By Fareeha Qayoom
akistan knitwear industry is only 1.5 billion of its total exports.
Knitwear industry has been struggling for the past couple of years. Customers have been demanding lower prices, technical and design innovation, quality product on-time. Pakistani vendors unfortunately, have failed to deliver as an industry. Instead they have been more focused on expansion, increasing capacities instead of improving their management skills, timely execution of their commitments, quality, merchandising and sales areas.
“Pakistan is ten years behind everyone else in the global marketplace. Even Bangladesh is more efficient and effective than us,” declares one buyer who wishes to keep his name out of the discussion. “The signs were always there. We could see it coming years ago. If we had based our operations on knitwear alone, we would have been out of our jobs pretty quickly. Instead, we started working in a new direction – and have managed to open up new avenues in the apparel sourcing of Pakistan. However, Pakistan again is nowhere on the global map in the woven business. Our fabric may be good according to most industry insiders, however, our poplins, and twills for woven shirts leave much to be desired. Taiwan, India and Bangladesh are leading the market again. Our woven bottom business has been a little better. However, again, we don’t have a lot of efficient and effective vendor resources. CBL has proved to be the only efficient resource for us from Pakistan,” he declares.
Muhammad Nasir, (merchandiser, Enrich Group Inc., based in the USA) doesn’t agree; “on the contrary, Pakistan right now is one of the leading suppliers of poplins & twill in the world market. We dominate yarn counts from 5 singles to 40 singles. Most of our competitors are using our piece goods!”
In the post quota scenario, experts were predicting that Pakistan will get the major chunk of business since it’s a cotton rich country – these reports were obviously based on the expert opinion of World Bank, IMF and other government and financial donor agencies. Muhammad Nasir, concurs with this opinion.
“According to experts, Pakistan, India and China will be the biggest gainers for WTO in the long run. Countries that do not have the raw materials, especially cotton will face serious problems going forward. In the short term, Bangladesh, Nepal, Sri Lanka, Gulf including Jordan, Africa will have business going to them. These are all assumptions at this point, only time will tell. Price structures may change for Fall 06 as buyers will have to place their programs other than in China. Garment prices should go up (even though prices are being determined by China right now, I met one customer yesterday who informed me the prices out of India are $1.50 per piece more than China), and big quantity orders will be split between China and a few other countries, even competition – probably the Middle East and Latin America, India and Pakistan. Turkey is providing cotton goods, and then they have a lot of stuff made in the Marianna Islands, the Philippines and Mexico. With the Middle East, it’s mostly the UAE where the fabric is brought in from other countries like India, Taiwan, and China and then only CMT is done in UAE. I agree the prices went down earlier this year because of China, now most of the hot categories are under quota, the prices are starting to rise again as I just explained.”
This unfortunately has proved to be a fallacy so far. Vendors are still waiting for the business that was sure to come; instead, business has been reduced drastically from last year. Shaharyar Hussain (Director, Angora Textiles) feels that “buyers have a wait and see attitude. Contrary to popular opinion, the knits business has not gone to China,” he asserts. “It has moved to India, Bangladesh & South Africa. Tommy Hilfiger and Gap are two such buyers who have moved to India. Chaps is sourcing out of South Africa. The reason is quite simple, better prices, less production hassles and no security issues.”
“Pakistan is an inefficient industry,” he continues. “Prices were good in the past so inefficiencies got covered. Cash flows were no problem. However, with the new trading scenario, duty and rebate advantages are available to certain countries. Take Bangladesh – it’s virtually impossible to compete with 15 percent cost advantage already built into their price. India is also offering better prices. Sri Lanka is duty free for Europe. There are two types of firms in Pakistan right now, the first category is made up of inefficient firms but they have orders, the second category of firms are inefficient and no longer have orders – they have a greater challenge ahead. We need to work on marketing, product innovation, and production efficiencies, HR training, and technical know-how to bring back the business and retaining it.” declares Shaharyar.
Azhar Iqbal (CEO, Leisure Textiles) also thinks the situation is unpredictable at this point. “Everybody misread the signals. Prices came down as well as the business quantum – China under safe guard quota may be positive for us, but it’s hard to say at this point. We are competing with India and Bangladesh too.”
Checking with a few buyers informally on this trend, one gets the impression that buyers are not very happy with the Lahore apparel vendors. One buyer, who represents the European market in Lahore, is deeply frustrated with the ignorance displayed, he comments, “Pakistani vendors are not very commercial or business oriented. They do not seem to understand the European market at all. The buyers have hundreds of suppliers. They do not need a supplier who doesn’t understand their business or cannot deliver what they are looking for when they are looking for it! They would rather go somewhere else. The
Europeans will give you a garment and just ask if you can make that at the price they want? If you can, the business is yours. You have to take care of the finer details yourself. They do not want to be bothered with the hassles of producing the garment. They have you for that. The runs may be shorter but they pay top dollar which actually translates into nine to fifteen dollars per unit and you end up making more money than you expect from a 1000 piece order. I do not understand why the factories in this part of the world are so unexposed, ignorant and unwilling to learn? With their attitude, business is sure to run away!”
Another buyer who is new to Pakistan also expressed his frustration, “All they seem to want is long runs! Why should I give them that business? They have not earned it. My Bangladesh suppliers are giving me hassle free production with low price and no attitude. They deserve to get this business more than the Lahore vendors,” he concludes.
That’s not all. The local buyers seem to be equally frustrated with the vendor attitude, “Most of the Lahore apparel vendors are first generation businessmen. Karachi is a little better since they are third generation. Why should I give them my business if they are not going to do any improvements in the management of their people and machines? If they are not going to concentrate on innovation, I do not have a lock on fresh ideas, I am looking for resources that can help me improve my product, make it efficiently at a lower price, adding differentiation to my product without transferring those costs to me and deliver it on-time. I have one Bangladesh vendor that has in-house designers – we picked a whole line from them! All we had to do was change the buttons! Why can’t Pakistan do that?”
Azfar Hassan, (CEO at Matrix Sourcing) is also one other buyer who is looking for product innovation from his vendors, he thinks the “vendors compromised their margins instead of improving efficiencies. The defect rate is high. Garments are practically made twice as they require a lot of re-work. Fabric yields have not improved. Vendors have not done what they should have to meet these challenges. There is virtually no emphasis on product innovation we need to concentrate on innovating creative fabrics and finishes. Vendors have built the infra-structure but they are not using it – the processes don’t mesh, overall there is no improvement in the quality area – we still have not improved garment presentation for example, in all these years – garments are still hard pressed. Nothing is changed. A lot of the vendors spent a lot of money on expansion, thinking in terms of economies of scale, but unfortunately, the basic business model was incorrect, the paradigm never shifted. The vendors were just wasting money. There is an absence of policy on training and budget. To run a good company, you need to have training programs in place. Even if there is a huge personnel turnover, that’s no reason to slash these programs. The vendors blew their money on machines instead of people. They spend more time fire fighting than doing basic management. What about your initiative? No effort is made to please the customer.”
Azhar Iqbal, (CEO at Leisure Textiles) also confirms vendors need to improve their management skills. “Our edge was always the production capacity. We never based it on innovative product line. Strategically we need to bridge the gap- improving productivity and efficiencies, bringing the prices down, and producing a quality product on-time consistently. Basics of production are missing in all three industrial cities of Pakistan. Karachi has managed to do better than Lahore because they operate on lower overheads. Our production tracking is weak.”
One problem is that vendors have literally no exposure to the market they are selling in. “There is lack of market focus,” declares Tariq Shabbir, (Marketing Manager at Combined Fabrics). “Marketing people don’t travel – there is literally no or limited exposure to the global market. Vendors with customer-driven focus have succeeded. If we look at India – they have their own labels. They project their industry abroad. They project their culture abroad. Our focus has been on indirect marketing only, which in practical terms means having limited exposure to the buyer’s liaison offices and agents. Now, direct marketing is required. We have learnt. We are competent. We can do fashion garments very easily. We have skilled labor. There is only lack of business orientation. India, China, Bangladesh and Sri Lanka are basically the same geographical region – the only basic difference between them and Pakistan is that Pakistani vendors have been working on short term goals – we have been trying to make easy money instead of building an industry.”
Unfortunately, due to various political reasons, customers have decreased or stopped coming to Pakistan for security reasons. The vendors have made no effort to build strong relationships with their customers over the years since quota used to give them an edge in the global market place. Shahrukh Chaudhry (Manager Knitwear Division at JC Penney Purchasing Corporation) confirms the above argument, he says, “Lahore vendors were inefficient to begin with. On top of it, they didn’t try to improve. Darwin’s law “survival of the fittest” seems to be playing out. Expansion in this climate seems impractical. All it has done is accelerate the rate of bankruptcy for the inefficient vendors. They could have survived for another six months if they had not gone into premature expansion. Vendors should have been working towards improving efficiencies and relationships with their current customers. Direct marketing and relationship building is the only way in the post quota scenario – vendors who focused on both areas have managed to sustain themselves even in this competitive environment. The strange thing is instead of concentrating on improving efficiencies, vendors thought in the post quota scenario business will grow and started building their capacities, the business in the meantime, quietly moved to India. I do not think China is a threat to Pakistan, India is. Buyers feel more comfortable with India, English is their second language. They also enjoy going to India from the tourist point of view, besides, in the business terms, they are offering better price points, better ser-vice and more variety in the product line. Why should not the buyers like India? The reason for Pakistani exports decline is very simple, lack of market intelligence with virtually no emphasis on marketing or trend forecasting,” affirms Shahrukh.
Adil Sher (brand manager, cK division at Linmark International), concurs with this opinion. “Pakistan is losing the race. Knitwear is down. Customers are clamoring for lower prices. We were not ready for this trend. Yarn dye is really hot. India unfortunately is better at yarn dye products. Things may start improving end of this year but at this point, its pure speculation, even the buyers are not sure about the post quota scenario. Woven apparel, on the other hand, is doing very well. Quota alone in category 347 used to cost us one dollar. That’s been slashed totally from the price. Our woven fabric has always been good. We have been exporting it to various parts of the globe. Now, we can make garments ourselves at a competitive price,” concludes Adil.
Shaharyar Hussain, (Director Angora Textiles) also feels woven apparel is the next new wave for Pakistani vendors. “Woven industry looks more promising. We can develop this area and compete globally. Our wash techniques need work though.”
Our leading woven apparel buyer doesn’t agree with this opinion, “Vendors who couldn’t deal with knitwear buyers effectively shouldn’t try their hand at making woven apparel. They are sure to lose money. You need to have a certain attitude to succeed in this business. You need to keep up with the trends and you need to initiate new trends. Sometimes, the only difference between a fifteen dollar jean and hundred and fifteen dollar jean is the finishing process.” •
This article was originally published in the print edition of “The Knit-Xtyle Fashion Review,” (Tkfr), issue 12, October 2005
Linmark International, VF and Angora Textiles shut their doors in Lahore soon after this article appeared in Print. With the exception of Levi’s, Li and Fung (formerly Colby International) and JC Penney Purchasing Corp. most multi-national buying offices closed their Lahore operations and moved to Karachi or out of the country entirely back in 2006. Editor