Surviving the challenge of Asia

1. Abstract

Over a period of the last 5 or 6 years this author hasworked with many individual organisations with the Textile Industry of Peru. Theseinclude individual dyehouses, dyestuff and chemical auxiliary suppliers and thePeruvian Chamber of Commerce.

Most of the Dyeing & Finishing operations who export doso to North America. There are one or two high quality operations, however, whoexport directly to Europe.

Many within the Peruvian Industry are fearful of thechallenge of Asia, particularly from China and India. Accordingly this authorwas asked by the Peruvian Textile Association to speak on thesubject. The full text of this article is a review of that address.

This paper is concerned with the dyeing and finishing oftextiles in a developed industry, and how that industry can compete with thethreat on low price from developing Asia.

Examples of wining strategies refer specifically to theexhaust dyeing of Cellulosic fibres with reactive dyes; but the principlesinvolved apply throughout the dyeing and finishing industry.

How?

By operating at lower process costs by virtue of higherefficiency, and focussing on lead-time. The contrasting views of European and USA consumers on critical purchasing issues will be reviewed. Exporters from Europe havealso focussed on improving productivity in order to reduce lead times; and haveevolved a way of responding to the volatile demands of fashion which is notprice driven.

There is no reason why these winning strategies can not beapplied within the Peruvian Textile Industry.

Two case studies from direct working experience are includedto illustrate the value and impact of improving Dyehouse Productivity onDynamic Response and shortening Lead Time.

2. Full Article

Surviving the Challenges of Asia: A Winning Strategy forPeruvian Textiles

2.1              Introduction

Creating Wealth

Improving Dyehouse Productivity lies at the very heart ofimproving profitability on existing business, creating new opportunities,creating better opportunities and boosting Profits.

Shortening the lead time does not always mean usingexpensive equipment.

Technical knowledge can be more important.

6. UTargets for Peruvian Textile &Apparel

Table 6. AComparison of EU and USA (1996)

5. Lead Times and the Importance of Right First Time Production

Lead Times are governed not only by distance from the target markets - but also by the organisation of production. The impact of Right First Time production and increased productivity on lead time cannot be disputed. Reducing lead time without increasing Dyehouse production efficiency will mean higher production costs. Reducing lead time by increasing Right First Time production can actually reduce production costs. This will be dealt with in a sister article Right First Time and Profit Margin to be submitted alongside this paper.

Two examples from these authors own experience may be of interest here.

Case 1

Location: Developing Asia

Order: First Order for Italian Retail.

Knitted Viscose / Lycra.

Very Bright and heavy Scarlet Shade.

Problems of Order Completion: The order had proved difficult to place across a number of Dyers and Finishers across Southern Europe.

The main technical problems were:

- crease marking

- patchy dyeings

- poor fastness to 60 C wash.

Authors Position: This author found himself working in the Asian factory when the trial order arrived.

Fortunately, from his own experience in Italy (final destination for retail) the author had experience of the technical problems.

A recipe straight into bulk without lab matching, and washed off to a fastness specification at 80 C.

A nominated representative of the customer was invited to the Asian Factory to witness sampling of the dyed batch from different parts of each rope of fabric. No shade variation from the central sample was witnessed to be > Delta E 0.4.

The finished order was freighted by special delivery within 7 days; a costly exercise, but the Asian factory got a succession of repeat orders.

Case 2

Substrate: Very fine knitted Viscose.

Shade: Very Bright Green: pale medium depth.

Destination: Italy.

Background: This author visited two factories trying to dye the shade.

One Dyehouse in South East Asia using modern machinery.

The other in Central America using old and basic equipment.

Both Europe and USA:

* are major textile consumers

* have large textile economies

* have geographically close lower cost producers with land transport.

Table 7. EU Imports

Top 10 Exporters into EU (% of Total)

The Internal EU Market is dominated by the 4 most expensive producers.

Why?

* Fashion

* Response Time

* Focus on niche and speciality sectors

* Culture

* Partnerships / Relationships

* Uniqueness

* Quality

* Value for money

7. UWho buys the Textiles?

Fig 18. Consumption of Textiles (Kg per capita)

8. Who Buys the Textiles and Clothing and WHY?

Note:

* The surveys were carried out by the same agency

* Consumers in USA and Europe were asked the same questions

* Fashion and Quality did not feature as issues for USA consumers

* Fashion and Quality featured highly for European consumers

* European consumers had more and more detailed, environmental issues.

9. UConcluding Remarks

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2.2 Background

2.2.1 Relative Labour Costs

If anyone in Peru feels threatened by China by price alone, they should try to imagine the enormity of the task facing producers in California. Therefore, if anyone in California can beat the Chinese then their strategy must be worth listening to.

Two very important points about labour costs bring some degree of perspective to their relative importance:

-costs are constantly increasing, and more so in rapidly developing economies

- labour cost is only one element of the Total Cost of producing one batch of coloured fabric.

Low labour cost (without reference to quality or productivity) is only a short term advantage.

Low production cost (taking account of all costing elements) is a considerable and longer lasting advantage.

Labour costs do increase. Take the progressive increase in labour costs in Turkey for example (Table 1).

Table 1. Index of Production Workers Hourly Wages (1997 = 100)

But this progressive increase in labour costs has not prevented the growth of exports of the Turkish textile industry.

Export Values (US$ 1,000)

Basing a production strategy, or a marketing campaign, on the strength of low labour cost alone is short sighted. Tomorrow there will always be someone cheaper. If we take the particular case of China, for example, costs are rising rapidly.

Table 2 displays how labour costs have risen steeply and we shall see later how Chinese dyers who want to reach export quality are forced to use more expensive raw materials than available locally.

Table 2. Labour Costs in China and India (China 1990 = 100)

Will India be tomorrows China, in this respect?

2.2.2 Putting Chinas Low Costs into Perspective

This paper is not concerned with the choice of reactive dyes open to the Dyeing & Finishing Industry of Peru. But it may be worthwhile, pausing for a moment, to review Reactive dye manufacture in Asia.

Some interesting points emerge.

China is widely regarded as an exporter of reactive dyes of some significance. However, the truth is that they UimportU more than they UexportU. This was revealed by Han Yu Li, of the China Textile Academy, at a conference in Mumbai (Ref 1). The conference was held to commemorate 50 Years of Reactive Dyes, and the present author was involved as a speaker.

China is not only the worlds biggest exporter of reactive dyes; China is the worlds largest buyer of reactive dyes.

The facts are:

- China is importing far more reactive dyes than it is exporting

- Currently 46% of all cellulose dyed in China is dyed with imported dyes

- Locally produced reactive dyes are not good enough for Chinas own textile processing industry.

These are facts, not editorial comment. They come directly from the China Textile Academy.

What has this got to do with the Peruvian Textile Processing Industry?

- it should be wary of using reactive dyes from Asia sold on low price only (this author has seen many Peruvian Dyehouses using such dyes).

- those textiles dyed and finished from China are unlikely to meet international standards unless they have been dyed with imported reactive dyes (expensive to them).

3. UGlobal Trading: Partnerships and Decisions

Price is a very important issue, but by no means the only issue.

Table 3. Changing Customer Needs

The Key Textile Customer Requirements will constantly change and evolve. Only those businesses that constantly strive to satisfy their customer needs will survive. And only those businesses that constantly strive to improve will be able to adapt to a dynamic market.

4. UResponding to Change

The ever increasing fashion input into the casual wear and leisure wear sectors places speed of response as one of the most important retailer demands.

Two aspects are important in speed of response (Fig 10).

Table 4. Comparative Lead Times in European Market

(Source: Textile Asia)

Table 5. Delivery Times to European Union

(Source: Harvard Business School)

Longer lead times are acceptable when demand patterns can be predicted with a high degree of certainty; and it is possible to take advantage of lowest possible costs and global technical capabilities. For fast moving consumer goods, newly designed products with a high degree of fashion input shorter lead times are essential. A compromise option is often reached which may be called Outward Processing Trade.

This is where:

- Fabric is dyed in developed consuming countries

- Garment confection is let out to nearby lower labour cost countries.

This involves the principles of triangular trade.