- 1 Drivers for change
- 1.1 1. Was lohn production, based on large volumes and cheap labour still sustainable?
- 1.2 2. Would sales of products under company’s own brand reach a level that ensured business viability?
- 1.3 3. What were the contextual and market trends?
- 1.4 4. How would the company’s own vision and values meet all those trends?
- 2 The best solution
- 3 Katty Fashion today
- 4 Challenges of switching
KATTY FASHION was established in 2003 by Caterina Ailiesei, a graduate from higher studies in textiles with over eight years experience as a production manager, to provide garments on a lohn-basis? for mid and high street labels in the UK. This was a period when this type of business was still favourable for Romanian producers able to offer highly skilled and cheap labour whilst benefiting also from an advantageous geographic position and a socio-politic environment more stable and safer than in other countries in Eastern Europe with traditions in the clothing industry.
The company recorded a maximum number of employees (around 150) and turnover in 2006 and 2007, providing large series orders for fast-fashion brands. This work covered its production capacity entirely but provided very low margins of profit.
The company faced the need to continuously adapt to the constant changes of the technological, economical and social environment and to a market becoming affected excessively by the competition on price. In order to ensure the viability of the business, significantly affected by the global crisis in 2008, the management team decided to approach more profitable market niches, like that of medium and high fashion brands from Western Europe countries and gradually switch from lohn based production, with large volumes and low prices, to medium and short runs, based on CMT and FBB production systems.
During that period, the organisation has developed its creative skills and launched on the domestic market an own brand of casual ladies apparel – Katty Fashion – but the socio-economic context wasn’t a favourable one for significant sales, giving another reason to focus on attracting orders from the foreign markets. Also, the organisation had just implemented the Quality Management System ISO 9001:2008 and was looking for financial solutions to continuously improve the performance of its team and processes in order to secure production capacity able to support execution to high quality standards while increasing productivity. Such a model would better withstand the strong competition in the market place and develop.
Drivers for change
Changing the type of production to short runs was an important decision. The company had to take into account the risk of losing its traditional customers with medium to large orders without any guarantee of getting orders from the new market that would cover its whole production capacity consistently. The decision process required reflection on significant matters, such as:
1. Was lohn production, based on large volumes and cheap labour still sustainable?
Official data indicated that repeated increases in the gross minimum wage in the recent years added major pressure on employers in this sector who always depended on cheap labor, while provoking a growing shortage of skilled and stable workforce. Many employees in this industry were looking for better paid economic activities or preferring to work abroad, foreseeing that the competitive advantage of cheap labor will totally disappear in the near future.
2. Would sales of products under company’s own brand reach a level that ensured business viability?
The domestic market of fashion was dominated by the big European labels (Zara, H & M, C & A, Benetton, Takko, etc.), selling their products in the big shopping centers, captivating the young generation, the segment most interested in Fashionable clothing. Furthermore, the low purchasing power per head, a result of the economic crisis of 2008, introduced competition for both outfitters and second-hand clothing as well as cheap clothing imports from Poland, Turkey, China, or India. Only a few local brands have succeeded in gradually occupying the second echelon of local fashion. In this context, this meant to subject a new brand to a long and costly process involving investments that the company could not sustain.
3. What were the contextual and market trends?
The unsustainable characteristics of the fast-fashion model, with major negative impact on social and environmental ecosystems globally, called for significant changes of textile and clothing production processes, to make them more ethical and sustainable creating new challenges and opportunities for the companies in this industry.
4. How would the company’s own vision and values meet all those trends?
The organization aimed to continue growing in a steady, sustainable manner, assuming social responsibility of protecting the local ecosystem and ensuring fair working conditions, while achieving excellence in meeting customers’ expectations.
Katty Fashion had already adhered to the Ethical Fashion Forum – the industry body for sustainable fashion.
The best solution
The management team concluded that only exports would generate revenues and profit for the business in the next years. The team gradually approached prosperous niche markets, while developing competitive and integrative production through optimal use of all resources, increasing own creativity and improving services.
The transition to the new production model should be implemented gradually, in concordance with strengthening its team, improving production capacity and developing value added services.
Katty Fashion today
Currently, Katty Fashion comprises a team comprising 51 members, highly skilled in all types of activities: technical support for product development, sampling and order manufacturing, quality control, sourcing, costing, marketing and management. Since 2014, all capacity has been dedicated to short run production, mainly on a CMT basis, for mid-high and premium fashion labels, whose orders provide more than 95% of its annual turnover in the last three years.
Here’s a look at some of the key areas that enable Katty Fashion to operate successfully.
The technical and product development team consists of: Technical Designers – textile engineers specialized in clothing and fashion design, operating a Gemini CAD System for the Clothing Industry, who realize technical documentation for sampling and production and support customers in developing new products, interpret the shape and the proportions in the designer’s croquis and realize the technical documentation for translating them in final real products and/or adapt previous patterns and grading, collaborating with the Marketing and Costing Manager – a person with a creative understanding of the products, who elaborates the open-costing sheet for each style, being also involved in analyzing the market trends and communication with customers and suppliers, and the Technical and Quality Manager – a basic textile engineer, involved in products development and sampling, taking care of all quality aspects of samples manufacturing, who well knows all customers’ requirements and makes sure they are met properly, before the delivery of the samples.
Sampling team: A Sample Cutter & Sample Machinists, high-skilled workers who work closely with the technicians to cut out and manufacture the toils, the first samples and the salesman samples, based on received complete specification sheet containing technical sketch, accurate measurements and detailed information about trimmings and finishes.
The Production team, coordinated by the Technical Director, gathers highly qualified personnel: cutters, machinists for all types of operations, quality controllers supervising the quality of the execution, and technologists supervising the whole technological circle and also the compliance with the delivery terms.
Product portfolio: Blouses, dresses, skirts, pants and jackets, made of woven and knitted fabrics, mainly from thin and medium materials, with very different fiber compositions and structures.
Services offer: CA pattern design, digitization and grading, sampling, technical documentation and open-costing, sourcing, and also, providing bio-finishing treatments by collaboration with domestic expert companies.
The ordering set up: Specific orders consist of 2 to 100 pieces / style, most of them fewer than 50 pieces / style. Orders are ranked according to the complexity of the models in the following price ranges:
- Reference price quotation (RP) – for at least 50 pieces / style to 100 pieces / style (RP)
- Quotation of 2 to 25 pieces/ style: (1.8 to2) x RP,
- Quotation of 26 to 50 pieces / style: (1.5 to 1.8) x RP
- Sampling quotation: RP x 2.5
- Extra-payments are negotiated for additional services as: technical documentation (pattern, grading, digitizing, technical file), print placement and sourcing.
Usual delivery time, depending on complexity and size of order:
- 1 to 2 weeks for sampling
- 3 to 4 weeks for production, following receipt of a Purchase Order and all materials and accessories.
Normal payment conditions, depending on order size and value, are 30% to 50% of the total amount paid in advance with the balance at delivery. Long-term partnerships with a history of repeat orders can be offered payment terms within 15 to 20 days from the date of delivery.
Challenges of switching
Facing new competitiveness criteria
The specific requests of this target market – small quantities/style, highest quality standards, short delivery terms, shift the focus from competing on price towards competitiveness criteria as: excellence in execution, flexibility and adaptability of production capacity, increased creativity and responsiveness, as well as the ability to provide as many additional services, getting of new orders being largely based on already gained reputation and/or recommendations of others of your beneficiaries. Maintaining on this market means meet the requirements of clients at the highest level that is impossible to achieve without ensuring constantly conditions for high skilled staff and proper production facilities.
Specialisation of equipment & skills and facing skills shortages
To face this challenge the company acquired in the last years new technological equipment as to improve production structure and support the increase of labor productivity and production quality, minimize energy and raw materials consumption, so making manufacturing processes more effective and ensuring the sustainable development of business in its entirety. It also needs to always make available all spare parts and special devices, required to adjustments.
Having skilled personnel for short run production is a real challenge, as machinists should be able to achieve the whole product or almost, so they need to operate all type of sewing machines ensuring high quality and timely execution. To offer value adding services it needs very skilled technicians, with clothing design knowledge and able to operate a CAD System for clothing industry, having, also, good English language skills.
The human resources policy is based on procedures of staff hiring, monitoring, motivation and training, in full compliance with labour law provisions, ensuring fair salaries and work conditions and incentives for increase staff motivation and loyalty. Katty Fashion invests in on-the-job training and collaborates with professional schools and also the Textile Faculty to increase its chances of attracting well-trained staff.
Logistics of components and cost implications
Optimal logistics of components require an accurate procedure of communication with both customers and suppliers, so as to avoid delays in supplying materials and accessories, as well as in delivering products.
Increasing the visibility of Short Run Producers (SRPs)
The marketing manager is responsible for communicate to all current and potential collaborators the improvement of the manufacturing processes and the exceptional quality through due to new investments in technology and also through company’s website and Facebook page, all accessible platforms of Textiles, commercial offers and promotional materials. The company also promotes its service offer at international fashion fairs.
More case studies: see http://tcbl.eu/resources
?) Lohn-based production: “The concept of lohn or lohn production focuses on processing raw materials into wholesale clothing production. A clothes manufacturer makes a contract which means that they will produce items at the request of a client at the exact technical parameters in exchange for a pre-established sum of money.” (source) ↑
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