Recap
In
Part 1, we understood what is Dollarization what were reasons for it and now
how De Dollarization has become imperative. We also have seen the early signs
of the same.
We
have seen the challenges this even is throwing along with new opportunities are
also coming up. I have listed many in the previous write up, now we will pick
up only those which are and will affect Textile Industry in particular and
let’s discuss the probable solution and road map for the same. The
Major inferences of the global rest expected to happen, which will directly
affect Textile Industry as below:
- Rupee is set to get appreciated against USD and other major currencies.
- This all-financial reset is expected to happen @ 2025.
- Next 2 /3 years are the years of uncertainties, as a result more and more countries will look inwards. As a result, these countries will apply more protectionist measures.
- US / China are also openly looking for internal consumption rather than import based. Esp. China has declared its look inward policy and encouraging more Local products.
- Expected appreciation of Rs Vs USD is 65 INR. We are not discussing effects after 2030, when it is expected to get appreciated sharply.
- Bharat is expected to get @ 100BUSD FDI each year. With So much FDI inflow, spending capacity of average Indians is going to increase, this will create a new segment of “Aspirational Customers” This assures increased markets for high end products across the board. Taking advantage of this situation will solely depends upon how you create your image, or how customer perceives you.
- UAE, Saudi, Russia, Japan and far eastern countries will be emerging market. UAE is already moving fast to become global hub for trading.
- Saudi is in more hurry in reducing its dependence on oil. From Oil based economy (80 % of GDP) to non - oil based economy (@ 50% of GDP). Saudi has identified Fashion / Garments are major thrust area.
- Full-fledged Riyadh fashion week in End March 24. Also 1st time in the history of Saudi, it has participant in “Miss world” Competition. De Radicalization and De Dollarization are going hand in hand.
These
are the major inferences we have drawn from last write up, 8th and 9th
are newly added events / information.
Where
do we go from here?
As I can see the solution will revolve around two issues:
- Product and Market Strategy.
- Cost of production
We will discuss these issues one by one and will try to find solutions for the same. These solutions should be such that it will help to handle situation in long term. Before starting discussing the solutions we need to fix up below important issues first.
My further analysis is more relevant in context of shirting and Bottom weight industry. But one can take this approach suitably for their industry.
Management
Philosophy
- Identify your dream. What you would like to see your company to be known for?
- One has
to be very specific in this. Products, marketing, manufacturing etc will fall
in line accordingly. – This will be single most reason will
take you at the top.
- Fix
and focus on business lines which you want to be in. Do not mix up products.
Like Prints, Yarn dyed, Bottom weights all together. I do not mean you
should exclude these but other products will come as supporting to the main dream.
- In these broad categories fix up the sub categories, 100 % cotton + natural fibres, re-generated fibre, Eco friendly, Sustainable, Poly cotton, Poly Viscose etc (e.g. please refer below matrix for categorization)
- List the required inputs like, knowledge base, manufacturing set up, customer base, marketing set up needed to achieve this dream.
- List what you have – Knowledge base, Products and design capabilities, manufacturing / out-sourcing set up, human skills and overall infrastructure.
- The gaps between what you required and what you have will decide the capital expenditure needed (with its urgency) / human skills, customers needed to be added etc.
- Make time based planned with major mile stones to achieve this dream.
Keep it in mind that this is not 5year plan and we have to wait till end of it. Speed is the name of Game. This will be strictly quarterly plan monitored monthly.
Now
let’s come back our two issues already identified
1- Product
strategy:
While
deciding the product strategy, invariably some mistakes / errors are done.
Company tends to be more volume / easy products oriented or sometimes designs,
concepts overtake the productivity etc. Both standalone is wrong.
In
this all, the main aspect is missed out that is Gross Margin of each product or
to be more specific Gross margin per loom shift, Break-even point for the
company.
So,
the product mix should be such that it must achieve the maximum profit.
I
propose to adopt Integrated Matrix Approach
- This will help the company to achieve the goals.
Before
starting the analysis, lets categorize the product mix based on its
characteristics,
- Basic product and mid-priced – meant for mass production
- Trendy products, utility finished - Capability display / accent products
- Md. High end / 2 ply products
- High end – Exclusive products
Company has to segregate these products based on above broad definition. One can make little modification based on their experiences.
Let’s see, below is the 1st Matrix Product Mix Vs Volume.
Company
has to analyse the existing product mix in the light of above matrix. Against
that company has to decide where you want to go. Above is the desired /
suggested % age. This is to be done along with below matrixes. One can’t decide
the % age stand alone.
Matrix no 2
2nd
Matrix is “Product Mix Vs. Market Segment” If you have noticed I have
put Export and Garment exports in same segment.
Post De dollarization this is the segment which will be mostly
affected. It doesn’t mean exports will not be there, but customer mix will be
drastically changed. As I mentioned earlier new base will shift to UAE, Saudi
Arabia, Japan, Russia and eastern countries. We are doing product mix analysis
we are doing this analysis keeping in mind this change.
Purpose
of this matrix is to understand the current distribution of various products
and its %age with each segment. We must know who is buying which product and
with what %age. A,B,C analysis of the customer based on products will get clear
with this.
Customer
focus will be sharper and their future needs will form input for future product
developments. This will also help to identify the strategic partners for the
company for various purposes. Entering in to
strategic partnership will be primarily management responsibility. This gives
company a great business stability.
This
also helps to identify the gaps in product mix and customer segment, so
marketing efforts gets more focused and fruitful.
Matrix no 3
This
matrix is little complex. This is Product Mix Vs GM / Loom shift. The
purpose of this matrix is to understand which product is bringing how much net
cash flow in the company to fulfil its profit targets.
This
matrix is most important because it will guide us to understand how much each
products needs to be sold. This will form the foundation stone for reshaping
customer mix / product mix by its % volume and to weed out products (may be
outsourced to retain customer and increased volumes).
Benefits
of this matrix is:
- Sharper customer focus buying remunerative products.
- Focused marketing efforts for gaining customer for company desired products.
- Focused digital marketing / visual promotional efforts in the event of exhibition participation.
- Focused product development efforts and strategic investments in equipment wherever needed (avoid impulsive investment).
- This will also help customer service department to focused on key customers who are bringing value to the company, their deliveries can be made more sharper with minimum turnaround time.
- Considering needs of these valuable customers working capital allocation, mfg. Capacities allocations can be fixed.
The
above analysis will lead us to below matrix
Matrix 4
This is matrix which will tell us which segment is bringing how much value to the company. The same analysis should be done within segment too, to arrive at which specific customer is bringing how much value to the company.
This is complete analysis of product mix which will form the base for the company to handle impending changes in the global market. The purpose of this is to make company more focused towards its business
Company will be more organized to handle the challenges posed by post De Dollarization situation. Responses will be sharper, quick. Entire organization will be clearer about its goals. Decisions will be quick.
Note: This is not enough. With Appreciation of INR vs USD or Euro company also has to relook in to its various input costs to make company viable. The prices need to be sharper so in next article we will talk about various cost reduction techniques, customer servicing parameters in detail.
The cost reduction will be discussed in Part 3
Again, stressing that my
purpose of entire analysis is “How to prepare
organization to handle the situation post financial reset”
About Author:
Mr. Jaideep Jamkhedkar, with a BE in Mechanical Engineering and an MBA, brings over three decades of extensive experience in the textile industry. His expertise spans across manufacturing, planning, marketing, business development, and product development. Throughout his career, Mr. Jamkhedkar has held various key positions, including Manager of Production, Deputy General Manager of Marketing, General Manager of New Business Development, and Head of Marketing.
He has made significant contributions to esteemed organizations such as Mafatlal Industries, where he worked in both manufacturing and marketing roles, Oswal F.M Haemmerle Textiles Ltd as the Head of Domestic Marketing, JCT Mill as the General Manager of New Business Development, and F.M Haemmerle Textiles Ltd as the Head of Marketing. His extensive experience and diverse skill set have made him a valuable asset in driving growth and innovation in the textile industry
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