Export Project 2012

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SHARMA

FASHIONS.Group: 09


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Index Page

I. Executive Summary 2

II. Business History 3

III. Market Research 5

IV. Marketing Decisions 8

V. Legal Decisions 9

VI. Manufacturing and Operations 10

VII. Personnel Strategies 16


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I.Executive Summary

SHARMA Fashions pvt. ltd. is an apparel manufacturing company that deals

mainly with mens and womens garments and has not yet diversified intochildrens clothing. It has been in existence for 5 years, operates out of its maincommercial office in Andheri and has a manufacturing unit in Vashi.

The organization is divided into various departments such as Finance, Marketing,Creative department, Production Management, Accounting, Human Resource,Quality Control and so forth and each department has their own separaterequirement. Finances are managed by ICICI and Axis Bank that offers relativelylow rates for working capital finance. Raw materials are imported from China andNepal in abundance and are then converted and re-exported, Europe and USA

being the main market.

At SHARMA Fashions Limited, we continuously innovate & offer merchandisethat is unmatchable. In addition we have in house integrated Design Studio and R& D Laboratory with modern equipment. We enjoy certain benefits such as dutydrawback, discounts on machinery, and also receive concessions on the imports.As far as distribution goes, it follows the indirect exporting strategy wherecommission agents and wholesalers undertake the sales and promotion activities ofthe organization.


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II. Business History

Incorporated in the year 2007 SHARMA Fashions Limited started its business atAndheri in Mumbai. Consistent hard work and adapting to the market trends and

buyers needs have enabled SHARMA Fashions Limited to establish itself asmarket leaders in manufacturing, sourcing and trading all types of textile products.SHARMA Fashions pvt ltd. has been in the apparel manufacturing industry for 5years. In that time we have focused mainly on Mens and Womens garments and

not on childrens apparel yet.

Products manufactured by the company include mainly t shirts and shirts to acertain extent. The products therefore cater to a wide range of male and femaleconsumers across income levels.

We offer good quality product at a competitive price with a great amount of varietyin the products for instance cartoon print t- shirts to quoted t-shirts, thus ensuringvalue for money for its lower priced products , claims to be the main selling pointof the company.The company trades internationally because of the favourable concessions receivedfrom banks and the government policies for export. Also prices in the foreignmarkets are higher than in domestic markets thus making SHARMA Fashions pvt.Ltd primarily export oriented. Our company exports virtually most of our

production with surpluses being sold in the local markets due to the above reasons.

In India, after the agricultural sector the garment export industry is one of thelargest industries generating directly and indirectly the highest amount ofemployment. The garment export industry also contributes a large amount offoreign exchange for the nation and is one our most important net exportingindustries.India grew its share in the global garment export market rapidly in the 80s. Themajority of Indias garment export is to developed nations. However, since various

reforms in 2010, the market has become more competitive with China, SouthKorea, Hong Kong, and other Asian countries gaining a technological edge overIndia. Due to this, SHARMA Fashions pvt ltd. has followed a policy ofmaintaining up to date machinery and technology in order compete at a globallevel.


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Firms such as Creative Garments, clothes rack brands for less etc.are directcompetitors to us as they manufacture similar products and export to our targetmarkets as well. However for our company , competition among Indian exportersis limited as not many manufacturers are into manufacturing high value added,branded apparel.Organizational structure:

Considering that it is a small unit, we have a very flat level of hierarchy.

ABC SHARMACEO

JHS SharmaFinance

Shah SharmaMarketing

Mangal PandeyHR

AMAN SharmaManuf.

TOD SharmaLogistics


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III. Market Research

As with most other companies in the garment export industry, we export primarilyto developed nations. Also, as our company specializes in mid to high end apparel,

the developed nations are the best market for our products.

Primary Market: Europe

Since the European Union has a common unified trade friendly economy with afree flow of goods across its trans-national borders, which chose to tap this market.Due to this, we only have to pay a uniform duty rate regardless of which country inthe EU the goods are exported to. Also, majority of the members of EU singlemarket share the same currency, i.e. the Euro.

Secondary Market: United States of America

The United States of America has the largest economy in the world and is theworlds largest importer therefore making it an important market, however, thehigher competition and uncertainty of laws in the USA made us choose Europe asprimary market.

Garment Exports from India


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Current Scenario

The current situation in our target markets is that the demand for apparel is rising,

and their domestic suppliers cannot compete with our prices. However China, SriLanka and other East Asian economies are exporting in large amounts to Europe aswell as America. The competition is severe and while our company has updatedand state-of-the art technology, most Indian manufacturers do not. For Europe inparticular, we face strong competition from Turkish, Hungarian and Romanianmanufacturers. Whereas in the case of the United States of America, it is again theother Asian economies competing on the basis of low raw material and labor costsas well as established loyal brands such as Ralph Lauren Polo, Hollister, etc.

The existing demand which fell due to the recent economic downturn in both our

target markets has reduced temporarily however with these economic issues beingthe most focused on issues, the situation is likely to change shortly.

The recent fluctuation in the Rupee: Dollar ratio also benefitted Indian exporters asthe Dollar touched a 52 week high of 54 rupees.

The EU countries have no discriminatory practices against a particular country andthere are no significant trade restrictionsand the market is free of quota restrictions.

The Indian Apparel & Textile Industry is one of the largest sources of foreign

exchange flow into the country with the apparel exports accounting for almost 21%of the total exports of the country.


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Strengths and weaknesses of the textile and apparel industry in India

1.Strength

1. India is self-sufficient in terms of raw material such as cotton. India is thethird largest in the world in the production of cotton.

2. Cheap labor and developing entrepreneurial skills have always been thebackbone of the Indian Apparel and textile Industry.

3. The small size of manufacturing in the apparel industry allows for greaterflexibility to procure specialized orders and undertake job production

4. The cultural diversity and rich heritage of the country yields in extremelycreative designers.

2. Weakness

1. The Spinning Sector in India lacks modernization2. India has relatively less number of shuttle-less looms (weaves 2-4 times as

much as conventional looms)3. High power costs and long export lead times are eroding Indias export

competitiveness

4. Less attention on man power training5. Large distance of the potential market


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Competition

Our competitors include numerous apparel designers, manufacturers, distributors,importers, licensors, and retailers, some of which may also be our customers. Thelevel and nature of our competition varies and the number of our direct competitorsand the intensity of competition may increase as we expand into other markets oras other companies expand into our markets. Some of our competitors may be ableto adapt to changes in consumer demand more quickly, devote greater resources toestablishing brand recognition or adopt more aggressive pricing policies than wecan.

In addition to this, with respect to certain of our businesses, retailers that are ourcustomers may pose a significant competitive threat by sourcing their products

directly or marketing their own private label brands. These competitive factorswithin the apparel industry may result in reduced sales, increased costs, lowerprices for our products and/or decreased margins.

With over 200 registered readymade garment exporters only in the country, thecompetition is extremely high. However, we choose to deal specifically to therequirements of European and American Markets which brings down thecompetition greatly.

However, competition isnt only from the Indian exporters, but the exporters fromchina, Hong Kong and Singapore as well which only makes it more difficult,forcing us to take all possible measures to reduce costs and enhance the overallquality of our products.


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IV. Marketing decisions

A.Distribution strategiesThe distribution strategy we have chosen is that of indirect exporting. However,gradually we are gaining better knowledge of our consumers preference and theirdemand therefore we are starting to use directly exporting on a small scale as well.As part of our marketing strategy, our agents are in touch with our customers todiscuss new sample requirements and product developments which we incorporatein our manufacturing process on a quarterly basis in order to keep up with fashiontrends (only for job specific orders)

B.Pricing strategyThe pricing strategy that we use is Competitive pricing, i.e. based on the pricescharged by our competitors. Our products range from $3 - $15 based on the colors,

prints, styles, etc. eg. Polo Collared T-shirts are 20-25% more expensive than

round neck t-shirts

C.Promotion strategyPromotion of our products is also primarily undertaken by our commission agentsand resident buyers that have the required local knowledge of what works in their

respective markets. We also regularly take part in trade fairs organized by theAEPC. However, the major promotion of our products is that we price much lowerthan most of the other garment/apparel suppliers while maintaining superior andconsistent quality.

D.Product strategyOur products range from tshirts, knitwear, ladies tops and tracks, etc andconsidering the wide range of our customer base characteristics we provide variousdifferent sizes ranging from XS to XXXL. We also offer a range of different color

and design patterns which change on a seasonal basis as per information obtainedfrom our agents in the target markets.


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V. Legal decisions

With regard to the Agent/distributor agreement, commission agents were hiredseparately for both our target markets. The agreement with them is that of a non-exclusive agreement so that a sale to any area does not have to involve oneparticular agent is therefore more flexible.

The agents we are associated in our target markets are as follows:

Worldwide enterprises LLC (USA) Shenzen Richford Enterprises (Europe) Shinobe globallink marketing (Europe)

Our company has the valid import export code number and is a member of AEPC

(Apparel Export Promotion Council)

Some of the documents required for garment export:

Customs Declaration Form Customs Invoice (Mainly needed for the USA) Bill of exchange Bill of Lading Commercial Invoice Certificate of Origin Marine Insurance Certificate

The disputes of our company are handled by the Alternative Dispute Resolutions(ADR) function Indian Institute of Arbitration and Mediation (IIAM) covering ourentire legal framework.

Quality

Every individual article has a separate standard, as specified by the importing

company. However, The company has been credited with the ISO 9001:2010, andthus will follow all the quality standards and norms as dictated by it.


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VI A Manufacturing Process:

The manufacturing process of t shirts is a fairly simple and largely automatedprocess. Specially designed machines integrate cutting, assembling, and stitchingfor the t shirts to be produced. Here, they produce 2 types of t shirts with respect tothe seams. One of the processes includes narrow, superimposed seams, which areusually made by placing one piece of fabric onto another and lining up the seamedges. These seams are frequently stitched with an overedge stitch, which requiresone needle thread from above and two looper threads from below. This particularseam and stitch combination results in a flexible finished seam.The second type that is used is called bounded seams, where a narrow piece ofcloth is folded around the seam, as the neckline. These seams may be stitched

together using a lockstitch, chainstitch, or overedge stitch. Depending on the styleof the T-shirt, the order in which the garment is assembled may vary slightly.

The detailed process goes as follows:

Cutting:The T-shirt sections are cut to the dimensions of the patterns. The pieces consist ofa body, or separate front and back sections, sleeves and pockets.

Assembling the front and the back:

The separate pieces for the front and back sections must be stitched together at thesides. They are joined at the seam lines to form a simple and narrow seam andstitched together using an over-edge stitch. Care must be taken so that the garmentdoesnt tear.

Assembling the sleeves:

The sleeves are generally finished before they are fitted into the garment, since it is

easier to hem the fabric while it is flat. There is an automatic system that moves thesleeves through a conveyer. The edge may be finished by folding it, forming thehem and stitching, or by applying a band.During the final stage of sewing the shirt, the sleeve and side seams are sewn in 1action.

Stitching the hem:


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The garment hem is sewn with an over-edge stitch which results in a flexible hem.Tension should be loose enough to allow the fabric to stretch without tearing it.

Adding pockets:

Pockets are usually sewn into tshirts used for casual wear. Higher quality T-shirtsusually inserts an interlining into the pocket so that it maintains its shape. Theinterlining is inserted into the pocket as it is sewn onto the T-shirt front.

Attaching and finishing the neck:

Necklines with superimposed seams may be taped, so that the shirt is stronger andmore comfortable. Tape may be extended across the back and over the shoulder

seams to reinforce this area as well and to flatten the seam. The seam is then coverstitched or top stitched.

Label:

One or more labels are usually attached at the back of the neckline. Labels provideinformation about the manufacturer, size, fabric content, and washing instructions.


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B. THE EXPORT PROCESS:

1. Order FormThe first step in the Export Procedure of SHARMA Fashions is the receipt of theorder form from a prospective importer. A person who is interested in importinggarments from SHARMA Fashions sends them an order form with the details ofthe garments he wishes to import. Details include number of pieces, sizes, coloursetc. In the Order form, the importer also inquires about the price, standard, weightof the goods in question.

2. Proforma InvoiceAfter Receiving the Enquiry Order form, SHARMA Fashions prepare a documentcalled the Proforma Invoice. The Proforma Invoice is a statement sent back to theimporter before the deal is finalized. It serves as a negotiating instrument. In theProforma Invoice, SHARMA Fashions give the exact Prices, Quantities, sizes,colors of the garments in question. It also states the weight and standard of thegarments in question. The total amount to be paid by the importer is alsomentioned in the Proforma Invoice.The initial proforma invoice often sets the stagefor the first round of negotiations if the exporter and importer have not yet had anyreal discussions.

3. Confirmation of Order an Receipt of advanceOnce the negotiations are completed and the terms and conditions are finalized,SHARMA Fashions sends 3 copies of the proforma invoice to the Importer for theconfirmation of the order. The Importer signs these documents and sends 2 copiesof the documents along with the advance payment back to SHARMA Fashions.SHARMA Fashions then send a receipt of the advance payment received back tothe importer. With the receipt of the Advance, the order becomes finalized.

4. Procurement of MaterialsOnce the Order is finalized and the advance payment is received, SHARMAFashions procures the required amount of garments based on the specificationsrequired by the importer. He also consults the importer on the choice of supplierdepending upon the quality of material required by him. The supplier manufacturesthe goods and sends it to SHARMA Fashions as soon as they are ready. The goods


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are then stored in the warehouse located adjacent to SHARMA Fashions officeuntil they are ready to be shipped.

5. Preparing Packing ListThe Garments are properly packed and are marked with necessary details such asport of shipment and destination, country of Origin i.e. India, gross and net weightetc. A packing list is also prepared along with the goods. The Packing list containsdetails such as total number of cartons, Number of pieces in each carton, totalgross weight and total net weight. The packing list is also essential for the importeras he cross checks the goods with the packing list.

6. InspectionBefore the goods are exported, they are sent for inspection and stuffing. TheInspection is carried out to see that the goods manufactured are of the standardpromised by SHARMA Fashions. Once the inspecting officer is satisfied with thequality of goods produced the inspection is completed. He then gives SHARMAFashions an Inspection certificate which the exporter would later have to produceat the Customs Authorities.

7. Obtaining Insurance PolicyOnce the Goods are ready to be exported, SHARMA Fashions obtain an insurance

policy. This is done to avoid the risk of loss of the goods during transit. The Policytaken by SHARMA Fashions is an Export Credit Guarantee Corporation of IndiaPolicy. In case anything were to happen to the garments during transit, SHARMAFashions could not be held liable for the loss. If anything were to happen to thegoods then the insurance company would be held liable. Once the policy is grantedhe will receive an Insurance Certificate as well as a Trade Certificate

8. Appointing Clearing and Forwarding AgentAt this point, SHARMA Fashions appoints a Clearing and Forwarding Agent for

the smooth clearance of goods from the customs and preparation and submission ofall Export related documents. SHARMA Fashions deal with a large volume ofbusiness, so it is impractical for them to keep running to the Docks for anyshipping related problem; hence they appoint a Clearing and Forwarding agent tohelp take care of all the post production work.


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9. Dispatch of GoodsThe dispatch of goods can be carried out in 3 ways at SHARMA Fashions. Thefirst method is called FOB(Free on Board). In this process they send the goods tillthe port (ex. JNPT). This is the end of their job. The next method is called the CIF

method. Here, they send the goods till the export destination. This process alsoincluded Insurance of the goods. The third method is called the CNF method whichis similar to the CIF method, but the goods arent ensured. The export process iscarried on by sea or air.

10. InvoiceAfter appointing the agent, SHARMA Fashions then send a copy of thecommercial invoice to the importer by courier along with a letter stating the actualdate on which the goods will be dispatched. Once the importer receives the

commercial invoice, he knows the exact amount of the money that is due toSHARMA Fashions. SHARMA Fashions send him the invoice in advance so thathe has time to arrange for the money and make the payment on the due date.

11.Obtaining Mates ReceiptAfter completing all the necessary formalities like submitting certificate ofInspection and submitting packing list, the clearing and forwarding agent receivesthe Customs clearance. The Goods are then loaded on the ship. Then thecommanding officer of the ship prepares the Mates receipt and hands it over to the

Clearing and Forwarding Agent.The mate's receipt indicates the name of thevessel, berth, date of shipment, description of packages, marks and numbers,condition of the cargo at the time of receipt on board the ship, etc. The shippingcompany does not issue the bill of lading unless it receives the mate's receipt.

12.Obtaining Bill of LadingAfter receiving the mates Receipt, the Clearing & Forwarding agent hands it overto the Shipping company who in turn issue him a Bill of Lading.Bill of Lading is adocument given by the shipping agency for the goods shipped for transportationform one destination to another and is signed by the representatives of the carryingvessel. The Bill of Lading is only given to the Clearing agent after the goods havebeen loaded and after the mates receipt has been issued.


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13.Obtaining Shipping BillOnce the Mates Receipt is accepted by the shipping company, they issue the Bill oflading. Then the Customs authorities issue a Shipping Bill. The shipping bill is themain document on the basis of which customs office grants permission for the

export. The shipping bill contains particulars of the goods being exported, thename of the vessel, the port at which goods are to be discharged, country of finaldestination, exporter's name and address, etc. On obtaining the Shipping Bill, theClearing agent sends all the documents to SHARMA Fashions along with the billfor his services.

14. Submission of DocumentsOn receiving the Documents from the Clearing Agent, SHARMA Fashions

submits them to their Bank Oriental bank of Commerce. After scrutiny of thedocuments, Oriental bank of Commerce forwards these documents to the ImportersBank.

15.Receipt of GoodsOnce the Goods are received by the importer after paying the duties, he checks thegoods with the packing list sent to him by SHARMA Fashions. Once he is satisfiedwith the goods, he deposits the remaining amount of money in SHARMA Fashionsaccount. SHARMA Fashions then pay the Clearing and Forwarding agent his dues.

After receiving the remaining amount, the export procedure is said to be complete.


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VII Personnel:

Workers:

As the company will just be starting, we dont plan to start on full capacity all thetime. We plan to employ 50 workers in one shift, consisting of 12 femaleemployees, primarily in the accountants, designing and washing department. Theremainder workforce will be carrying out the rest of the work.Skilled: for departments like Accounts, supervisions, managers of inventory,preparing of delivery ad work schedule etc.semi-skilled: for work like designing and purchases, floor managers etc.

Unskilled they will be involved in the actual production and packing process forthe garments.

The women will not be working post 7 pm, due to the rules of the Indian FactoriesAct. Also, there is no absolute requirement for them to work late on the dutiesallotted to them.

Operations:

The company operations will be carried out in 2 shifts of 10 hours each(7am-5pmand 7 pm-5am)), including breaks for lunch, rest and other personal allowances,not lasting for more than 2 hours in a day, 6 days a week.

Recruitment requirements:

Subject to the department the employees are recruited to, requirements will change.However, qualities such as dedication and honesty are needed from everyone.For the accounts department, the potential employees should have at least the basicqualifications of education, such as XII passed along with a degree specialising infinance.Designing dont really require a specific qualification other than a basic education.

However, the stitching and cutting etc should be people, who know the trade and

wouldnt really require any training oer sayWashing and loading, packing etc dont require any specific qualifications as the

work is more physical rather than mental. They should be healthy and able to carryout such tasks.


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Training:

Believing in overall development and enhancement of the employees and therebythe company, we plan to make intermittent training programmes a norm, where allemployees staying with us for over 10 months will be given training about thevarious developments and innovations in the garment export sector, depending onthe field they are employed in.For the Designers and tailors, programmes run by the AEPC under the names ofSMART, community college and Disha which would be partly paid by us, andpartly funded by the government as per their policiesFor the account department personnel, courses in computers and the latest softwareavailable for the accounting processes as well as a time to time update about thevarious policies and their consequent changes.The management also plans to organise seminars with well known people of the

field as well as refresher courses on a periodic basis.

Incentives:

We understand that the human resources need constant morale boosters andincentives in order to achieve maximum outputs. This we have introduced a perpiece way of paymentOvertime, Diwali and New Year bonuses shall also be awarded to loyal employeeswith a satisfactory level of outputThere will always be room to grow and expand the current employment portfolio,depending entirely on the employees capability and motivation.For the female employees, we plan to provide a small day care centre

Safety:

Accidents in a factory are common phenomena. By introducing certain preventivemeasures, we hope to reduce the number of these significantly.Protective gloves and face masks for our cutters, washers, dyers and tailors is oneof the most basic facilities we plan to offer.

Protective, grip boots for the washers in particular are also on the cards.Health insurance for employees who have been with the company for over 1 yearalso shall be taken by the management.


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Working conditions:

Adequate lights and ventilation with proper climate control and seating facilities isthe main concern as far as the working conditions go.A clean rest room facility, separate for both genders will definitely be provided forthe staff, irrespective of their station in the organization.Also, a canteen with food at concessional rates will be provided

Councils:

On inception, we have decided to become a part of the government funded andaided Apparels Exports Promotion Council


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Acknowledgements

We would like to thank our teacher Prof. Venky for the opportunity to understand,to some extent what would starting our own export import business would be like.

We would also like to thank all the people who helped us through this project atdifferent areas of developing it. Sincere thanks to all.