sign direction quality - leadership

How to compensate for materials and labour cost increases

There are variables that the brands and their factories cannot control. We have seen commodities’ price fluctuation. Cotton for example. Economic or political crisis in certain countries, weather conditions, sometimes even natural catastrophes are some of the reasons for the fluctuation in supply and demand that affect the price of the materials needed for our apparel, footwear or leather goods production.

So in order to compensate for the variables we cannot control, like materials or labor cost increases, let’s work on the variables we can control. The opportunities for improvement are there, in our own work, in the way we do what we do, and why. We just have to spot those opportunities and take them. We are talking about reducing costs by improving our performance.

sign direction quality - leadership

A candid assessment of the supply chain done by qualified professionals is the first step to find such opportunities. Then it is time to define the strategic goals that will drive the transformation and develop a well designed action plan. The implementation has to be planned in consecutive phases, in order to measure, track and evaluate results in completed stages. The choice of the correct Key Performance Indicators is crucial.

All processes are susceptible to being optimized, from Product Development to the distribution to the stores, but especially in manufacturing. The benefits apart from lowering costs are numerous: shorter lead times, increased sustainability, more flexibility to produce smaller orders faster, just to name a few. It comes down to eliminating waste and inefficiencies in all their forms: overproduction, excessive transportation reprocesses, reworks, rejections. Savings are seen instantly once we eliminate waste of time, materials, labor and, capital.

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The Exodus to Africa: The Risks and Rewards of Migrating Your Manufacturing Operations

Change is afoot in the manufacturing world. While China has dominated low-value, labor-intensive manufacturing sectors for nearly three decades, rising labor costs have many companies looking to Africa as a cost-effective alternative. But as many companies have found, migrating operations to Africa can present a wide array of unexpected challenges.

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The Manufacturing Exodus to Africa

From the 1980s until recently, a combination of high productivity and low wages allowed China to dominate the manufacturing of lifestyle goods such as apparel, footwear, leather goods, and outdoor gear.

However, as the nation’s wealth and wages have risen, along with energy costs, land costs, and regulatory restrictions, China’s cost advantage has dwindled. In fact, according to Justin Lin, former chief economist of the World Bank, China may have to export 80 million jobs as its competitiveness wanes in certain manufacturing sectors.

Meanwhile, in Africa, sub-Saharan Africa in particular, the economy and industrial output is rapidly growing. Infrastructure investments have upgraded roads, railways, ports, and electricity, and telecommunications networks have expanded. These investments, combined with low labor costs, abundant resources, reduced trade barriers, and capital subsidies, have created an appealing business environment for manufacturers.

 

The Risks of Starting with New Supply Chain Partners in Africa

While Africa is viewed by many as the world’s next manufacturing hub, many companies are discovering numerous risks, unexpected costs, and pitfalls when migrating their operations there. Experts must be moved or hired, factories must be evaluated, and trials must be run.

In addition, sub-Saharan Africa’s labor productivity is generally low compared to their Asian counterparts, and sub-standard quality is common among new supply chain partners. For example, Impactiva’s quality assurance technicians recently began working at an Ethiopian factory and due to poor initial quality were forced to reject and send for rework an extremely high percentage of shipments.

 

The Solution: Employ Sustainable Solutions to Optimize Your Supply Chain

To ensure a cost-effective migration of your manufacturing operations, it is critical that you employ sustainable, hands-on solutions to quickly ensure that you get the right product at the right time.

At Impactiva, our technicians are already working full time in Africa. At the Ethiopian factory mentioned above, the very high rework was reduced to 4 percent in less than one season. To accomplish this feat, we trained the factory’s quality control staff and supervisors and are continuously providing cutting, sewing and finishing technical training courses to all operators. Further, we studied and refined processes in all of the factory’s departments.

We can do the same for your production. We can deploy technicians to provide quality assurance / quality control inspections, factory technical audits or quality training. Ultimately, we can ensure that your African factories have quality-focused team members proud of making an excellent product.

Call us today for a customized proposal of services to help you safely, quickly, and cost effectively migrate your production to Africa.

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Cutting time loss – Case #336

“A picture is worth a thousand words”. Practical solutions to problems encountered in the manufacturing process that demonstrate how we assist our customers’ factories to produce Right from the Start TM.

Problem: wrinkles on the socks covering that make it very difficult for operators to proceed, which results in a considerable time loss.

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Impactiva solution: we got the factory to revise the cutting die, adding some notches in order to avoid these wrinkles on the cover edges.

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Stay tuned for more Impactiva technical solutions to every day production problems.

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Are you considering re-shoring?

More and more companies in the fashion industry are considering, or already actively working on re-shoring projects. By re-shoring we understand to bring back the manufacture of products to the countries of origin of these companies, or to produce nearer to the consumer.

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The comparison can no longer be done on the unit cost or landed duty paid cost of a product. This implies ignoring hidden and not-so-hidden costs that affect the final figure, like exportation packaging, international banking/financial expenses, trips of executives, emergency airfreight costs, inflation and currency appreciation in the manufacturing countries, just to name a few.

 

The re-shoring might not be possible or worthwhile for all companies and products. Maybe it can be wise only to produce some of the components, or to carry out some stages of the manufacturing process only. It takes a deep analysis of costs and a solid project of Manufacturing Excellence in the countries where the production is intended to return, as a really Lean, sustainable way of manufacturing is needed to counterbalance the higher labor cost (higher wages).

 

At least it is worthwhile the exercise, analyzing a possibility of re-structuring the manufacturing process, analyzing inventory control, supply chain management, and operational inefficiencies.

 

Here is where Impactiva can help! Our Manufacturing Excellence Business Unit has programs in place to optimize material management, transform the manufacturing process with Lean techniques and scrutinize your entire supply chain for optimization. Our deep knowledge of the leather, footwear and apparel industries combined with our ability to apply industrial engineering techniques guarantees a unique and realistic assessment of the current situation of a supply chain and a sound plan to improve it. Contact us!