Competing through Capabilities: Strategies for Global Competitiveness of Indian Textile

Industry
Author(s): Pankaj Chandra
Source: Economic and Political Weekly, Vol. 34, No. 9 (Feb. 27 - Mar. 5, 1999), pp. M17-M24
Published by: Economic and Political Weekly
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 Competing through Capabilities
Strategies for Global Competitiveness of Indian Textile Industry
Pankaj Chandra

The global textile trading regime is going to change drastically from the year 2005 with the phase-out
of MFA. Its implication for competition will be significant. Countries that have already put competition
policies in place and firms that have been improving their capabilities are the ones that are going to benefit
the most. This paper discusses the nature of competition that Indian textile firms are going to face domestically
and abroad in a few years from now. Some of the characteristics of competitive firms that will emerge in
the ensuing period are indicated. The paper presents a summary of comparison of Indian primary textile
firms with those of China and Canada (based on a primary plant level survey in the three countries). In
addition, some processes that are helping the Chinese textile industry grow rapidly are discussed. It is argued
that competitiveness of Indian firms would be contingent on developing long-term distinctive capabilities.
Three key strategies, namely, Commitment, Co-ordination and Co-operation, for developing distinctive
capabilities are presented and illustrations of initiatives at the firm level, industry level and the government
level that would form part of the implementation package for each strategy are provided.

I has changed drastically in this century

uncertainties of global markets ? And more
Introduction alone with spinning speeds having important, how do firms develop such
increased 25 times and weaving speeds competencies ? Are there certain industrial
DOES the phase-out of MFA on January having
1, increased 20 times [Hartmann practices that help firms manage such
2005 not mean that the Indian textile 1997]. On the other trade blocks around uncertainties with relative ease ?
the world have created their own 'captive
industry will be able to increase its global In this paper we argue that firms in the
market share? Does the cost advantage low cost production zones': Turkey, Indian primary textile industry will have
that Indian firms have not imply a Hungary, Poland and Czech Republic in to develop some distinctive capabilities to
continuing comparative advantage'? Do EU; Mexico, Honduras and Caribbean in compete in the future once the Agreement
Indian firms have an advantage while NAFTA; and Vietnam, Laos, and Cam- on Textiles and Clothing (ATC) expires.
supplying the home market because of bodia in the ASEAN. Factor advantage In the next section, we present the emerging
better understanding of and proximity to is shifting away from traditional low costcompetitive scenario and highlight the
the market? Are there distinctive countries. Firms in these countries are nature of competition that Indian firms are
competencies that firms need to gradually have in moving up the product going to face. In section mI we present a
order to remain competitive in thecomplexity
future? ladder and are finding new summary of the findings of a multination
Is technology investment a sufficient sources of innovation, chiefly new benchmarking study that establishes the
condition for sustaining growth in the and enhanced processes. Theoperational status of Indian textile industry.
applications
sector ? These are some of the many spinning
issues sector in India has performed In section IV, we present some salient
that need to be addressed in assessing the well in the last four years - it features of practices from the Chinese
extremely
competitiveness of the Indian primary is expected that the world market sharetextile industry and the impact that they
would touch 30 per cent by the end of have had on industry performance. In
textile industry and in designing strategies
for meeting the challenges in the 1997.post-
Most of this impressive performance section V, we develop a framework for
MFA period. What is quite clear has that,through large -scale investments 'capability based competitiveness' and
is come
since the nature of competition will in change
new ring spinning machines - in 1996, discuss key strategies towards building
dramatically, firms will have to the total of such new machines purchased distinctive capabilities. We also point
of evolve
newer strategies that are based on around the world, 52.6 per cent was towards the role of textile policy in assisting
procured by India [Strolz 1997]. It is
contingent strengths and long-term such efforts. We present our conclusions
interesting to note that the recent
perspectives. In this paper we argue that in the last section.
devaluation of the baht in Thailand and
only those firms that develop unique
II
capabilities will qualify to compete in the rupiah in Indonesia have led to drastic
global textile markets. lowering of yarn prices, and spinners in
Competitive Scenario
India are struggling to recover their costs.When MFA expires on December 31,
The global market share by value of the
Indian primary textiles hovers around With
2.8 inventories sitting in warehouses 2004, most of the product categories in
and the interest-clock ticking on capital
per cent (as of 1996) as compared to 12.5 which north America and Europe compete
per cent of China. Countries like Korea investments (most often made in foreign would have already seen free trade for at
currency), it would be a while before least
(with a market share of 5.6 per cent) and our a year while those which are crucial
Taiwan (5 per cent) are ahead of India spinning industry starts to recover. Thisfor Indian exports would then get off-
while Turkey (2.75 per cent) has caught begs a question: what are some distinctive
quota. One implication of this back-loading
up and others like Thailand (2.3 per cent)
capabilities that these firms have developed
agreement would be that Indian firms may
and Indonesia (2.0 per cent) are catching
other than technology (that is already a to see increased domestic competition
start
up rather quickly. On the one hand, commodity) which will ensure that firms from foreign firms in about two years time
technology which has become a commodity are able to withstand the increasing from now. They will face imports from

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other countries as well as entry of MNCs increased manifold since this 'graceful collection and planning mechanisms,
in existing domestic product segments as disintegration'. training and evaluation, grievance handling
well, in addition to preparing for export - German manufacturers have imple- process, process and product innovation,
markets that would open up in 2005. These mented 'lights out' weaving for 24 hours subcontracting networks etc. It is now
new firms will also bring in new products where weaving machines have been loaded well established that firms that pursue
to the domestic markets. The competitive with weft packages just before shutdown technological change along with organ-
environment is poised to change in several on Sundays and computers adjust weaving isational changes get maximum advantage
other ways as well, e g, speeds to optimise yar speeds. of investment in technology. In other
- new products will replace some of the - Japanese and American plants are words, technology (orcodified knowledge)
existing mix thereby affecting capacities using TQM practices like Design of Ex- that is not developed in-house is accessible
of domestic firms; periments for optimising weaving to all competitors and it does not provide
- increase in variety with a considerable practices. a distinctive advantage to a firm. However,
reduction in volume per variety; a study - In Indonesia, one operator works 48 managerial practices (or tacit knowledge)
of the textile firms in the US by Abernathy looms and shares the profits stemming that are uniquely designed to take
et al (1995) reveals that the average number from them. advantage of technology can be copied
of SKUs per business unit increased from - Burlingtons in the US have reduced less easily and hence provides competitive
6,411 in 1988 to 13,261 in 1992 and that manufacturing and delivery lead times 200 advantage. Toyota's development and
in 1992 firms on the average introduced per cent in the last five years and in-plant implementation of the JIT is one such
7,257 new SKUs while they dropped from defect rates are now measured in parts per example. In textile industry, these
the product line, on the average, 5,788 million. managerial practices form the important
SKUs; - Firms in southern USA are researching link between technology adoption and
- several countries will have upgraded the use of genetic engineering, cellular competitiveness. The key issue is the ability
their technology stock with latest versions biology and tissue culture to grow coloured of firms to increase their productivity
by the year 2005; for example, Turkey has cotton in order to eliminate the dyeing between two epochs of technology
been the largest investor in open-end rotor process. acquisition.
in 1996; - Firms are using 'looming robots' to Manufacturing management has played
- strong productivity increases by firms setup looms, load and unload them and a critical role in linking technology with
in north America and Europe; forexample, to transport the cloth to the stock room. competitiveness. It requires (a) develop-
References on the above and details are ment of an effective work environment,
Unify Inc, a spinning firm in the US has
tripled its sales since 1988 to US$1.7bn documented in Chandra (1998). Successful (b) emphasis on capability bui ding process
and most of addition in capacity has come firms are changing their technology stock (of both people and technology) and
through process improvements and not and the organisational structure that uses (c) a mechanism for evaluating the per-
capital investments (McCurry, 1997); this technology simultaneously. The former formance of the manufacturing regime.
- stronger environment requirements includes updating machinery, plant The reader is referred to Chandra et al
both from the citizens as well as the infrastructure, transport and handling (1998) for a literature review and discus-
legislature; the process industry is already equipment, storage facilities, processsion on each of these factors. Gold (1997)
penalised for not treating its effluentscontrol, ventilation and environment mentions that recent industrial experience
responsibly; pressures will also come fromcontrol systems, effluent generation and from US suggests that extensive adver-
international consumer groups to adopttreatment systems, etc. The latter includes tising/marketing, take-overs of competitors
processes that do not generate pollutingreporting and communication structures, by firms have provided only short-term
effluents; manufacturing management practices, data profitability and competitiveness. His study
Firms around the world have developed
TABLE 1: BENCHMARKING INDIAN PRIMARY TEXTILE INDUSTRY
different kinds of capabilities that have
Canada China India
allowed them to perform well in the face
of severe competition. In the long run, a Environment: External to Firm
competition between firms is a 'contest of Infrastructure 100 52 20
competencies'. Firms whose competencies Regulatory Regime 100 36 20
are more robust and more distinctive tend Breadth of Home Market 100 116 164
to gain more than others. Examples of Quality of Home Market 100 36 52
Environment: Internal to Firm
such competencies are given below. What
Quality of Work Environment 100 52 36*
is worth noting is that it would be firms Absenteeism 100 68 36
with these type of capabilities who would Wages 100 200 170
compete with Indian firms both in the R and D Investments 100 68 20
domestic and international markets in few Capabilities: People
years from now. Some examples of how Quality of Workforce
firms around the world have been changing Managerial 100 52 116
Technical 100 132 116
are:
Operator 100 68 52
- In Prato, Italy, large mills have Training and Development 100 84 52
disintegrated to form a cluster of smaller Capabilities: Technology
firms that specialise in a single process. Extent of Investment in Technology 100 84 68
They compete on end products and Type of Technology Available 100 84 68
collaborate on technology development Indigenous Development 100 148 16
and infrastructure maintenance. The output Capabilities: Managerial Practices 100 52 84
of this cluster and the variety produced has * We have"islands of excellence"

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shows that the two most consistent sources filed (e g, related to discipline and dis-
the Canadian sector (whose index is taken
of improved competitiveness have been as 100 for all factors). These comparative
charge, safety and health, overtime assign-
"increasing the performance capabilities indices are based on raw data which is ment, etc), nature and extent of training
of the products, and offering more favour- programmes, etc. Chandra et al have
provided in Chandra et al (1998). The
able product prices for comparable developed aggregate raw scores for each
index value for a country on each parameter
products". Improving the basic technology is determined by scaling the raw data onsuch factor. These scores were used to
on which the product design and its that parameter vis-a-vis the Canadian rawcreate our index. These findings represent
performance is based, improving the data and then representing it on a base 'average
of values' while outliers existed in
quality and mix of materials (raw material each of the three country samples.
100. For example, the index on the quality
or intermediate products) and advances in of work environment is based on actual Table 1 is a representative sample of
effectiveness and quality of the manu- data on wages, incentives for plant workersthese comparisons. It may be noted that
facturing operations are seen by Gold as (e g, profit sharing, housing and transport,many of the observations that are made
the three key sources for achieving the pay forknowledge, etc), worker motivationin the following paragraphs are based on
above. They also shape the long-term programme (e g,job rotation, flexible workdata on specific factors that have been
capabilities of any firm. schedules, employee suggestion pro-aggregated to give the indices that are
In the next section we report some gramme, alcohol/drug abuse programme shown in Table 1. Both Canadian and
findings from a benchmarking study to etc), type and frequency of grievances Chinese policy-makers have recognised
assess the capabilities of the Indian primary TABLE 2: SOME KEY CONCERNS OF INDIAN TEXTILE INDUSTRY
textile industry based on the above discu-
Operational
ssion. These findings will highlight how
1 A large proportion of exports from the powerloom sector is in grey due to lack of good
well, on the average, our firms are pre-
quality processing houses outside the mill sector:
pared to meet the competition from firms 2 Weak work culture - an worker in Indonesia can operate 48 looms at a time while in India it w
that have characteristics described above. be around 8;
3 Worker skills are very poor; dependence on agriculture worker; dependence on untrained
III
women in the garments sector;
Benchmarking Indian Primary 4 Poor ginning facilities;
Textile Industry 5 Poor cotton agriculture practices;
6 Transportation, port and customs procedures are very lengthy, unclear, and cumbersome
In this section we describe the findings7 Long production cycle times and high inventories;
of a plant-level, cross-country study to
Structural
benchmark the capabilities of firms on a8 Garment exporters have to depend on the powerlooms (whose quality and reliability levels are
variety of operational parameters. This was low and reas mill sector is not able to supply in small volumes to small exporters;
a collaborative study between the Indian9 Relationship of cotton growers, etc, with mills or spinners, etc, is short -term oriented;
10 Weak indigenous textile machinery sector especially those related to looms and processing;
Institute of Management, Ahmedabad,
I Multiple agencies represent different entities of the supplier chain;
McGill University, Montreal and Renmin
Strategic
University, Beijing. Primary data was12 Powerloom sector does not have resources to invest in new technology for quality improvement;
collected from 173 plants in Canada, China13 Interest rates are very high - firms find it risky to invest in new technology in addition to
and India through a standardised high pre-shipment and post-shipment export credit rates;
questionnaire and detailed interviews were14 Indian exports are 80 per cent cotton based while world trade is shifting towards the use of
synthetic fibre (75 per cent of world trade);
conducted with managers at several of
15 Entrepreneurs are very inward looking;
these plants. Indian firms have been
16 Water charges in Bombay are highest in the world - firms are unable to re-locate with the
compared with Chinese (representing a changing cost environment;
high growth country in terms of global17 Entrepreneurs do not see themselves as part of a national industry - behaviour is short
market share) and Canadian (a proxy for term and opportunistic;
18 Indian producers are competing with other Indian counterparts in the export markets;
high productivity oriented north American
choice of product mix is based on orders and not so much on long-term capacities - are we
firms) firms. The sample comprised of
competing in the same segment with similar products ?
composite mills as well as firms that19 Industry has not been able to forecast properly the demand for various product-market segments;
performed one or more of the spinning,
20. European and North. American producers are shifting production bases to Morocco, Tunisia,
weaving and dyeing, and finishing Portugal, Turkey, Mexico, Honduras, Czech Republic, Hungary and other low wage CIS
operations. Most firms were medium to countries;
Regulatory
large in size (in terms of employment and
21 Regulatory requirements: Hank yar requirements, Essential Commodities Act, Excise, etc, have
sales). A large majority of firms were a detrimental effect on the competitiveness of firms;
profitable and care was taken that each
22 Evasion of Excise, false branding, etc, by small-scale producers;
country sample included a representative
23 Synthetic fibre is very expensive in India due to a variety of duty and other restrictions;
proportion of firms that were performing 24 Large units are not allowed in the garment sector until they export 75 per cent of their
well in global markets. Information from production; the country, however, will not be able to restrict imports of garments from large
units;
various tradejournals were used to identify
25 Import of raw materials is restricted, at best;
such firms. Similarly, the sample also
26 Power availability is very irregular;
included a few firms who focused on
27 Cascading taxes and local levies are close to 10 per cent;
domestic markets only but were successful
28 Duties, reservations and other structures imposed by the government are forcing people to
in terms of sales turnover. cheat or behave in a manner which is un-economical in the long run; e g, fabric that is
A sample of these findings is reported reserved for the handloom is actually coming from the powerlooms;
in Table 1. The numbers in the table 29 Non-tariff barriers to exports exist;
30 Devaluation of rupee will hurt in the long run until the domestic textile machinery
represent an index giving a relative position
industry is strengthened.
of firms on a given factor as compared to

Economic and Political Weekly February 27, 1999 M-19

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the importance of this sector to their
respective economy and have developed
targeted programmes (like the Programme
to Enhance Productivity (PEP) in Canada)
to improve productivity of their firms. It
is apparent from the table that Indian firms
have typically produced a large variety of
counts which, on one hand reflects the
flexibility at the plant level while on the
other hand reflects a lack of strategic
response at the firm level, i e, focusing
on few products and developing cap-
abilities to improve quality of both the
successful firms in the US are holding ability of firms. to use such a technology
extensive education programmes for their(and consequently produce a value adding
workers and managers. For example, estab-product mix) may, to a very large extent,
lishing process capability of machines hasdepend on the skill level of its workforce.
become necessary to control defects. This The relative lower quality of the technical
requires operators to plot statistical charts,workforce and the operators, as shown in
interpret them and then modify processTable 1, is directly linked with low invest-
parameters accordingly. Many computer ment in training by Indian firms. Similarly,
assisted machines generate and capturethe technological capabilities of Indian
such performance data automatically. Thefirms are lower, on the average, as conm-
TABLE 3(A): DESIGN OF INITIATIVES TO DEVELOP DISTINCTIVE CAPABILITIES - COMMITMENT
Firm Level Initiatives

product and the processes. Many firms in
India continue to serve, profitably, the low
end of the market. This has had two salient
effects in conjunction with domestic pro-
tection: first, these firms have not graduated
to producing and serving higher value
added market segments; and second, they
have not made efforts to introduce better
products (at the same cost) to replace the
low quality offerings. While there exist
islands of excellence in firms like Arvind
or Coats or Bombay Dyeing, etc, organis-
ational practices withi n firms in the primary
textile sector are often 'Dickensian'. It is
not unusual to find firms where large-
scale dyeing is still done manually (by
hand) or where the humidity in loom rooms
is unbearable or where the worker (as well
as managers, at times) motivation is
very low. Such plants are to be seen in
China as well.
While the wage levels in India are low, * Spread Good Manufacturing Practices
those in China are almost half of those in
India. When one factor lies in the quality* Invest in an Advanced Technology Centre that holds regular displays of new textile
of the workforce, the impact of wages on technology from all over the world
* Focus on Speed and Quality to Reduce Costs
* Product Mix Choices to be based on 'Real' Competencies in Operations
* Focus on Quality of Life of the Employee
* Extensive Education of Workforce
* Strategic Investment in Technology
Industr, Level Initiatives
* Support Long-Term Textile Related Education Programmes
* Design Industry Policies
* Establish Textile Quality Council
Government Level Initiatives
* Establish Escrow Fund for Education in Textiles
* Remove Structural Impediments like Reservation
* Come up with a new Textile Policy focusing on year 2015
TABLE 3(B): DESIGN OF INITIATIVES TO DEVELOP DISTINCTIVE CAPABILITIES ' CO-ORDINATION
Firm Level Initiatives
* Focus on Supply Chain Management
* Emphasise Excellence in Production - Housekeeping, Statistical Process Control, Shop Floor
Synchronisation, Productive Maintenance and Value Engineering
* Map and Reduce Variability in the Operations (e g, reduce expediting)
* Move towards Pull Modeof Production
* Invest in New Technology that will keep you ahead for at least two years
* Increase Use of Computers
Industry Level Initiatives
* Identify Weak Links like Processing Houses and help upgrade technology

competitiveness decreases as the ability of* Co-ordinate Flow ofG Goods and Information between different Cotton farms, ginneries,
spinners, weavers, processors and garment producers via EDI technology, etc.
the workforce to bring about sustained* Develop an Independent Certification Agency
enhancement in productivity is limited.Government Level Initiative
This is one of the reasons why Indian * Remove Restrictions on Availability of Domestic and Imported Raw Materials
firms do not 'indulge' in any indigenous* Need to re-organise the Textile Ministry to include all elements of the Supply Chain - rem
R and D (the average value is 0.2 per cent Inter-Sectoral Policy Distortions
* Need to Strengthen Domestic Textile Machinery Industry
of sales)- more on this later. Interestingly,
* Provide Tax Benefits to small and medium firms that are investing, in say, quality
there now exists a market for innovation
improvement rather than organising seminars for them
in China - periodically, innovators get-
together and share/sell their innovation to TABLE 3(C): DESIGN OF INITIATIVES TO DEVELOP DISTINCTIVE CAPABILITIES - CO-OPERATION
firms. Many PSUs in China have a floating
Firm Level Iniiattives
payroll system where the wage bill of a
* Strategic Alliances between Indian Firms on Technology Development, Pre-Competitive
firm is pegged to a negotiated output level.
R and D, Infrastructure, Funds Availability, etc.
This has been inducing certain amount of
* Strategic Partnership with Other Entities in the Supply Chain
change in the internal environment of firms * Co-operation between small/medium and large firms: Formation of Central-Satellite Firms
as many benefits have been linked with (CSF) Network - reduction of risk for small and medium firms and
productivity. Most firms in Canada and increase in flexibility for the large firms
some in China and India have recognised * Investment in R and D up to at least 2 per cent of Sales
Industry Level Initiatives
that in order to improve productivity of
* Help Firms develop a CSF network - selling the idea to firms that they will survive only if
plants, workers must be treated fairly and they co-operate
that work environment must be healthy * Facilitate shifting of competition from between firms to between various CSF Networks -
and safe. initiate the partnering process
McCurry(1997) points out that the textile * Transforn into a single Integrated Textile Industry Association
Government Level Initiatives
worker, in times to come, cannot afford
to remain un-educated as new technology * Float Partnership Program for Pre-Competitive Product Development
* Tax Benefits for Patents Obtained and Income from Patents made Tax Free
demands new skills. He points that

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pared to those in Canada or China. Most recent survey of 300 spinning mills in 27 two aspects of this problem that are worth
investments in India, in recent years, has countries revealed that, of the 14 most noting - first, there appears to be too much
been in spinning units. However, 65 per contaminated varieties of cotton, 8 were conflict between the small, medium and
cent of spinning machinery is still more from India [Strolz 1997]. Most quality the large players in the industry. Composite
than 10 years old as compared to 90 per problems stem from weak quality measure- mills or large plants lack flexibility to
cent in Italy which has the most modem ment and control systems. Moreover, produce variety or small orders at low
spinning sector [Strolz 19971. The picture spinning a poor quality cotton or weaving costs. Powerlooms/small plants have the
in weaving and dyeing and finishing a poor quality yarn is wasting productive flexibility due to low overheads but have
processes is much worse. China invested machine capacity. This calls for identifying outdated technologies and work practices
in 68,000 shuttle-less looms between 1987 and removing defects at source. Improving to produce high quality products. In a
and 1996 as compared to 8,000 in India quality practices at the ginneries should market where garments have to be delivered
or 30,000 in Indonesia or 81,000 in Korea. be one of the most crucial itemls on the quickly at low cost, a modern powerloom
it is estimated that half of the 3.6 million agenda of the textile industry. It can sectorbe will be an asset but a reservation
shuttle looms aroundl the world are in Indiaeasily shlown that improvements in qualityprice of Rs 3 crore cannot buy even 20
[Strolz 19971. There is a noticeable absenceat this stage not only benefits the spinners
Sulzer loom (and such investments may
of adequate capacity in good quality dyeing but also the ginners via higher premiums be required every 5-6 years to remain
and finishing processes. These two on their product. The same can be said ofcompetitive). The second issue is related
processes limit the entry of indian textiles poor housekeeping and weak plant and to the first - decisions on product mix
into hig,her value products despite a modemequipment maintenance systems in Indian choice and product markets are very local
spinning sector. and short-term oriented which result in
plants. Healthy work environment (both for
Some other challenges that the Indian short-term gain at the cost of long-term
people and machines) is necessary forhigher
primary textile firms will have to overcome productivity. Best practices (for example,
effectiveness. As a tautology, technology
can be classified as (a) operational, in world class plants one cannot enter achoice decisions have been linked to this
(b) structural, and (c) strategic. Opera- loom room without ear plugs) only add
latter issue. Strategically, a plant cannot
tional challenges include reducing be both low cost producer as well as variety
value in the long run. They help in attracting
manufacturing and delivery lead times, provider. Plants make choices on whether
better customers, employees and suppliers.
improving product and process quality Structiural challenges include looking to focus on few products at high volumes
and improving plant and equipment at the operations of the entire sector asor a to produce a large variety at lower
maintenance. Chandra et al (1998) show single entity. There is poor co-ordination volumes per variety. This becomes neces-
that production cycle times in Indian plants between different entities that comprise sary as for each type, design of operations,
are almost twice those in Hong Kong or the supply chain, like the cotton producers,layouts, practices, processes, factors to
Korea. Specifically, production run sizes ginnerinn nners, weavers, dyers andfocus on, etc, are different. Plants in India
are ionger in Indian plants (across the iimsihers, knitters and apparel producers. that have followed such an approach have
three processes) as opposed to those in There is still no recognition of the fact that
done extremely well (e g, Arvind, Ashima,
Canada thereby resulting, in higher waitingthey are interdependent in their growth.
Modern, etc) but many others still believe
in opportunistic market seeking which
No longer are fir:ms competing in global
times for a lot and, consequently, resulting
in higher working process inventory. The markets by themselves. When Benetton introduces inefficiency in operations.
average manufacturing and delivery lead
competes with Stefenal, it brings the In summary, there appears to be an
overdependence
strength of its own supply chain (ie, cotton
times from procurement of yarn to shipment on low wages and raw
(ie, receipt by customer) for our apparel material costs as source of competitive
farms with which it has special relationship,
exports is between 144 to 182 days I Raman advantage. The textile policy regime,
its 1000 or so small suppliers, its transport
protected environment, and certain
network, its franchises, etc) to the market.
1995]. This is often longer than an entire
fashion season. Most firms do not follow Benetton has linked its suppliers' low costhistorical factors have all contributed in
any scientific approach to shop floorweaving skills with its own high quality making this sector very static and un-
planning and control, thereby, leading to responsive to changes that have been
dyeing resources to deliver orders at short
poor co-ordination between processes.lead times and at low cost. Ad hoc supply happening around the world. Table 2
Batches wait for days before they get chains based on short-term advantages summari ses some ol these concerns though
processed at each machine due to non- we have decided to focus on firm level
and poor co-ordination between various
synchronised order releases. Planning tools strategies and responses (note: several of
entities are resulting in delayed information
like MRP or JIT are almost non-existent and product flow between various entities. these concerns were highlighted during
This is leading to high inventory level discussions
in most Indian textile plants. There is lot in at Texcon 97).
of scope for improvement on these factors Indian supply channels. This is corro-
IV
by introducing appropriate shop floorplan-borated by our survey which revealed that
ning systems. For example, a good bale 36 per cent of Indian textile firms kept
What the Chinese Are Doing Right
management system which allows proper more than 75 days of RM inventory asChinese textile industry is an interesting
combinations to be formed from various opposed to an average of 11 per cent andcase study of how policy intervention,
quality bales would go long ways to reduce 13 per cent of firms in China and Canada,
firm level changes, and strategic techno-
waiting times and defect rates. (Interes- respectively. Similarly, poor managerial logy choices helped it to become an
tingly. such a system can be set up at apractices and technology in the processing important player in the world market. It
central facility for common use). IIighsector is limiting the ability of many yarn is important to point out that most of these
defect rates (about 3-5 per cent in India,and cloth producers to climb up the quality
changes have taken place over years and
1-3 percent in China and 0.01-0. I per centand value added ladder. that the industry has been successively
in Canada) are another source of delay, Another challenge before the sector canclimbing up the value added ladder. While
in addition to increased costs. In fact, a be termed as strategic in nature. There are
it is difficult to create a single visual of

Economic and Political Weekly February 27, !999 M-21

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these efforts, one can identify several No 3 Cotton Mill which has invested V
factors that have contributed positively close to US$1 bn in new equipment inCapability
the Based Competitiveness
to the growth of the Chinese textile last ten years. Another feature of this
sector. As Wang (1998) points out that the
growth has been a spate of joint ventures The challenges for the Indian textile
'four modernisation' programme in that each of these firms have entered with industry range from defending domestic
China after the Cultural Revolution firms outside China - most of these firms market shares, starting about two years
recognised textiles as a key sector produce
whichto specifications provided by from now. to entering new markets with
could generate large amounts of foreign foreign partners. existing products to entering domestic and
exchange which was necessary for There has been another facet of develop- new markets with new products. These
investment in other sectors of the eco- ment in the Chinese textile industry require very different types of responses
nomy. As a result, the number of textilewhich has provided a significant long- from firms as compared to their current
enterprises grew from 4,551 in 1978 to term benefit to individual firms. China approaches that have been highlighted
11,242 in 1991. Together their current does not have a long or strong history of earlier. A majorityof Indian textile products
global market share is close to 26 per cent managerial initiatives. However, its are in the low cost, low value added
including both primary textiles and secondary and technical education segment which will never generate enough
apparels. programmes are very stringent. Chineseeconomic surplus for continuous invest-
The Chinese industry has followed a firms have recognised this lacunae andment in technology, practices and research.
two-pronged strategy in building market have started to invest in in-company In addition, this segment is most suscept-
share, i e, developing large volume/low training of its workforce in modern ible to competition from other low cost
cost units and low volume/high value technology and managerial skills. On thecountries, like Bangladesh, Morocco,
adding units. This dual strategy has drawn average, Chinese textile firms give 70Honduras, Vietnam, etc, who are slowly
Chinese expatriates from Hong Kong, hours of training each year to an ex-climbing up the technology ladder. Firms
Taiwan, Europe and the US who have perienced worker as opposed to 32 hourswhose source of low cost is any of the
played the role of 'market makers' as well in Canada and 10 hours in India [Chandrafollowing are going to be most vulnerable
as producers with factories in China. It et al 1998]. This survey also found thatto competition:
must, however, be mentioned that the about 16 per cent of Indian firms did not - protection in various forms,
quality of the domestic market is far provide any training to a new employee - low wage workers especially with no
inferior to that of export markets and is as compared to 1.8 per cent in China. To or little training,
thereby open to competition, just like put these efforts in perspective, the training- old machines which require heavy
India, after year 2004. In fact, the extent that a long-term auto worker gets as a new breakdown maintenance,
of competition in the domestic market is hire at Saturn's plant in the US is between- externalising of environmental costs to
not as intense as one finds in India. Chinese 350 and 700 hours [Rubinstein et al 1993]. society,
policy has encouraged export-oriented Chinese work-units on shop floor are - clever accounting practices, and
units in a variety of ways that range from increasingly making productivity-related - product mix that has not changed in a
the availability of credit for buying new decisions. Interestingly, the focus of all decade.
equipment to canalising raw materials shop floor programmes or technology New markets and applications that can
and finished goods through centralised investments has been improvement of generate higherprofit margins will require
channels. This has helped in reducing quality which is quite similar to that in very different strategic responses from
uncertainty in availability of good quality India. Joint ventures have brought in firms. Similarly, new strategies will be
material for exports. In addition, it has set new managerial practices which are required to meet the competition from
up a single apex body for each of the sub- helping firms upgrade their capabilities. firms around the world in a post-MFA era.
sectors in order to facilitate export The Chinese goverment has been anxious What is needed is to change focus from
formalities and to better co-ordinate across to enter new application areas in textiles 'cost based competition' to 'capability
the sub-sectors. With implementation of and has set up a commercial R and D based competition'. It must be noted that
the "responsibility system", pressures on organisation, the Chinese Textile Science capability based competition does not
most state enterprises has increased to and Technology Development Cor- preclude low cost, high quality, low deli-
perform, especially, since the wage bill poration, to help develop new capabilities very time and high value added operations.
has been linked to output levels. This has especially in industrial textiles. Finally,
driven many firms to export as that was Hong Kong has been playing a key
the only way to fund purchase of new role in China's growth. It provides high Wanted
technology through which they could quality design and apparel manufac-
increase their output and consequently turing and marketing services, efficient An institution is looking for Social
their wages bills. Another pillar in this financial and shipping facilities that have Scientists, preferably economists
modernisation process has been considerably reduced delivery times, and (youngsters/retired persons) with
technological upgradation. Since 1985, plants that are capable of quick ramp up aptitude for action-oriented research
cotton and silk firms have importedto meets customers' short delivery require- to work in South India/Delhi. Part-
equipment worth US$ Ibn each year ments. This network of low cost opera- timers also may apply.
[Wang 1998]. However, by the year 2000 tions in mainland China, fashion design,
only 20-25 per cent of the total technology operational skills for quick turn-around Box No. 30598
stock would have been updated. (In 1992, and efficient port handling in Hong Economic and Political Weekly
1.08 million cotton spindles and 18,000 Kong, and Chinese market makers in Hitkari House
looms were made obsolete and Europe and the US have allowed the 284 Shahid Bhagatsingh Road
eliminated.) Another example of such
Chinese textile industry to make signi- Mumbai 400 001
ficant strides.
investments has been the state-run Beijing

M-22 Economic and Political Weekly February 27, 1999

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 A firm's ability to engage in 'capability and extent of investment should provide cesses but will also ensure that good quality
based competition' depends on three key strategic advantage to a firm at least for raw materials are available in the right
strategies: commitment, co-ordination and a period of two-three years in the future. markets at the right time. To remove inter-
co-operation. Commitment is a decision This issue is closely related to choice of sectoral policy distortions, the govern-
to be in the business in the 'long run'. Co- product markets to compete in - product ment will have to re-organise the textile
ordination is the willingness to see industry mix should be based on 'market pull' ministry to include all elements of the
as a single 'supply chain'. And, Co- rather than 'technology push'. textile supply chain. This may be an
operation is learning to jointly develop Most firms focus on optimising indi- effective way of not only co-ordinating
'operational and technological' capabi- vidual elements that comprise a supply policies but also in identifying weaknesses
lities. By focusing on these three key chain (ie. raw material suppliers, inter- across the entire supply chain. (Or else,
strategies, firms can build distinctive mediate goods suppliers, end-product how will we ever stop receiving complaint
capabilities that will allow them to create producer, distributors and/or retailers) of the kind recently made by knitting
a niche for their products. There are several which leads to lack of synchronisation. weavers in fareast about the inferiorquality
issues worth mentioning here - how does This results in either high inventories in yarn of 30s and 40s counts that came from
a firm develop such a focus or what is the the chain or long delays. Lack of infor- India. The yarn producers blamed the
role of the industry at large or the govern- mation on production plans, inventory cotton farmers for providing poor quality
ment policies in developing such a focus? levels, market offtake, etc, and variability and contaminated cotton Shankar-6, H-4
Or what is preventing firms from due to uncertainty in availability of and LRA varieties of cotton while the
developing such capabilities ? While these resources, breakdowns, defects, expediting cotton farmers blamed the Gujarat govern-
issues need to be dealt with compre- exacerbate this problem. Co-ordination ment for providing tainted seeds of
hensively, we will illustrate how a firm strategy seeks to bring information at the S-6, S-8 and S-10 varieties [Business
or the industry or the government policies place of usage and attempts to reduce Standard 1997].)
can improve the levels of commitment, variability which helps in synchronising Another strategy which will help firms
co-ordination and co-operation. It must be different levels of decisions across the to develop distinctive competencies is that
noted that such initiatives must be able to of co-operation. Whetherit is a firm in the
chain. At the firm level, shop floor improve-
overcome some of the current weaknesses ment programmes, evaluation of the value Prato region or Benetton in Italy or textile
and should be able to draw from successful of co-ordination, and implementation PSUs
of in China, they have one thing in
models around the world. pull production systems like JIT help in
common - ability to co-operate on techno-
Tables 3(a), (b) and (c) give illustrations
improving coordination. Industry associa- logy development and operational
of the nature of key initiatives that form effectiveness. Firms in other industrial
tions can play a crucial role by co-ordinating
the portfolio of successful strategies with demands and flows across the ginners. sectors, for example, most Japanese auto-
respect to developing commitment,spinners, co- motive companies, Sematech for semi-
weavers etc. Internet can be used
ordination and co-operation, respectively. successfully to create such a database thatconductor R and D in the US or the Airbus
Commitment can be developed by invest- can be updated continuously. Similarly, consortium of EU. etc, have successfully
ing in long-term resources like education an Advanced Technology Centre needspractised to advanced versions of co-operation
of the workforce whether in-company beorset up which holds regular displays toof
mutual advantage of participating firms.
in-institution. Both, government and Maruti Udyog is one such successful
the state-of-the-art textile technology from
world over, co-ordinates the flows of
industry have to invest in this resource. example in our country. Co-operation can
The government can develop a scheme take a variety of forms - firms can form
technology to industry and networks with
whereby a fraction of a firm's tax can be
machinery producers and research centres
strategic alliances for technology develop-
put in an escrow fund which can be ment or for pre-competitive R and D or
to provide solutions to various technical
withdrawn exactly in amounts spent on
problems. To facilitate the co-ordination
for common infrastructure development.
process, it then becomes necessary to
worker training. It is not only important For example, it would be wise for most
for the firm but also for the state to ensure
develop an independent certification spinning or weaving units to come together
and help ginners improve their
agency which can rate the production units
that the industry has well educated workers.
Even when workers are empowered, they and the quality of products coming out technologies
of and practices as they affect
need to have abilities to make productivity the quality of downstream operations.
the plants. This is essential given the failure
improvements and hence the need of for Similarly, large industrial houses could
capital markets to reveal to investors
participate in joint research to develop
the true (and not the perceived) perfor-
extensive training. Similarly, any invest-
ment in improving the quality of life mance
of of textile firms. This could help
new varieties of synthetic material with
the workers and their families, outsidefirms
the to raise funds for long-term invest-properties of cotton or for developing
ments in technology, etc. It could formcoloured
realm of salary or bonuses, will provide a cotton. When it would come to
a long-term benefit to growth of the firm commercialisation, these same firmscould
basis foridentifying partners in developing
in terms of good personnel practices,
networks. For example, spinning unitscompete with different end-products or
worker motivation and productivitycould enter into long-term relationship
using different processes.
improvement. Levine (1995) has reported
with certain good (ie, certified) ginneries;Strategic partnerships can also exist at
numerous examples where practices in liketurn, progressive ginneries would another level in the form of a 'Central-
pay for knowledge, employee ownership,improve their processes in order to get Satellite Firms (or CSF) Network'. Such
certified which may bring premium to
sharing of gains. employment security with a network would naturally have a large
reciprocal contracts by both workers their
and products. Similarly, government firm at the centre to which a variety of
management have lead to considerable small firms (representing different
policies can assist this strategy by ensuring
elements of the chain) are linked. Such a
increases in productivity and profitability that the idea of global supply chains become
of firms. Investment in technology has to viable in each segment. This would not network will have powerlooms, spinners,
be strategic in nature - the timing, nature only ensure that firms improve their pro- ginners, finishers, textile machinery

Economic and Political Weekly February 27. 1999 M-23

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producers, transporters, etc, linked together VI level non-competitive practices, the
to deliver products to customers. Of course, Conclusions industry will be on its way to become one
such alliances are based on unique of the most modern in the world.
capabilities that each firm will bring to the It is apparent, from the benchmark [The author thanks an anonymous referee for
CSF network. It allows forfirms to develop studies, that Indian textile industry has useful comments.]
several
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a hallmark ci' capability based competi-capabilities and processes that would be

tion. One would be failing in duty if wedifficult to imitate by a competitor.
do not recognise tht ththe list of top 10 The domestic textile sector has been Economic and Political Weekly
corporale houses in India, in terms of Rquite competitive and has witnessed many
and D investment as per cent of sales,upheavals. It has certain inherent strengths available at
ircludes a textile machinery manufacturer, which have to be built upon and new A K Nayak
ie, Lakshmi Machine Works (the only onecontemporary strengths need to be added. Bus Stand Book Stall
from the textile, clothing and related sectorThis will make the industry more vibrant Bhubaneswar - 751 009
in this list) at sixth position for the yearand competition more dynamic. With the Orissa
1995-96. removal of policy distortions and firm

M-24 Economic and Political Weekly February 27, 1999

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