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Analysis of Sourcing From India and China. Which Is Better and Procurement Is Easier

This document compares sourcing from India and China. It discusses that both countries are major hubs for global apparel sourcing, especially to the US and EU. India has large textile industry and is a major cotton exporter. China has the largest textile industry in the world and accounts for over 40% of global clothing exports. The document then analyzes the strengths, weaknesses, opportunities and threats of sourcing from each country based on factors like production capacity, labor costs, infrastructure and market access.

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ishita khanna
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0% found this document useful (0 votes)
82 views

Analysis of Sourcing From India and China. Which Is Better and Procurement Is Easier

This document compares sourcing from India and China. It discusses that both countries are major hubs for global apparel sourcing, especially to the US and EU. India has large textile industry and is a major cotton exporter. China has the largest textile industry in the world and accounts for over 40% of global clothing exports. The document then analyzes the strengths, weaknesses, opportunities and threats of sourcing from each country based on factors like production capacity, labor costs, infrastructure and market access.

Uploaded by

ishita khanna
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ANALYSIS OF SOURCING FROM INDIA AND CHINA.

WHICH IS BETTER AND PROCUREMENT IS EASIER

INTRODUCTION
 India and China are emerging as the major hubs for global apparel sourcing, mainly to
U.S.A. and the European Union.
There are several factors which led to this development. Textile industry in India is the
second largest industry next to agriculture, and makes 30 percent of the country's total
exports and 4 percent of India's GDP. One out of every 6 household in India is linked
with the textile sector. India supplies around $13 billion USD of apparel and textile to
international markets.
It has 30,000 garment manufacturing units giving employment opportunities to 3
million people. Sourcing to India has given good quality and productivity gains to
foreign countries. India is being looked upon as a major exporter of fashion apparels
and is being appreciated in international markets. There is a strong demand for Indian
made products in Italy, Spain and U.K. India is the third biggest apparel exporter to U.S.
next to China and Mexico.
. India has vast sources of raw materials. Labor costs are low in India. Indian traders
have a wealth of entrepreneurship, designs and experience, which enable them to
produce and apparel of high quality.
Changes in the policies of the Indian government have opened up the Indian economy to
the outside world, which has led to a rise in exports. Indian textile firms are quick in
making changes such as expanding their capacity and adopting new technology, keeping
in view the growing demand for Indian apparel all over the world. India has a large
source of cotton domestically. About 75% of India’s exports are cotton items. Reputed
foreign traders like J.C. Penney, Wal-Mart, Gap, Marks & Spencer and others source
apparel from India.
No other country except for China can quite match the Indian textile industry. In the
year 2005, Indian exports to U.S.A. grew by 34% and exports to the European Union
went up by 30%. Both of them together account for around 70% of India’s exports. In
the year 2005, India ranked 3rd in apparel exports to U.S.A. and 5th in apparel exports
to the European Union. The total textile exports of India were 8568.61 million USD for
the period April-October 2005, which rose to 9022.61 million USD in April-October
2006, recording an approximate 5.3% growth.
Indian apparel exports are rising; however they are still behind China in this respect.
U.S. imports of apparel from India rose from 2976.18 million USD in January-December
2005 to 3186.90 million USD in January-December 2006, which reflects a growth of
about 7%. U.S. apparel imports from China rose from 15142.87 USD in January �
December 2005 to 18517.52 million USD in January-December 2006, reflecting a
growth of about 22%.
WHY SOURCE FROM CHINA
1. The textile industry in China is the largest in the world in both overall production
and exports.[1] China exported $274 billion in textiles in 2013, a volume that was
nearly seven times that of Bangladesh, the second largest exporter with $40
billion in exports. This accounted for 43.1% of global clothing exports.
2. China has unparalleled production capacity and offers the most variety of textiles
and apparel. Chinese factories supplies products ranging from chemicals, yarns,
fibers, trims, threads, labels, packing materials to finished garments. In
comparison, most other countries or regions serve a narrower role in supply
chain.
3. Lower labour costs 

Generating apparel needs a large amount of labour to achieve efficient amounts


of goods. Compared to Western countries, China has a much higher capacity for
said labour at a much lower cost, with the usual rate of said labour being 660
USD monthly. Because of this low labour cost, organizations can manage their
overhead expenditure and allow for long term growth. 

4. Efficient supply chain capabilities

China is one of the most developed countries in terms of supply chain


capabilities. Chinese manufacturers offer an efficient and streamlined logistical
experience to deliver goods in a timely fashion. Many Chinese manufacturers
also offer full-service packages to further assist organization’s in reducing supply
chain costs. 

5. Experience with product manufacturing. 

China also has a deep history in garment manufacturing, with expert knowledge
in creating apparel in various styles and materials to facilitate your
organization’s design requirements. 

WHY SOURCE FROM INDIA

1. Local availability of raw material:


India is among the top 3 cotton manufacturers in the World and the 2nd largest
spinner. 51% of the World’s Organic cotton is grown in India, compared to 19%
in China.All other raw materials required for garment manufacturing like zips
and buttons are also made locally although in the last years, cheap Chinese
products have made inroads in the market. However with the highly negative
China sentiment and calls from across the industry to #BoycottChina, this sector
will increasingly go back to local in the times to come.

2. Special Economic Zones:


Special Economic Zones (SEZ) are geographical regions that have economic laws which
vary from the usual economic laws of the country to provide an internationally
competitive and hassle-free environment for exports. This is done with the intention to:
 
 Attract FDI (Foreign Direct Investment).
 Increase the country's exports.
 Offer special tax benefits and exemption from duties.
 Accelerate the country's economic growth and achieve industrialization, and
 Development of infrastructural facilities for textile industries.
 
Preferential treatment is given to SEZ by granting them government policy concessions.
Efforts are being made by the Government to minimize the weakness of the sub-sectors
of the textile industry, and overcome its lack of quality infrastructure so as to enable
textile business firms to conduct business smoothly.

3. Manufacturing Facilities:
India has lakhs of big and small garment manufacturing units with varying
degrees of organisation and credibility.  India has over 1,254 GOTS (Global
Organisation for Textile Standards) certified factories compared to 220 in China.
There are over 977 SA800 certified units in India compared to 606 in China and
4 in Bangladesh. 40% Fair trade cotton is produced in India and there are over
217 GRS (Global Recycled Standard) facilities in India.
4. Lower MOQs and Flexible Production: Indian manufacturers are usually more
flexible on the minimum order quantities and different units work with different
minimum requirements. So if you want just 500 pieces of a product, or 50
thousand, both are possible to get done.

SWOT ANALYSIS
SWOT ANALYSIS OF SOURCING FROM INDIA
Strengths
Indian textile industry is as old as the word textile itself.
Close to 14% of the output of the industry and 30% of the
export market share is contributed directly by the Indian
textile industry. Its strengths are,
1) High textile production capacity
2) Proficient multi-fiber raw material manufacturing capacity
3) Large pool of efficient and inexpensive work force
4) Entrepreneurial knowledge with experiences
5) Heavy export capacity
6) Greater domestic market
7) Lower import content
8) Tangible Ready-made garments manufacturing system

Weakness
Weaknesses like fragmented infrastructure, rigid labor laws,
technology obsolescence and many others have pulled Indian
garments industries from behind. They are below,
1) Increased global competition in the post 2005 trade
regime under WTO
2) Imports of cheap textiles from other Asian neighbors
3) Use of outdated manufacturing technology [26]
4) Poor supply chain management
5) Huge unorganized and decentralized sector
6) High production cost with respect to other Asian
competitors

Opportunities
Although India has a few bumps in the road, the future of
their garments industry also has opportunities. They are,
1) The trade is growing between regional trade blocs due to
bilateral agreements between participating countries.
2) ‘Supply Chain Management’ and ‘Information Technology’
has a crucial role in apparel manufacturing. Availability of
EDI (Electronic Data Interchange), makes communication
fast, easy, transparent and reduces duplication.
3) India has the opportunity to increase its UVR’s (Unit
Value Realization) through moving up the value chain by
producing value added products and by producing more
and more technologically superior products.
Threats
As India is a large country, it is comparatively unorganized
than other apparel exporter countries, which can be a real
threat [24]. Some other threats including,
1) Formations of trading blocs like NAFTA, SAPTA, etc.
has resulted in a change in the world trade scenario.
Existence of bilateral agreements would result in
significant disadvantage for Indian exports.
2) India will have to open its protected domestic market for foreign players thus the
domestic market will suffer.

SWOT ANALYSIS OF SOURCING FROM CHINA


Strengths
China has been the most influential figure in the world of
apparel manufacturing. Its strengths are,
1) Abundant skilled man force
2) Low Lead Time
3) Efficient transportation system
4) Quick port clearance
5) Strong infrastructure
6) Large domestic market
7) Availability of almost every kind of raw materials
8) Tangible ready-made garments manufacturing system
9) Simple financing policy
10)Great marketing skill
11)Technologically advanced factories
12)Available land and worker
13)High market value
14)Variety of products

Weakness
China’s apparel makers are going through a painful
industrial restructuring. While the country is still the world's
largest clothing exporter with enormous production capacity, oversupply at home, high
labor costs, and rising global
protectionism have all eroded its competitiveness. The
weaknesses are below,
1) Limited Brand Awareness
2) Lack of Classic luxury style
3) Low social media presence
Opportunities
China has the leading phase going and still has some unused opportunities left in its
tally.
1) Chinese expansion would boost company growth
2) Consumers are increasingly valuing brand quality rather
than just brand name alone
3) They are already very advanced in technology which
may help in garments production factories [23].
4) China has several ports with a huge capacity and
efficiency which attract buyer for faster delivery.

Threats
China's textile and apparel makers are going through a
painful industrial restructuring. China's market share by value
in the global textile and clothing industry fell from 38.6 per
cent in 2015 to 35.8 per cent in 2016, with a downward trend
in major apparel importing regions such as the US, European
Union and Japan. Their threats are,
1) Competing luxury brand
2) Counterfeit product
3) High tax on luxury goods

CONCLUSION
While China remains the top textile and apparel supplier in the global market, fashion companies
have been actively seeking China’s alternatives due to concerns ranging from rising wages, trade wars
to perceived supply chain risks and have been shifting their sourcing to India. As far as textile
export is concerned, China accommodated US $ 5.74 billion worth of textile shipment to USA
in January to June ’21 period, constituting around 35.26 per cent of total textile import value
of USA. The value is down from 41.35 per cent that China clocked in H1 ’19. On the other
hand, the Indian shipment of textile products to USA valued US $ 2.72 billion in H1 ’21.
Markedly, India’s share increased from 14.53 per cent in H1 ’19 to 17.82 per cent in H1 ’21,
clearly indicating number two has grabbed the orders from number one textile shipper to
USA.

With all the advantages discussed, India does present a credible large
scale sourcing option, that it already is.
Considering its long history as a global manufacturing leader, China is sure to play a
central role in firms’ sourcing efforts for years to come. It’s world-class facilities,
manufacturing infrastructure, and expertise aren’t going anywhere fast, and it will no
doubt be top-of-mind for companies considering low cost country sourcing. China
does, however, have many challenges to overcome in the years ahead including
increasing tensions with global trade partners, rising labor costs, and a global
pandemic that began within its borders.

Given recent world events and a multitude of government initiatives that India has
committed to in order to strengthen its economy and infrastructure, it seems inevitable
that India’s manufacturing sector has a bright future. Many firms currently sourcing in
China are already looking to diversify their manufacturing portfolio by sourcing from
India as part of a China-plus-one strategy. Other firms that are just now exploring low
cost country sourcing are considering India as a lucrative and in some cases superior
option to China.
 Alignment means employees to be aligned with the
organization’s higher purpose and know the  needs
of customer and other stakeholders and also put in
their efforts  to organization strategies, goals,
objectives, and plans.
 Authority means that employees should have
individual responsibility and capability and also any
kind of barriers to successful exercise of authority
should be removed
 Capability means that employees must have the
capability to achieve appropriate goals as 
organization objectives cannot be fulfilled if these
employees do not know what actions to take or how
to take them.
 Commitment is  a state of mind which is in evidence
when the employee assumes responsibility for
creating success, and takes initiative to achieve that
success. The organization must earn the commitment
of employees by continuously demonstrating that the
employees are valued members of the organization,
and by appropriately recognizing and rewarding
them.

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