Evolving business models to keep up with changes in the industry

November 19, 2020

In this fireside chat, we spoke to Pallak Seth, the Founder and Vice-Chairman of PDS Multinational. His passion for solving market frictions through technology has also led him to invest in many ambitious technology startups in the apparel space. 

PDS Multinational manages global retailers’ and brands’ supply chains in various consumer goods, including apparel, footwear, home furnishings, and beauty.

The reason behind the shift in PDS’s business model. 

In recent years PDS has transitioned from a global sourcing business to also include a manufacturing business. Pallak acknowledges that PDS will remain a design-led sourcing business at heart, but expects 20% of its revenues going forward to be from manufacturing. He mentions three interconnected reasons as to why the group has invested in manufacturing:

  1. To onboard big retail clients who insist on having their own relationship with manufacturers, and prefer not to work solely with sourcing businesses. 
  2. This improves PDS’s credibility and reputation with its existing customers. 
  3. With more vertical integration, manufacturing has higher potential for profit than a solely sourcing focused business. 

“Today, our existing retailers see PDS as a completely vertical business. Having design, financial strength, global footprint, and our own manufacturing, which adds to our credibility and strength.”

The key learnings Pallak has seen through PDS’s transition is that you must treat manufacturing with an entirely different mind frame than running a sourcing business. It is all about managing processes on all levels. “What’s on the production lines is not where the profit is. If you can save the wastage and negotiate better, your profitability will improve in this industry.”

Actionable steps that PDS group is taking to digitise its business 

Even before COVID-19, PDS group had been adapting to overcome challenges around compliance, strengthening its design, managing the customer credit risk, and focusing on sustainability. Recently, however, the entire focus has shifted to digitisation. There are several projects that PDS is running to grow its digital capabilities. Firstly, implementing new SAP software to extract data on a more user-friendly basis, and more easily share with team members. The second project is digitising the PDS platform to become a plug-in-play solution to onboard new companies. Lastly, the most considerable change on the customer-facing side is digitising the entire sampling process. Digital sampling allows members of PDS group to reduce the lead time in terms of providing samples, savings on costs, and to provide more design capabilities. 

Advice to struggling manufacturers in the current industry climate

With the effects of COVID-19 and a looming trade war, this is a challenging time for both retailers and manufacturers. Pallak offers three crucial pieces of advice for manufacturers struggling today. 

  1. Manage credit risks well, and do proper due diligence on customers. “You cannot just go by the history you have with retailers because the landscape is continuously evolving.” 
  2. Invest in lean manufacturing processes as customer prices are always going to be under pressure. 
  3. “Have an unrelenting focus on compliance and sustainability. There is no business without compliance. There are no shortcuts to be taken.” 

Balance sheets and high levels of collaboration can be used to bring opportunity out of a crisis 

“Every crisis brings danger and opportunity. As a group, we successfully managed the danger, and now we’re going after new opportunities.” 

Pallak believes the key to mitigating these challenges is through adopting several balance sheets. 

  • Cash Balance Sheet: PDS is a business with hardly any long-term debts. Having a healthy cash reserve on the balance sheet brings more confidence from the group’s customers, banks, and other stakeholders. 
  • Credibility Balance Sheet: Making sure there is goodwill, not only with its clients but also with its suppliers and bankers. “We made sure during the COVID crisis to pay all our suppliers; we took care of all our banking liabilities without having any issues.” 
  • Capability Balance Sheet: “What PDS group has done in the last 20 years is invest in people and talent rather than machines and assets.” There are a lot of small to medium-sized companies who are struggling as stand-alone business units, so PDS has taken the risk to onboard these companies and grow their businesses. 

Through focusing on all three of these balance sheets, Pallak believes that companies will be able to flourish in years to come. 

Aside from this, Harvard Business School has written a case study on PDS group that will be taught at Harvard MBA and Exec Education programs. The case study is covering the evolution of the PDS platform and the collaboration efforts between various PDS group companies. Pallak attributes this success to a joint Profit & Loss (P&L) tool which incentivises companies in PDS to not only look at their individual P&L, but at PDS group’s as a whole. This tool has been very successful for bringing businesses within PDS together more because companies feel a sense of community and responsibility to one another. 

Benefits to using a platform like Serai 

“Serai very quickly has emerged as a solution and a platform connecting some of the most reputable retailers, suppliers, and industry service providers. The platform can help companies find reliable and trusted business partners in the apparel industry. And Serai has the opportunity to act as a glue, gelling the industry together in the new digital age. It can emerge as the leader in this whole transition that we are seeing. I’m excited to work with Serai and be part of your journey with PDS.”

If you found this fireside chat insightful, be sure to follow Pallak Seth on LinkedIn to stay up to date with him and PDS Group.  Also make sure to join the Serai Webinar on 26 November, 5.00pm HK time, at which Pallak will be speaking. You can register for it here!