Wall Street Journal spotlight on Brandix’s global push via regional foray

Wednesday, 12 October 2011 01:18 -     - {{hitsCtrl.values.hits}}

The influential Wall Street Journal (WSJ) has put Sri Lanka’s Brandix under spotlight with key insights from its CEO Ashroff Omar which the newspaper described as an “apparel magnate”.

The article speaks of Brandix’s strategy of serving global markets, especially the US via its mega Apparel City in India along with supply chain dynamics. Here are excerpts of the article titled ‘Remaking India, One T-Shirt at a Time’.

Brandix CEO Ashroff Omar addressing the launch of Apparel City in India. File photo

In a sprawling industrial zone on India’s east coast, apparel magnate Ashroff Omar is determined to prove that India can produce brassieres, T-shirts and underwear inexpensively.

China, Bangladesh, Vietnam and other countries have built thriving apparel industries by making low-end garments, creating jobs for millions of unskilled workers. Yet India, with 300 million people living in poverty, accounts for just 4% of the world’s $164 billion in clothing trade, according to Global Trade Information Services. China accounts for 40%.

While exports have surged recently in India, rising 49% this year from last, trade is concentrated in such highly skilled areas as autos and laser-cut diamonds. Even India’s well-known information-technology sector employs only 2.5 million of the country’s 1.2 billion people, according to Government statistics.

Omar is trying to change that. He is Chief Executive of Brandix Lanka Ltd., which runs the buttons-to-briefs Apparel City manufacturing complex. The facility is larger than New York’s Central Park and employs nearly 10,000 people. It houses several companies — some in ventures with Brandix and some independent — and is slated eventually to employ 60,000 workers, which would make it among the largest such operations in India.

The complex already is the largest manufacturer of underwear for export from India, Brandix says. The Bay of Bengal facility is near a port and is supported by a government willing to provide land and incentives to businesses.

“India has an abundant supply of human resources” and is the world’s largest exporter of cotton yarn, advantages that other companies have overlooked, Omar says.

Around $ 51 million was spent on the first phase of Apparel City, which is in the south eastern city of Vishakhapatnam. It was built in a special economic zone where Brandix and other companies, including suppliers, make clothes for brands such as Hanes and Victoria’s Secret.

Brandix, which is based in Sri Lanka and also operates in Bangladesh, set up Apparel City in an area far from India’s apparel-making hubs near Mumbai, New Delhi and Bangalore because of the “huge amount of unemployed female labour,” Omar says. He hopes to benefit from rising costs in China, which have put some of that country’s apparel-export business up for grabs.

But many economists and apparel executives in India fear that efforts like his will be defeated by India’s notorious bureaucracy, poor infrastructure, a complex tax structure, strict labour laws and higher wages compared with some neighbouring countries.

“Men’s underwear is moving out of China, but it’s going to Bangladesh. It will not come here,” says Ajay Shah, an economist at the Government National Institute of Public Finance and Policy in New Delhi.

“If you are going to buy a $ 4 blouse, India is not the place to make it,” says Hari Kapoor, owner of Allied Export Industries North Manufacturing Corp., a clothing maker in the New Delhi industrial suburb of Noida.

Success in India’s apparel industry generally has been at companies like Kapoor’s that make more-complicated garments than what Brandix produces, with embroidery, multiple pieces and different types of fabric.

Executives in India say India is more likely to become the next Italy of fashion, rather than the next China, saying Indian apparel makers have special skills in design and complex manufacturing that can outweigh the added costs from the country’s production obstacles.

Kapoor employs 2,400 workers who produced four million garments last year with wholesale prices that range from $ 7 to $ 20 apiece.

Omar’s formula is to rely on India’s strong cotton-textile industry and to move close to inexpensive rural labour. Running factories in triple shifts, which is unusual for India, lets Brandix fill orders more quickly than competitors can.

He declines to discuss wages. But several industry executives say workers are paid 30% to 40% less outside the traditional apparel hubs, where wages are around Rs. 5,000, or about $ 100, a month.

Brandix also is building economies of scale and a supply chain that Omar says is inspired by the auto industry, where suppliers gather around big car makers. Such supplier networks are common in China and becoming so in Bangladesh but not in India, he says. Apparel City includes shops that make fabric, elastic, embroidery and underwire — all the main components of a bra.

“We are building a full supply chain for a particular product so that we can do our products much more competitively and… at high speed,” Omar says.

For labour, Brandix is bussing in women from rural villages who are close enough to commute daily. By moving to the labour rather than relying on labour to move to the factory, as competitors do in Mumbai and New Delhi, workers can go home at night. That stability helps makes workers more reliable, he says.

“We’d love to produce for Wal-Mart and other discounters and we are talking to them,” Omar says.

A Wal-Mart Stores Inc. spokesman says the company has no plans to work with Omar but intends to keep in contact. Limited Brands Inc., which owns Victoria’s Secret, says it is a Brandix customer but declines further comment. Hanesbrands Inc. didn’t respond to requests for comment.

Omar dismisses the idea that India can’t compete because of its wages. Vietnam’s wages are higher than India’s, yet Vietnam has nearly double the exports of apparel to the US, he says.

“I don’t think it’s just the wage rate,” he says. “We can build the supply chain and can compete with anyone in the world… We can give you mass production at a moderate price level.”