Denim is defined as,

“a firm durable twilled usually cotton fabric woven with coloured warp and white filling threads”

What started as workwear for the gold miners in USA, is today a fashion symbol across the world. Going beyond workwear!

Many countries across the world manufacture this fabric, but countries like China, India & Vietnam are some of the leading ones.

In India, the denim industry has grown significantly over the past 7-8 years owing to increase in domestic & export demands. Though the growth has been substantial, it is laced with issues. One of the biggest issues the Indian denim industry faces is Capacity Utilisation.

Today, India’s capacity usage is pegged at 80-85%. Of the total capacity of 150 million metres, supply per month is in the range of 110-120 million metres, leaving capacities idle & increasing pressure on prices. This had lead to the skewing of the demand supply equation in favour of the market.

The recent pandemic has further added to the pressures being faced by this industry. With an average production of less than 20 million metres, capacity usage is at an all time low. Everyone across the supply chain, from factories to the retailers are uncertain of the scenario 3-6 months later… The demand for denim has completely dried up with very few brands & retailers taking the risk of producing and supplying to the market.

Let's look at some of the problems plaguing this industry and inhibiting it from becoming a force to reckon with.

A cash run economy -

Even today, the domestic market functions on cash economy. Many small players across the supply chain prefer this way of working. The cash payments are usually accompanied by long credit cycles (upto even 180 days). Because of this business model, lot of energy is channelised in getting the validation & reconfirmation of payment process. In doing so, product development, expansion of consolidated capacities or improvement in washing techniques often take a back seat.

Lacking export orientation -

Indian denim manufacturers, except a few, have not tried to go beyond the domestic market. Persistence, patience, networking & continuous product development  are the key factors in establishing a good export supply chain & get continuous orders.This is completely missing in the Indian denim manufacturers. The lack of export orientation has resulted in only 15 million metres of fabric being exported of a total of 110 million metres manufactured. Indian suppliers need to understand the dynamics of global denim business and work out business models which help them diversify their risks. Suppliers with an export business in place have better chances of survival in this current scenario with approx. 70% of their production going to export orders.

Compromised product development capabilities -

With a persistent focus on the domestic markets, the Indian manufacturers have not invested in developing product capabilities which are in line with the international requirements. Indian suppliers have not been able to establish themselves as a strong player in any aspect of the trade. Unlike other countries like;

• • China which has established itself as an extremely strong player in multiple blends offering innovative fabric in viscose, rayon & poly spun lycra blends.
  • Turkey which is known for progressive washing techniques and are the largest fashion denim suppliers to the European markets.
  • Bangladesh which has increased it garmenting capacities for exports & is one of the largest suppliers to European & US markets.
  • Vietnam & Cambodia who have emerged as new denim manufacturing hubs & taken over majority of the Chinese volumes in the Covid scenario.

No FTA -

India has been unable to sign the free trade agreement (FTA) unlike Bangladesh, Pakistan, Vietnam etc. FTA has given these countries an advantage in terms of prices & has helped them in building infrastructure & and ecosystem to develop high volumes & supplies. For example, Bangladesh today is 10 times larger than India in denim exports.

Disaggregated supply chain -

The Indian denim industry comprises of multiple small disaggregated players which leads to multiple issues in the smooth functioning of supply chain. Many at times this leads to a disorganisation across the chain & leads to delivery problems.

Environmental issues -

From fibre to finished good, denim is a water intensive product leading to high levels of environmental pollution. This has lead to many manufacturers coming under the scanner by activists, government and also brands. With more and more brands taking sustainability as a mission, it’s important that the manufacturers invest in technology & equipment which helps them become sustainable. While some big players are able to do so & have come up with innovative solutions, the smaller players are finding it difficult to survive.

The pandemic has been a wake up call for the Denim industry & its has its tasks cut out clearly;

Close on FTA ASAP -

The government has already taken steps towards this goal. Once the agreement is signed, it will help create a conducive environment for exports & will drive volumes. It will also bring in diversified products, washing techniques, modern communication & build a homogenous ecosystem.

Integration with global denim supply chain -

This will help diversify risks, reduce pressure on domestic volumes supply, bring in modern technologies & product segments. This will eventually help the industry to elevate to the next level.

Consolidation of the domestic supply chain -

Long credit period, the risk of losing capital, addition of costs due to interest on delays is making the industry uncompetitive and unproductive. Alignment of supply and bringing the industry to the mainstream is extremely important to reduce the credit cycles & make it productive.

New products & production techniques -

These are required to stay ahead of global competition. Once Indian Denim industry gets into a cycle of new product development it will be  ahead of the curve in getting orders from domestic as well as International buyers.

Sustainable -

Developing sustainable products and processes is the need of the hour. Though this has been talked about across the globe, no concrete steps have been taken by the industry at larger. Few big players are working towards it, but the smaller ones are lagging behind. With the brands clearly racing towards sustainable development, the manufacturers have to gear up too.

Strategic partnerships -

If other industries can grow multifold with strategic partnerships why not denim industry? Be it automobiles or consumer durables the integration of supply chain has helped the whole industry to become economical and productive. If Brands, garment manufacturers and denim suppliers get into Strategic understanding it will help in two way flow of information will be productive for complete supply chain.

There are many opportunities for the Indian denim industry to thrive on. I think it is important for the various stakeholders to take charge and have a unified vision. Look beyond the obvious & build up capabilities to stay relevant in todays world. Those days are gone when vendors were only looked at as service providers. Today, they are solution providers. Thats exactly what the Indian denim industry needs to be; a solution provider to both, the domestic & international buyers.

With the article I have tried to cover an overview of the denim industry. In my upcoming articles, I will dwell into micro aspects of the industry & share my insights. Feel free to leave your comments below!

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