03 May 2004	Monday	12 Rabi-ul-Awwal 1425

The textile industry world wide is standing on the verge of uncharted territory as it prepares to deal with the rapidly evolving business environment emerging in view of fast approaching quota abolition.

As negotiations for 2005 deals commence, the effects of the expected abolition are already being felt by Pakistani organizations more tuned to international markets and dealing with the larger buying houses and retail chains.

It may not be unfair to state that for the first time, a Pakistani industry of international stature would be forced to compete for export markets without any trade protection and that no organized initiative has been undertaken to educate the smaller and medium sized players as to the underlying threats and opportunities of such a business environment either on a private or public basis.

It is being argued by industry pundits that China, India and Pakistan will emerge as clear winners in the post-quota regime due to various inherent strengths that the textile industries in these countries possess.

However, there is a very clear apprehension that the smaller to medium-sized and perhaps some of the larger mills may not be able to adjust to the ensuing competition and the power of huge retail chains operating on the model of lowest cost procurement.

The devastating effect on the US textile manufacturing due to lower procurement cost and wage arbitrage by chains and brands is a very clear example of what is in store for Asian manufacturers over the next few years.

The above projected scenario is acceptable under the doctrine of free trade and efficient manufacturing and procurement, however, without proper strategies, tactics and tune-up, units that could otherwise be profitable and competitive may not be able to withstand the new business order and related shocks.

The strengths of Pakistan textile industry- current market shares, cotton crop, technical knowledge base, low cost manufacturing- are self evident. The opportunities that will come up in terms of open worldwide markets, probability of development of a seller's market and chains dealing directly with vendors, to state a few, paint a very comfortable picture; however, deeper analysis reveals the inherent weaknesses of the Pakistan industry necessary to be addressed to ensure proper exploitation of the opportunities being presented. A discussion of such critical issues follows.

Supply chain: The concept of an integrated supply/value chain has been embraced by all major multinational business concerns leading to significant cost savings and development of strong competitive advantages, however, in the Pakistani environment, it remains an unknown variable.

The current supply chains in the textile sector are distorted, disconnected and unbalanced with the result that a high percentage of shipments barely make it by the agreed upon shipment date.

The new business environment will see buyers slapping fines for shipment delays of even 24 hours and air shipments in case of further delays, hence the criticality of well balanced and coordinated supply chains cannot be underestimated

Delayed shipments are essentially a breach of contract and with the choice to buy from any where in the world post 2005, buyers will not be hesitant to dump one supplier in favour of another. Customer loyalty will depend heavily on the variables of customer service, on time delivery being one of them.

Marketing: Prevalent paradigm, for the local textile industry, as far as marketing is concerned means to a large extent nothing beyond pricing. This thinking emanates from commodity selling mindsets and needs to change drastically to compete in a non-quota regime.

Marketing under the new business order will cover all aspects possible including but not limited to buyer requirements, sample development, designing services, pricing, information transfer and processing, work-in-process, deliveries, payments, customer service, audits and repeat order generation.

The role of the marketing departments will have to change from a merchandizing base to a customer service base externally and from a dependent variable to an independent variable internally leading to customer-driven internal systems and plans and not otherwise.

System orientation: Multinational brands and retail chains operate professionally and source product worldwide. They expect professional approach on the part of vendors, realistic commitments, quick responses, systems orientation and proper documentation.

Unfortunately the professionalism that is required to compete internationally is not inherent in our business culture and perhaps is among the reasons for not capitalizing on various opportunities that this nation has been presented with over the years.

Furthermore efficient seamless functioning is not possible without proper systems and their implementation. The current emphasis on personality driven business processes and cultures is not conducive to continued growth and development of both business and human resource.

The textile industry needs to refocus on an immediate basis towards development of systems so that orders can be processed with minimum human intervention and available human resource may be utilized for issues other than fire fighting.

Design and development: The US/European end consumer is price oriented for average constructions, however, he is willing to pay the premium on high thread count and value added constructions.

At high thread counts, the product becomes a branded fashion statement and the vendor's design capability can be exploited as a competitive advantage. Therefore to improve product development timeliness companies will need to emphasize in-house product and design development where the designer is in touch with latest fashion trends generally and home fashion/apparel designs, colours, motifs specifically.

Compliance: Strict social compliance and security requirements are being enforced by western buyers on all vendors. Vendors under all circumstances have to comply and non-compliance will lead to suspension of business.

The points raised above constitute structural weaknesses that are prevalent in the textile industry and their elimination is necessary for proper exploitation of the marketing opportunities coming our way. The larger conglomerates and composite mills are conscious of the above prerequisites for competition in post quota environment, however, it's the smaller and medium sized enterprises, which constitute the base for employment in any economy, that are at threat and need to ramp up operations on a war footing.

It may be worthwhile to note that not much has been done either on a private or public level to educate our small to mid sized units on the new business paradigms that are essential to compete post 2005, other than the recently launched Pakistan Compliance Initiative.

In view of the above weaknesses and fast approaching abolition of quotas, the industry under the auspices of APTMA or perhaps the finance/commerce ministries/EPB should work towards establishing a policy cell which studies individual groups of companies, facilitates removal of above mentioned weaknesses and guides the industry thorough 2005 and beyond.

This step is essential considering that textile sector contributes more than 60 per cent to the economy's export earnings.