Fine Cotton Textiles 1

Supply Chain Management

Instructor: Dr. Rizwan Ahmed

Submitted by:

Bisma Shahzad

Eesha Rehan Malik

Fatima Safdar

Mariyam Mohsin

Syeda Saleha Munsoor

Zoha Junaid

Lahore School of Economics

Section C
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Table of Contents
Executive Summary.........................................................................................................................3

1. Company Introduction.................................................................................................................4

1.1 Project Objectives..................................................................................................................4

1.2 Introduction of the Company.................................................................................................4

1.3 Products and its Categories....................................................................................................4

2. Analysis of the Supply Chain......................................................................................................5

2.1 Competitive and Supply Chain Strategy................................................................................5

2.2 Strategic Fit............................................................................................................................6

2.2.1 Customer and Supply Chain Uncertainty........................................................................6

2.3 Supply Chain Drivers.............................................................................................................7

2.3.1 Facilities..........................................................................................................................7

2.3.2 Sourcing...........................................................................................................................9

2.3.3 Inventory.........................................................................................................................9

2.3.4 Transportation.................................................................................................................9

2.3.5 Information....................................................................................................................10

2.3.6 Distribution Network.....................................................................................................10

2.4 Issues Causing Inefficiencies...............................................................................................10

3. Issues Identified and Recommendations...................................................................................11

3.1 Possible Solutions and Recommendations...........................................................................11

3.2 Tradeoffs in Resolving the Issues........................................................................................13

3.3 Benefits of Resolving Issues................................................................................................14

Appendix........................................................................................................................................17
Fine Cotton Textiles 3

Executive Summary
This report consists of findings about one of the aspiring cotton textiles companies in Pakistan:
Fine Cotton Textiles, who have been providing apparel to many institutional and retail customers
for more than two decades. The report investigates and analyses different supply chain
operations of the company which have aided in establishing itself as a successful business-to-
business.

The company uses special and unique sewing machines, fabrics, threads, elastics, and other
materials to manufacture products of top-notch quality for its customers based on push strategy.
Fine Cotton Textiles provides its customers with the best quality, at the lowest prices and hence
adopts a competitive strategy focused on being cost leadership. Their an efficient supply chain
strategy which is inspired by their competitive strategy. Fine Cotton Textiles’ both facilities
within Pakistan (Phool Nagar and Karachi facilities) are equipped with state-of-the-art
machinery. However, the company remains exposed to risks associated with supply chain
disruption, such as market risk and other policy-related issues. We suggest that these risks can be
mitigated through strategies like hedging, diversifying raw material sources and collaborating
with the government.
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1. Company Introduction
1.1 Project Objectives
Our objectives as we analyze the supply chain configuration and operations of Fine Cotton
Textiles are:

1. To analyses supply chain operations of one of the aspiring textile companies in Pakistan,
with customers, and suppliers across the globe.

2. To realize practical implications of supply chain concepts studied during the semester.

3. To explore how implementing different strategies within the supply chain can help reduce
the chances of risks associated with disruptions in the supply chain.

1.2 Introduction of the Company

Fine Cotton Textiles has been a trusted provider of apparel to institutional and retail customers
since 1990, with manufacturing facilities located in Phool Nagar and Karachi's Korangi Creek.
They specialize in producing high-quality value-added apparel, garments, home textiles, and
other related products for the local and global textile market.

The company prides itself on using state-of-the-art green technology that is environmentally
friendly, setting a benchmark for quality in the industry. Their ethical and responsible supply
chain processes are recognized worldwide, ensuring timely delivery of premium quality products
that meet the needs of their customers.

Fine Cotton Textiles' products are specifically designed, constructed, and tested for prison use,
with a focus on addressing the issues of inmate abuse and industry laundry systems. Their
products can withstand significant force, thanks to the unique and special sewing machines,
fabric, threads, elastics, and other materials specially prepared for jail and prison use.

1.3 Products and its Categories

Since its inception in 1990, Fine Cotton Textiles has been providing institutional wear,
particularly for inmates. However, as the demand for their products grew, they expanded their
product line to cater to a wider range of customers. Today, they offer an extensive range of
products, which include medical wear, home textiles, bath accessories, construction apparel,
denim wear, chef wear, and general garments.
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Their medical wear products are reusable and disposable textile items designed for use in
hospitals, nursing homes, and laundries. The home textiles range includes bed linens, pillow
covers, duvet covers, and other related products. Bath accessories include Terry Towels,
Institutional Towels, Bath Towels, Bathrobes, Hospital Towel Supplies, and Shop Towels. Their
construction wear is tailored to the specific needs of construction workers, carpenters, utility
workers, electricians, and other professionals who require quality and safety in their work attire.

Fine Cotton Textiles also exports inmate clothing, including prison uniforms, work release
clothing, prison undergarments, work clothes, outerwear, property storage bags, and laundry
bags. In addition, they manufacture denim wear and general garments such as t-shirts, pants,
trousers, hoodies, jackets, and undergarments.

Through their extensive product line, Fine Cotton Textiles has established itself as an aspiring
provider of high-quality textile products for a wide range of customers.

2. Analysis of the Supply Chain

2.1 Competitive and Supply Chain Strategy
Fine Cotton Textiles distinguishes itself from competitors through its exceptional ability to
provide materials that can endure high levels of applied force, making them ideal for
construction workers and inmate apparel. However, while differentiation may be an enticing
strategy in the highly competitive textile industry, Fine Cotton Textiles strategically adopts a cost
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leadership approach. By consistently offering the finest quality products at the most affordable
prices, the company establishes itself as one of the known companies in the market.

In order to maintain its competitive edge, Fine Cotton Textiles places great emphasis on
developing and maintaining an efficient supply chain. This involves identifying opportunities for
procurement optimization, waste minimization, and skillful negotiation with suppliers. By
effectively managing these aspects, the company can secure better deals, thereby optimizing
costs and passing on the benefits to its customers.

Additionally, Fine Cotton Textiles employs a proactive approach to inventory management. By

ensuring an adequate stock of inventory, the company can effectively cater to unforeseen
circumstances, such as during the pandemic or when import bans were imposed in Pakistan. This
prudent practice not only enables the company to swiftly respond to market fluctuations but also
results in economies of scale. Through bulk purchasing, Fine Cotton Textiles can take advantage
of lower unit costs, optimize machinery utilization, and distribute fixed costs over a larger
output, ultimately enhancing its competitive position.

2.2 Strategic Fit

2.2.1 Customer and Supply Chain Uncertainty
1. Quantity Needed in Each Lot

This depends on the demand and varies for each product. However, approximately 80-90
containers are exported every year with each containing 22,000kg of products.

2. Response Time

The company has a high tolerance, enabling effective planning, resource optimization, and cost
reduction. Typically, the delivery time frame from the order placement is around 60-90 days.
This time frame allows the company to streamline its operations and align its resources
effectively, ensuring timely delivery and customer satisfaction.
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3. Price

As they compete on cost leadership, prices are kept low while maintaining good quality as
compared to other competitors. This competitive pricing approach enables the company to attract
customers and gain a competitive edge in the market.

4. Service Level Required

Low levels of service and longer lead times are acceptable to customers as bulk purchasing is
done through Fine Cotton Textiles. This helps them achieve economies of scale.

5. Product Variety

The variety of products offered is high in order to target a wider market. By offering a diverse
portfolio, the company can capture different segments and strengthen its position in the industry.

6. Buying Channels

The buying channels employed by the company primarily follow a business-to-business (B2B)
model. They first sell their products to wholesalers, who subsequently distribute them to other
customers.

7. Desired Rate of Innovation

Since the products offered are standardized, the products don’t require much innovation.
However, they do cater to customized needs of their customers and upon receiving samples from
customers, the company takes proactive measures to imitate and reproduce the desired products
accurately.

2.3 Supply Chain Drivers

2.3.1 Facilities
Fine Cotton Textiles has two facilities, one located in Punjab in the city of Phool Nagar and the
other in Korangi Creek in Karachi, Sindh. The factory in Sindh is larger than the one in Punjab
since Karachi is home to a lot of industries which thrive in Korangi Creek due to its proximity to
the sea and the seaport. This aids the process of exporting for the company since all of its clients
are based in the US and the products are transported in containers via ships. As for the factory in
Punjab, it is located far away from the main city. This is done since the population decreases
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along with the price of real estate, which makes it easier for companies to acquire a lot of land
for their facilities. Both the locations are in a place where heavy trucks and other vehicles can
access them. Such industrial areas have roads which are accustomed to such a heavy load and
have no restrictions on their movement as opposed to the rules imposed in main cities.
Furthermore, an uninterrupted supply of electricity is both promised and subsidized. The location
of the factories also helps the factory keep track of its waste and dispose of it mindfully, which
would not have been possible in city centers.

Both the facilities are equipped with state-of-the-art machines which are environmentally
friendly and have been labelled as green machinery due to the lack of waste produced. The
company wants to set a standard for the rest of the industry and enable waste-free production,
especially due to the amount of pollution textile companies are already accused of.

The factories are equipped with machines for the following processes: weaving, singeing,
mercerizing, dyeing, printed, cutting, stitching, finishing, and packaging. All these processes are
followed in this specific order. These machines are able to produce around 40,000 to 50,000 of
fabric every day.

The weaving process is carried out by a Sulzer Weaving Machine which weaves fabric into
different formations and power looms such as Dobby, Jacquard and Circular. Fine Cotton
Textiles has excelled in multiple types of weaving including twill weaving, satin weaving, sateen
weaving and plain weaving. For the dyeing process, the GS HOR is used which is a high
pressure and high temperature dyeing machine. It contains vertical spindles. As for stitching,
JUKI and Sewkey stitching machinery are used. This includes many stitching machines such as
lockstitch machine, overlock/safety machine, zigzag stitching machine, cover stitch machine,
button sewing machine and pinpoint sewing machine. These methods all accelerate the stitching
process taking it up to 3000 stitches per minute which is a lot compared to the number of stitches
made manually. The printing process includes various methods such as the digital printing and
screen-printing methods as well as printing using rotary printing machinery. The former methods
are used over the latter one when time is limited. Next up, finishing and packaging are done
manually which takes the longest time out of all the processes since it is done manually. This
step takes even longer since the final product is sprayed with a chemical that keeps it flame
retardant, wrinkle and bacteria free. While the machinery at the factories heavily facilitates the
Fine Cotton Textiles 9

production process, finishing is a process that still hasn’t been mechanized as yet and takes up
the most time.

2.3.2 Sourcing
Fine Cotton Textiles sources its material from multiple suppliers as opposed to a single supplier
to ensure a constant supply of raw material. It depends on both local as well as international
suppliers. This is done to ensure there are no disruptions in the supply chain. Furthermore, the
quality from imports tends to be better and the quantity is also more than what local suppliers
can supply with.

The yarn is sourced from local companies like Colony Textile Mills, Arshad textile Mills and
A.A. Spinning. Buttons are acquired from SCOVIL Snap Fastener from China or Y.K.K Pakistan
Pvt. Limited whichever is cheaper and Kadura Fabric is imported from China. Since yarn is the
basic raw material used in the textile industry, Fine Cotton Textile has kept mainly 2 sources for
yarn.

2.3.3 Inventory
Fine Cotton Textiles follows the push inventory strategy which works on anticipation of orders
and runs on forecasts. This enables the company to keep a buffer stock for two or three
shipments in the future. Raw material shipments are re-ordered every three months, which helps
get stock for current orders as well as the buffer stock.

The company also has a minimum requirement stock which is 10% of the order quantity to deal
with urgent deliveries and any unexpected orders which need to be fulfilled.

Warehouses are not outsourced, and all inventory is stored in factory warehouses. This prevents
delays and uncertainties of raw material reaching the factory. This way, inventory shortfall is
avoided and unprecedented orders can be catered to quickly.

2.3.4 Transportation
In-bound logistics are dependent on trucks and trolleys to bring the raw material from the source
to the factories. Out-bound logistics include the shipping of the final product via seaports in
Karachi to customers, who are in the United States. Customers include Zacron Textile, FSI Inc.,
Bolt Textiles Inc., Paramount Textiles Inc., and Intralink Textiles Corp.
Fine Cotton Textiles 10

Maritime shipping is the cheapest way of transporting exports. Air shipping becomes very
expensive as rates increase when the weight of the transported material increases. Fuel costs are
also high in air travel. The distance between the United States and Pakistan is large and has two
oceans in between which is why waterborne transportation is the most suitable method for Fine
Cotton Textiles.

2.3.5 Information
Fine Cotton Textiles does not use any specific software for customer relationship management or
supplier relationship management, e.g., SAP ERP systems. It stores data on excel sheets for all
its orders and refers to the same sheets while making forecasts for inventory. Orders are placed
via email, WhatsApp, or the Fine Cotton Textiles website.

2.3.6 Distribution Network

Unlike most distribution networks, Fine Cotton Textiles does not have a retailer in between.
Customers are provided with the finished product directly. Since Fine Cotton Textiles is a B2B
company, it sells its products to institutional and retail suppliers (wholesalers). These companies
further sell the finished material to their customers.

2.4 Issues Causing Inefficiencies

Price fluctuations due to inflation and varying dollar prices have greatly disturbed the supply
chain since prices are highly variable and have to be negotiated frequently with the suppliers,
leading to an increase in uncertainty. This also leads to problems in determining the sale price of
the products.

Various raw materials like nylon fabric which is also known as the Kadura fabric is imported
from China. Alongside this, accessories like buttons and zips that are stitched to the garments are
imported from SCOVILL Snap Fastener China or bought from Y.K.K. Pakistan Pvt. Ltd.
depending on which company provides a better price. Due to this not only are raw materials
sometimes expensive but also problems like import bans are hindering the supply of raw
materials and making it difficult to open LCs.

Quality control is another issue that the company faces as substandard items are returned to the
supplier for replacement. This leads to delays in production and delivery which can reduce the
competitiveness of the company and increase costs.
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Political instability and security issues are also impacting the supply chain of the company in
Pakistan. This has resulted in disruptions to production and delivery schedules, as well as
increased costs due to security-related measures.

The company faces a shortage of skilled labor. After hiring labor huge costs have to be incurred
on their training which is not only time consuming but slows down productivity.

The company also faces several regulatory and policy-related issues, such as complex export
procedures, import tariffs, and taxes. These increase the overall cost of production and reduce the
competitiveness of the industry in the global market.

3. Issues Identified and Recommendations

3.1 Possible Solutions and Recommendations
According to the owner there are some or no possible solutions until the financial situation of the
country gets better. However, we recommend some solutions that can be implemented by the
company these are:

One possible solution for the company facing price fluctuations due to varying dollar prices is to
implement a hedging strategy. Hedging involves using financial instruments such as futures
contracts or options to mitigate the risk of price fluctuations. They can use futures contracts to
lock in a fixed exchange rate for a specific time period, thus reducing the uncertainty of future
cash flows. For example, the company can enter into a futures contract to buy dollars at a fixed
exchange rate for delivery at a future date. This would provide the company with certainty about
the price it will pay in dollars, regardless of any fluctuations in the market. Another possible
strategy is to establish long-term relationships with suppliers and customers that involve price
stability agreements. These agreements can provide stability in prices and reduce the need for
frequent negotiations with suppliers. In addition, Fine Cotton Textiles can also explore the
possibility of diversifying its export markets to reduce its reliance on a single market which is
USA in their case. This can help to spread the risk of price fluctuations across multiple markets
and provide a cushion against any sudden changes in the exchange rate.

For the import of raw material Fine Cotton Textiles can diversify the sources of raw materials
and accessories. One possible solution to reduce the dependence on imports from China is to
diversify the sources of raw materials and accessories. Textile companies can explore alternative
Fine Cotton Textiles 12

suppliers from other countries, such as India, Bangladesh, and Turkey, or even consider sourcing
locally produced materials where possible. They can build strategic partnerships with reliable
and trusted suppliers to ensure a consistent supply of raw materials and accessories. These
partnerships can help to mitigate risks related to import bans or other supply chain disruptions.
Furthermore, to reduce dependence on imports, Fine Cotton Textiles can also consider investing
in local production capacity for certain raw materials and accessories, such as cotton and zippers.
This can help to reduce costs and ensure a consistent supply of these materials.

Fine Cotton Textiles faces the issue of receiving substandard items which can delay delivery.
The company maintains backup inventory to cater to this issue so that the orders are delayed
even if some items have to be returned. The company can also set up quality standards for
suppliers and conduct regular audits to ensure that these standards are being met. The company
can develop and implement a quality control system to ensure that all products meet the required
quality standards. This can involve conducting regular quality checks during the production
process and before the products are shipped out to customers.

One possible solution to reduce political instability and security related issues is to diversify the
production locations to areas with more stable political and security conditions. This can help to
reduce the risk of disruptions to production and delivery schedules due to political instability and
security issues. They can also implement risk management strategies to identify potential risks
and develop contingency plans to mitigate them. Furthermore, they can implement measures to
improve security at production facilities and during transportation of goods, such as hiring
private security firms and implementing security checks at checkpoints. This can help to reduce
the risk of theft, vandalism, and other security-related issues that can disrupt the supply chain.

Fine Cotton Textiles can establish training centers in rural areas to train unskilled workers and
develop their skills. This can help to attract workers from rural areas who may not have access to
training opportunities in urban areas. They can also offer apprenticeship programs to train
unskilled workers and develop their skills on the job. This can provide practical experience and
on-the-job training, which can be more effective than classroom-based training for certain skills.
Furthermore, if the unskilled workers do not speak the same language as the trainers or the other
workers in the company, language barriers can hinder training and communication. Therefore,
the company can provide language training to help bridge the communication gap and improve
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the effectiveness of training. The company can collaborate with local communities to identify
and train potential candidates for employment. This can involve working with community
leaders and organizations to identify individuals who are interested in working in the textile
industry and provide them with the necessary training and skills development.

The company can engage with government authorities and policymakers to address regulatory
and policy-related issues that affect the textile industry. This can involve advocating for policies
and regulations that promote a favorable business environment and reduce the overall cost of
production. Furthermore, Fine Cotton Textiles can explore trade agreements and partnerships
with other countries to reduce or eliminate import tariffs and taxes. This can help to reduce the
overall cost of production and increase the competitiveness of the industry in the global market.

3.2 Tradeoffs in Resolving the Issues

1. Long-Term Contracts vs. Short-Term Contracts: One trade-off in contracts is between
long-term and short-term options. Long-term contracts offer pricing stability by fixing
rates over an extended period, but limit flexibility to exploit cost reductions or market
fluctuations. In contrast, short-term contracts provide more flexibility but expose the
company to immediate price changes.
2. Domestic vs. International Sourcing: A trade-off exists between domestic and
international sourcing. Domestically, there's stability, less exposure to exchange rate
fluctuations, and import/export restrictions. However, international sourcing brings cost
advantages and access to a wider supplier network. The right balance depends on
circumstances and risk tolerance.
3. Cost vs. Quality: A trade-off could arise in balancing the cost and quality of raw
materials. Removing or easing import bans may expand the company's supplier options
and materials range, albeit at a higher cost. Conversely, if the company sticks to domestic
suppliers due to import bans, they may encounter restrictions in terms of raw material
quality or variety.
4. Supply Chain Reliability vs. Risk: A trade-off in supply chain reliability occurs with
imported raw materials, risking disruptions due to factors like political tensions, global
economy, or natural disasters. Conversely, relying on domestic suppliers offers stability
but limits quantity and variety.
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5. Competitive Advantage vs. Local Economy: Resolving the problem could affect the
company's advantage and the local economy. If import bans are lifted, the company may
face more competition from international players with cheaper materials, impacting
profitability and potentially causing job losses. However, lifting import bans could
stimulate economic growth by increasing raw material access and attracting foreign
investment.
6. Supplier Relationships vs. Quality Control: The company should assess supplier
relationships and consider switching if consistent substandard items are received.
However, changing supplier’s poses challenges and supply chain disruptions. Balancing
the benefits of a reliable supplier with the risks of transitioning is crucial.
7. Time Efficiency vs. Quality Control: Implementing strict quality control measures
requires time and resources, potentially slowing down production and impacting
deadlines and customer demands. Balancing timely production and quality standards is
crucial.
8. Workforce vs. Skills: Pakistan's skilled workforce and textile industry expertise may be
lost if production is relocated, making it difficult and time-consuming to hire and train a
new workforce in a different location.
9. Training and Development: One trade-off is investing in training and development
programs or hiring skilled workers. Training requires time, resources, and effort, while
hiring skilled workers may involve greater recruitment efforts and potentially higher
wages.

3.3 Benefits of Resolving Issues

By resolving the problem of price fluctuations due to inflation, the firm will be able to efficiently
control its expenses by addressing the price swings brought on by shifting currency values. With
suppliers, it may help to bargain better terms and keep consumer pricing steady. As a result of
this, there will be increased profitability and market competition can also be tackled skillfully. In
addition to this, having a stable price environment will enable the supply chain to become stable
and it will become easier for the firm to plan their production schedules and inventories more
efficiently which will thus enable reduced lead times and cost of holding inventory. Last but not
least, when the prices are volatile, it can be difficult for companies to be able to plan and forecast
their finances accurately. By reducing these price fluctuations, the risk of unexpected costs or
Fine Cotton Textiles 15

revenue shortfalls may be able to be reduced and the financial future of the firm will also be able
to be planned and forecasted in a better manner.

Import bans can create shortages of raw materials, which can impact the ability of a textile
company to manufacture and deliver products on time. By resolving the problem of import bans
and other supply chain issues, Fine Cotton Textiles can ensure a steady supply of raw materials
and avoid production delays. Delays in opening LCs (letters of credit) can increase the cost of
doing business, as companies may be forced to pay higher prices for raw materials or incur
additional fees for late deliveries. By resolving these issues, a textile company can improve its
profitability by reducing costs and avoiding penalties. By resolving supply chain issues and
ensuring timely delivery of products, a textile company can improve customer satisfaction and
loyalty. This can lead to repeat business and positive word-of-mouth recommendations, which
can help to grow the company's reputation and market share.

By addressing the issue of substandard items, Fine Cotton Textiles can improve the overall
quality of its products. This can lead to increased customer satisfaction, repeat business, and a
positive brand image in the market. Fine Cotton Textiles can reduce these costs and allocate
resources more efficiently. Consistently returning substandard items to suppliers can strain
relationships and create a negative perception of the company. By resolving this issue, Fine
Cotton Textiles can build stronger relationships with suppliers, fostering collaboration, trust, and
long-term partnerships. When substandard items are returned, production may come to a halt
until replacements are received. Resolving this issue can minimize production downtime,
allowing the company to maintain smooth operations, meet deadlines, and fulfill customer orders
promptly.

By diversifying production locations, the company reduces its reliance on a single region,
thereby mitigating the risks associated with political instability. Political instability can lead to
disruptions in the supply chain, such as strikes, riots, or changes in government policies.
Operating in politically stable areas reduces the likelihood of these disruptions and ensures a
more consistent and reliable production process. Political instability can result in frequent power
outages, infrastructure issues, or even shutdowns. Moving production to areas with stable
political conditions helps ensure a more reliable business environment, minimizing the risk of
Fine Cotton Textiles 16

disruptions and downtime. This, in turn, improves business continuity and allows for smoother
operations.

Skilled workers possess the necessary expertise and knowledge to perform tasks efficiently. By
having an adequate supply of skilled labor, Fine Cotton Textiles can enhance its productivity and
output. Skilled workers are more likely to complete their tasks accurately and quickly, leading to
improved efficiency in operations. Skilled labor is crucial for maintaining high product quality
standards. Workers with specialized skills can handle complex tasks with precision, ensuring that
the textile products meet or exceed customer expectations. Higher product quality can enhance
the company's reputation, attract more customers, and lead to increased sales. Skilled workers
often appreciate opportunities for professional growth and development. By addressing the
shortage of skilled labor, Fine Cotton Textiles can create a more favorable work environment
and provide a platform for employees to enhance their skills. This can lead to higher employee
retention rates, improved morale, and increased employee loyalty.

Simplifying export procedures eliminates bureaucratic hurdles and reduces the time and effort
required to export goods. This facilitates market access to international buyers and opens up new
opportunities for the cotton textile company. With smoother processes, the company can explore
and tap into new markets, reaching a wider customer base. High import tariffs and taxes can
significantly increase the cost of importing raw materials and machinery for the cotton textile
industry. By addressing these issues, the company can reduce its production costs, making its
products more affordable. This cost reduction can ultimately lead to higher profit margins and
improved competitiveness.
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Appendix

Figure 1: Certifications of Fine Cotton Textiles

Figure 2: Weaving
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Figure 3: Singeing

Figure 4: Printing
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Figure 5: Cutting

Figure 6: Stitching
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Figure 7: Finishing

Figure 8: Finishing
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Figure 9: Packaging

Figure 10: Stitching Machines Used

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Figure 11: Stitching Unit at Fine Cotton Textiles

Figure 12: Fine Cotton Textiles Office