An integrated Supply Chain Programme for the South African cotton garment industry – Pilot study

Van Niekerk, Hester Christina (2018-03)

Thesis (MEng)--Stellenbosch University, 2018.

Thesis

ENGLISH ABSTRACT: Cotton is used in many products for its characteristics, flexibility, and comfort. It also forms part of a very important natural fibre used in the textile industry for weaving fabrics and producing garments (DAFF, 2016a). However, the production of cotton in South Africa (SA) by local farmers decreased significantly from 2006 until 2011. Furthermore, according to the Department of Agriculture, Forestry, and Fisheries (DAFF) (2016b), approximately 40%-60% of South African cotton demand is imported. In 2005, a study was sponsored by the United Nations Development Program, and done in conjunction with the Industrial Development Corporation (IDC), Department of Trade and Industry (DTI), Human Science Research Council (HSRC), and others. The study indicated that in SA, for every R1 million output in Agriculture, 18.6 people are employed, and with regards to the Apparel & Textiles sector, 9 jobs are created for every R1 million output (CSA & De Wet, 2016). This means that if even a small portion of the high percentage of imports were to shift to local producers, there would be major opportunities for job creation and industry upliftment. Job creation could not only be focussed on raw material, but the whole Supply Chain (SC), from the farmer to the retailer. The harshness of the world we live in today puts a lot of stress on SCs to be responsive to change. Demand could shift in an instant, especially in the fashion and clothing sector, and the SC should be able to adapt to changes as quickly and effectively as possible. However, in SA, retailers tend to struggle with quick response. Furthermore, there are major pressures occurring in the textile industry from governmental institutions to become more sustainable (Perry & Towers, 2009). Company X, a company that focuses on sustainably sourced food and fibre products, is a profitable SC engineering and trade management company. Established in 2008, company X provides sourcing of sustainably produced commodities for international and regional buyers. With regards to the textile industry, company X focusses on the production of sustainable cotton fibre as a commodity, with a specific focus on virtual integration. An Integrated Supply Chain Programme (ISCP), driven by company X, is defined as a business practice that ensures delivery of products that are fully traceable, with great integrity by means of SC optimization. It is done by virtually integrating textile SCs, with retailers, as demand-driven participants. The ISCP was piloted by one of the leading retail groups in SA in 2014.2017 however would be the first year of implementation of the Cloud Based Information System Platform (CBISP) which will be discussed shortly. This dissertation will aim to pilot the platform by means of implementing the ISCP, and then aims to improve the ISCP through business process re-engineering. A local cotton garment SC was implemented with a local retailer, and the ISCP brought about many advantages and opportunities for every link in the SC. The ISCP allows retailers to have full visibility and control over their whole SC. The ISCP operates by means of long-term forward contracting (volume commitments) and planning. It is done to ensure that products meet the market demand and ensure price stability for 12-months, which improves the local price point for each SC member. The ISCP offers SC transparency to ensure market credibility and improve local sustainable sourcing. It also ensures traceability to protect the integrity of sustainable claims and to track programme impact. The ISCP assists in the process of creating long-term partnerships amongst SC stakeholders. Even though the ISCP brings about a lot of advantages and opportunities, there is a need for a technological platform to support it. Visibility in a SC is very important, as well as traceability. Equally important is the flow of information, in both the upstream as well as downstream direction. Furthermore, forecasting and planning is required for a SC to run at its optimum capacity. Thus, a CBISP was created by the sustainable cotton cluster and company X, to support the ISCP. This platform is designed to offer: item-level traceability; sustainable compliance and marketing opportunities; and Supply Chain Management (SCM) with full visibility from fibre production to point of sale. It allows interfacing capabilities, via the cloud, with individual Enterprise Resourcing Planning (ERP) systems in the SC. The CBISP was partially implemented and tested in this thesis, by means of implementing the ISCP with retailer A. The data obtained in the ISCP with retailer A was used to pilot the CBISP. However, due to a lack in contracts, excessive costs to improve individual ERP systems and even lacking sufficient ERP systems in the SC, the traceability function could not be tested. Further implementation and testing of the CBISP, in future studies, is thus required to successfully pilot the complete CBISP.

AFRIKAANSE OPSOMMING: Katoen word gebruik in baie verskillende produkte vir sy unieke eienskappe, buigbaarheid en gemak. Katoen word ook geklassifiseer as ‘n baie belangrike natuurlike vesel, wat gebruik word in die tekstielbedryf om materiaal te weef en kledingstukke te produseer (DAFF, 2016a). Die produksie van katoen in Suid Afrika (SA) deur plaaslike boere, het baie afgeneem van 2006 tot 2011. Volgens die DAFF (2016b) word 40%-60% van SA se katoenvesel ingevoer. ‘n Studie in 2005, wat geborg is deur die “United Nations Development Program,” tesame met die IDC, DTI en HSRC, het aangedui dat in SA is daar potensiaal om 18.6 werksgeleenthede te skep vir elke R1 miljoen se landbou uitsette. Volgens die tekstiele en klere sektor kan 9 werksgeleenthede geskep word vir elke R1 miljoen se uitsette (CSA & De Wet, 2016). Die gevolgtrekking kan gemaak word dat met die hoë persentasie wat tans ingevoer word, is daar geleenthede om werk te skep, asook om die industrie te verbeter, as van die produkte met slegs ‚n klein hoeveelheid gelokaliseer word. In verband met werksverskaffing kan daar nie net gefokus word op die rou materiaal nie, maar op die hele ketting, soos dit van die boer na die handelaar beweeg. Die rigiditeit van die wêreld waarin ons leef vandag, sit baie stres op vervaardigingskettings om volhoubaar te wees. Aanvraag kan in ‘n oogwink verander, veral in die mode- en klere sektor en die vervaardigingsketting behoort aanpasbaar te wees tot verandering, wat ook so vinnig en doeltreffend as moontlik moet kan gebeur. In Suid-Afrika, is die kleinhandelaars egter geneig om te sukkel met vinnige en doeltreffende reaksie op die verandering in aanvraag. Verder sit regeringsorganisasies baie druk op die tekstiel bedryf om verantwoordelik te wees teenoor volhoubaarheid (Perry & Towers, 2009). Maatskappy X, 'n maatskappy wat fokus op volhoubare verkryging van voedsel en vesel produkte, is 'n winsgewende vervaardigingsketting en handelbestuursmaatskappy. Maatskappy X, wat gestig is in 2008, verskaf ‘n diens om te verseker dat volhoubare produkte geproduseer word en sluit internasionale asook plaaslike kopers in. Met betrekking tot die tekstiel industrie, fokus maatskappy X op die produksie van volhoubare katoen vesel as kommoditeit, wat fokus op virtuele integrasie. Die “Integrated Supply Chain Programme (ISCP),” gedryf deur maatskappy X, word gedefinieer as 'n besigheidspraktyk wat verseker dat aflewering van produkte wat ten volle opspoorbaar is, met groot integriteit deur middel van verbruikers ketting optimalisering. Dit fokus op virtuele integrasie, tekstiel verbruikerskettings, met kleinhandelaars as vraag gedrewe deelnemers. Die ISCP is alreeds deur een van die voorste handelaarsgroepe in SA getoets in 2014. 2017 sal dus die eerste jaar van implementering van die “Cloud Based Information System Platform” CBISP wees, wat binnekort bespreek sal word. Hierdie navorsingsdokument sal poog om die platform te toets deur middel van die implementering van die ISCP en ook poog om die ISCP te verbeter deur middel van besigheidsproses adressering notasie (BPMN). 'n Plaaslike geproduseerde katoen kledingstuk vervaardigingsketting is geïmplementeer met een van die plaaslike handelaars in SA en die ISCP het baie voordele en geleenthede meegebring vir elke skakel in die ketting. Die ISCP laat kleinhandelaars toe om volle sigbaarheid en beheer oor hul hele verbruikersketting te hê. Die ISCP bedryf deur middel van langtermyn kontraktering (volume verpligtinge) en vooraf beplanning, verseker dat produkte voldoen aan mark aanvraag en prysstabiliteit vir 12 maande, wat die plaaslike prys punt vir elke verbruiker in die ketting verbeter. Die ISCP bied verbruikersketting deursigtigheid, om te verseker dat mark geloofwaardigheid verbeter word en om plaaslike volhoubare ontginnings strategie verbeter. Dit verseker volle naspeurbaarheid, om ten einde die integriteit van volhoubare bemarking eise te beskerm. Dit skep ook lang termyn vennootskappe onder verbruikersketting belanghebbendes. Selfs al bring die ISCP voordele en geleenthede na tevore, is daar 'n behoefte vir 'n tegnologiese platform om dit te ondersteun. Sigbaarheid en naspeurbaarheid in 'n vervaardigingsketting is baie belangrik. Die vervaardigingsketting kan eenvoudig nie effektief genoeg reageer op verandering in aanvraag, sonder volle sigbaarheid nie. Ewe belangrik, is die vloei van inligting, stroomop, sowel as in die stroomaf rigting. Vooruitskatting en beplanning is ‘n vereiste vir 'n vervaardigingsketting om op optimale kapasiteit te funksioneer. 'n CBISP is dus geskep deur die volhoubare katoen cluster en maatskappy X, om die ISCP te ondersteun. Hierdie platform is ontwerp om die volgende diens te lewer: item-vlak naspeurbaarheid; volhoubare voldoening te verseker en bemarkingsgeleenthede te skep; en verbruikerskettingbestuur te verskaf met volle sigbaarheid van veselproduksie tot by die punt van die verbuiker. Dit het vermoë om via die internet te integreer met individuele “Enterprise Resourcing Planning” (ERP) stelsels in die tekstiel voorsieningsketting. Die platform was gedeeltelik geïmplementeer en getoets deur middel van die implementering van die ISCP met handelaar A, en die verkryging van data deur die ISCP met handelaar A. As gevolg van 'n tekort in kontrakte, tekort aan fondse om die individuele bestaande ERP-stelsels te verbeter en selfs in sommige gevalle waar daar tans geen ERP-stelsels gebruik word nie, kon die platform nie heeltemal geïmplementeer word nie. Sonder behoorlike ERP inskakeling kan die naspeurbaarheid van 'n produk is ook nie getoets word nie. Die toets van die CBISP vereis dus verdere toetsing en implementering in toekomstige studies.

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