In the crunch of profitability of the apparel business, investment should be modeled in a way we stay sustainable and profitable. In general, apparel leaders sometimes view ‘investment’ in terms of expansions in the horizontal and vertical mapping of the business where investment strategies often lack clarity in practice.
However, factories usually do investment in technologies and establishments easily other than areas that require investments as well to reap fruits from the major investments.
The allure of capital availability from financial institutions, sometimes, leads us to invest instead of calculating real market demands that eventually increases liability. A suitable investment strategy can help the factory as to where and how to invest putting critical eyes on the expected return, the goal of sustainability, risk appetite, long-term, short-term return, factory situation and guts of own expertise.
To critically revisit the investment strategies in textile and apparel, textile today picked an episode titled ‘Investment Strategies’ in TexTIMe on 30 May 2021. Shakhawat Abu Khair Mohammad, Managing Director, Robintex Group and Sheikh HM Mustafiz, Managing Director, Cute Dress Limited were present in the webinar as panelists. Tareq Amin, Founder & CEO, Textile Today moderated the webinar.
At the beginning of the program, the moderator pointed out that the capacity of the industry becomes mammoth whereas there is little investment in many areas despite requirement. He was inquisitive of the reasoning behind the investment decision where financial or mathematical calculations were felt insufficient. Amin underscored if the investment appetite comes from the market side rather than the suppliers’ side.
Shakhawat responded to the moderator recalling the time he started his career in the apparel industry in Germany. He then worked with Bangladeshi manufacturers where the quality and delivery were not at a satisfactory level, he felt.
Realizing the market demand, he invested in knitting and dyeing set up on a small scale back in 1995 with the high-end German technologies. There were no capable human resources at that time to perform with those delicate technologies. Robintex signified the sustainability and environment first in the investment decision as he was akin to the German industry for a long time, he added.
Instead of conventional dyeing, they set up CPB (Cold Pad Batch) for continuous bleaching and dyeing of knit fabric. The CPB was awarding them 30% cost saving to chemical, energy and water consumption altogether. It also offered them salt-free dyeing that was environmentally friendly.
In terms of productivity, CPB plays significant role than that of the exhaust process of dyeing. One of the audiences from the webinar was interestingly sought the guidance of the CPB from Shakhawat. He stated that professionals were skeptical if the CPB can produce the expected result.
He trained and tried to convince employees by giving confidence that if the bad quality comes you would be held no responsible. Then they could perform and eventually we gained an expected result out of CPB. Though buyers were reluctant to pay higher for the CPB, they were attracted to this environmentally friendly technology and process, Shakhawat added.
Amin enquired as to what made Robintex validate for investment. Shakhawat replied that Robintex preferred investments in the state of the art technology that can produce with 20-30% efficiency and can lower 20-30% production cost down. He traded off between a little higher investment in high-tech machines and conventional technology.
They invested a big money in the digital printing technology which can produce 70 plus meters of fabric per minute with unlimited colors, was the highest productivity of machine in Bangladesh.
They researched a lot of alternatives before going to the investment. To the question of employee capacity building, Shakahwat expressed that they impart training and time to the people and encouraged them to drive fearlessly.
In the enquiry of lack of spare parts availability in Bangladesh – if we could invest in the industry of spare parts. Shakahwat observed that there was not enough government support to such factories whereas the government imposed as high as 60 to 70 % tax on imports of spare parts.
This scenario leads us to purchase spare parts for the next two-three years in advance to stay active in operations. He was of opinion that before going to the investment in machines, we should invest in people development, ERP and overall system development.
With the issue of investment, Mustafiz put significance on the assessment of the actual demand of the market. He critically observed that there was no proportionate investment in the total raw material and supply chain – what was only taken seriously – was the investment for the capacity growth.
“Investment trap” – with the term clutched by the moderator, Mustafiz observed that he was not befallen in that trap where many of his acquainted investors in the industry fell in. He mentioned that his investment decision was quite specific to the customer demand. He said that he doesn’t work with buying a house rather he directly does marketing and hunts customers regularly. He focused on the customers who maintain sustainability and compliance.
With the question of investment in the green, Mustafiz stated that he invested in the green factory by which he could take leverage out of this investment. Whereas many green investments cannot reap the fruits by doing heavy investment in the environment with the choice of the buyers.
Cute Dress invested a lot in two particular segments consciously – one in marketing and another in fabric development. He happily expressed that these two were the key driving forces for his business sustainability.
The moderator asked as to where the new investment opportunity now lies in the time pandemic or post-pandemic. Mustafiz posed the number one substance in the investment in the manufacturing of synthetic fibers. He lamented that we were heavily depended on China. Secondly, we could invest in viscose fibers to stay competitive. In third, he expressed the urgency of product diversification.
Amin asked as to how Cute Dress develops factory people to adjust with the high value-added products with small quantities. Mustafiz replied that they are capable of style changeover as quickly as 16 times in a day in a modular line. They could attain a superior level of efficiency that the average factory cannot perform normally.
He structured his management by distributing due responsibilities by concentrating small areas in detail. He also observed that big factories can also set up several modular lines for executing lucrative and profitable small orders. In last, Mustafiz reiterated his position of investment in marketing and RnD.
Watch the full video here: