China has the largest wool textile industry in the world, contributing 80 per cent of the growth in world wool consumption in the 1980s. However, recent economic reforms and market developments have posed major challenges to the viability of most Chinese wool textile mills.
The mills are under pressure to become more competitive, to introduce better enterprise management and to improve their environmental standards. Yet in many cases there is a lack of both the decision tools and skills needed to improve management practices.
Understanding the different impacts on mill profitability, for example, has the potential to improve dramatically mill pricing strategies for their outputs and purchase strategies for their fibre inputs. There is also a need to introduce improved scouring efficiency and discharge systems to meet new environmental standards.
China is Australia's largest market for raw and semi-processed wool, accounting for one quarter of Australia's wool exports. In 1997, some 53 per cent of China's wool imports came from Australia. Wool and wool textiles are also the major trading items between China and Australia. These statistics emphasise the economic importance of the continued viability of the Chinese textile industry to both China and Australia.
The overriding goal of this project was to improve the long-term viability of Chinese wool textile mills through adaptation to the changing market and policy environment and improvement to the efficiency of operation. The project aimed to improve mill viability through its recommendations on mill fibre-input/textile-product selection and effluent treatment technologies.
The researchers sought ways to improve Chinese wool textile mills viability through an economic analysis of mill-fibre/textile-product selection procedures and efficient treatment technologies. They developed an economic modelling framework capable of simulating the impacts of various mill management strategies, and undertook extensive fieldwork with mill engineers, accountants and management.
The researchers identified user preferences for particular characteristics of outputs from Chinese mills. They conducted interviews and group discussions with fabric makers, garment makers, wholesalers and retailers to determine customer specifications, tolerances allowed, and what they were prepared to pay for certain product attributes.
Project work entailed a comprehensive analysis of both the domestic wool supply chain and the imported wool supply chain. The project team examined transaction/system costs of mills receiving particular types of wool and analysed alternative marketing systems for both, to find ways of improving efficiency.
Fieldwork for the project focused on six regions - in Year 1 Beijing and Gansu, in Year 2 Jiangsu and Xingiang and in Year 3 Shandong and Inner Mongolia.
The "core" component of the project - the development of a wool textile mill management model - demanded access to large amounts of internal mill data that was both very commercially sensitive and time-consuming to collate and prepare. Development of the model was made possible because of the goodwill built up with collaborating mills and industry organisations. On this basis, the research team built the CAEGWOOL mill management model. Capturing the complexities of mill processes within a model usable across China proved to be highly demanding from both analytical and programming perspectives. The model was calibrated in mills in China which, by the end of the project, reported that from its application they were producing robust results that closely reflected actual mill operations.
The model was extended to managers from a broader group of around 15 worsted mills and other industry officials at a training workshop in Wuxi City in June 2004. They learned to use the model in an interactive way, and in connection with a series of papers and talks about management systems and analytical approaches. Questionnaires conducted at the workshop indicated that the mills will use the management tool and/or the management approaches to complement existing decision-making practices. The model was subsequently presented at the International Wool Textiles Conference, attended by all major industry officials and senior staff from hundreds of Chinese wool textile mills. The interest in the model, and encouragement for its further dissemination across the industry generated at this Conference, has seen the Chinese research team seek funding from Australian Wool Innovation Ltd. to further develop and disseminate the model.
Measures are now being undertaken to move from a "research" to a "commercial" model and to transfer all knowledge to a Chinese organisation that will pro-actively target a large proportion of the hundreds of wool textile mills in China, teaching them to use the model. This more "scientific" management tool promises to make a significant contribution to the management and, ultimately, the viability of Chinese wool textile mills that are the dominant customers for Australian wool.
Amongst many publications arising from the project are the following major flagship publications, each of which targets a specific audience:
an ACIAR technical monograph that includes the "research model" itself, the manual for its use, and a range of supporting technical documents (published bilingually in Chinese and English and made widely available in China);
a book entitled Modernizing China's Industries: Lessons from Wool and Wool Textiles, written by the Australian members of the research team;
a book entitled The Chinese sheep industry - markets, trade and industry organisation, written by the Chinese members of the research team.
Through these and previous project activities and publications, the research team has become highly visible in industry activities in both China and Australia. Chinese members of the research team are now regularly invited to deliver presentations on wool textiles and the Chinese sheep and wool production and marketing systems. At the same time, Australian team members have provided advice on developments in the Chinese wool and wool textile industries to industry groups in both Australia and China.
The consistent message conveyed through these forums is that the Australian and Chinese wool industries are complementary rather than competitive, and that there are various measures that can improve the flow of Australian wool to China and the way that Chinese mills use that wool. The Chinese wool textile industry needs to become more pro-active and turn attention to improving management practices, and to improve co-ordination between industry sectors.
In December 2004 and January 2005, the Australian research team prepared two detailed briefs for Australian Wool Innovation Ltd. about Chinese wool production, marketing, and supply chains. These two reports, together with a much shorter set of Notes prepared for a National Farmers Federation delegation visiting China, were used to inform Australian industry leaders about the domestic wool industry in China, and to brief Australian government officials preparing for the negotiations surrounding the China-Australia Free Trade Agreement.
Links:
[1] http://www.aciar.gov.au/country/China
[2] http://www.nrsm.uq.edu.au/agecon/ResearchProjects/wool/WoolTextile.html
[3] http://www.aciar.gov.au/programarea/Agricultural Systems Management