The fabric costs nearly 50 to 60 per cent in a garment, which is the highest as compared to all other costs in apparel manufacturing. And given the current critical situation across all industries across the globe, it is quite evident that apparel manufacturers, who don’t have enough funds to pay wages to their workers for the month of April, will not be able to pay to their fabric suppliers. Majority of fabric manufacturers are facing the heat created by this challenge, as their payments are delayed, and they don’t even have any major activity as of now, which ultimately leads to the fear that a lot of fabric might have to be returned. But despite all the negative circumstances, fabric companies do have their own reasons for positivity too. Apparel Resources explores all aspects of fabric manufacturing businesses and their strategies in this never-seen-before difficult phase.
COVID-19 has stalled the cycle of the textile value chain. Like apparel manufacturers, all the fabric producers and suppliers are also facing the cash and revenue crunch, as it was the peak time for their businesses and they were expecting to receive their payments in the months of March and April. But now they are unsure of receiving their payments, and moreover, fear they might even have to take their fabrics back. Not only that, but due to the overall uncertainty, their business of almost one and a half years is lost.
Mukesh Bansal, Sr. Vice President, Vardhman, believes that the situation is quite uncertain and chaotic. A lot of goods are stuck in transit and many orders stand cancelled or put on hold. The customers are also not sure when their stores will open and how much material they will need.
“The retail industry and the manufacturing supply chain are facing a huge challenge of liquidity. This situation is not going to change for a couple of months. A lot of consolidation may happen in the times to come. It is still very difficult to predict how the ‘new normal’ will look like. I think we need some more time,” he says.
For every company, the first priority is the safety of its workers. Vardhman has taken good care of the labour class and officers staying in colonies. “We are keeping close contact with all the customers and assuring them of our full support. We are preparing ourselves and our plants to meet the contingency,” informs Mukesh.
Bashi Singh of HP Singh, Delhi – a leading fabric supplying company, says, “Fabric deliveries for the summer season were also under process, but now it is lost, and looking forward, the demand for winter season too seems to be low. Production for the next season is also delayed. As far as the next summer season is concerned, it will also be impacted. So overall, it is an extremely dicey situation for fabric companies.” He further adds that the legal system is not prepared for issues like fabric return.
The company is also working to change its payment strategy to improve fund rotation. It is also focusing on training its employees for the maximum use of various digital platforms for all activities, which earlier used to take place offline. HP Singh is one of the most respected names in fabric suppliers. The company is associated with more than 400 fabric companies.
For many other firms, it is time to have fingers crossed, as they will be in a position to take any decision only once things will be back on track. In discussion with Apparel Resources, many companies second the opinion.
Rahul Sachdeva, ED, Mercury Fabrics, Delhi, says, “Things are changing every day and for the worse mostly, so as of now we can’t decide and say anything. How brands will react will naturally have a domino effect on all of us, so it is too early to form any strategy.” Having a state-of-the-art unit and an annual turnover of around US $ 40 million, Mercury Fabrics is one of the most renowned names in knitted fabric production.
Some fabric mills and suppliers underline that payment recovery from apparel manufacturers was not easy even earlier,and it will be all the more difficult now. “Apparel manufacturers, especially exporters, are supposed to get some relief from the Government, while we have fewer chances of receiving any such support. We have to wait a lot for our payments,”shared a mill owner on the condition of anonymity.
Fabric companies with strong reach in the domestic market are equally impacted, as their businesses ultimately depend on festivals. Especially Surat, India’s biggest hub for man-made fabric, is badly hit by the current global pandemic.
Conditions are getting even worse in Surat and Ahmedabad, as both the cities are highly affected owing to COVID-19 positive cases across Gujarat. As both the cities are known for textile production, local industrialists believe that it will take almost a year for the businesses to get back to normal. Though majority of businesses in Surat belong to the domestic market, as far as export is concerned, yarn export was already facing the heat and it is more impacted now.
As the world is going through tough times, the industry agrees that supporting each other is the need of the hour, which will help all get through this together. Amandeep Singh Saluja, Director, Sahiba Fabrics, Surat, opines, “Yes, the situation is very critical, but our strategy is to cooperate and support everyone, as the entire supply chain is affected and the entire industry is expecting cooperation and support,” further adding, “As companies are moving from China, I am hopeful that it will certainly benefit India, but can’t say when and how.” Sahiba Fabrics is a well-known fabric company in Surat, boasting of a wide market reach with strengths like value addition and product development.
As the entire industry is geared up for the ‘new normal’, some fabric companies are positive about the upcoming changes, and thus, are not panicking at all. Girish Luthra, Chairman, Gujarat Eco Textile Park, Surat, informs, “Once businesses will be back on track, payment cycles will move and the entire market will evolve. As far as the return of fabric is concerned, I think it is not going to be a very big issue. While it used to be 3-4 per cent earlier, it can now be 8-9 per cent, which is quite natural in this scenario and can even be negotiated upon.”
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“Business coaches believe that such critical times happen around once a decade, and if one can bear it, it clearly means that the business is good and going in the right direction. So, I don’t see any reason to panic, as the situation is totally the same with everyone,” he adds.
Girish also suggests that the textile industry should follow the model adopted by the automobile sector, wherein the market leader Maruti supports all ancillary units in all ways, helping these units to grow well. Similarly, in the textile industry, there should be a few players taking up leadership roles to support other units, rather than everyone trying to be a leader here. This attitude needs to change in our industry.
HP Singh is receiving a lot of enquiries regarding fabric for sampling, and so, it expects that it will convert into good demand in future. The company is very supportive of apparel manufacturers regarding sampling and product development. “I can see some potential, as enquiries are good,” says Bashi Singh.
“We have to move according to the global conditions. To survive in this challenging phase, we will focus more on sustainability and efficiency at all levels,” shares Umang Poddar, Director, Panna Textile Industries (Pannatex), Mumbai, a leading fabric exporting company with an international presence since 1982.
