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New Asia Group: Fibre to Fabric

CASE STUDY, SUPPLY CHAIN MANAGEMENT
ET Cases, 31 Pages
AUTHOR(S) : Sandeep Chatterjee, IIM Kozhikode (Batch of 2003) and Associate Director, KPMG

Case Preview

New Asia Group: Fibre to Fabric

 

It was the Ramzan month in July 2014. Mr. Ambarish Chaudhary, the Managing Director of New Asia Group was attending the ‘Milab’ at one of his factories in Dhaka, Bangladesh. ‘Milab’ is a grand feast held during the holy month of fasting to break the fast after sunset. The company had done well in the past but with China and Vietnam picking up, the margin in the textiles business was under pressure and that was worrying Mr. Chaudhary. And with the image of Bangladesh going nosedive, there was cause of worry.

New Asia Group

The New Asia Group is comprised of six individual entities that form a vertically integrated apparel manufacturing organization, headquartered in Dhaka, Bangladesh. Established in 1987, the Group started out with Rahim Textile Mills, a dyeing and printing mill for both knit and woven fabrics. Since then, they have expanded into the production of greige yarn (for both knitted and denim garments), denim fabric, knitted garments, sweater garments and denim garments, which supply some of the world’s most wellrecognized retail brands and are distributed to stores across the world. With over $200m in Sales and almost 15,000 employees in just 30 years, the New Asia Group is one Bangladesh’s leading private organizations and is poised for further growth under the guidance of its dynamic leadership team. Exhibit I gives an overview of the evolution of New Asia Group.............

New Asia’s Philosophy

The company calls itself ‘New Asia’, as it believes that Bangladesh will be the next major manufacturing hub of Asia, and it aims to provide a brand of customer-service that exceeds any experience received elsewhere in the world.

The advent of new media and the digital marketplace, transformed the consumer behavior in the fashion industry. Today, brands across the fashion pyramid are changing their business models by shortening their traditional selling seasons and producing more collections per year. Concurrent with such shortened product lifecycles, is an overwhelming demand to offer a wider variety of stylish, high quality and affordable clothing within each collection...........

New Asia Group Companies

The New Asia Group consists of the following six companies:
• Knit Asia
• J M Fabric
• Salek Textiles
• Malek Spinning
• Rahim Textile Mills
• Aurum Sweater


Knit Asia

Established in 1999, Knit Asia Ltd., commenced operations with a solitary garment manufacturing unit in Ashulia. In 2006, it expanded its operations to become a composite production facility by creating a fabric production unit in Shafipur............

(a) Ready Made Garment (RMG) Unit

RMG Factory Locations
Ashulia (Savar, Bangladesh), Shafipur (Gazipur, Bangladesh) and Nischintapur (Gazipur, Bangladesh).
Product Range

...........................

(b) Fabric Unit

Fabric Production Unit Locations:
Shafipur (Kaliakoir), Gazipur, Dhaka, Bangladesh
Product Range

.........................

J M Fabric

JM Fabric Ltd was acquired by the New Asia Group in 2011. It specializes in manufacturing ladies knit garments and intimates. As a composite knitting facility, JM Fabrics, also produces the fabric used in making its finished garments.........

(a) Ready Made Garment (RMG) Unit

RMG Factory Locations
South Nayapara, Bhawal Mirzapur, Bangladesh
Product Range

....................

(b) Fabric Unit

Fabric Production Unit Locations:
South Nayapara, Bhawal Mirzapur, Bangladesh

....................

Textile Industry in Bangladesh

The importance of the textile industry in the economy of Bangladesh is very high. The garments manufacturing sector earned $19 billion in the year to June 2012, one of the impoverished nation’s biggest industries. Currently, this industry is facing great challenges in its growth rate. The major reasons for these challenges can be the global recession, unfavorable trade policies, internal security concerns, the high cost of production due to increase in the energy costs, different safety issues specially fire, etc. Depreciation of Bangladeshi Taka that significantly raised the cost of imported inputs, rise in inflation rate, and high cost of financing has also effected seriously the growth in the textile industry. As a result neither the buyers are able to visit frequently Bangladesh nor are the exporters able to travel abroad for effectively marketing their products.............

Overview of Textile Business

The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning facilities, spinning and extrusion processes, processing sector, weaving and knitting factories and garment (and other stitched and non-stitched) manufacturing that supply an extensive distribution channel. This supply chain is perhaps one of the most diverse in terms of the raw materials used, technologies deployed and products produced (Exhibit IV and Exhibit V)...........

Manufacturing Process of New Asia

New Asia is an integrated textile manufacturer which has spinning, fabric processing and readymade garments. The company is a contract manufacturer and it is 100% export-oriented concern because as per the laws of the land, if raw material is imported then the finished goods cannot be sold in the domestic market. New Asia gets the design from the buying house/direct customer and produces as per specification (Exhibit VI (a), Exhibit VI (b) and Exhibit VI (c))..............

Product Portfolio

Being an integrated textile manufacturer, New Asia has an entire gamut of products across the value chain (Exhibit VII and Exhibit VIII)........

Key Initiatives

In order to reverse the margin pressure, New Asia had undertaken some initiatives (Exhibit IX and Exhibit X).........

Time and Action Calendar

Time and Action (TNA) calendar (Exhibit XI) is one of the most important tools for managing a project. In garment manufacturing each order is not less than a project to a merchant because from order receiving to completion of an order it involves a number of tasks of various timelines and utilization of various resources. Like number of processes, lot of people are also involved to accomplish an order. Similarly each order is unique in terms of process and time demand............

Cost Sheet

Costing is an integral part of New Asia as the entire quoting process is dependent about the estimated cost. In the clothing manufacturing, supplier gives final manufacturing cost to buyer prior to order confirmation. For that factory prepares cost sheet estimating costs in different cost heads. Cost heads like Fabric, Trims and Packing materials, Labor cost and Overheads (Exhibit XII)............

General Sewing Data (GSD) has defined set of codes for motion data for SAM calculation. There are also other methods through which one can calculate SAM of a garment without using synthetic data or GSD.

Method #1: Calculation of SAM Using Synthetic Data

In this method ‘Predetermined Time Standard’ (PTS) code are used to establish ‘Standard Time’ of a garment or other sewing products.

Step 1: Select one operation for which you want to calculate SAM.
Step 2: .............

Method #2: Calculation of SAM through Time Study

Step 1: Select one operation for which you want to calculate SAM.
Step 2: ..............

Line Loading Plan for Garments

In “Line loading plan” planner decides on which date a style to be loaded and how many lines to be considered for the style to meet the production completion date.

Line loading plan is an important task for a production planner. Planner needs to do backward and forward planning based on lead time.

Step 1: Make a list of current orders with details such as order no., order quantity, style description, and production completion date (Exhibit XIII). Suppose order has been received on the month March and production completion date on May from 4th to 21st

Step 2: .......................

Textile Industry Global Outlook

The Textile industry has undergone major changes over the years. The key markets for the apparel industry are the European Union (EU) and US but China has caught up quite a bit over the years. While US has shown a cumulative average growth rate of 5%, China has shown a CAGR of 29%. This clearly shows the changing nature of the apparel demand. Exhibit XVIII depicts this trend............

Exhibits

Exhibit I: Evolution of New Asia Group

Exhibit II: Key Differentiators of New Asia Group

Exhibit III: Top 3 Textile Nations

Exhibit IV: Textile Supply Chain

Exhibit V: Macro Dynamics of the Apparel Manufacturing Industry

Exhibit VI (a): High Level (Knit) Apparel Production Process

Exhibit VI (b): High Level (Knit) Apparel Production Process

Exhibit VI (c): High Level (Knit) Apparel Production Process

Exhibit VII: Balanced Income Stream driven by Complimentary Product Portfolio

Exhibit VIII: Customer Base

Exhibit IX: Integrated Business Planning and Operations

Exhibit X: Transparent Costing and KPI based Controlling

Exhibit XI: Time and Action Calendar

Exhibit XII: Cost Sheet

Exhibit XIII: Order List

Exhibit XIV: Available Capacity Calculation

Exhibit XV: Required Capacity Calculation

Exhibit XVI: Planning Board

Exhibit XVII: Order Loading Date

Exhibit XVIII: Apparel Consumer Demand by Market

Exhibit XIX: Changing Consumer Demand

Exhibit XX: E-tailing has Posted Soaring Growth Rates in the Past Few Years

Exhibit XXI: Growing Sustainability Concerns

Exhibit XXII: Continuous Price Pressure

Exhibit XXIII: Wage Increases

Exhibit XXIV: Labor is only one-fourth of Apparel Ex-factory Unit Cost

Exhibit XXV: Textile Capacity Concentrated in China

Exhibit XXVI: Country Mix of Total Apparel Export to the US (by value) Source: US

Exhibit XXVII: Country Mix of Total Apparel Export to the EU (by value)

Teaching Note Preview

New Asia Group: Fibre to Fabric

 

Synopsis

This case study is a classic example of how to move up the value chain from a contract manufacturer to a design house and focus on sales and marketing. The very dynamic nature of the apparel industry poses further challenge to the margins in the supply chain. The case gives an overall perspective of the apparel value chain, its drivers and the vagaries of the shop floor.

The case has a number of exhibits which details out the costing methodology and appreciates the fact how each penny matters. The time and action calendar along with the line loading plan reemphasizes the importance of each activity in the timeline.

Prerequisite Conceptual Understanding

Prerequisite Conceptual Understanding (PCU) material is the background material that would aid immensely in mapping the decision areas of this case study and bring a synthesis amongst the relevant concepts. The participants/students should be encouraged to read this material to benefit from the perspectives outlined in the case study.

This case study presupposes conceptual understanding of the following. A working knowledge along with the business implications of the following concepts would enable an effective discussion leading to more practical solutions than a mere intellectual exercise.

  • • An understanding of end to end Supply Chain
  • • An understanding of the apparel value chain
  • • An understanding of time and motion study

 

Expected Learning Outcomes

  • • Understand the stakeholders and the drivers in the supply chain for an integrated apparel manufacturer
  • • Appreciate the intricacies of each activity in the supply chain
  • • Understand the nuances of the costing methodology
  • • Appreciate the line loading plan for the apparel industry

 

Case Positioning and Setting

This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Supply Chain Management course:

  • • Supply Chain Value drivers
  • • Cost Management
  • • Project Management
  • • Production Scheduling

 

Assignment Questions

The case seeks answers to the following questions:

  • I. What should be done for higher margins in the apparel industry?
  • II. How can Bangladesh retain its competitive advantage in textiles?

 

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Product code: SCM-1-0004, SCM-1-0004A

Abstract

New Asia Group (NAG) is a powerhouse in textiles in Bangladesh. From a humble beginning of a printing and dyeing unit, the company went through a series of forward and backward integration and is the only integrated textile manufacturing company in Bangladesh (spinning, fabric and readymade garments). Presently, NAG has six  group companies, with an expanded product portfolio from woolens to denim. The next step in the journey is to move from being a contract manufacturer to a design house and subsequently have its own retail brand. This case study looks at this transformation journey.



Pedagogical Objectives

  • To understand the stakeholders and the drivers in the supply chain for an integrated apparel manufacturer
  • To appreciate the intricacies of each activity in the supply chain
  • To understand the nuances of the costing methodology
  • To appreciate the line loading plan for the apparel industry

Case Positioning and Setting
This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Supply Chain Management course:

  • Supply Chain Value drivers
  • Cost Management
  • Project Management
  • Production Scheduling



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
$7.31
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