a share of 12 percent(US $ 2.2 bn) and 26 percent (US $ 18.5 bn), respectively, for textiles and

clothing imports, by USA. In most of the quota products imported by USA,India was one of the leading suppliers of readymade garments in USA. Though China is a biggest competitor, the unit prices of China for most of these product groups were high and thus provide opportunities for Indianbusiness.

Import Trends in EU affecting Indian Exports

EU overtook USA as the world’s largest market for textiles and clothing. Intra-EU trade accounted for about 40 percent (US $ 40 bn) of total clothingimports and 62 percent (US $ 32.5 bn) of total textile imports by EU. Asia

dominates EU market in both clothing and textiles, with 30 percent (US $ 30bn) and 17 percent (US $ 8 bn) share, respectively. Central and EastEuropean countries hold a market share of 11 percent (US $ 11.3 bn) inclothing and 7.5 percent (US $ 4 bn) in textiles imports of EU.

As regards preferential suppliers, the growth of trade between EU andMediterranean countries, especially Egypt and Turkey, was highest in 2003.As regards individual countries, China accounted for little over 5 percent (US$ 2.8 bn) of EU’s imports of textiles and over 12 percent (US $ 12.4 bn) of clothing imports.

In the EU market also, India is a leading supplier for many of the textileproducts. It is estimated that Turkey would emerge as a biggest competitorfor both India and China. However, with regard to unit prices, India appearsto be lower than both Turkey and China in many of the categories.

Import Trends in Canada affecting Indian Exports

Amongst the leading suppliers of textiles and clothing to Canada, USA hadthe highest share of over 31 percent (US $ 8.4 bn), followed by China (21% -US $ 1.8 bn) and EU (8% - US $ 0.6 bn). India was ranked at fourth positionand was ahead of other exporters like Mexico, Bangladesh and Turkey, with amarket share of 5.2 percent (US $ 0.45 bn). Finally the problem with Indianexport is the lack of huge capacity and the Technology which lags Indiabehind.




OPERATIONS RESEARCH

Potential Gains

It may be noted that clothing sector would offer higher gains than the textilesector, in the post MFA regime. Countries like Mexico, CBI countries, many of the African countries emerged as exporters of readymade garments without

having much of textile base, utilizing the preferential tariff arrangementunder the quota regime. Besides, countries like Bangladesh, Sri Lanka, andCambodia emerged as garment exporters due to cost factors, in addition tothe quota benefits. Thus, it may be concluded that these countries are likelyto lose their market share in the future scenario.

Scenario:

Estimated Gains in USA and EU For China and India(US $ Billion)

Markets

Textiles Clothing Total

Present(2003)

Future(2014)

Present(2003)

Future(2014)

2014

Gainsin

China

IndiaChina

IndiaChina

IndiaChina

IndiaChina

India

USA 3.6 1.5 13.0 5.0 12.0 2.3 67 13 80 18

(20) (8.4) (32) (13.

5)

(16.9

)

(3.2) (42) (8) (40) (9)

EU 2.8 1.9 12 8 12.3 3.0 60 16 72 24

(5.3) (3.2) (12) (8) (12.2)

(3.0) (30) (8) (24) (8)

It may be said that countries like China, USA, India, Pakistan, Uzbekistan and Turkey have resource based advantages in cotton; China, India, Vietnam andBrazil have resource based advantages in silk; Australia, China, New Zealandand India have resource based advantages in wool; China, India, Indonesia, Taiwan, Turkey, USA, Korea and few CIS countries have resource basedadvantages in manmade fibers. In addition, China, Pakistan, USA, Indonesiahave capacity based advantages in the textile spinning and weaving. Finallydue to only few reasons like Technology and huge Capacity in themanufacturing production units for textile industry, India is in back seat.




OPERATIONS RESEARCH

China is cost competitive with regard to manufacture of textured yarn,knitted yarn fabric and woven textured fabric. Brazil is cost competitive withregard to manufacture of woven ring yarn. India is cost competitive withregard to manufacture of ring-yarn, O-E yarn, woven O-E yarn fabric, knittedring yarn fabric and knitted O-E yarn fabric. According to Werner

Management Consultants, USA, the hourly wage costs in textile industry isvery high for many of the developed countries. Even in developingeconomies like Argentina, Brazil, Mexico, Turkey and Mauritius, the hourlywage is higher as compared to India, China, Pakistan and Indonesia.

From the above analysis, it may be concluded that China, Pakistan, Taiwan,Hong Kong, Brazil, Indonesia, Turkey and Egypt would emerge as winners inthe post quota regime. The market losers in the short term (1-2 years) wouldinclude CBI countries, many of the sub-Saharan African countries, Asiancountries which are Bangladesh, Sri Lanka and India.

The market losers in the long term (by 2014) would include high costproducers, like EU, USA, Canada, Mexico, Japan and many east Asiancountries. The determinants of increase / decrease in market share in themedium term would however depend upon the cost, quality and timelyReview of Indian Textiles and Clothing Industry The textiles and garmentsindustry is one of the largest and most prominent sectors of Indian economy,in terms of output, foreign exchange earnings and employment generation.Indian textile industry is multi-fiber based, using delivery. In the long run,there are possibilities of contraction in intra-EU trade in textile and garments,reduction of market share of Turkey in EU and market share of Mexico andCanada in USA, and thus provide more opportunities for developing countries

like India.

It is estimated that in the short term, both China and India would gainadditional market share proportionate to their current market share. In themedium term, however, India and China would have a cumulative marketshare of 50 percent, in both textiles and garment imports by USA. It isestimated that India would have a market share of 13.5 percent in textilesand 8 percent in garments in the USA market. With regard to EU, it isestimated that the benefits are mainly in the garments sector, with Chinataking a major share of 30 percent and India gaining a market share of 8percent. The potential gain in the textile sector is limited in the EU market

considering the proposed further enlargement of EU. It is estimated that Indiawould have a market share of 8 percent in EU textiles market as against theChina’s market share of 12 percent.




OPERATIONS RESEARCH

STATISTICAL DATA AND ITS ANALYSIS

CURRENT FACTS

Export under cotton reduced about 1% during 2008-09.

The productivity of cotton which was growing up over the years hasdecreased in 2008-09.

Cotton exports couldn't pick up owing to disparity in domestic andinternational cotton prices.

Imports of cotton were limited to shortage in supply of Extra Longstaple cottons.

The share of Textile Industry to country’s total exports is reduced to16.63%.

The major sectors for exports are: Readymade Garments, Cotton Textiles, Textiles made from Man-Made fiber, Wool & Woolen Goods,Silk, Handicrafts, Coir & Jute. India’s contribution in global textiles andapparel market is 3.9% and 3 % respectively.

Exports in 2006-07: US $ 16 billion, exports in 2007-08: US $ 14 billion

are registered 22% decline. Finally the Textile exports of India haddecreased substantially by 11.43 % in rupee terms.




OPERATIONS RESEARCH

Trend in value of export of cotton handloomFabrics & Made-ups

Year Fabric Made-Ups Total

Rs. In Crs Rs. In Crs Rs. In Crs

2004-05 503.58 1414.76 1918.34

2005-06 488.48 1491.57 1980.05

2006-07 489.63 1637.82 2127.45

2007-08 496.47 1568.47 2064.94

2008-09 842.94 1790.33 2633.27

Export Performance Category wise




OPERATIONS RESEARCH

Trend in value of export of cotton handloom productgroup-wise – Fabric

Fabrics Export Trends over Last 5 Years

FabricsProduct

Name Group

Value Of Exports Over 5 Years

2004-05

2005-06

2006-07

2007-08

2008-09

RMHK 26.63 19 30.4 17.53 12.14

Lungies 67.06 43.14 46.05 46.54 40.23

Dothies 77.38 78.48 74.88123.2

8339.5

8

Sarees 20.58 12.02 14.78 9.45 10.94Shirtings 53.07 37.97 40 29.09 51.11

Furnishings 25.28 18.45 15.18 17.51 23.42

OtherFabrics

233.58

279.42

268.34

253.06

365.53

TOTALFABRICS

503.58

488.48

459.23

496.23

496.46




OPERATIONS RESEARCH

COMPARISON OF INDIAN EXPORTS AMONG VARIOUS COUNTRIES

FROM PAST YEAR WITH LATEST YEAR

SL NO. TEXTILESEGMENTS

USA(2008)in Crs

USA(2009)in Crs

EU(2008) inCrs

EU(2009) inCrs

1 Cotton 5.7 3.2 3.6 2.76

2 Silk 4 2.36 4.32 3.90

3 Woolen 5.89 4.37 4.86 4.13

4 ReadymadeGarments

8.60 6.17 5.21 3.46

5 Jute & Coir 3.25 3.06 4.37 2.58

6 Hand-Crafted N.A N.A 2.34 2.02

Hence this table show clearly how much money wise the Indian Exports beenreduced from 2008 to 2009. There was a drastic change all of the sudden in

the Indian Textile Industries.

ITEMS

2006-07 2007-08 2008-09

Rs.Crore

MnUS $

Rs.Crore

MnUS $

Rs.Crore

Mn US$

ReadymadeGarments 40237 8884 39001 9692 50291 10954

Cotton Textiles 25197 5564 27600 6859 21808 4750

Man-made Textiles 10863 2399 12783 3177 15088 3286

Wollen Yarn, Fabrics,Madeups,etc 385 85 374 93 457 99

Silk Textiles 2000 442 1553 386 1669 364

TOTAL 78682 17374 81311 20207 89313 19453

Handicrafts 6181 1365 5844 1452 4940 1076

COIR & COIRManufacturers 660 146 645 160 681 148

Jute 1178 260 1319 328 1376 300

TOTAL 8019 1771 7808 1940 6997 1524

GRAND TOTAL 86701 19145 89121 22147 96310 20977

Source: Foreign Trade Statistics of India (Principal Commodities &Countries)




OPERATIONS RESEARCH

http://www.indiantextilejournal.com/articles/FAdetails.asp?id=2680






OPERATIONS RESEARCH

CAUSES FOR THE PROBLEM

ANALYSIS OF INDIAN EXPORT IN TEXTILE USING CAUSES

VARIOUS CAUSES ARE:

1. The composition of Imports of Textiles by USA in 2007 was 80% (us $

71 bn). Due to the agreement on textiles to abolish quotas marked a

significant down turn.

2. The share in Total Imports by Europe and USA from India, (Cotton yarn,

fabrics & made-ups) hold relatively lesser share than products made by

other category.

3. Major producers in India of cotton yarn and fabric productivity of cottonas measured by yield is very low.

4. The capacity and technology infusion need to be further enhanced.

5. Affected by technological obsolescence.

6. High power costs for manufacturing Textiles compared with other

countries.

7. Total production costs were higher than other competitor’s countries.

8. Level of Technology in the Indian weaving sector is low compared toother countries.

9. High production process Time (45-60 Days) when compared with other

countries whose time period is just 30-35 days.

10. High Input Cost and Low Demand Hit the Indian Textile Industry

11. India had very insignificant foreign direct investment in the

textile and clothing sector –receiving only $450.02 mn between 1995

and March 2008, amounting to just 1.16% of total FDI of $ 38.96 bn.12. Another consequence as also a factor for the poor FDI was the

relative absence of global retailers and textile chains till almost

recently.

13. Another factor which hindered India’s export growth was its

absence from practically very major regional free-trade agreements. In

the last decade, the fastest growing apparel exporters –Mexico,




OPERATIONS RESEARCH

Romania, Bangladesh, Turkey –have all been part of preferential trade

agreements.

ISHIKAWA DIAGRAM/ CAUSE & EFFECT ANALYSIS

Cause and Effect:

Cause and Effect Diagrams is used to think through causes of a problem thoroughly. Their major benefit is that they push you to consider all possible causes of theproblem, rather than just the ones that are most obvious.

The approach combines brainstorming with use of a type of concept map.Cause andEffect Diagrams are also known as Fishbone Diagrams, because a completeddiagram can look like the skeleton of a fish.

Follow these steps to solve a problem with a Cause and Effect Diagram:

1. Identify the problem:Write down the exact problem you face in detail. Where appropriate identifywho is involved, what the problem is, and when and where it occurs. Write theproblem in a box on the left hand side of a large sheet of paper. Draw a lineacross the paper horizontally from the box. This arrangement, looking like thehead and spine of a fish, gives you space to develop ideas.

2. Work out the major factors involved :Next identify the factors that may contribute to the problem. Draw lines off

the spine for each factor, and label it. These may be people involved with theproblem, systems, equipment, materials, external forces, etc. Try to draw outas many possible factors as possible. If you are trying to solve the problem aspart of a group, then this may be a good time for some brainstorming. Usingthe 'Fish bone' analogy, the factors you find can be thought of as the bones of the fish.




OPERATIONS RESEARCH

3. Identify possible causes:For each of the factors you considered in stage 2, brainstorm possible causesof the problem that may be related to the factor. Show these as smaller linescoming off the 'bones' of the fish. Where a cause is large or complex, then itmay be best to break the it down into sub-causes. Show these as lines comingoff each cause line.

4. Analyze your diagram:By this stage you should have a diagram showing all the possible causes of your problem that you can think of. Depending on the complexity andimportance of the problem, you can now investigate the most likely causesfurther. This may involve setting up investigations, carrying out surveys, etc.

These will be designed to test whether your assessments are correct.

Cause & Effect analysis (or Fishbone Analysis) provides a structured way to helpthrough all possible causes of a problem. This helps you to carry out a thoroughanalysis of a situation. Some of exports which include fabric and Made-ups duringthe period between 2004to2009 is increasing from 1918 to 2633 but export infabrics is fluctuating similar fluctuation with lesser intensity is found in Made-ups.

The fish bound diagram examines the causes in the fluctuation of fabrics and Mad-ups

OVERVIEW OF IMPACT ON EXPORTS OF TEXTILE

MARKET:

India’s textiles exports have declined to US$ 18.52 billion during April-

February’ 2008-09 from US$ 19.55 billion (5.31 %) as compared to the

corresponding period of the previous financial year. India’s textiles and

clothing export has indicated a growth of over 7% in Indian rupee terms

during April-February’ 2008-09 over the corresponding period of previous

year. However, in US dollar terms, it recorded a decline of 5.31%.

Indian Textile Industry:

Textile exports grow from US$ 14 billion in 2004-05 to US$ 17.52 billion in

2005-06 at an average of nearly 25%. These were US$ 19.14 billion in 2006-

07. Registering an increase of 9.3%. Textiles exports during 2007-08 were

US$ 21.46 billion, registering a growth of 12.10%. Textiles exports in 2008-09will be 20% more than what were achieved in 2007-08. It has been recently

reported that textile exports in 2009-10 period will be equal or could be even

lower than the one achieved in 2008-09. As per government data, India’s

total textile exports for the fiscal year ended March 2008 stood at $ 22




OPERATIONS RESEARCH

billion. The rupee fell about 4% since the beginning of 2009, bringing some

cheer to exporters battling a global downturn.

Cotton Textile Industry:

Cotton production reached 244 lakh bales (170 kg each) in the cotton season

(October- September) of 2005-06, 270 lakh bales in the cotton season of

2006-07, and was 315 lakh bales, a record, in the cotton season of 2007-08.

The productivity jumped from 399 kg/hectare in the cotton season of 2003-

04 to 560 kg/hectare in the cotton season of 2007-08. 58 lakh bales of cotton

were exported in 2006-07 against 47 lakh bales in 2005-06, and 0.84 lakh

bales in 2002-03. In 2007-08, exports were 100 lakh bales.

India’s position in World Organic Cotton:

The country’s organic cotton output increased 292 % during 2007-08 to

73,702 tones compared with the previous year. But this is what the Organic

Exchange’s Organic Cotton Farm and Fiber Report 2008 had to say: “While

this (production details) is partially the result of more accurate data, the

increase is also a result of unavailability of fertilizers, prohibitive cost of

synthetic pesticides and general disenchantment with genetically modified

cotton production.”

However, it says India is undeniably the world leader in this field and showing

signs of continued increase in production. And in turn, it has pushed global

organic production by 152 % to 1.46 lakh tones. This means India contributes

exactly half of the world’s organic cotton output.




OPERATIONS RESEARCH


Weaving Sector:

The textile industry has been very badly affected by the global slowdown of

2008, with the handloom and powerloom production declining 3.8% and 3.2%

respectively. During 2007-08, the total production of fabric was 57 billion sq

mtrs, compared to 36.10 sq mtrs in 2005-06 and 33.10 sq mtrs in 2004-05.







OPERATIONS RESEARCH

The textiles sector has witnessed a spurt in investment during the last four

yrs, increasing from Rs 7,941 crore in 2004-05 to Rs 16,194 crore in 2005-06,

to Rs 61,063 crore in 2006-07, and to Rs 19,308 crore in 2007-08. The

investment between 2004-08 was Rs 1,04,506 crore and it is expected that

investments will touch Rs 1,50,600 crore by 2012. This enhanced investment

will generate 17.37 millon jobs by 2012. According to the provisional data

available, production in the handloom sector in 2008-09 stood at 6,677

million square metres, as compared to 6,947 million square metres the year

before. But, the production in mills increased a marginal 0.8% from 1,781

million metres to 1,796 million square metres. Also, the hosiery sector

witnessed an increase of 2.4% in its annual production.


Following are area, production and productivity of cotton in India during the last six decades:






OPERATIONS RESEARCH

Year Area in lakh hectares Production in lakh bales of 170 kgs Yield kgs per hectare

1950-51 56.48 30.62 92

1960-61 76.78 56.41 124

1970-71 76.05 47.63 106

1980-81 78.24 78.60 170

1990-91 74.39 117.00 267

2000-01 85.76 140.00 278

2001-02 87.30 158.00 308

2002-03 76.67 136.00 302

2003-04 76.30 179.00 399

2004-05 87.86 243.00 470

2005-06 86.77 244.00 478

2006-07 91.44 280.00 521

2007-08 94.39 315.00 567

2008-09 93.73 290.00 526

Cotton Exports from India

Year Quantity (in lakh bales of 170 kgs) Value (in Rs./Crores)

1996-97 16.82 1655.00




OPERATIONS RESEARCH

1997-98 3.50 313.62

1998-99 1.01 86.72

1999-00 0.65 52.15

2000-01 0.60 51.43

2001-02 0.50 44.40

2002-03 0.83 66.31

2003-04 12.11 1089.15

2004-05 9.14 657.34

2005-06 47.00 3951.35

2006-07 58.00 5267.08

2007-08 85.00 8365.98

2008-09 50.00 8753.64

During the year 2008-09, the industry had to face adverse agro-climaticconditions due to which the production has been affected.

http://business.mapsofindia.com/india-industry/textile.html

CAUSES /CHALLENGES:

BRIEF EXPLANATION

High Lead Time The average delivery lead times (from procurement to fabrication

and shipment of garments) takes about 45-60 days. With

international lead delivery times coming down to 30-35 days.

Poor supply chain The supply chain in this industry is not only highly fragmented but






OPERATIONS RESEARCH

management is beset with bottlenecks that made the growth of this sector slow.

Major sectors of the value-chain including weaving, processing stillfragmented and still to be fully modernized.

Huge unorganized

and decentralized

sector

Furthermore, this policy also envisages the inclusion of the huge

unorganized and decentralized Indian textile sector under the

organized textile industry. This is because the unorganized textilemanufacturing sector in India accounts for 76% of the total textile

production.

Affected by

technological

obsolescence

Apart from low cost labor, other factors that are having impact on

final consumer cost are relative interest cost, power tariff,

structural anomalies and productivity level (affected by

technological obsolescence).

Increased global

competition in the

post 2005 trade

regime

Increased global competition in the post 2005 trade regime under

WTO which made the Textile producers to produce for cheaper

textiles from other Asian neighbors. High production cost with

respect to other Asian competitors lagged India behind.

The capacity and

technology infusion

Though India is one of the major producers of cotton yarn and

fabric, the productivity of cotton as measured by yield has been

found to be lower than many countries. The level of productivity in

China, Turkey and Brazil is over 1 tone/ha., while in India it is only

about 0.3 tone/ha. In the manmade fiber sector, India is ranked at

fifth position in terms of capacity.

High power costs

for manufacturing

Textiles

A study by International Textile Manufacturers Federation revealed

high power costs in India when compared with other countries like

Brazil, China, Italy, Korea, Turkey and USA. Percentage share of

power in total cost of production in spinning, weaving & knitting of yarn for India ranged from 10% to 17%, which is also higher than

that of countries like Brazil, Korea & China. Percentage share of

capital cost in total production cost in India was also higher ranging

from 20% to 29% as compared to a range of 12 to 26% in China.

High Input Cost and

Low Demand Hit

the Indian

Textile Industry

The outlook for the Indian textile industry for 2009 remained grimas most of the developed markets are facing recession, leading tolow textile demand and due to negative impact of the recession oninternational markets.

http://www.textilesindepth.com/index.php?page=Indian-textile-exportshttp://business.mapsofindia.com/globalization/india-industry/textile-industry.htmlhttp://www.rncos.com/Blog/2009/01/High-Input-Cost-Low-Demand-Hit-Indian-

Textile-Industry.html

ANALYSIS OF INDIAN EXPORT IN TEXTILE USING CAUSE &


http://www.textilesindepth.com/index.php?page=Indian-textile-exports

http://business.mapsofindia.com/globalization/india-industry/textile-industry.html

http://www.rncos.com/Blog/2009/01/High-Input-Cost-Low-Demand-Hit-Indian-Textile-Industry.html








OPERATIONS RESEARCH

EFFECT/ISHIKAVA/FISH BOAN DIAGRAM

CAUSES ARE CATEGORIZED IN 4 M’s:

1. Method

Huge unorganized and decentralized sector,

High production process Time, High production cost with respect

to other Asian competitors, Poor supply chain management,

The capacity and technology infusion need to be furtherenhanced.

2. Man Power

Increased global competition in the post 2005 trade regime underWTO.

Most of the workers have rural routes hence they are not

innovative. Labour absenteeism is high in the first week whenthey get their wages most of them spend their earning forunproductive activities.

Labors don’t have waste consciousness, cost consciousness andmethod consciousness. Hence labour productivity is low in mostof the textile mills.


EFFECT OF

FLUCTUATI

ON IN

TEXTILE

EXPORT

3.Materi

3.Materi 1.

1.

2.

2.

4.

4.



OPERATIONS RESEARCH

Due to the agreement on textiles to abolish quotas marked asignificant down turn.

3. Material

Material Packaging and Quality is low & due to Monsoonproduction decline.

Major producers in India of cotton yarn and fabric productivity of cotton as measured by yield is very low.

The share in Total Imports by Europe and USA from India, (Cottonyarn, fabrics & made-ups) hold relatively lesser share thanproducts made by other category.

4. Machine

Affected by technological obsolescence.

High power costs for manufacturing Textiles compared with othercountries.

Level of Technology in the Indian weaving sector is low comparedto other countries.

There is only break down maintenance in most mills. Only inmodern mills we see preventive maintenance but they are very

small in number




OPERATIONS RESEARCH

CONCLUSION

Strategies and Recommendations

Cost competitiveness in Indian garments sector has been restrained bylimited scale operations, obsolete technology and reservation under SSI




OPERATIONS RESEARCH

policies. While retaining its traditional cost advantages of home grown cottonand low cost labour, India needs to sharpen its competitive edge by loweringthe cost of operations through efficient use of production inputs and scaleoperations. Besides, there are needs for rationalization of charges, leviesrelated to usage of export logistics to remain cost competitive. As fallout to

the quota regime, there would be consolidation of production and restrictionon supplying countries, which would necessarily mean improved scaleoperations. Indian players should also integrate to achieve operatingleverage and demonstrate high bargaining power.

It is reported that Chinese textile firms have already invested heavily toexpand and grab huge market share in the quota free world. In India,organized players in this sector would require huge investments to remaincompetitive in the quota free world. These players need to expand andintegrate vertically to achieve scale operations and introduce newtechnologies. It is estimated that the industry would require Rs. 1.5 trillion

(US $ 35 billion) new capital investment in the next ten years (by 2014) to lapthe potential export opportunities of US $ 70 billion. It is estimated that USAand EU together would offer a market of US $ 42 billion for Indian textiles andgarments in 2014.

Technology would play a lead role in the weaving and processing, whichwould improve quality and productivity levels. Innovations would also behappening in this sector, as many developed countries would innovate newgeneration machineries that are likely to have low manual interface andpower cost. Indian textile industry should also turn into high technologymode to reap the benefits of scale operations and quality. Foreign

investments coupled with foreign technology transfer would help the industryto turn into high-tech mode.

Internationally, trading in textile and garment sector is concentrated in thehands of large retail firms. Majority of them are looking for few vendors withbulk orders and hence opting for vertically integrated companies. Thus, thereis need for integrating the operations in India also, from spinning to garmentmaking, to gain their attention. This would also bring down the turn aroundtime and improve quality. Indian players should also improve upon their softskills, viz., design capabilities, textile technology, management andnegotiating skills.

Garment manufacturing business is order driven. It would be difficult for theplayers to keep the workforce full time, even in lean season. This calls forchanges in contract labour laws.

Logistics and supply chain would also play a crucial role as timely deliverywould be an important requirement for success in international trade. The




OPERATIONS RESEARCH

logistics and supply chain management of Indian textile firms are relativelyweak and needs improvement and efficiency. China has already created aworld class export infrastructure. Given the volume of projections for exportsby India, it may be necessary to create additional export infrastructure,especially investment for modernization of ports. In addition, India needs to

invest for creating brand equity, supply chain management and apparelindustry education.

To sum up, the ability of Indian textile industry to take advantage of quotaphase-out would depend upon their ability to enhance overallcompetitiveness through exploitation of economies of scale in manufacturingand supply chain. The need of the hour therefore is to evolve a well chalkedout strategy, aimed at improvement in the levels of productivity andefficiency, quality control, faster product innovation, quick response tochanges in consumer preferences and the ability to move up in the valuechain by building brand names and acquiring channels of distribution so as to

outweigh the advantages of competitors in the long run.

---------- THE END ----------




OPERATIONS RESEARCH

BIBLIOGRAPHY:

Source: Export-Import Bank of India.

http://texprocil.com/kerala-handloom_texprocil.html

http://www.livemint.com/2009/07/08170651/India8217s-textile-exports.html

http://texprocil.com/

http://www.google.co.in


http://business.mapsofindia.com/globalization/india-industry/textile-

industry.html

http://www.rncos.com/Blog/2009/01/High-Input-Cost-Low-Demand-

Hit-Indian-Textile-Industry.html



PGP/SS/09/11/FIN




http://www.google.co.in/











http://www.google.co.in/








Documents

Operations Research Report