One of the greatest assets a business leader has is the ability to make decisions with the bigger picture in mind. In the day-to-day operations of running a business, it’s easy to get caught up in the issues demanding immediate attention. However, for a business to be successful, it’s imperative that leaders take a step back in order to understand the downstream impact of their choices.
In the world of cotton textiles, buyers often miss the bigger picture. Instead of understanding how certain cottons perform throughout the manufacturing process, they first focus on cost, ultimately—and sometimes unknowingly—losing their business valuable profits.
Cotton represents around 70 percent of the total yarn cost, depending on yarn count and yarn type, which persuades many mills to make cotton purchasing decisions based solely on comparing raw material prices. In many cases, these buying decisions are made by ownership or financial executives who are less involved in all the details of the cotton manufacturing process. As a result, they are often not as close to the impact, both positive and negative, that their decisions have on manufacturing performance and the profitability of their mills.
In the interest of understanding the bigger picture, Cotton Council International (CCI) commissioned independent, third-party research studies and captured the results in an informative white paper, “The True Cost of U.S. Cotton,” which demonstrates the importance of factoring in the entire process to understand the true profitability of cottons from different origins. These studies showed that the inherent benefits of U.S. cotton fibers, as well as process improvements to the cotton manufacturing process, consistently netted a more profitable outcome for mills.
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The Benefits of U.S. Cotton
U.S. cotton has a variety of benefits in comparison to other cotton fibers that positively impact profitability for mills and manufacturers. These benefits include contamination-free fibers, traceability, fiber elongation and more. In particular, a significant commercial advantage of U.S. cotton is the superior consistency of its moisture content compared to many of its competitors.
U.S. cotton consistently outperformed the compared cottons at every stage of processing (with performance measured by industry-standard manufacturing performance KPIs) in all the independent comparative research studies commissioned by CCI.
Increased Profitability with U.S. Cotton
While U.S. cotton generally trades at marginally higher prices than competitor cottons, it also performs significantly better in manufacturing. In one study commissioned at a partner mill in India in 2020, four cottons were examined to understand their profitability: Shankar 6, Brazil, West African Plebe and U.S. cotton.
Despite an initial disadvantage of a raw material price that was at least 8 cents per pound more expensive, the garments produced with U.S. cotton generated a profit per garment of 22 cents higher than the initially cheaper local cotton. This pattern of recovering an initially higher raw material price for U.S. cotton in higher garment profits by the end of the process chain has been repeated in all independent comparison projects commissioned by CCI.
Another recent study involved a leading textile group in Bangladesh and compared the technical and financial performance of producing a Ne 16 yarn size* for denim end-use. The group substituted a mix of 100 percent U.S. cotton for the West African/Brazilian cotton blend the mill was previously using.
The study found that the yarns produced from the 100 percent U.S. cotton mix were of equal or superior quality and, most importantly, the yield from the U.S. fiber was significantly better than that achieved with the regular West African/Brazil mix. Additionally, CCI’s analysis found that there was significantly less waste when using the 100 percent U.S. cotton mix, drastically improving the potential profitability. In this particular case, the study found that switching to a 100 percent U.S. cotton mix, in addition to making process improvements, could result in a potential annual savings of up to $5 million.
The Takeaway
These studies have proven that even though U.S. cotton fiber may be more expensive to buy, the net cost is less and the profitability is higher than other cottons due to U.S. cotton’s superior performance characteristics that result in higher efficiency and less waste.
Mills that initially operated on a “buy on price” strategy have come to understand the importance of developing a raw material purchasing strategy that looks beyond just the cotton price and dives deeper into the real value that purchasing U.S. cotton can bring to their business. Those that factor in these additional elements in collaboration with the COTTON USA SOLUTIONS® Technical Team are able to see the bigger picture and make more informed decisions that ultimately benefit the productivity of their business.
Download the white paper here to learn more about the true cost of U.S. cotton.
Discover more about the benefits of U.S. cotton at cottonusa.org.
*Ne also known as Number English or English Cotton Count: An indirect method of expressing the size of a cotton yarn (as the number increases, the physical yarn size decreases).