Ludhiana DS

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APEX CLUSTER DEVELOPMENT SERVICES

LUDHIANA KNITWEAR AND APPAREL CLUSTER

2009Prepared for

Small Industries Development Bank of IndiaUNDER SMEFDP

A-246,

OKHLA, PHASE-I, NEW DELHI-110020

ContentsExecutive Summary......................................................................................................... 4 CHAPTER I - BACKGROUND AND CLUSTER PROFILE........................................... 8 1.1 Methodology and Objectives.................................................................................... 8 1.2 Sector Analysis ......................................................................................................... 8 1.3 Global Environment.................................................................................................. 9 1.4 Ludhiana Knitwear Cluster - cluster Profile ......................................................... 11 1.5 Geographical Spread of the Cluster ....................................................................... 12 1.7 Turning Point.......................................................................................................... 14 1.8. Institutional Set Up in Ludhiana............................................................................ 19 1.9 Industry Associations............................................................................................. 23 1.10 Financial Institutions............................................................................................ 24 1.11. Production Process.............................................................................................. 25 Value Chain Process - Woollen ................................................................................ 25 Value Chain process - Hosiery ................................................................................. 26 1.12. Value Chain T- shirt ....................................................................................... 27 1.13 Cluster Map .......................................................................................................... 29 1.14 Determinants of Ludhiana Cluster Dynamism ..................................................... 30 15.4.5 The Diamond Model-Ludhiana .......................................................................... 35 1.16 SWOT Analysis ..................................................................................................... 35 1.17 Need for Business Development Service Providers (BDS)................................... 38 CHAPTER II STATUS AND DEMAND FOR BDS SERVICES................................ 39 2.1 Core Cluster Actors ................................................................................................ 39 2.2 Demand for BDS Services....................................................................................... 51 CHAPTER III - STATUS AND SUPPLY OF BDS ........................................................ 61 3.1 Status of Business Development Service Providers in the Cluster........................ 61 3.1.7 E- Readiness Centre/ ICT adoption .................................................................. 64 3.1.12 . Financial Services ......................................................................................... 66 3.2 Who Does Who Pays Matrix: Ludhiana Knitwear Cluster (Annexure - II)............ 67 3.3 Supply of Business Development Services in the Cluster ....................................... 67 CHAPTER - IV CONCLUSIONS AND RECOMMENDATIONS ................................ 74 4.1 Challenges before the Industry .............................................................................. 74 4.2 Areas of Intervention ............................................................................................. 75 4.3 Major Pressure Points ............................................................................................ 80

4.4 Cluster Vision ....................................................................................................... 81 4.5 Strategy ................................................................................................................... 81 Annexure II BDS Analysis Who does, who pays? ................................................... 83 Annexure-III Knitwear and Apparel Manufacturers Association of Ludhiana (KAMAL) ........................................................................................................................ 87 Annexure IV Estimated BDS Usage and size................................................................ 88

Executive SummaryLocated in the Northern state of Punjab and known as Manchester of India Ludhiana Knitwear cluster manufactures the entire range of winter and summer wear for people of all age groups. Further, it contributes to almost 80% of the total woollen/acrylic output of the economy. The product range includes gents, ladies and children garments including T-shirts, sweat shirts, pullovers, jackets and grey fabric clothes of hi-fashion quotient. The cluster The Ludhiana is highly labour-intensive and the labour is mostly migratory, unskilled labour though there is skilled and semiskilled labour workforce also. Indirect labour activities include tailoring, embroidery, packing, retailing and marketing etc. and some of these are BDS (Business Development Service) activities. The cluster value chain is rather long but Knitwear manufacturers are at the core of the value addition cycle. Activities post knitting of the yarn, and upto the garment manufacturing stage constitute about 62% of the total value addition in the exfactory price. While spinners, dyers and sub contracting knitting units provide backward process support, Dye manufacturers, machinery manufacturers and accessory suppliers extend the raw material feed to various processes. In domestic markets the sales and marketing process is facilitated by BDS Providers like intermediate agents, wholesalers and retailers. Similarly, in the export markets, merchant exporters, buying agents and buying houses assist the firms. Subcontracting is a major critical attribute of Ludhiana cluster with a large number of small and micro knitting and knitwear firms extending production and manufacturing support to the bigger firms and direct exporters. Though the cluster started off as a woollen knitwear cluster, it is gradually getting transformed into a highly diversified knitwear cluster on account of market dynamics extending better margins and market reach. To stand up to the expectation level in the face of global competition, production systems need to be improved, skill of the workforce needs to be upgraded, quality

control system should be strong, system should be in place to get right information at appropriate time, value chain should be strong in terms of technical capability, & delivery time, while inter firm co operation should be good. This requires lot of support from the service providers who can advise and establish the system to achieve the goal. A primary survey was conducted with the value chain firms to assess the BDS demand side. The survey revealed that the cluster has number of service providers in functional areas to address routine business needs like accounting, auditing, taxation ESI & PF accounting, logistics, documentation etc. However, as regards both availability and competence of service providers in strategic areas like productivity improvement, quality improvement, waste minimization, system implementation, design development, and energy conservation, an interventionist approach in the cluster market is required. Thus to simulate BDS activity in strategic areas, project support will have to butt in as an incentive factor to kick start the activities which alone can demonstrate the gainful benefits to the firms. The survey also revealed that though there is a large network of institutions in Ludhiana most of these are riddled with government control and bureaucratic interference becoming a big obstacle in skill development in the cluster and which needs to be mapped to the industrys requirements. Prominent institutions in the cluster are Industrial Training Institute, Government Training Institute for Women, Textile Committee, National Small Industries Corporation, Northern India Textile Research Association and Sportking Institute of fashion Technology. Besides, there are a host of financial institutions that provide various kinds of financing facilities including foreign exchange transactions. These institutions are mainly the nationalised and private banks operating through their branches in Ludhiana. To name a few, Small Industries Development Bank of India, National Small Industries Corporation, Punjab National Bank and many more. However, efficient working capital management for stocking requirements is a major critical success factor for these units as efficient delivery schedules need to be matched with

market order books to cut the market reach time. So there is an urgent need in the cluster of BDS services to plan the supplies at the backend and match them with the delivery schedules required by the market, and also suggest the required working capital (finance) withdrawals/limits based on such a real time flow scenario. The supply side assessment was done through another primary survey with the leading BDS providers. It revealed that the private sector BDS providers have a very significant role to play in the export markets. They can act as middlemen between the buyer and exporter by procuring order from the buyer and by identifying the right supplier for the order and by coordinating. Considering the high degree of controls & bureaucratic procedures in international trading arena, these BDS providers would have a critical role to play and need to be induced to diversify themselves to areas like pricing strategy from their current specialisation in