The Indian textile industry is one of the largest and most important sectors in the economy in terms of output, foreign exchange earnings and employment in India. The key advantages of the Indian textile industry are Textiles account for 14 per cent of India's industrial production and around 27 per cent of its export earnings. In textile and apparel Industry supply chain plays an important role. If we talk about the supply chain, India is one of the few countries that owns the complete supply chain in close proximity from diverse fibres to a large market. In the 1980s the term Supply Chain Management (SCM) was developed, to express the need to integrate the key business processes, from end user through original suppliers.

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 (other stitched and non-stitched) manufacturing that supply an extensive distribution channel. It is capable of delivering packaged products to customers comprising a variety of fibres, diverse count sizes, cloths of different weight and weave, and panoply of finishes. This permits the supply chain to mix and match variety in different segments to deliver new products and applications. This advantage is further accentuated by cost based advantages and diverse traditions in textiles.

This chain supplies to about 70 per cent by value of its production to the domestic market. The distribution channel comprises of wholesalers, distributors and a large number of small retailers selling garments and textiles. It is only recently that large retail formats are emerging thereby increasing variety as well as volume on display at a single location. Another feature of the distribution channel is the strong presence of 'agents' who secure and consolidate orders for producers. As per one estimate there exist 65,000 garment units in the organized sector, of which about 88 per cent are for woven cloth while the remaining are for knits. However, only 30-40 units are large in size (as a result of long years of reservation of non-exporting garment units for the small scale sectors - a regulation that was removed recently). While these firms are spread all over the country, there are clusters emerging in the National Capital Region (NCR), Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana employing about 3.5 mn people. According to the estimates, the total value of production in the garment sector is around Rs.1,050-1,100 bn of which about 81 per cent comes from the domestic market. The value of Indian garments (eg. saree, dhoti, salwar kurta, etc.) is around Rs.200-250 bn. About 40 per cent of fabric for garment production is imported - a figure that is expected to rise in coming years.

The weaving and knitting sector are at the heart of the industry. In 2004-05, of the total production from the weaving sector, about 46 per cent was cotton cloth, 41 per cent was 100% non-cotton including khadi, wool and silk and 13 per cent was blended cloth. Three distinctive technologies are used in this sector - handlooms, powerlooms and knitting machines. They also represent very distinctive supply chains.

I believe that Indian textile industry has suffered in the past from low productivity at both ends of the supply chain - low farm yields affecting cotton production and inefficiency in garment sector due to restriction of size and reservation. Added to this, contamination of cotton with consequent increase in cost (as it affects quality and requires installation of additional process to clean and open cotton fibres before carding operations), poor ginning (most equipment dates back to 1940s), high average defect rates in production process (which also leads to increase in effective labour and power costs), hank yarn requirement, etc. and its competitiveness gets compromised severely. Similarly, processing technology is primarily manual and small batch oriented with visual colour matching and sun drying. This leads to inconsistency in conformance quality. Lead times across the sector continue to be affected by variability in the supply chain - defect rates average over 5%, average % of orders on time is about 80%, variance in order size across firms is high (e.g., the coefficient of variability of average order size for spinning firms is about 2.6), and on an average, 16 days of sales as work-in-process inventory (the highest for garment firms) and an average of 30 days of sales in raw material inventory (the highest for spinning firms) (Chandra 2004). Some of the hurdles (eg., reservation in the garment sectors) including tariff distortions between the organized and unorganized sectors have now been systematically removed by policy initiatives of Government of India and have opened avenues for firms to compete on the basis of their capabilities.