STRATEGIC GAPS IDENTIFICATION

(THE CASE OF ETHIOPIAN LEATHER GARMENT & GOODS EXPORT)

Strategic Gaps Identification in Ethiopian Leather Garment & Goods Manufacturing Subsector.

June, 2011
[Presented by: Solomon Tadesse (Eng.), Directorate Director, Ethiopian Leather Industry Development Institute.]

Adama

CONTENT

1.INTROUDUCTION Footwear, leather garments and goods are the most important value added products in the export bin of Ethiopia. From the point of view of employment generation, and net foreign

exchange vital roles

earnings, in the

these countrys economic

industries are expected to play sustainable development.

Though availability of trainable, cheap manpower, base taken large and by raw policy the materials initiatives

and

achieve

the

projected

advantage. 2.OBJECTIVE OF THIS PAPER The article is principally aiming to: analyze the past, present and

government are taken as the strength of the leather garment and goods subsectors, however, the achievement from exporting leather garments and goods so far was not effective and as expected. The inept performance of this sub-sector in the global market place is primarily due to limited production capacity and lack of access to international market. In addition, technological knowhow constriction, low quality of raw materials and accessories, incapability of its conversion into leather and later into the product development and the manufacturing of products are also casted negative shadow on success of this sub-sector. Therefore, it is necessary to bluntly understand the root cause of these problems and design best strategies to solve it

future market

trends

of

export of garment

performance leather

Ethiopian

and goods sub-sector. provide insights into caprice of the market place and also to suggest a number of long term based winning on both the for strategies local and

international trends. understand requirements preparation source of advantages market and identifying to

improve competitiveness. 3. EXPROT PERFORMANCE in MILLIONS of USD.

Exportin M illion Dollar

8 6 4 2 0 200620072008200920102011 Export Year Planned Achieved

In general, this sub-sector as a Yea Plann Achiev Gaps r 200 6 200 7 200 8 200 ed 3.12 0.26 2.52 0 0.64 6.54 13.08 ed 0.3 0 0.03 0.15 0.1 0.58 1.16 -2.82 -0.26 -2.49 0.15 -0.54 -5.96 -11.9

Expert Effectiveness (EPE) EPE =

e u l a V

Performance (Achieved Export /

9 201 0 201 1 Tot

Planned) x 100% EPE = (1.16/13.08) X 100% Ineffectiveness = 91.13% The fact that Ethiopian leather garment and goods industries are working with and be in an outdated insufficient effective substantial technology inability suppliers quantities. Besides, increased competition, capacity expertise pressure prospects limitation, in on global lead of lack time growth of and & sourcing, to

al whole has not yet come to term with the need for a paradigm shift in attitude, concept and product market strategy. This is exemplified ineffectiveness by of our the past

capacity clearly indicates the

export performance in leather garment and goods indicated above. 4. FACTORS EXPORT. A. Technology Modern technology has transformed the way in which businesses carry out the process AFFECTING

quality has harshly affected the profitability of these industries.

of production. In manufacturing, firms now make greater use of technology in both the design and manufacture of products. In service industries, technology has vastly improved the ability of firms to handle and store data and has transformed the way in which businesses

Today however, most firms will use technology to design and manufacture their products. The most common used types in of technology leather

garment and goods design is Computer Aided Design (CAD). It is the use to of assist computer in the the

communicate. In the past, the vast majority of leather products design work would have been carried out by hand on pieces of paper. If a product designer had an idea for a new product he would have sketched number been the of design different by the from a angles. product

technology CAD

design of a product. Current packages allow designer to produce drawings of the product in two dimensions, and in many cases three dimensions.

These sketches would then have used developers to build a prototype which would then be tested for fit, cost, performance If would the tests be and a on Gerber CAD Garment Technologydurability. passed decision prototype then made

these

whether to launch full scale production.

The use of modern equipment and technology should lead to improvements in quality since the product is standardized and there is less room for human error Using Increased productivity technology allows for

increased production with no need for rest or breaks Elitron-CAD for Leather Goods The parametric functions stylistic changes on of and all Lower average costs While new technology may be expensive to purchase the extra fixed cost should be more than compensated by the reduction in operating costs. Speedier development of new products The use of CAD and CAM help to speed up the process of product design and development. A large number of problems in Ethiopian leather products development arise at the outset on the stage of design and pattern making owing to lack of technology and technical knowhow. Therefore, CAD-CAM system need to be part of every

these systems allow obtaining automatically dimensional basic pattern. The system also produces a wide range of reports: technical card of the style and its variants, consumptions, list of the basic patterns, customized printings needs. Many firms spend huge amounts of money on new technology because they believe that they will benefit from: Improved quality upon customers

pieces acting directly on the

leather

products

exporters

build up the manufacturing and product quality level. Hence up-gradation of

operating environment. B. The skill level of the workers Manufacturing quality is affected due to lack of sufficient supervision at the floor level. Supervisor-worker ratio needs to be improved in and our leather goods to garment manufacturing

technology on continuous basis is essential in order to sustain in the competitive market place.

industries

reach international standards. In this regards, supervisory Start of the art system. D. Weak productionand

training is a key ingredient in upgrading quality. C. Systems and practices. Another major problem area is the control of information and material flows on the production floor. Quality is also a multidimensional construct and, therefore, from quality of design to quality of presentation and all such quality intrinsic and extrinsic ultimately elements manufacturing for achieving productivity and

distribution chain linkage There are three main links in the production and distribution of leather products.

Component suppliers: in this group

companies accessories. leather,

provide the raw material and For example bottons lining,

zippers, threads and other products required to produce finished leather articles.

Finished

product

suppliers: - firms in this

group manufacturer finished leather garment and goods products.

will want. Manufacturers must be aware of what is going on in the world, including economics, politics, demographics and social change, and how these event and conditions will affect their business. With proper research, or with an unexpected turn of events, products ends up on the sale racks, causing losses and even business closures for producers, manufacturers and retailer alike. Therefore, our companies must continuously study the lifestyles of consumers; shop the market and news to read trend to and design report, fashion magazines and paper This understand research is consumers and what they want buy. absolutely necessary to make intelligent and sales. F. Marketing & fashion More importantly, lack of strong presence in global fashion market, lack of fashion concepts (styles, change, acceptance and planning decisions regarding design, manufacturing

Retail distributors:- this catalogs, and

group includes all forms of retailing-store, television shopping,

internet shopping and so onthat provide the link to move to leather products from the manufacturers consumer. These are known as the channel of distributionin that is the network of interrelated functions involved moving products from where they begin to end with the consumer. These three segments must work together closely to produce and deliver products quickly. E. Lack research It is not easy to make or sell what people will want to buy in a future selling research are needed season. and for Awareness planning of market to the

producers and retailers to make, buy and sell what consumers

taste), pressures on lead time and high rivalry from competitor have leather negatively. In order to meet an ever new affected the Ethiopian sector products

indispensable so as to ensure and realize our competitiveness. Price competitiveness the size of the order, the length of the trade channel the quality of the products availability of the products added value Quality aspect Reliability of the supplier Speed of delivery Technological advancement 6. Expected Leather

increasing demand for leather products along with fashions for leather, and expand our markets, leather producers must constantly strive to develop new leather finishes, colors and quality. G. Capacity limitation Financial constraint - difficulty in obtaining bank loans, power constraints, logistics Unawareness rigorous regulations 5. In general, INTERNATIONAL MARKET EXPECTATIONS. awareness of the and understand international following market of international

Garment & Goods Export in Million USD (2010-2015) Garme nt 0.52 0.69 4.12 11.8 21.02 36.67 Goo ds 0.12 0.15 0.91 2.58 4.61 8.05

standards by many exporters environmental

Year 2010 2011 2012 2013 2014 2015

Total 0.64 0.84 5.03 14.38 25.63 44.72

requirements and strategies for identifying source of advantages to improve competitiveness is

Exportin Million USD

50 40 30 20 10 0 2010 2011 2012 2013 2014 2015 Year Garment Goods Total

begin to realize that they needed customer to be more focused.

e u l a V

Learning their needs, and focusing on how to best serve those consumers needs is very critical.

7. FUTRURE STRATEGIES The plan seems to be striving when looked at the present scenario of these manufacturing firms but if government develop certain wining strategies are followed, it is possible to realize even much better. 1. Organizing the industries around the consumer
Understanding consumers:

2. Developing infrastructure

water, transport the

electricity

&

3. Enhancing

production of of existing foreign-

capacity of industries
expanding

companies
attracting

owned factories through investment promotion

merging/clustering

of

human

needs

are

small and micro business enterprises. 4. Investing on accessories manufacturing industries/suppliers. 5. Improving the productivity and quality upgrading product upgrading CAD,CIM design & development technology

uncertain and differ from one country to the other. These needs vary along with seasons. Therefore, it is essential to completely understand the need of different society based on the trend of fashion.
For many companies, old

capacity & creativity

strategies did not work anymore. Many should

 upgrading

skill

and

9. Product diversification fashion & basic types of products variety of origin goat, pig, cow etc) finishing techniquessplit, nappa, (suede, product (sheep,

technological expertise assuring the quality of raw materials integration using advantage improving 6. Market segmentation demographic such as age factors childrens working condition of employees management capability as competitive and products backward consistently

nubuck etc) quality/price ration: -low, medium and high economic factors- income and spending power brand climate aspects. fashion-based materials, colour end user-mens, women;s and childrens functional aspects 10. Seasonal presentation fashion show/runways showrooms advertising & publicity 11. Managing lead time lines & sales styles on and awareness and and preferences seasonal

wear and adults, gender (men and women) by the type of products by the type of activity resulting attitude of in specific consumers clothing behavior towards fashion 7. Product specialization
age/sex/types/lifestyles

8. Price specialization
price range- depending on

the labour,

quality the quality

of and

workmanship, the cost of amount of materials used.

 speed distribution in order to meet ever-fasting delivery requirements and avoid delay. quick 12. response Channel as a marketing strategy selection and specialization agent/broker importers/wholesalers domestic manufacturer large retail chains and buying groups
13. Applying

productivity,

service

and

image)advantages. Abundant cheap enough raw materials alone to are and not in

labor

anymore

achieve

competitive

advantage

leather products exports. Cost leadership in subject to price pressure and without quality and time delivery, it has no meaning. The new positioning has to be aimed at moving advantage from to comparative

information

technology throughout the production-distribution chain computer integrated manufacturing. 8.CONCLUSION Considering the various sources of competitive advantage, the leather products exports have to formulate best strategies for growth and profitability derived from a combination of qualifying (cost, product quality, reliability, delivery and material) and order-winning (time/speed,

competitive advantages where raw material quality, delivery, speed, productivity of labour and competitive prices become the elements of the value chain leading to sustainable competitive advantage. 9.RECOMMENDATION As labour intensive industries are more suitable to a low labour cost situation, automation which will replace human labour has to come later,

design & product development,

where

as

technology the

which quality

enhances

dimensions of the products is absolutely essential. Each industry should identify and separate its qualifying strategies objectives share and to of and order-winning realize increased

market

profitability. Manufacturers order to form and retailers and

should merge with others in larger stronger firms-Clustering.