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BUSINESS MODEL

At Sudar, we feel that it is possible to generate attractive growth - revenues, margins and bottomline - through a low-cost, high capability business model, with strict adherence to quality and timely deliveries. This becomes possible due to the presence of all requisite equipment for garments manufacture under one roof.

Volume: We feel that it is possible to run a robust garment manufacturing business based on a minimum order of 10,000 units per style. At Sudar, we are presently working on an order booking of around 25,000 units per style, resulting in a low batch changeover time and economies of continuous working.

Integrated: We feel that the most viable garment units are those that have integrated from raw material (fabric) to garment manufacture to washing to ironing and dispatch. This progressive in-sourcing makes it possible to reduce production costs and enhance competitiveness. The loss of production due to uncertain outsourcing and logistical issues connected thereof, is completely compensated due to the presence of all requisite machineries in-house.

Product mix: We feel that it is possible to enhance viability through a focus on the manufacture of shirts, trousers, knitted wear, children and ladies garments, which represent a balance between value-addition and productivity. However, it is noticed that the demand for the gents shirts is very high and it occupies the highest share in our production programme model.

Facilities: We feel that the business of garment manufacture is not about fabric or garments as much as it is about people. In this people-intensive operation, the more we make people feel comfortable and motivated, the higher their productivity. In view of this, Sudar invested in residential, recreation and canteen facilities within is premises resulting in productivity higher than the industry average.

Turnkey: We feel that it is possible to enhance margins in the challenging business of garment manufacture through turnkey assignment management. Turnkey assignment management comprises the ability to source fabric, manufacture in-house and market the product as opposed to getting the fabric from the client for simple conversion. At Sudar, we procure the fabric at competitive rates through volume-based negotiation resulting in economies of turnkey manufacture

Value-addition: We feel that enhanced viability in a competitive business like garments manufacture comes from value-addition. How much value can we add to the garment? What complexity can be achieved in manufacture easily without additional capital expenditure and with corresponding increase in realisations? At Sudar, we have achieved progressive value-addition through a combination of tailoring, embroidery, washing and ironing. This was reflected in an increase in average realisation per SKU from Rs 200 in 2010-11 to Rs 350 in 2011-12

Labour mix: We feel that a labour-intensive business like garment manufacture is especially vulnerable to labour attrition. The enduringly successful companies are those with a high component of resident labor (staying within the campus or within the location's vicinity) complemented by a non-resident population. This complementing translates into a high productivity. At Sudar Garments, half the labour force is resident and half is non-resident.

Capacity utilisation: We feel that in a single-shift garment business, success is derived from low downtime due to power outages or labor breaks. At Sudar Garments, we have demonstrated a strong operational discipline marked by meticulous scheduling and production incentives, helping minimise downtime.

Economies of scale: We feel that in a single location and labour-intensive garment manufacturing operation, there is a critical mass - 400 workers - beyond which the location becomes profitable. At Sudar Garments, our existing location comprises [400 workers and we expect to grow the location to 600 by the end of 2012-13].

Customised raw materials: We feel that in fabric-intensive business like garment manufacture, much of the profitability is derived from the consistent ability to source the right quality of fabrics with the right designs at the right prices in the right quantities from the right suppliers (the proximate the better)and at the right time. Over the years, Sudar Garments has leveraged its longstanding understanding of the dynamics of the fabric sector to procure material around the best price-value. No single supplier accounts for more than 20 per cent of procurement. 70 per cent of the Company's fabric consumption was sourced from within 85 kms from its plant. The Company leverages the abundant supply of cotton and cotton-blended fabric in India, a country rich in cotton and blended polyester yarn manufacture.
Focus: We feel that much of the success in the garment industry is derived from an untiring focus onquality and timely supplies at the best price. Over time, this focus has condensed into our decision of making progressive investments in scale, our product variety, our customer focus and investments in technology among others. This focus works better at growing the business over companies that are also engaged in the manufacture of yarn and fabric in addition to garments. Besides, this is also an advantage over companies that are also engaged in exports and over companies that have selected to brand and market their products. The Company markets its products to exporters and large branded players. The Company is the largest garment manufacturer at a single location in the Mumbai region and one of the largest in India overall.

Committed clients: We feel that the stable and successful garments companies are those that have committed clients. At Sudar we have selected to work with large and growing garment marketing and exporting companies. This is an association of convenience; while the Company does not have to incur marketing expenditure to reach its products to consumers, the marketing companies do not need to invest in garment manufacture if the management bandwidth is associated with this activity.