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Mehmood Textile Mills Technology Improvement Decision

3703 words - 15 pages

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CRESCENT TEXTILE MILLS: WEAVING TECHNOLOGY DIVISION

Mr. Nasir Shafi is considering expansion of his mills' shuttleless weaving capacity in order to produce higher value added products. The mills, Crescent Textile (CTM), have been increasing value addition in their products with the advancements in weaving technology. In the textile manufacturing, it is the process of weaving that offers greatest opportunities for value addition. Hence, with the shuttle loom weaving, the mills could only do as much as produce gray cloth, (or purchase from local small scale producers) of moderate quality, and export it after dyeing, printing and finishing. The leap in manufacturing came with the development of shuttleless loom technology, when CTM began producing garment cloth or casual wear. As he observes global trends today (1990), Mr. Nasir sees variations in the shuttleless technology in practice in U.S and Europe, some being more successful than others.

Whether or not to expand Capacity

The history of the weaving technology shows that the productivity in weaving sector (and textile sector broadly) has increased manifold as fly shuttle replaces handloom, power loom replaces fly shuttle, later automatic looms rule the industry defeated only by shuttleless looms in the mid 20th century. All these innovations were led by a strong emphasis on productivity and quality with the result that the working hours required to weave fabric from loom have been reduced from about 20 to 0.25 during the last 125 years, and in the last 50 years there has been a reduction of 95% in operative hours per standard unit produced. The advent of power loom made Britain the richest country in 2nd industrial revolution. Today, the modifications and improvements in shuttleless technology are the key towards exploring untapped opportunities in the 21st century. In order to grow as a textile concern, value addition in its products is the next logical step, which if achieved through implementation of latest technologies, will reduce costs of production as well as give a cutting edge to its products. Hence a capacity expansion decision is the need of the day. As the Pakistani exports of ready-made garments and hosiery are increasing significantly (Exhibit 1: Graph); Europe and Far East being the major demand markets, this also supports capacity expansion.

CTM has been an exporter of cotton yarn as well as cloth. In the current scenario, due to pressures by the weaving sector, government may increase custom duties on yarn export. This will limit the yarn export, hence it is only beneficial for CTM to diversify its portfolio and grab its share in the new export opportunities.

Mr. Nasir thinks pragmatically and wants a margin of flexibility in his capital investment decision. In the following is presented a detailed analysis leading to decisions about how much capacity to expand, using which type of looms and what will be the business implications of the...

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