Apparel Industry Scope Of Operation

Published Date: 02 Nov 2017

Apparel industry is one of the biggest industries in Sri-Lanka. Apparel industry plays vital role in development of Sri-Lanka. Sri-Lankan industry develops more than 15% by apparel industry. Country’s workforce, accounting for around half of country total export. Sri-Lanka is one of the top apparel producing in all over the world.

Sri Lanka's apparel industry began to grow significantly in the 1980s as an alternative to India's garment manufacturers, because of its open economic policy as well as the trade and investment friendly environment. Under the Multi Fiber Agreement, quota regime Sri Lanka became an attractive new venue for businesses. In 1985, Martin Trust, one of the pioneers in the development of "speed sourcing" for the American fashion retail sector, began working with Sri Lankan textile and apparel companies. In 1986 and 1987 he established joint venture partnerships with The Omar Group (formerly known as LM Apparels and part of the Brandix group) and The Amalean Group which helped make the country more competitive through knowledge transfers and technology, attracting further foreign investors. These were the first of nearly two dozen joint venture companies in Sri Lanka which made the country competitive in the garment sector. Including Trust’s partnership with German brassiere maker, Triumph International, and Sri Lankan company, MAS Holdings, to create a new venture called Bodyline.

Apparel Industry Scope of Operation

In Sri-Lanka, the apparel and garment industry in the country is work toward offering better price schemes to the buyers and develop their proficiencies in relation to design, product development and marketing.

While highlighting the importance of designing the apparel industry, the design centre set up by MAS in 2005, has helped the company to grow from a contract manufacturer to a company that provides a full fledged system to its customers. It has even aided them to develop design expertise for their business, there are also developing marketing wings and a design center which has added value to the products and services they provide to their consumers.

There are also have instituted research and innovation centre which aims to bring together product, technical know-how and process innovation. This initiative helped them to develop ground breaking products which are functionally more productive and more luxurious. Besides product and technology innovation, there are also introduced lean manufacturing which facilitated innovation in process and fully renewed the manufacturing process of the company by enhancing product quality, waste removal, cost cutting.

Brief Profile, Vision & Mission, Milestones, Founder of the selected companies:

Brandix Lanka Ltd:

Brief profile:

Brandix Lanka Limited through its subsidiaries, engaged in developing, manufacturing, and marketing apparel in Sri-Lanka. Its offers women, Knitted, and printed fabrics, casual, sleepwear and lougnge wear, briefs and accessories, including hangers, button, and threads. The company was formely known as Lux Shirts (pvt) Ltd. And chande its name to Brandix Lanka Limited in 2002. Brandix Lanka Limited was founded in 1972 and based in Colombo,Brandix Lanka Limited operates as subsidiary of Phonix Ventures Limited.

Vision and Value of the company:

Vision:

To be the inspired solution for branded clothing.

Value:

Integrity, Team.work, Customer Service, Learnig and Developement, Ownership and commitment

Management Body of the company:

Chairman: Desamanya Ken Balendra

Chief Executive officer: Ashroffomar

Director: Aslamomar

Director: Firozomar

Director: AjitJohnpillai

Directoe: UdenaWickremasooriya

Finance Director: TrevineJayasekara

Director (Non- Executive): Priyan Fernando

Founder of the Brandix Lanka Limited

Mr.IshanDantanarayana – Chief People's Officer, Brandix Lanka (Pvt) Ltd. [1] 

Selsan Clothing & Company:

Brief Profile

Selsan Clothing & Company is an exporter of Sri Lanka Pants, Trousers & Jeans products.

Selsan Clothing was established in 2003 and currently operating as a SME family business, based in Sri Lanka having it's operations in Bangladesh as well. Our products range from mens, womens, teens, kids, sports, corporate, industrial / protective wear & accessories. In terms of services we can assist our clients from the stage of development to door step delivery.

Our products always sell well in the worldwide markets, including North America South America Western Europe Eastern Europe Eastern Asia Southeast Asia Mid East Africa Oceania. We consider quality as the most important and our clients as our god.

  "at selsan clothing-we believe profits through-Values, Ethics & Social responsibility"    We warmly welcome all friends from all over the world to be our business partners on the basis of equality and benefits to create a good future. [2] 

Vision & Mission of the company:

Vision

to set the standard for quality, delivery and personalized friendly service in the apparel manufacturing industry.

Mission

to maximize growth within an ethical and socially responsible environment. [3] 

Board of Director of the company:

DhammikaPerera: Chairman

Sampath Bank: Executive Director

MrSenanayake: Senior Investment Officer

MrRanilPathirana: Finance Director

KanokaScreenprinting (Pvt) Limited:

The Chairman Mr. N.G. Dharmakeerthi was kept in his first step in 1987 for the screen printing industrial. With his courage and past 19 years experience opened his Owen factory as Kenoka screen printing (Pvt),ltd at Makuluduwa in 2007. After that he is support service to

export market with his sound of technical knowledge up now. Mrs.M.P.S.KumariPeries who Director of company and she has been the backbone supporting the company development and is a committed and hard working individual who see through to the end.

Vision and Mission of the company:

Vision

To create inspiring solutions.

To meet customer needs and provide results that exceeded.

Customer expectation.

To be the best .because together everyone achieve more.

Mission

To maintain quality and consistency in our product in socially responsible and professional manner.

to seek new opportunities for growth and develop lasting relationships with our customers and partners to be company with global presence. [4] 

History of Apparel Industry

Garment industry has an important place in Sri Lanka’s economy. It hasbecome Sri Lanka’s largest export industry since 1986. It is also the country’slargest net foreign exchange earner since 1992. Total value of export earningsin the sector was at US dollars 2,424 million accounting for 52 per cent of thetotal export earnings in 2002. The contribution to the Gross Domestic Product(GDP) was 5.3 per cent in 2002. This industry provides more than 330,000

direct employment or 5 per cent of country’s total employment in more than

1,060 garment factories.

Sri Lanka’s garment exports have been largely governed by theMulti-fibre Arrangement (MFA) since 1978. The MFA is a system of exportrestrictions imposed by developed countries on textiles and garment exportsoriginating in developing countries to protect the garment industry in developedcountries. The Uruguay Round Agreement on Textiles and Clothing (ATC) ofWTO succeeded MFA in 1995. According to the new rules, the sector is to befully integrated into normal rules of WTO by phasing out MFA in four phasesby 2005. Sri Lanka has already fulfilled its commitments under Phase I andPhase II of the elimination of MFA phasing out procedures. The governmentsubmitted to the Textiles Monitoring Body of WTO in 1996 and 1998 lists ofitems on which Sri Lanka is ready to accept the removal of quota. The thirdphase of integration became effective on January 2002.

The MFA, by providing a ready market, has restricted Sri Lanka’s exportsbut has protected it from competitors. Phasing out of MFA will open up moremarkets to Sri Lanka’s exports, and at the same time will intensify competitionfrom other developing countries. The future of the garment industry depends,to a large extent, on the ability to compete in free market where both garmentproducing developed and developing countries in the world will be players inthe market. Over the last 20 years, a strong foundation has been laid for theindustry, on which the future of this sector could be strengthened further and safeguarded. Yet there is much to be done to meet the challenges of intensecompetition in the coming years. This paper identifies the threats andchallenges faced by the industry and assesses the capabilities and prospectsof the sector to face them.

The rest of the paper is structured as follows. Section II of this paperdiscusses the international and domestic trade policy relating to textiles andgarment industry. Section III examines the nature of Sri Lanka’s textiles andgarment industry and its challenges. Section IV provides the challenges thatthe garment industry face in the global environment and possible challengesin the post–MFA period. Section V evaluates the impact of liberalisation ofworld textiles and garment industry and Section VI identifies the areas in which the textiles and garment sector could maximize existing capacity to achieve its goals and objectives.

1.2 Role in the Economy of Selected Country

1. Contribution of GDP and GNP of Apparel Industry in Sri-Lanka

Contribution in GDP of Apparel Industry in Sri-Lanka:

Year

GDP

Year

GDP

2001

-1.50%

2007

6.80%

2002

4%

2008

6%

2003

5.90%

2009

3.50%

2004

5.40%

2010

8%

2005

6.20%

2011

8.20%

2006

7.70%

2012

7.50%

From the above table we can interprete that the in initial stage the apparel industry is not paid contribution for growing the country. But after that the Apparel industry grow and by the help of government suport they can grow their industry. As compare to other year in 2011 and 2012 apparel industry provide more contribution in growing the country. So, now apparel industry is on growing stage.

Contribution of GNP of Apparel Industry in Sri-Lanka:

Year

GNP(Billion)

Year

GNP(Billion)

1982

$14.1

1996

$38.2

1984

$16.1

1998

$43.6

1986

$19.1

2000

$49.8

1988

$21.2

2002

$53.4

1990

$24.7

2004

$63

1992

$28.8

2006

$76.4

1994

$33.8

2008

$89.9

Unlike gross domestic product (GDP), which defines production based on the geographical location of production, GNP allocates production based on ownership. At initial stage the GNP of Sri-Lanka is very low. After that it is continuously increase. Contribution of apparel industry in GNP is increasing. It shows that the industry is on growing stage. In 2006 and 2008 the contribution of apparel in GNP is $ 76.4 billion and $ 89.9 billion respectively.

2.Contribution in National Income of selected country

Particular

2010

2011

GNI ($ Billion)

49

59

GNI Per capita income

2349

2804

Share in the world GNI, (in %)

0.77

0.84

Growth rate of GNI, %

119.5

120.4

The GNI is similar to the gross national product, expect that in measuring the GNP one does not deduct the indirect business taxes. Gross National Income of Sri-Lanka in 2011 is 3.04%.

3.Contribution in Budget Income of selected country:

The budgeted income of the Sri-Lanka of last Budget is $8.495 billion

4.Contribution in Foreign Investment of selected country:

In Sri-lanka 322 million dollars of the 1.0 billion $ secured in 2011, was invested in manufacturing, which represented a 101% increase over a year earlier.

The bulk of the investment was in services and infrastructure, which increased 107% on the previous year to $706 million.

In the 2011 annual report, the Central Bank of Sri-Lanka, this tips $2billion FDI this year. And last year’s FDI in manufacturing was generated. The former state-run steel giant was sold off to a foreign investor few years ago, under a privatization drive.

Tourist arrivals have swelled into Sri-Lanka, since the government ended the decades long ethnic conflict with the Tamil Tiger separatiss in May 2009.

2.1. Organization Structure or Industry Structure

1. Unorganized or organized (Proportion, trend Etc.):

In apparel industry organized and unorganized sectors are as under:

Organized Structure Type

Apparel Industry

Percentage

Unorganized

75%

Organized

25%

2. Type of Organization Structure:

In apparel industry types of organized structure as under:

Type of Structure

Apparel Industry

Centralized

Decentralized

3. Hierarchy & Departments in selected company

2.2. Functions and Business Activities of selected Industry

1. Forms of Business (Sole proprietorship, partnership Etc.):

Forms of Business

Srilakan Rubber Industry

Sole Proprietorship

Partner ship

HUF

Co-operative

2. Business Customs & Practices:

Industry leaders have moved corporate responsibility and compliance into their sourcing business units. A significant change came at LeviStrauss& co. when "each global sourcing team became accountable for social and environmental standards. "Nordstrom realigned its independent corporate social responsibility team into each of its business units-Men’s, women’s, footwear, etc. The CSR experts now "sit with the brand and they have a dotted line reporting into the director of supply chain responsible for sourcing decisions."

Companies also link factory performance to management performance reviews and compensation. At one company, "many people at various levels of the organization have social and environmental sustainability targets included in their work plans, and they are evaluated on them annually.

Corporate staff and management on compliance issues, training is necessary.Staff must understand the "bigger picture" of the true and total cost of bringing goods to market.Phillips-Van Heusenconsiders it important that training in the ripple-effects of purchasing practices be extended throughout the company.

3. Transportation & Communication System needed for specific Industry:

Sri Lanka is having much advantage on the infrastructure conditions against other apparel manufacturing countries in South Asia mainly due to its strategic location. Present expansion in Bandaranayke airport at Katunayake and also newly suggested port at Hambanthota area will provide positive initiatives towards the transportation infrastructure as input/output port for apparel exporters. Also the efficiency in customs procedures complement each other in minimizing transit periods for shipments involved in international trade have made Sri Lanka more internationally competitive.

The rates of telecommunication charges (IDD rates) are clearly cut down for certain countries (USA/UK) with the use of new technology internet calling. This is a major advantage for Sri Lankan apparel industry as most buyers are concentrated in US & EU countries

Modes of Transportation

Modes of Transportation

SrilakanApparel Industry

Railway

Road

Sea

Modes of Communication

Srilakan Apparel Industry

Telephonic

E-Mail

Post

4. Labour Force (Size, Potential Etc.):

Nos

Name of Company

Total Employees

1

Brandix Apparel Ltd

1,000

2

BerhardBotejue Industries Limited

1,200

3

ComfortwearPvt Ltd

1,500

4

Eskimo Fashion Knitwear Pvt Ltd

2,500

5

Hirdramani Industries Limited

1,160

6

Noyon Lanka Pvt Limited

250

7

Smart Shirts Lanka Ltd

12,000

8

Tip Top International Pvt Ltd

10

9

Brandix Textile Ltd

1,000

10

Emerald International Pvt Ltd

1,200

11

Gaat Lanka Pvt Ltd

40

12

Interfashion Private Limited

1,000

13

Sintesi Limited

200

14

Texwin Clothing Pvt Limited

1,100

15

Tolarams Industries Pvt Limited

2,000

Apparel industry provides more employment to their customers. It provides more employment as compare to other industry. More than 30,000 peoples of Sri-Lanka is dependent upon apparel industry. Also labour force is available for apparel industry.

5.Development in science & technology, Current technology Available (Computers Machinery, tools Etc.), Percentage of GNP Invested in R & D, Technological Skills of Labur Force & General Population

Development in science & technology, Current technology Available:

Investment in technology

Technology used in production is considered to be a highly important factor as it determine the quality of output, time consumed for production which ultimately decides the lead time.

Investments are to be made in order to upgrade the technology in use. This will enable the country to be in par with the global trends and the other competitors. Usage of obsolete technology will indeed act as a barrier in the apparel industry. Sri-Lanka is currently challenged by the above situation as many factories other than few large players, do not possess advance technology in manufacturing and designing.

The technology levels of the apparel industry vary significantly at present:

The ratio of worker and machine is 1.8:1. This is compared to our competitor high. The ratio of competitors is 1.2:1. The apparel industry and technology both grow with each other.

By this way investment technology define in different parts. It is capable to servicing the industry in the way of quick response time and efficient manufacturing process.

The diversified manufacturing system helps product and efficiency could be improved and also they can reduce the production cycle time.

Marketing Technology focus on new application of Automatically Identification and Data Capture (AIDF).Electric Data In charge (EDI) facility to improve global supply chain management and customer relationship management. This effectively opens window of access for buyers and manufacturing site.

Information technology, informs technology to focus on effective use of information and aid the efficient management of resources within organization.

Enterprise Resource Planning (ERP) software such as SAP, BARN and ID Edwards which help to effectively streamline manufacturing operations, would add much value to the industry.

Value chain Model:

Support Activity

Services

Sales and Marketing

Inbound Logistic

OutboundLogistic

Operation

Administration and Infrastructure

Human resource Management

Product/ Technology/ Development

Procurement

Primary Activity

Synthetic Fibers( oil, Natural Gas)

Natural fibers( cotton, wool, silk etc…)

Raw Material Network

petrochemicles

Yarn ( Spinning)

Component Networks

Synthetic fibers

Fabric ( Weaving, Kitting, Finishing)

Asian Garment Contractors

Us garment factories

( Designing, clothing, sewing, buttoning, ironing)

Production

Domestic overseas subcontractors

Domestic &Mecsicanlcaribean basic sub contractors Network

Brand named apparel

Overseas buying offices

Trading companies

Export Network

Off price factory outlet, mail order

Off price factory outlet, mail order

Speciality Stores

Department Stores

Speciality Stores

Department Stores

Mass Merchandise Chains

Discount Chain

Industrial and commercial firms have both promoted globalization, establishing two types of international economic 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. This is typical capital and technology intensive industries such as automobiles, aircraft, computers, semiconductors and heavy machinery. Buyer driven value chains are those in which large retailers, marketers and branded manufacturers play the provide roles setting up decentralized production networks in a variety of exporting countries, typically located in developing countries. This pattern of trade-led industrialization has become common in labour intensive, consumer goods industries such as garments, footwear’s, toys, handicrafts and consumer electronics. 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. Firms that fit the buyer driven model, including retailers like wal-mart, sears and JC Penney, athletic footwear companies like Nike and Reebok, Fashion oriented apparel companies.

They are manufacturers without factories with the physical production of goods separated from the design and marketing. Unlike producer driven chains, where profits come from combinations of high value research, design and marketers to act as strategic brokers in linking overseas factories and traders with the product niches in their main consumer markets.

Profitability is greatest in the concentrated parts of global value chains that have high entry barriers for new firms. In the producer driven chains manufacturer of advanced products like aircraft, automobiles and computers are the key economic agents both in terms of their earning and their ability to exert control over backward linkages with raw material and component suppliers, and forward linkages into distribution and retailing. The lead firms in the producer driven chains usually belong to international oligopolies. Buyer driven value chains by contrast, are characterized by highly competitive and globally decentralized factory system with low entry barriers. 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 accurse at each stage.

Thus, large manufactures control the producer-driven value chains at the point of production, while marketers and merchandisers exercise the main leverage in buyer driven value chains at the design and retail stages. Apparel is an ideal industry for examining the dynamics of buyer driven value chains. The relative ease of setting up clothing companies, coupled with the prevalence of developed country protectionism in this sector, has led to an unparalleled diversity of garment exporters in the third world. Furthermore, the backward and forward linkages are extensive, and help to account for the large number of jobs associated with the industry. The apparel value chain is organized around five main parts, raw material supply, including natural and synthetic fibers, provision of components, such as the yams and fabrics manufactured by textile companies. Production networks made up of garment factories, including their domestic and overseas subcontractors, export channels established by trade intermediateries and marketing networks at the retail level. There are differences between these parts, such as geographical location, labor skills and conditions, technology, and the scale and type enterprise, which also affect market power and distribution of profits among the main firms in the chain. Entry barriers are low for most garment factories, although they become progressively higher when moving upstream to textile and fibers, brand names and stores are alternative competitive assets that firms can use to generate significant economic rents. The lavish advertising budgets and promotional campaigns needed to create and sustain global brands, and the sophisticated and costly information technology employed by mega retailers to develop "quick response" programs that increase revenues and lower risks by getting suppliers to manage inventories, have allowed retailers and marketers to displace traditional manufacturers as the leader in many consumer goods industries. In apparel, the split between manufacturing and marketing that prompted the emergence of "lean retailing" was caused by the development of several key information technologies.

These included bar coding and point of sale scanning used to provide immediate and accurate information on product sales, electronic data in charge used by retailer to restock and automated distribution centers to handle small restocking orders, rather than the traditional warehouse system used for large bulk shipments.

A major hypothesis of the global value chain approach is that national development requires linking up with the most significant lead firms in the industry. These lead firms are not necessarily the traditional vertically integrated manufacturers nor are they necessarily involved in making finished products. Lead firms such as fashion designers or private label retailers can be located upstream or downstream from manufacturing, or they can be involved in supply of critical components. What differences lead firms from non lead firms is that they control access to major resources that generate the most profitable returns.

3.1COMPARATIVE POSITION OF APPAREL INDUSTRY OF SRI LANKA AND INDIA

Particulars

Sri lankaAppeal industry

Indian Appeal industry

Technology

Backward

Forward

Pricing

Relatively High

Relatively low

Communication

Transportation

Distribution

Usage

Festival, Regular Bases

Festival, Regular Bases

Purchase Pattern

Direct & Indirect

Direct & Indirect

Target Market

Kids & Youngsters

Kids & Youngsters

Raw Material Availability

Natural Resources

Compare Technology Advancement

India is more competitive in technology needed in apparel industry, compared to that of Sri Lanka. India have adopted Backward and Forward Integration in Apparel sector, where as Sri Lanka is better in only Forward Integration. India has competitiveness in mainly 3 technologies, i.e. Ginning, Spinning and Weaving & Knitting processes. It has leadership in Handloom materials. Sri Lanka imports more than 50% of raw materials from different countries and then exports the finished goods. Sri Lanka is backward in manufacturing of raw material at cheaper cost and so it imports at larger extend from India. It has started the best technology in Garment Industry, world’s 1st Eco-friendly "Green Garment Factory" for providing eco friendly products by reducing bills and producing environmental friendly products. Still, Sri Lanka needs to adopt and make efficient technologies like "Supply Chain Management and Enterprise Resource Planning".

Pricing

Prices in India are lower than Sri Lanka. The cost of labor and machines used are much lower compared. Also, much part consists of labor intensive technologies. Whereas, Sri Lanka have high labor cost and as a result high prices of products. They have strategy of quoting price by adding profit to cost but as cost of production are high; the net price is also high. Therefore, Sri Lank imports most of the raw material from India to save cost and achieve high profit.

Usage

Mainly, apparels are consumed on festivals in both the countries. In India it is mainly consumed during Diwali, Idd, and other important festivals of Christians and Sikh. While in Sri Lanka it is mainly consumed at the eve of Vesak,Kandy EsalaPerahera and even on Diwali.

Purchase Pattern

Purchase pattern is of 2 kinds:- Direct Purchase and Indirect Purchase. In India and in Sri Lanka, both, purchasing pattern is same. Both purchase using Direct as well as Indirect Purchasing Pattern. The person who wants apparel, can either purchase himself (Direct Pattern) or anyone can purchase on his behalf (Indirect Purchase).

Target Market

Generally apparel is a product which is being consumed by everyone in every country. So the Target Market for this industry is Kids, Youngsters, Men and Women. People of all ages need apparel and so there is Full Market Coverage and no different segmentation.

GDP Contribution of India

As per the ministry of textiles apparel sector contributes 14% to industrial production, 4% to GDP and 17% towards export earnings. As per estimation it is said that the Indian apparel and textile share would be increased in the world to 8% from present level of 4.5% and by 2020 will reach to US$80billion. [i] 

GDP Contribution of Srilanka

As per 2010 data, the apparel sector of srilankahas contributed 10% of country’s GDP accounting for US$ 3.2 billion. [ii] 

Transportation of Apparel in India

In India transportation of apparel is done through various ways like railways, airways, roadways and waterways. [iii] 

Transportation of Apparel in Srilanka

In srilanka majority of transportation is mainly based on roadways since it is centered in Colombo moreover there are also railway network, waterways, airways and harbors.

Communication system in India

In India various modes are adopted to communicate or to aware the customers about apparel sector, it is through newspaper, magazines, internet, television, leaflets etc. Thus in order to aware the customers about the sector various modes are available.

Communication system in Srilanka

In Srilanka the various modes adopted for communicating or awaring the customers about the apparel sector is newspaper, magazines, internet, television, leaflets etc.

Distribution System in India

In India the distribution channel is extensive and consists of wholesellers, distributors and small retailers selling garments and textiles. Moreover there are agents who help the producer in getting order for the product. [iv] 

Distribution System in Srilanka

In Srilanka the distribution is similar to that of India. The only point where it lacks as compared to India is that they have to import raw material and there are retail distribution channel & networking that is selling the apparels through retailers and owned distribution which are generally carried by large scale producers they have their own chain of distributors.

Availability of Raw Material in India

India is naturally blessed with easy availability of raw materials required in apparel sector but specialised and high technological material are not manufactured sufficiently. A large variety of fibres like cotton, silk, jute and other fibres are available in India. Since many year the growth in production of cotton has increased the availability of raw cotton at competitive price providing it a push in the global market.

Availability of Raw Material in Srilanka

Srilanka is not blessed with easy availibilty of raw material that is required in apparel sector as a result it is heavily dependent on imports which affects the pricing pattern. Their only core strength is producing readymade garments.

Natural Resources in India

India is self sufficient in production of cotton that is required in apparel sector. India is largest in production of jute and second largest in production of cotton, silk and cellulose fiber. The country ranks fifth in production of Synthetic fibres and sixth in producing clean wool.

Natural Resources in Srilanka

Srilankan apparel market is totally dependent on imports. They’re only core strength is production of ready made garments and they even lack in adopting latest technologies