Newsletter No.26 14 July 2017
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#Homesewn: K-Way’s lean local manufacturing machine
South Africa’s clothing and textile industry has seen some trying times. In the past 15 years, jobs in the local sector have decreased from 200,000 to 19,000 and numerous factories have shut their doors – some following reports of worker exploitation. Then there’s the competition from large international retail chains and brands with an eye on increasing their South African footprint, their profits sometimes built on the backs of low-cost foreign labour sourced from the likes of China and Bangladesh.
But rising above the challenges is outdoor apparel brand K-Way, which since being founded in Cape Town in 1981, has not only gone on to vastly improve its production efficiency but has also played a part in addressing the country’s unemployment crisis.
The proudly South African manufacturer has its roots in the bespoke tailoring industry; producing made-to-measure uniforms along with customised jackets and foul weather gear for the police force and security industry. The company soon began supplying South African outdoor adventure store, Cape Union Mart, with technical clothing – giving the retailer an edge as this type of apparel was only available from overseas suppliers at the time.
While the business performed reasonably well during its early days, new management appointments in 2004 and the application of a lean manufacturing system spearheaded by Bobby Fairlamb, contributed to a number of improvements in terms of quality, pricing, innovation and delivery. This resulted in a spike in sales growth together with the company pioneering a number of firsts on the African continent.
Among these were being the first manufacturer of rain- and storm-proof, seam-sealed, foul weather protective clothing; being the only African company to have been awarded a licence to manufacture clothing using the technical Gore-Tex fabric and more recently, becoming the first African manufacturer to use Sewfree technology in the production of technical clothing.
Staff and enterprise development
K-Way has invested heavily in its workforce, providing staff across the board with ongoing skills training to improve their daily work procedures, methods and systems. This, combined with healthy working conditions and a management team willing to listen to the ideas of employees on all levels has resulted in reduced staff turnover and low absenteeism.
The company’s workforce has swelled by 65% and now employs over 240 staff – 50% of them have been with the company for over five years and many hail from the communities surrounding the workshop in Ottery, Cape Town.
Furthermore, as part of K-Way’s commitment to local enterprise development, it has nurtured a number of smaller, outsource Cut, Make and Trim (CMT) factories, assisting them with development and training as well as lending them machines. There are now over 150 people permanently employed through these CMTs.
K-Way’s improvement efforts have been well recognised, with the business winning a spate of awards over the past 10 years from the DTI, CCTC and Productivity SA. Other accolades accrued include being named Best Practice Workplace Provider by the Fibre Processing and Manufacturing (FP&M) SETA and taking home Leadership Management International Inc.’s award for Outstanding Achievement.
Today, K-Way is the number one supplier to Cape Union Mart and the best-selling brand in South Africa’s outdoor apparel market. Despite this, the company says it is committed to constant improvement and evolution to ensure that it remains on the cutting edge of technology.
After a recent tour of the K-Way factory, manufacturing team leader Bobby Fairlamb let us in on how he adapted the lean manufacturing system to the K-Way business, which elements are needed to create award-winning production models and why he believes SA’s clothing manufacturing sector has especially large potential to employ people in large numbers.
Briefly describe what the lean manufacturing process entails, and how the system was adapted for use in K-Way’s factory?
Lean is a way of thinking; a journey and not a destination. Lean repurposes the organisation to deliver value from the perspective of the customer, profitably. The model focuses on optimising operational time in all areas of the business through eliminating waste in the process (non-value adding steps). Lean allows each area and each person of and in the business to see how they can make value flow.
K-Way has spent much of its time training and developing the staff on the model and its tools that enable the sustainability of continuous improvement. K-Way started with the simple application of waste walks (observation) where all staff are taught to look for waste and eliminate it. Tools that have been successful are problem-solving (A3’s), Kanban and reduction of inventory. It has been quite a simplistic approach to embedding a transformation in the culture.
K-Way has invested in its workforce with constant training. Why is this important and how has it impacted the business’s bottom line?
Knowledge is power! By giving people education, we are empowering them to be a greater asset to the company. By uplifting people and helping them to achieve their full potential, we are also feeding into their motivation levels and allowing them to take ownership and to be an important part of the organisation. It becomes self-fulfilling when the company excels.
It has indeed been a great advantage to be a part of the Cape Union Mart Group. It has given us the opportunity to build a vertically integrated supply chain throughout the K-Way brand from concept to end user.
With K-Way being part of the Cape Union Mart family, it has given impetus to the buying team to actively pursue design, development and production as it is our own manufacturing facility. From K-Way’s perspective we have also actively made a point of offering our retail partner a competitive advantage by being innovative, flexible, punctual (on-time delivery), quality-driven and cost-effective.
When it comes to manufacturing locally, many companies remain hesitant due to the accompanying costs. How does K-Way keep costs manageable and what advice can you give brands that are considering local production?
In my mind it is not entirely true that it is difficult and costly to manufacture in South Africa. Productivity has very little to do with the workers and everything to do with management. Workers do not arrive at work in the morning with the intention of being lazy or making mistakes. As managers, we decide and provide everything required to run our businesses.
• We decide what product to make
So, in light of the above, if our businesses are inefficient and uncompetitive it’s more likely a management issue rather than a worker or environment issue.
As the team leader of K-Way’s manufacturing division, what has been your career highlight thus far?
As the manufacturing team leader I’ve had many highlights of which I am proud over the 13 years I have been with the company. However, the overriding highlight has to be that I lead a team of management and staff who have completely evolved from a traditional manufacturing mindset to the lean progressive and successful company it is today.
In 2004, the K-Way Factory was struggling, along with the rest of the market. However, when I joined the company, things started to turn around and today it is a flagship model of success and an example of what can be achieved with investment in people and technology being the main drivers.
Considering you have first-hand experience, which combination of elements do you believe make for an award-winning clothing factory?
An award-winning clothing factory needs:
• A healthy culture which values and respects people and recognises that people are the company’s most valuable asset.
What do you think the future looks like for South Africa’s clothing manufacturing sector?
I believe that out of all the other industries in South Africa, the clothing manufacturing sector has huge potential to employ people in large numbers.
For this to happen it will require that industrialists and entrepreneurs team up with retail and embrace niche products and technology to differentiate themselves from the low-cost run of the mill type products; which, ends up being a race to the bottom in trying to compete with other low-cost businesses locally and abroad.
In addition to this, manufacturers need to embrace modern manufacturing techniques and need to explore and use proven management models and systems, such as lean manufacturing.
TFG, Truworths look offshore for growth
TFG, the retailer that owns Foschini, @Home and Totalsports is in talks to acquire British womenswear brand Hobbs, a UK press report says. Hobbs, a high-end fashion retailer, was put up for sale by its private-equity owner 3i in January for 80m, according to The Times of London.
Continued political uncertainty and SA’s credit downgrades have lent urgency to the country’s apparel retailers in diversifying their revenue streams with hard currency to reduce dependence on the local market, which is in pronounced economic slowdown. TFG has been looking for international acquisitions and has appointed a dedicated head of mergers and acquisitions in 2016.
The newspaper quoted sources as saying that Truworths, another JSE-listed retailer, was the frontrunner in the race to buy struggling chains Oasis, Coast and Warehouse, all of which were owned by failed Icelandic bank Kaupthing. t said TFG was “unwilling to fork out the full asking price”, and that 3i, which had hired NM Rothschild to find buyers, was expected to lose money on Hobbs.
In an e-mailed response to Business Day, TFG said: “At this point in time we are not talking to anyone, but in any case, we do not comment on any potential acquisitions.”
Truworths said it was not its policy to comment on rumours or media speculation.
Alec Abraham, Sasfin’s senior retail analyst said that based on SA economic outlook relative to that of the UK, it seemed the UK was potentially the “cleaner dirty shirt”, although it was also highly uncertain because of the potential consequences of Brexit.
The buyout by Christo Wiese-backed Brait of high street stalwart New Look has been an unmitigated disaster. This was mostly blamed on Brexit and the subsequent fall of the pound and consumer confidence, as well as rising inflation in a promotion-led retail market. The highly geared brand, which was acquired in June 2015 for 780m, is now banking on Asian growth.
Truworths’s R5.5bn buyout of UK footwear chain Office has not drastically shifted the needle for the group, whose share price has fallen nearly 20% in the past nine months.
Though developed markets are not necessarily a high growth shoo-in, a geographic foothold does afford scale and a rand hedge for companies. Listed property groups have also been boosting their offshore presence. There are about 20 rand hedges on the JSE.
The UK risk, however, is that if the pound depreciates and the rand strengthens, foreign buyouts become pricier. This reduces any initially expected offshore revenue.
TFG has already made plays in the UK, first with its acquisition of Phase Eight and then Whistles. In 2017, TFG bought Australia’s Retail Apparel Group for R3.025bn. Abraham said that based on his last interaction with TFG chief financial officer, Anthony Thunstrm, the company was still acquisitive and continued to find high-quality opportunities.
“At the current level of gearing a capital raising may be necessary if an acquisition is pursued,” he said.
In TFG’s latest financial year, retail sales gained 11.6% to R23.55bn, a growth rate which, if not for an international sales contribution of R4.64bn – 19.7% of total group retail sales – would have been 8%.
At a pretax profit level, the difference was even more pronounced. Without the contribution from international sales, TFG’s reported pretax profit growth of 6% to R3.2bn would have been just 2.8%.
The expansion in SA of global players, including Zara, Cotton On and to a greater extent H&M has hindered sales growth at domestic players. H&M’s cheap ‘n chic offering has found favour with local consumers, across lifestyle measures. Since its opening two years ago, the Swedish brand has brought differentiation to the market, which was historically dominated by entrenched local players.
AfDB wants strong fashion industry for Africa
The African Development Bank (AfDB) has called for empowerment of small and medium operators in the textiles, apparel and accessories sectors as a job creation strategy at the recently held Small Business Indaba in Gauteng, South Africa which aimed at providing small, medium and micro-enterprises (SMMEs) tools and network to grow manufacturing operations.
“Textile and clothing is the second largest sector in the developing world after agriculture. This sector is dominated by SMEs and holds the potential to create jobs for millions of women and youth across Africa,” Emanuela Gregorio, gender specialist at AfDB, said at the conference.
“The foundation of any long-lasting venture in Africa depends on the continuous empowerment of regional SMEs and young entrepreneurs. Governments, the private sector and international investors must consider Africa’s young people and SMEs central to the stability of their economies,” Gregorio said.
A large percentage of workers in the textile and clothing industry is made up of women.
“In this context, we have developed a flagship initiative named Fashionomics to enable African women and youth operating in the textiles, apparel and accessories sector to develop and grow their businesses,” she noted.
The AfDB launched Fashionomics (the economics of fashion) initiative to increase Africa’s participation in the global textile industry supply chain.
Fashionomics is an initiative to support the development of micro, small and medium-sized businesses (MSMEs) operating in the textile, apparel and accessories industry in Africa, with a focus on women and youth empowerment.
SMEs have the great potential of fuelling growth and spur job creation. Today, these small and growing businesses create around 80 per cent of the region’s employment, establishing a new middle class and fuelling demand for new goods and services.
The Bank runs an SME programme designed to support micro, small and medium enterprises. The Bank is closely tracking its role in the continent’s inclusive development through its High-5 agenda (Light up and power Africa, Feed Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life for the people of Africa).
Did you know..
– The ‘New Look’ was introduced by Christian Dior with his spring-summer collection in 1947. It featured a cinched waistcoat that accentuated the bust and gave an hourglass look with the long pleated skirt.
– The first bra was invented by a New York socialite, Mary Phelps in 1914
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