Facing change in the footwear industry
SATRA can do much to help members stay profitable, despite transformations within global trading strategies.
Image © Sebastian Kaulitzki | Dreamstime
Since the economic downturn, Western consumers have become more cautious about spending, and retailers are struggling to retain turnover and profitability. As a result, retailer buying decisions have moved towards simplifying and reducing product ranges, placing smaller orders and requiring shorter delivery times. Coupled with rising consumer demand in Asia, traditional Western suppliers are rethinking their business methods.
For the past 25 years or so, economic production strategy for many shoemakers and brands has concentrated on reducing manufacturing costs by relocating to regions with cheaper labour. This has seen huge changes in the geographical distribution of footwear manufacture. Many Western factories have closed down or converted into sourcing and warehousing operations, requiring a fraction of the previous staff levels. Thousands of skilled workers have been made redundant and lost from the industry, although many key personnel have relocated to Asia.
Most Western countries still retain a footwear industry, and some larger European factories can still compete against Asian manufacturers. A number of Western producers have recently increased production, although they are likely to manufacture specialist or niche products. A few countries have bucked this trend – Italy in particularly and, to a certain extent Spain, have retained significant capability across a range of footwear sectors that also includes the supply of components.
Prior to the recession, rising costs in Asia (especially in China) were already forcing companies to re-evaluate their economic models. Chinese labour rates were increasing due to a combination of labour shortages and the developing aspirations of workers. Electricity, fuel and transport costs were rising, affecting raw material and component prices. Many companies relocated to Vietnam, or to cheaper emerging economies such as Bangladesh and Cambodia – or revisited recent manufacturing centres such as Indonesia and Thailand. Some companies looked closely at manufacturing efficiency. As a result, SATRA experienced an increasing interest in management efficiency systems such as SATRAData, and our materials utilisation and training packages SATRASumm and SATRA Visionstitch, all of which are described later in this article.
The banking crisis of 2008 precipitated the worst industrial recession of recent times. A dip in Western consumer demand led to the closure of many thousands of companies in China’s Guangdong province alone. Since then, business confidence has improved, although the global economy is still fraught with difficulties. While the situation remains fragile for some, many Asian factories are busy producing footwear again for Western markets. However, all of them report stiff competition, rising costs and thin profit margins. China remains the most dominant footwear exporter, but the business environment has altered. Other Asian economies are becoming more competitive and buying trends have changed.
Giant brands and manufacturers still dominate. However, smaller brands and sourcing organisations have found it harder to establish business relationships without compromising price, quality and delivery requirements. Asian manufacturers have realised that the rapid growth rates experienced in the early part of the 21st century are not sustainable. So, they are looking to develop independently – especially in relation to their growing domestic markets. There is also a growing trend for Chinese companies to invest in retail operations in the West.
In addition, retailers and brands are reluctant to source large amounts of product at one time. Hence, they are looking for a more flexible supply chain that can provide at least some of their requirements in a matter of a few days rather than weeks.
While some suppliers have moved to other Asian countries, shorter and more ‘agile’ supply chains can only be effective when physically close to the retailer. There is renewed interest in placing orders with the remaining Western manufacturers or establishing new factories. Nevertheless, there is a serious shortage of infrastructure, suppliers and skills. Most Western ex-footwear employees have found alternative jobs and have little interest in returning to shoe manufacture. In many respects, Western Europe and North America are likely to remain expensive for the foreseeable future. In reality, any talk of factories relocating back to the West normally means looking at Eastern Europe, Mexico and some South American countries.
These areas may satisfy the requirement for a shorter supply chain, but they still need to supply competitive product that reliably satisfies expectations. Factories must return to the effective use of technology and skills training, rather than rely on foreign manufacturing methodology based around a vast labour resource.
With many years of assessing Western manufacturing facilities and advising and implementing efficiency improvement programmes, SATRA is uniquely placed to help. It can use its knowledge to both develop greater factory efficiency and to continue its supply chain support – through such provisions as its laboratory accreditation programme and leather grading protocols.
SATRA is responding to change in retailing and supply by liaising with industry and equipment suppliers to provide technical solutions through its research programme.
Established management systems such as SATRAData and 'Q' can be used to establish the most effective production lines, while SATRA’s experienced consultants can advise on the optimum factory layout for efficient working. Anticipating a return to a more technology-based production environment, SATRA is developing the next generation of factory efficiency tools. As many factories are short of technical skills, these tools have been devised for use by less experienced technologists and factory production engineers.
SATRA Visionstitch is designed to speed up the development and quality of new sewing machinists, and is particularly suitable for integration into 'lean manufacturing' programmes. Another tool is SATRASumm, which maximises material usage and reduces wastage.
The SATRA Accredited Footwear Technologist training course (SAFT) has been amended to better reflect the changing needs of shoemaking today. In addition, a new SATRA Accredited Footwear Engineer (SAFE) course has been designed for industrial engineers. SATRA has also engaged with a number of other training providers to contribute to basic footwear manufacturing training initiatives.
While it is difficult to predict the future, we can be sure that life will be tough for manufacturers and businesses will need to adapt and change. Greater efficiency will be fundamental to success, whether a company is manufacturing in Asia or in the West. The ability to make short runs and deliver these to retailers rapidly and flexibly will be a feature of the future, and SATRA is ready to help members become more effective and differentiate themselves from their competitors.
How can we help?
Please email firstname.lastname@example.org for further information on how SATRA can assist footwear companies to become more effective during the ongoing economic difficulties.
This article was originally published on page 38 of the December 2011 issue of SATRA Bulletin.