In the midst of struggling to meet buyers’ price points, a growing number of exporters have realized the importance of ‘being profitable’. The mantra for them is not to work for better toplines but concentrate on strengthening bottomlines. In fact, in the enthusiasm to grow, many exporters over the years concentrated on getting more business, building infrastructure to service more clients and paying very little attention on how the race for better toplines was actually eroding the bottomlines. However, now that the margins are constantly shrinking many exporters have realized the folly of chasing toplines and strategies have been put in place to run the factories ‘profitably’.
Team Apparel Online recently met five exporters in Bangalore, all with a turnover of more than Rs. 300 crore who have streamlined their operations to give good returns. The profile of the five companies that AO interacted with – Bombay Rayon Fashions Ltd. (BRFL), Gokaldas Exports Ltd. (GEL), Mandhana Industries Ltd., Texport Overseas and Indian Designs is distinct and the working styles are also different, but what binds them together is the determination to ‘just not run a factory, but run it profitably’. In the words of Aman Agrawal, Vice Chairman, BRFL, “At the end of the day we are businessmen and if we do not earn from our investments then there is no point being in the trade.” While all five of the companies admitted that their cash flow position is good and they are keeping a close watch on their ‘costs’, the strategy that they are following to remain profitable is specific to the company, their client base and product profile…
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[tab title=”Bombay Rayon Fashions”]
Investing for the future
BRFL has surprised many in the industry by investing in 28 digital printers in one go, which they claim is the largest installation of digital printers in the world. “The target is to have 500 machines, then only will there be economies of scale and the cost at par to rotary printing,” argues Agrawal. He admits that the demand in the current market does not require so many machines, but then the investment is for tomorrow. “We are not scared of investments and are building huge capacities over the complete supply chain, so when the market situation improves we are already ready with capacities, specialized machines and accessories,” avers Agrawal.
Very bullish about the future, Agrawal says that an edge BRFL enjoys is the right attitude to business. “We entered the garmenting trade after the post quotas and have built our business in this competitive environment that gives low margins, so we have from the start kept a tight control on cost and never compromised on profitability,” he reasons. Being an integrated company has of course helped, but he is very vehement that no business in the chain compromises on its profitability to feed the other businesses. “Every business in the chain whether it is spinning, weaving, button manufacturing, sewing threads or garmenting is a profit centre in itself and the advantage is not price, but on commitment and deliveries which are critical to do global business today,” says Agrawal. The company’s strength according to Agrawal is supply chain management and as buyers, increasing look for companies that can deliver ‘the right product at the right price and at the right time’ and BRFL will remain a preferred choice.
[bleft]“We are not scared of investments and are building huge capacities over the complete supply chain, so when the market situation improves we are already ready with capacities, specialized machines and accessories.” [/bleft]
Building on this strategy, over the years the company has invested in strengthening its supply chain and today the textile and garment business have a 50% share each in the total turnover of the company. The DNA of the company supports large volumes and small quantities are not accepted. “We have built large capacities for garmenting and it is not viable to work on smaller quantities, the only time we do small quantities is to service regular buyers for special demands. Going forward, also factories for smaller quantities are not our cup of tea,” says Agrawal. In textiles the capacities have already been built and the next step could be backward integrating into cotton farming.
The focus area for the next few years is garmenting with capacities coming up for denim wear and knits. “As of now we have a capacity of 50 tonnes per day in knitted fabric and with Tirupur taking a beating it is the right time to enter the fray,” argues Agrawal. In Denim, the company has no immediate plans to manufacture fabric, but denim garments are a priority. The new factory will take the production capacity in denim wear from 800 pieces per day to 25,000 pieces per day. The factories are coming up in different locations in Maharashtra and Karnataka and while some of them are in villages, Agrawal believes that going completely into the interiors is not the right strategy. “The culture to support global business is missing and it is difficult to sustain a factory long enough to built the culture, so it is better to invest in areas that already have a strong garmenting culture,” he opinions.
In the area of sustainability and CSR, Agrawal says, “We are doing many things which are in line with the concept, but that is not buyer-driven, it is because as a group we believe in preserving the environment and being honest with our workers.
When we will be asked to show these initiatives to earn points to be preferred suppliers, we are prepared, but it is not something we like to publicize.” Confident that they have already earned the tag of ‘preferred supplier’, BRFL is only concentrating on capacities for the future and not impressing the buyer with ‘extras’.
[tab title=”Gokaldas Exports”]
Focus on building customer-employee confidence
To be more cost-effective smaller operations at GEL have been consolidated and greater efforts are on to curb wastages. “We cannot afford luxuries like before, it is important to see where expenses can be cut and where they are a value add to the business,” says Gautam Chakravarti, Director & CEO, Gokaldas Exports. While travelling is encouraged, even the top management flies economy and wherever possible expenses are curbed, but when it comes to spending on worker engagement programs like scholarship to meritorious student of workers, summer camps for children of workers, restructuring of salaries, implementaion of retirement policy, the company has not shielded away from making investments. “We believe that the industry has not invested enough on upgrading human resources despite the industry being a people-oriented industry,” says Chakravarti. He is confident that if the workers are motivated and satisfied the fruits will be borne by the organization.
For Chakravarti the challenge has been bigger as he has been the face of transition at GEL from a family-run business with the Hinduja’s, a well respected name in the global industry to a corporate structure. With nearly three decades working across a number of industries, Chakravarti has brought in a fresh approach to the business. “Industry knowledge is just 35% of the job, the remaining 65% is what you can bring to the table based on your experience. Questioning conventional wisdom means that you tend to do the same things differently, so the results are also different,” avers Chakravarti.
Keeping a tight balance between industry needs and fresh ideas, the new management team at GE is now well in position. “The transition has been smooth as it was well planned out over a period of time and when I officially took over at the helm about a year ago, both the employees and the buyers were confident of the change,” says Chakravarti. He informs that they have not lost any of the existing buyers and have in fact added on 10 new buyers over the last year with a target to add another 10 new customers this year. “In the current market scenario it is important to have a wide client base so that the overall order position remains healthy. We are encouraging a ‘be-proactive’ approach and everyone in the management has the freedom to use his/her resources to get business and the buyer will get the same attention and respect as those brought in by the core marketing team,” says Chakravarti. The message is clear… everyone has a stake in the company and the effort is to involve everyone in decision making for greater accountability.
The company is now adding workwear to its product profile and they have been already working for Bangalore International Airport. “The nuts and bolts of the industry are the same, to add a new product category it is important to change the mindset of the manufacturing team,” informs Chakravarti.
There is also an increased focus on strengthening design capabilities as ‘design plus’, as Chakravarti calls it, is what the buyer is looking for. “We have to give the buyer options to get value and keeping pace with fashion is no longer incidental, but a necessity,” reasons Chakravarti.
Improving quality is also a focus area and Chakravarti meets his workers regularly and imbibes in them a sense of nationalistic pride, “I tell them that your jobs are in danger from not another Indian company, but from workers in Bangladesh and Vietnam who are more efficient and have the potential to take business away from us. I can say with pride that the perception of quality has improved noticeably over the year,” says Chakravarti. Steps to improve productivity, incorporating management tools and strengthening working procedures are only a part of the quality efficiency building exercise.
The vision for GEL today isto be known as a versatile customer-driven companywhich is profitable with high ethical values.
[tab title=”Mandhana Industries Ltd.”]
Geared to service small quantities effectively
Being a very design-driven company the selection of customers is also very niche and the company works only with European companies that share its design sensibilities. “Just building a good infrastructure is not a passport to success; it is about servicing the buyers. We are profitable because we have struck the right balance between our product profile and client profile, offering value products that get us a few cents more,” says Piyush Vyas, COO, Mandhana Industries, responsible for all garment projects of the group.
Mandhana Industries sincerely believes in the power of innovation as the only way to survive and flourish in the world of cut-throat competition and ever-changing markets. To be able to be on top of the emerging trends both in textile and garments, Mandhana employs a team of dynamic fashion and textiles design professionals trained from reputed design schools in India and abroad. The designers are supplied with all the requisite tools that they need at their disposal in terms of the infrastructure support. They work on the latest and the best design software available in the market. They use the global forecasting services to keep abreast with the emerging trends globally. They also travel extensively, through which they come, enriched and brimming with new ideas. Even though this is a big expense, Mandhana Industries realizes that research and development are the key areas that help it stay ahead of the competition.
To support the PD efforts, Piyush points out that it is important to build factories suited to product profile to get the best efficiencies. “We have products that run into 67 to 90 stations so the handling time is very high, that is why we work on batch systems. But the advantage is that Bangladesh is not our competitor and we are evaluated only on our product and delivery strength,” says Piyush.
The secret behind a strong product profile matching client profile is the strength of the merchandising segment, which is often a neglected area in garment manufacturing. “Much effort is made to tighten production, but it is the skills of the merchandisers which is the key to understand the customer and develop products to his exact preference,” reasons Piyush. Working on smaller runs more than SAM values, it is the product which defines value.
Of course being integrated is a major advantage, which the company acknowledges and having already invested in spinning last year the company is concentrating on its two new garmenting units in Tarapur and Baramati to increase its production capacity threefold from the current 4 million units per annum to a total of 12 million units per annum. “I feel we are actually two years late in expanding our capacities, as we have had to turn down new buyers for want of capacities, but with the new facilities our growth will be manifold,” says Piyush.
The company is also very bullish on the global brand ‘being human’ and in France the brand has received rave reviews. Though the India launch is still awaited, the opportunities that the venture presents is exciting for the company and Manish Mandhana, MD, Mandhana Industries is currently focusing his full attention to the project, while his core team for textiles and garmenting are keeping bird’s eye view on the business.
“Being a corporate set-up has also been a major growth driver,” says Piyush. The company lays great stress on identifying the right person for the right job and then giving him the authority to do his work optimally.
[tab title=”Texport Overseas”]
Feeding lines all 12 months is important to be profitable
With an annual turnover exceeding Rs. 400 crore, Texport Overseas, is a company that has a clear strategy in place for remaining profitable. It is moving up the value chain to beat the competition from Bangladesh while also focusing on immaculate planning of operations and fast style change over time organized well in advance.
The young and passionate Director of Texport Overseas, Samir Goenka is in a very positive frame of mind. “Setting up infrastructure is only 10% of the job, the rest is how you run it on a daily basis,” he says. Defining strong operational controls as one of the biggest reasons for profitable business, Samir also admits that successful currency management through rupee hedging has also helped to keep the bottomlines healthy.
In 2011, the company adopted lean manufacturing systems and has achieved a man-machine ratio of less than 1:1 bringing down the workforce by 5%. Despite many exporters in the city facing labour shortage, Samir claims that the attrition rates at his units have been minimal over the last two years as the company has made it a policy to ensure that the workers get work all 365 days and workers are not laid off, further it is made sure that salaries are paid on time and calculations for overtime are accurately and honestly calculated. “The biggest motivator for any worker is money and if he sees regular work and payments then there is no real reason to look for new jobs,” argues Samir. The secret behind all year work is immaculate planning of operations and having style changes organized well in advance. “We have even apprised the buyers on the need to give consistent quantities so that there is no break in line feeding and I know how my lines will move three months ahead,” says Samir. The company works predominantly with US buyers, as they prefer to work with larger quantities.
Samir adds, “It’s about upgrading the products, better fabric, better accessories, more detailed sewing in garment, more processing in garment, both in dry and wet processing, all of which take us up the value chain and add to the bottomlines.”
Growing at 15 to 20% YoY the challenge for the company is not only growing toplines, but proportionately growing bottomlines. With total 10 units, Texport’s unit value realization has gone up by 20%.
The company treats its manufacturing process like a chain and every loop is a profit centre. Though the company has taken one of its factories outside Bangalore, the unit will cater only to basic items as the skill sets required to make the high value products that it is aiming for is not available in the area. “With a mix of basic and high-end products, we can service our customers as a full package,” says Samir.
With a vision to continue growing with this strategy Samir concludes, “Our core strength is manufacturing and management and that is what we want to concentrate on and keep moving up the value chain.”
[tab title=”Indian Designs “]
Flat organization drives growth with sense of Ownership
Considered to be among the five fastest growing export houses in Bangalore, Indian Designs has seen real growth only in the last three years wherein it has expanded its capacity from 1500 machines to around 4000 machines with 2 new units on the outskirts of Bangalore.
The core strength of the company is tops, though they are increasing doing bottoms for regular customers. Highlighting the drive for growth, Naseer Humayun, MD, Indian Designs says that a combination of three factors have resulted in exponential growth over the last three years – a judicious mix of customers from different markets, commitment to deliver on time every time and a flat organization which encourages sense of ownership in every employee.
A conscious decision was taken three years ago to change the structure of the company and make it more buyer responsive, this drive included increasing capacities, putting all operations under FastReact for better management and planning of manufacturing, building forward and backward integration chains with vendors and working more aggressively on employee engagement. With the FastReact system in place the production process has been streamlined and the company claims that they have fulfilled orders up to 99% on time in the last few years, which has made them a preferred supplier for many buyers.
Though two new units are already in place, plans for another unit is already in the pipeline and the site is decided upon. “We are trying to balance our customers with our production capacities and unit specialisations. We have the flexibility to give large runs and small quantities as per buyer need; also the buyers are well spread out over various countries and market segments, so the changing market conditions do not impact us as much,” reasons Naseer. With a turnover of over Rs. 290 crore, the company is targeting Rs. 350 crore turnover in the next financial. The confidence comes from the appreciation that it is receiving from its buyers.
On the employee engagement front, Indian Designs gives a complete package to the employee, from money incentives to the intangible benefits, to make them feel part of the organization. “When we expect a sewing operator to work at a certain efficiency level and they achieve it, the same should be followed by the organization. As a result we have very good attendance throughout the year and all being on payroll,” says Naseer. Apart from the various tangible incentives roll-out under the extensive HR policy, the company also imparts training, organizes outstation trips, provides scholarships to worker’s children and since more than 80% of the workforce is females, special care of pregnant women is also taken at the factory. Health benefits (ESI and Mediclaim) to employees and gratuity after retirement/resignation to employees who have completed minimum 5 years’ of service are also included. “It’s all about making workers feel a part of the organization and inculcating a sense of ownership, where workers feel that it is also their responsibility that the product is delivered on time, this is our biggest strength,” adds Ravikumar, CEO, Indian Designs.
With positive vibes from customers the vision for the upfront company is to touch Rs. 1000 crore turnover in five years time, and the proactive attitude of the company is aligned to the goal. “We can put as many processes and tools to improve systems as we want but it is really about attitude and this company is willing to face any challenges that can crop up,” concludes Naseer.