The downturn had a devastating effect on the export-oriented apparel units. The first sign that I saw was a sharp drop in percentage of enquires turning into orders. Increasingly, customers started negotiating on prices.
And since they were not getting desired prices from us, they moved to other cheaper destinations such as China, Vietnam, Bangladesh and Sri Lanka. For about six weeks, we didn't react. At that point, our priority was to retain customers at any cost, so we decided to slash prices by 15-20 per cent. Considering that margins in apparel business are wafer-thin (12-15 per cent), all we wanted was to ride through that stage even if it meant no profits for a brief period.
We then came up with measures to cut costs and raise productivity. I shared the problems with all the key employees and asked them for suggestions. After some assessments, it was found that we were losing about Rs 48 crore a year because of bad processing, poor managing of raw material and lack of housekeeping.
We set an internal target to reduce it to below 2 per cent of sales, from 6 per cent, in the next few weeks. Several teams were made and mandate was given to people at every level to stop waste. Thanks to our initiatives, we have reduced our wastages to Rs 16 crore annually, and there is still work in progress to reduce it further to below Rs 8 crore.
In another such assessment, we found out that almost 1,200 employees were redundant. We gave them an option to either upgrade their skills by participating in our training programmes or quit. At the operational levels, we started training programmes at every manufacturing unit. As a result, the employees' productivity went up by as much as 15-20 per cent in a matter of few weeks.
— Sudhir Dhingra, 61, Chairman and Managing Director, Orient Craft
(As told to Manu Kaushik)