October 11, 2005

Clean-up act: Small firms are getting smart(because they need to)

By Sujit John/TNN

Bangalore: Sitting in his office in Madurai, Britto M Joseph can look into Wal-Mart’s website and monitor sales of the kitchen textile products he has supplied to the international retailer. He can do it by item, store, distribution centre and goods in transit. That helps him understand how much of a particular product would be required where and by when.
   Britto then alerts his factory in Karur, 130 km away, to prepare for the fresh orders
expected. Since his relationship with Wal-Mart began in 1998, he has invested so much in processes and technology that deliveries can today be made to Wal-Mart stores within 14 days of receiving an order, against the average of 40 days for an Indian supplier. In June of this year, Britto’s JVS Export received Wal-Mart’s ‘International Supplier of the Year 2004 Award’ in recognition of this successful point-of-sales replenishment programme.
   From Madurai and Tirupur to Agra and Moradabad, small and mid-sized clothing, home textile, leather goods and homeware product companies are being transformed, often radically, to meet the requirements of international retailers. Dingy, dirty factories are being cleaned up, upgraded, modern machineries installed, labour practices improved, and the latest in technologies and processes employed to improve supply chain efficiencies.
   Ashok Logani’s Delhibased Instyle Exports, supplier of women’s readymade garments to retailers like Tesco, C&A, Quelle and LaRedoute, has invested some Rs 35 crore in the last two-three years to bring his factories to the standards expected by his high profile customers. He has employed a German professional to oversee his quality and systems issues, he has prepared quality manuals, laid down labour safety, health and environment standards, created separate committees to ensure these standards are met and has set up an emission treatment plant. “Today our standards are better than what international retailers expect from us,” says Logani. 
 Another Tesco supplier, Parthasarthy of Tirupur-based T u b e k n i t Fashions, says he is
using technology to reduce consumption and bring down costs at every stage of the manufacturing process, as also to reduce rejections. He says he has invested about Rs 40 crore in the past four years, investments that are now paying off — in the previous two years, turnover has increased from Rs 57 crore to Rs 95 crore.
   These initiatives are also paying off in the minds of international retailers. John Hoerner, Tesco’s chief executive of international sourcing, says that five years ago, he wouldn’t let anybody buy from India. “We couldn’t be sure we’ll get what we ordered,” he says. But today he sees in Indian entrepreneurs a high level of integrity. And he dismisses the argument that Indians are doing it under pressure from the retailers. “Indian managements are very enlightened. They are investing and using techniques that incentivise employees because they realise it makes for good business,” he says.
   Hoerner notes that one Indian garment exporter even gets every clothing piece inspected for faults. “No factory in the world does that. But this guy does it, and is able to do it because he can get women at low costs for the job.”
   But there is also no denying that the retailers themselves are playing a big role in the on-going transformation, by working together with Indian entrepreneurs, educating them about best practices, mandating social standards, and giving longterm buying commitments.
   Britto says Wal-Mart has taught the company a lot in terms of quality and ethical standards. “It is incredible that we have access to Wal-Mart’s top management in the US who help us with our sourcing queries, quality standards and providing training. We learn and then fine tune these,” he says.
   Chand Bhalla, promoter of Delhi-based Mayur Overseas, supplier of ladies’ garments to Wal-Mart since the late 1980s, says Wal-Mart has a complete system of upgrading suppliers. “They also hold very instructive seminars that owners of the supplier companies are obliged to attend. We can’t send any of our managers. In these seminars they underscore the need to follow the law of the land, the need to upgrade ourselves, our employees. They are also very particular that we educate our staff on issues like AIDS,” he says.

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