Application of SaaS BPM in Apparel Manufacturing

Transcription

1 Application of SaaS BPM in Apparel Manufacturing by Krishna Kumar Simbus Technologies 1

2 TABLE OF CONTENTS Introduction..3 External Reasons 5 Internal Reasons.7 2

3 . Introduction The Indian Apparel Manufacturing Industry is a USD 16 billion Industry which employs roughly 25 million people. Out of this, the exports are approximately USD 10 billion. Along with the other textile industry sub sectors like spinning, weaving etc, Apparel industry is the 2nd largest employer in India after Agriculture. Given the fact that the Industry is a large employer, successive governments have been trying to provide significant fiscal and non fiscal boosts to ensure that the Industry is on a high growth path. The incentives provided to the Industry range from low interest loans, capital subsidy to creation of apparel clusters to enable world class manufacturing. The value chain of the industry stretches from the retailer to the fabric manufacturer. The typical value chain is shown below 3

4 The textile and apparel value chain is unique compared to the other industries. The main differences are as follows : 1) There is no level of consistency or pattern in terms of the fragmentation / aggregation of the sub sectors across the value chain. For eg, the number of players in Natural Fibres production is large compared to synthetic fibres, where there are few players. Similarly the apparel manufacturing space is characterized by the large number of players. As per latest Data by Clothing Manufacturers Association of India (CMAI), there are more than apparel manufacturers in India. 2) In terms of the scale of operations especially in the manufacturing space, the apparel manufacturing industry lags behind most industries. The largest apparel manufacturer in India is no bigger than USD 250 million. As per the CRISIL estimate of the industry, there are only about 300 companies which are more than USD 10 million. 3) In terms of the IT penetration, the industry lags behind other industries especially in South Asia. This could be attributed to the lower investment scale and also due to the lower education and skill levels of the workforce leading to lower IT adoption. The other reason could be the ownership pattern in the industry, where most of the owners are first generation entrepreneurs who lack the investment muscle to invest in IT systems. In spite of being an important constituent of the Indian Economy and despite being given considerable fiscal and non fiscal incentives by the government, the industry is perennially sick and has never been an attractive investment magnet. The reasons for such poor profitability are mainly internal; within the individual companies and also within the industry. What are the reasons which affect the profitability of the industry and also the long term growth? The following are the major reasons 4

5 External Reasons 1) Poor Collaboration between supply chain partners: Unlike other industries, the industry suffers from very poor collaboration between the manufacturers, buying houses and Customers. While there is great pressure to shrink the Go to Market Lead times, the industry players have not had much success in working together. Key activities like product development are fragmented, there is no infrastructure to share product development progress and most of the communication is through archaic methods like . This lack of collaboration extends even into the bulk production where key activities like timely sample approvals, quality approvals etc hold up the bulk production. The end result is the sub optimal working leading to delays and huge hidden transaction costs. Contrast this with other industries which have moved to very active collaboration between the players leading to super efficient supply chains. 2) Lack of Standardisation : Whilst the industry is all about fashion and trends, the attempts towards standardization have been nonexistent. Even as companies work hard to differentiate their products from a fashion perspective, almost 30% of the components have only a functional value and can easily be standardized leading to lower costs. Even where standard components are being used across styles, companies have not realized the benefits of standardization due to low IT penetration and/or poor master data management practices. Such poor practices lead to high visible and hidden costs like stockout costs, dormancy and spoilage etc 3) Poor IT penetration: Historically the industry was regulated by the small scale industries act which ensured that investment levels never went beyond the threshold required for modernization. The result was very low investment in IT. Most of the entrepreneurs could not fathom the importance of IT. They preferred to invest their monies in machinery as it was seen as the revenue generator. Also the low skill levels in the industry led to lower IT usage in the industry. 5

6 4) Poor Compliance : Another drawback in the industry which has contributed to poor profitability is the complete lack of standardized procedures and in cases, where some semblance of processes exist, extremely poor compliance. The result of poor compliance to SOPs is costly mistakes and rework. The reasons for poor compliance are mainly the low skill levels and also the high workforce attrition in this industry. 5) Low Skill Levels: The industry is caught in a vicious cycle as it competes for human capital with other fast growth and better paying industries. The problem of low skill is very acute at the middle management levels. This crucial layer which is critical for shop floor success are mostly made up of recruits from the blue collar category. Whilst these recruits have shown great enterprise and initiative to move up the ladder, the companies have unfortunately not responded by investing in advanced skills and attitudes training. Also the efforts of the industry to attract the educated workforce have also not yielded many results. The government has also stepped in by starting the National Institutes for Fashion Technology to fill in the lacunae in the area of professional shop floor management. While this has shown some results, the bulk of the middle management constitutes people who desperately need training and skill enhancement. 6

7 Internal Reasons Apart from the industry level drawbacks which affect the profitability, there are several internal reasons which severely impact the company profitability. The following are the specific reasons which affect the profitability Excess Raw Material Ordering Poor Integrationn with Suppliers leading to delays and rejections Poor Quality Practices leading to high cut to despatch value loss Loss of Profit Poor collaboration with Customers Poor TNA monitoring leading to shipment delays and costly air freights Poor quality practices leading to higher quality inspection failures 7

8 1) Excess Raw Material Ordering : Most companies do not have a water tight process to correctly estimate the raw material ordering. Not only do companies lack advanced CAD software to correctly estimate consumption, even in cases where CAD systems exist, the padding up of consumption at multiple levels is a major issue. This problem is a classic case of poor compliance to SOPs and also due to the archaic mindset. 2) Poor Quality Practices : This is one of the biggest reasons why companies lose heavily. The poor compliance to SOPs, lack of approval mechanisms, poor record management and poor collaboration with customers lead to poor quality levels. This is reflected as a higher value loss due to higher end of the line rejections and also as delayed shipments due to multiple rescreens on account of failure of the shipment to meet the AQL standards of the customer. 3) Poor Integration with Suppliers : Archaic methods form the bulk of the interaction with suppliers. Lack of supply chain visibility in terms of delivery dates of fabrics, defect points in fabric, fabric lab test results etc lead to uncertainty in planning. The net result is unutilized capacity, Overtime to meet shipment deadlines, high amount of rework due to poor quality, rejected shipments due to poor raw material quality and time loss due to approval delays. 4) Poor Integration with Customers : The lack of collaborative working with customers leads to delays in approvals, rework of samples and bulk due to poor understanding of specifications and miscommunication. This lack of collaboration also affects the bulk production and dispatch due to delays in approvals of PP samples, size sets, bulk samples etc. The end result is severe losses for the manufacturer and also for the customer. 5) Poor Time and Action calendar (TNA) monitoring : The issues related to TNA which impact profitability are missed deadlines in meeting key events leading to delays and mistakes made while expediting. Both these affect the quality of the shipment and also the timeliness leading to manufacturers incurring expensive airfreight or expensive discounts due to shipment delays. 8

9 Given the issues which plague the industry, a product built on a SaaS enabled BPM platform is the right solution to solve the myriad problems of the industry. The inherent features of a BPM platform is a natural fit for the industry as shown below : Industry Challenge Applicable BPM Feature Remarks Poor Compliance to SOPs Lack of Standardisation Poor Access to Information Poor Monitoring Lack of Collaboration with external partners Business Modeller, Business Rules and Workflow Master Data Management, Business Rules and Case Management Enterprise Content Management and Web Services Business Activity Monitoring, Workflow and Alerts Web Services The BPM tool enables strict control while providing required flexibility where required. This ensures adherence and minimises non compliance risk BPM features minimise constant manual intervention in defining standards. The versatile BPM features ensure availability of the latest and the correct version of key information. Alerts and escalations can be configured for delivery over multiple communication channels Web enabled BPM ensures seamless and online interaction Poor Skill levels Business Rules and Workflow Can be built to minimise data entry with a high degree of error proofing Lack of ability to make upfront IT investments SaaS feature and Web Services The low TCO coupled with the deferred investment provides the right incentive to invest. It would be very interesting to see if the IT industry players take up the challenge of building such a solution for the Apparel Industry. 9