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In this document we are going to discuss, ponder analyse and solve the risks involved in the garment manufacturing industry. We are going to look at the garment industry from different aspects analyse possible threats and discuss the process that goes on.

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Common problems Found in Garment Production:

  • Defect Generation in Sewing. When the sewing lines are completed and the garments are checked, there are a number of garments that have defects
  • Problem with Raw Materials
  • Delay in Production Start.
  • Long Line Setting Time.
  • High Lost Time.
  • Operator Absence
  • Frequent Change in Production Planning
  • Insufficient Information.

Risk is a condition in which there is a possibility of negative deviations from the desired outcomes that we expect or hope will happen. In terms of business, the risk is an unfulfillment of desired business objectives and it must include threats and opportunities from the environment that can potentially contribute to the growth and development of the company, but prevent development, and thus endanger the very survival of a company. The risk, in the broadest sense, is a particular danger, uncertainty, loss, or uncertain future event that may have unintended consequences.

In garment or fashion industry we serve every person living on the planet, it’s a huge industry that we have various that are present in it,

Ready to wear, luxury etc., now all the garment are produced seasonally in most parts of the world, that is the clothes are manufactured in a particular region in accordance to the climatic condition in the region, them those are designed, sourced and constructed, which is a huge process with multiple minute processes, which are basically categorized as, Fashion trends – processing – wasted management and discarding.

Risk consequences on the planned garment production are:

  • Exceeding the framework of the assessment of production costs,
  • Exceeding the requested date of making
  • Not acquiring the quality of clothing.

Tracking disorders and disturbances in production, their systematization and statistical methods can lead to the sizes which belong to risk and can be included in the calculation. The risk may appear:

  • Because of the placement of low bids in the market and
  • In production compared to the size of the series that is produced.

We do SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis in order to get marketing weapon and overcome all existing problems, which means to take all advantages and eliminate weaknesses of the company.

Weaknesses cannot often be overcome in a short period of time. External estimate implies those possibilities and dangers that will have a main influence on business results of a textile firm. New fashion trends, i.e. new designs that should be accepted, should also bring new results. The problem which exists in garment industry is that we analyse and follow trends that have already taken place on the fashion scene so while a collection is being accepted and the preparation for production is getting completed, a new fashion demand is here, and the old one hasn’t been accustomed to yet. External estimate deals with advantages and dangers connected with a market, technology, scientific-technological development, changes in micro and macro environment, economy, ecology.

Development of products and production technology get into danger and can’t “keep pace” with fashion trend although they try hard. A good distribution net, besides placing goods on the home market, should think of doing it on the foreign market. Because of poor economic power and large competition on the world market there are possibilities for many fashion companies to fail, therefore a good distribution net should enable joint breakthrough for many fashion companies to the foreign market, as the only real possibility.


StrengthsWeaknesses
– Tradition in business– Very high price because of fast changes
– Futuristic design – Small series with a large number of models(three to five articles in work order)
– Good Image– Manufacturing of only three sizes
– Reaction to a new fashion trend– Bad covering of foreign market
– Quality of textile fabric and production– High price of energy
– New ergonomic form of production– Condition and price rise of raw material because of introducing VAT
– Short period of development of a model and short period of duration– Short time for optimal products
– Industrial training conducted by specialist
– Establishing ‘show room’ objects
– Ecological requirements

Opportunities Threats
– Consumer’s wish for new designs– Import of similar articles of clothing at low prices
– Marketing of products into a new market– Competitors have lower price
– making e-mail catalogue– Competitors have better distribution net with more sales places
– Value of labor– Quick obsolesce of technology
– Production of garments Made-to-Measure– Labor market rigidities
– Promote technology transfer and knowledge– Lack of skilled personnel
– Cooperation with educational institutions

Risks can be identified in the following categories:

  1. Business Risks: These are strategic risks that may threaten the existence or the smooth running of the business in the future.
  2. Operational Risks: These are risks encountered in the day-to-day running of the business and are mainly mitigated by putting strong business processes with internal controls in place. These risks are function-wise.
  3. Financial Risks: The finance function including borrowing, forex management and hedging, etc is centralized for the company and hence these risks are for the central finance department.
  4. IT Risks: Risk of disruption in business due to failure of Information technology for the company as a whole.
  5. Legal Risks: The legal risks for the company as a whole but the mitigation procedures are fairly decentralized depending on the compliance requirements.

Different Areas of Business Risks:

  1. Raw Material a) Risk: Availability of raw materials at competitive prices.
    • Volatility in input prices. Increase in prices of essential materials (Cotton, wool, polyester, acrylic etc.) b) Risks: Constraints in availability of raw materials.
    • Fluctuation in prices, non-availability due to various reasons. RM required to be imported, may adversely impacted due to decline in bilateral relations, war, trade embargo, etc.
  2. Product portfolio
    1. a) Risk: Changes in demand or market trends
      • Primary markets may no longer accept the existing products due to new fashion trends, low economy, changing age group of major consumers etc. Changes in demand patterns reduce the demand for the company’s existing products. Also, changes in preferences may affect the sale of particular category of products and hence affect profitability (E.g. The shift from woollen to PV & acrylic products, 100% cotton to P/C, 100% Polyester etc. affects margins.
    2. Risk: Product concentration or dependence
      • A certain product range dominates the company’s product range. Significant revenues or profits of the company flow from these products and hence any adverse impact on the sale of few products could impact the business severely.
  3. Customer
    1. Credit Risks: Risk of customers not meeting payment obligations.
    2. Risk: Customer concentration
      • Few customers should not be accounted for bulk of the sales or profits, to avoid over dependency on a small customer base. These customers could dictate terms or loss of a single customer may adversely affect the business.
  4. Competition
    1. Risks: Loss of market share.
      1. Loss of market share to competitors.
    2. Risks: Global competition.
      1. Availability of foreign substitutes.
  5. Technology a) Risks: The present technologies or manufacturing processes may become obsolete.
    1. Alternate manufacturing processes available to manufacture products at lower costs.
    2. Up-gradation of manufacturing facilities in time.
    3. Inadequate resources for product development and research in emerging technologies.

b) Risks: Impact of emerging technologies

1. Inability to correctly assess impact of new technology on existing business model (e.g. Internet –e Commerce).

6.  Economy & Market Risks
  • Risk: Slow economic growth/ recession – Reduction in buying power of the end customer base.
  • Risk: Inadequate market analysis- Inability to foresee demand patterns.
  • Risk: Inadequate market analysis- Inability to price products competitively or profitably.

7. Regulatory Environment a) Risks: Adverse policy changes.

  • Adverse changes in local government policies or regulations leading to adverse impact on business environment.

Operational Risks:

  1. Human Resources
    1. Risks: Employee Integrity
      • Compromise of employee integrity could lead to frauds or pilferages.
    2. Risks: Industrial relations
      • Industrial unrest could lead to strike or disruptions in activities.
    3. Risks: Possible shortage of skilled man-power and risk of high staff turnover.
      • Unavailability of new talent or inability to retain existing talent. High staff turnover could affect continuity and growth of the business.
  2. Procurement
    1. Risks: Continuity of supplies.
      • Unreliable suppliers or frequent disruption of supplies could pose risk of disruption in operations.
    2. Risks: Continuity of supplies.
      • Dependence on single-source suppliers or service provider leading to business partner risks.
  3. Logistics & Supply chain
    1. Risks: Non-optimal inventories.
      • Risks of overstocking leading to blockage of working capital and obsolescence of material and risk of under-stocking leading to loss of sales.
    2. Risks: Late delivery of finished goods.
      • Company’s inabilities to deliver on time meet peak season demands or delivery commitments.
  4. Production
    1. Risks: Risk of rejections
      • High rejection rates for finished goods could result in business and reputation loss.
    2. Risks: Disruptions in resource supply
      • Risk Description: Inadequate resources for manufacturing like power, water, fuel, etc.
    3. Risks: Shop floor hazards
      • Failure to take adequate safety precautions may lead to accidents in manufacturing facilities.
  5. Sales & Marketing
    1. Risks: Incorrect pricing
      • Over or underpricing the products
    2. Risks: High number of customer claims
      • Large number of customer claims for failure in fulfilling commitments or delivering the right product.
  6. Commercial
    1. Risks: Loss of benefits
      • Inability or failure to claim available benefits (e.g. DEPB, EPCG) etc for either lack of knowledge or lack of compliance could lead to financial loss.
    2. Risks: Business partner risk
      • Failure of a business partner/counterparty (vendor, service provider, dealer to meet obligations or service levels results in disruptions in business operations).
    3. Risks: Business partner risk
      • Dependence on the single service provider for services leading to business partner risks.
  7. Others operational areas

a) Risks: Inadequate internal controls

b) Risk Description: Inadequate or weak internal controls across functions.

c)    Risks: Damages to property and assets.

  • Operations (manufacturing facilities, warehouses, corp. offices, etc) may be adversely impacted due to natural disasters/acts of God.
  • Damages due to industrial espionage, sabotage, etc.
  • Damages due to carelessness or lack of safety measures.

Conclusion:

There are various adamant risks that industry take on a daily basis to even go through and produce a single product, now the risks taken are of various level and should be considered and well thought about before putting yourself and a lot of vulnerable people at stake. Through the SWOT analysis and other methods, we can identify the risks and issues and combat them to achieve a flawless working environment and generate products that have proper use and do not add to the various existing problem to the garment industry like environmental, disposing of etc. like we face a big problem in the industry when it comes to fair trade and disposing of the waste and treat the material after its use , and then paying labours and sustainability in the industry are a major topic we discussed.


Bibliography:

  1. Paunovic D, Colovic G (2005) the application of SWOT analysis in designing of garments. Management 37: 71-77.
  2. Colovic G (2012) Strategic management in the garment industry, Woodhead Publishing, India.
  3. McNamee PB (1985) Tools and Techniques for Strategic Management.
  4. /Hazard%20Identification%20and%20Risk%20Assessment%20on%20Apparel%20Industry%20_%20AAA%20Cont rol%20_%20Ensure%20Professional%20Growth.html

About the author:

Harshit Prajapati
(@hahahahahaharshit, @prajarty,
Bachelor of Design,
National Institute of Fashion Technology

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