another response from someone who ran a narrow fabrics plant in the USA. This is very insightful.
1 if you mix nylon and cotton rather than polyester, realisations are higher
2. dyeing and providing a finished look product helps improve realizations - eg., the nice looking bands on calvin klein, hanes etc. Dyeing issues may be the reason why they may have moved to vietnam since india has strong environmental control norms on this.
3. the price is also a function of pick (similar to count in cotton spinning) the higher the pick, the more robust the fabric and lasting the feel.
Clearly premco is gettiing all of this right.
Below are my initial responses to your questions. Please let me know if you need more details.
Is Narrow Fabrics a Labor Intensive Industry?
I would say yes. In the US, direct labor costs (excluding benefit
expenses) would run about 20%. Operations in LDCs would likely cut your
labor costs in half, but my experience is that a good portion of that
savings will be eaten up by increases in energy costs and, if you are
operating a dye house, water costs.
what’s the differentiation in narrow fabrics and how does one move up
the value added curve ? Why does for eg., a metre of a narrow fabric
sell at $ 0.10 cents and some at $ 0.40 cents.
There are a lot of factors that go into the cost of a narrow fabric,
but the two big factors are the yarn content of the material and the
picks per inch of the fabric. The yarn content is generally measured in
the form of grams/meter. The pick is one crossing of the crosswise
yarn in a that goes over and under the
The yarn content of the fabric is directly related to the cost of the
raw materials. Obviously a fabric with a heavier yarn content is more
expensive to make because it takes more yarn to make the fabric.
However, the choice of the yarn also can have a large influence. Nylons
and cottons are generally more expensive to purchase but much easier to
dye than a polyester or polypropylene. Generally polypropylenes and
polyesters are less expensive to purchase.
The pick per inch measure gives an indication of how efficiently you
will be able to produce the fabric. Each loom will run at a set speed.
While this set speed will depend on the actual design of the fabric, I
would plan on production levels of about 1600 picks per minute for
products up to 2.5 cm, 1200 picks per minute for products up to 5 cm and
about 800 picks per minute for wider products. Since picks per inch
are almost always specified by the customer, this will limit the overall
production you can expect to get off a given loom.
Is it difficult to get approved as a narrow fabric vendor ? what
governs it - price/quality/experience in business/ability to offer
different product types ?
It is very difficult to break into Hanes, Fruit or the other major
manufacturers. In my experience, these vendors are very price sensitive
but are also quite demanding in their quality and delivery
requirements. They will not simply turn the business over to you but
will vet you with small orders and if they like you they will keep you
at the edges for years until they are ready to drop a vendor and move
you into the position. The standard practice is to force the existing
vendors to take the prices you offer instead of giving you the business.
Proximity to their manufacturing is also important to them. If you
have existing operations near their facilities, they may be more
inclined to give you a shot.
To be treated seriously, you will also have to have the ability to
dye your fabrics and to match the shade of the dyed fabric very closely.
does manufacturing in places like india/vietnam pose a cost advantage
? I see that players like AEC still have factories in the USA –
As a general rule, shipping costs tend to level the playing field.
When I ran a mill, generally, I could match the price and beat the
delivery of imported narrow fabrics. That was not the sourcing
direction Hanes and Fruit took. They would source the entire garment
from a region and would source their fabrics, including narrow fabrics,
locally within the region.
is it possible for a player to do both narrow fabrics and normal fabrics
I would not suggest it. The narrow fabrics industry is a different
market and mindset from the broad fabrics market. While there would
seem to be advantages in merging the two, the difficulties caused from
the differences will almost certainly overwhelm any advantages you may
get.
I have seen broad fabric manufacturers get into narrows and lose a lot of money in the process.
This will probably be clearer with a specific example.
The narrow fabric contend of an undergarment sold by Hanes or Fruit
is probably 5-10% of the value of the garment. To sell into Hanes or
Fruit a narrow fabric vendor will have to dye their product to match the
shade required by Hanes or Fruit and each dyed shade lot will have to
be approved by Hanes or Fruit.
Now suppose that a broad fabric manufacturer dyes a lot that is 7%
too blue relative to the standard Hanes or Fruit provided. In a
rational world, the broad fabric manufacturer would be expected to redye
their lot to bring their material into the shade standard. However, in
practice, a narrow fabric manufacture will be expected to adjust their
lot shade to adapt to manufacturer’s lot that is too blue. While this
isn’t right, it makes economic sense: it is less expensive to adjust 5%
of the content rather than the 50% of the content that the broad fabric
would represent.
The key point here is that this is a not billable service. Even
though the narrow fabric vendor hit the shade, they will be expected to
adjust the shade at their own expense. A narrow fabric vendor that
tried to bill for this would be thrown out of Hanes pretty quickly.
There are a lot of these sorts of unbillable expectations that are
placed on NF vendors that broad fabric manufacturers generally have a
lot of problems dealing with.
what are the typical gross margins in this business for a normal fabric and for value added fabrics (eg., medical, defence) ?
I would expect gross margins in the 15% range and profit margins in
the 2% range. If gross margins get to 20% or profit margins get to 5 or
6%, you can expect a lot of competition getting into the market.
I don’t see any margin advantage to the defense markets – unless the
item is a small volume niche item, they are pretty competitive.
Any margin advantage from the medical market really would be derived
from an FDA approval which is a pretty expensive undertaking.
I hope this helps.
If I may answer any questions, or be of any assistance, please do not hesitate to let me know.
Regards,
Jim
