#learningacademy

The Indian textile market is projected to grow approximately at 12% CAGR according to a recent report by ministry of textiles 2019. The Indian per capita income is also on the recovery phase post COVID, indicating that purchasing power of the Indian customer is on the rise. To ride this wave, it is one of the foremost needs of textile manufacturers to optimize their supply chains to cater to the future demand. But, the Indian textile supply chain is plagued by a multitude of problems impacting efficiency and cost.

Complexity of the problem

The textile industry has always been one in which the changes have been frequent and fast, from shorter production cycles to the development of fast fashion as an industry. Apart from the seasonal demand that has always existed here, for example, there is always more demand for winter jackets and warmer apparel in the Autumn-Winter season than in the Spring-Summer; the pursuit of new materials, fabrics and fresher fashion has been one of the driving forces of demand in the Indian textile and apparel industry.

The Indian textile industry is also heavily dependent on exports to countries of higher demand and margin which makes the supply chains and inventory management more complex. This necessitates the evolution of the industry from a basic spreadsheet model to a dedicated smart software.

There are multiple steps in the textile manufacturing and distribution process. Managing inventory based on demand in the apparel market and accordingly managing the raw material procurement can be challenging. The industry has been a victim of huge bullwhip effect in the past due to this complexity.

Business challenges in the textile and apparel supply chain

· Unapplied cash: inventory pile ups!!

There has been a large amount of unapplied cash due to stacked up inventory leading to higher costs.

· Lack of efficient predictive systems: forecasting

Inventory is often seen to be losing value due to overstock after campaigns due to faulty prediction. Companies do not usually use advanced predictive systems that help them learn from previous inaccuracies.

· Damage of Inventory: On an average, 30% of its working capital tied up in inventories

There is lot of revenue loss due to damage of inventory and their outdating due to inefficient stocking systems in place and manual audit systems.

· Vendor management Issues: Collection cycle management and vendor scoring system

There is a major problem to get collections on time which leads to loss of sales at point of sales (POS) which is a direct result of improper management of vendors.

· Sluggish responsiveness of global supply chains

The supply chains are very long with many different parties involved taking different roles. Globalization trends have made supply chains broader and more international, increasing the turnaround time leading to bullwhip as there is a lack of supply chain visibility and inventory holdup in different stages of supply chains, different level of supply chain maturity of partners.

Possible solutions

Supply chain problems in Indian textile industry need systematic demand planning resulting in greater responsiveness as it is very company and system specific. Apart from efficient inventory management systems, artificial intelligence (AI) enabled state-of the art vendor management and digital supply chain management (SCM) systems should work inharmony to make the existing systems more effective, the transformation must be guided by an experienced set of change management and digital supply chain consultants. With AI driven systems in place, it is possible to digitally mirror existing supply chains and manage them while the system continuously learns making decisions with incremental precision every time. With intelligent systems in place, organizations can save a lot of lead time to plan for changes and manage supply chains better.

Leading the change: Need for more optimization

The industry is shifting from a manual system to Sales & Operations Planning (S&OP) to one which integrates S&OP with Sales & Operations Execution (S&OE) systems. Digitizing the processes in the supply chains are more of a necessity these days. To read more, please read the article written by my colleague Manish on how digitizing supply chains is not a good-to-have anymore. With efficient digital management of the supply chains Kognoz Consulting have been able to achieve the following changes:

•   Arrest revenue leakage by 20-30%

•   Increase in system efficiency by 20-25%

•   Releasing cash, liquidating inventory

Supply chain planning is essentially about making decisions in the supply chain.

How accurate is our forecast for sales; based on this how much we should plan to sell and produce?

How much materials/components do I need to order from suppliers?

Is my capacity having a constraint? What trade offs we need to make?

Where should I put inventory in the supply chain? Nearer to Customer or nearer to supplier?

What will happen to my customer service if I accept this large order?

What level of profitability will I generate?

Do I need to invest in more manufacturing capacity in three years? If so, where?

Do I need to increase my distribution footprint?

Will I require more suppliers?