Challenging low margins with optimism

Redwood Comment
Published:  31 August, 2016
Mike Redwood

As the industry gathers in Shanghai no one is saying that the state of trade is good. Some tanners are quiet, but even in the busier areas margins are being squeezed hard. Yet, it would be wrong to say this has brought with it a sense of pessimism - quite the reverse. Tanners are laying out their long-term plans and are positive about them, and there is an interest in the strategic, as compared to short term tactic, that has been noticeably absent in previous years.†

This might appear curious when one recurring theme in the pre-Show LeatherNaturally! Leather Forum organised by ILM and APLF, and sponsored by Lanxess, Zschimmer & Schwarz and Tyson, was that the tanning industry does not make the profit needed to invest in research, experimentation, recruitment and the elements of lean production needed to secure a more stable future.

In a session loaded with startling, often radical thoughts and ideas being raised, no challenge was considered too great. Making shoes within 30 days needs leather in ten according to Adidas, so this means that tanners have to find ways to reconfigure the tannery. Jon Clark, CEO, PrimeAsia made it clear that demands for faster delivery were inevitable as it was the consumer who was creating the pressure, driven by advancing technology and communications. The consumer does not expect to wait. He noted that, when scrutinised, a lot of the delay in getting leather out to customers is in the administration procedures rather than the manufacturing side, and huge strides could be made just by understanding better what is going on.

Thorsten Lahnstein, Director China and South Korea of automotive leather producers, GST AutoLeather, thought that if tanneries could find more really good staff to manage the technology there should be a move back to the days when tanners used to develop their own robust "platforms", or fundamental leathers from which a variety of end products could be quickly delivered. This also plays into ensuring fewer leathers get classed as commodities, which is one route to uncomfortably low margins.

If all of this is framed in a marketing oriented approach that puts the consumer at the pinnacle, tanners could start to meet the demands of the "at once" society while carefully positioning their leathers for slightly improved margins even in tough times. The serious tanners, who are typical of LeatherNaturally! Membership, are "highly competitive but not the cheapest". To meet the requirement for innovation and CSR in its most comprehensive sense thinking customers knew there was a small price to pay.

With this approach, and the industry telling its marketing story properly recruitment should be easier, the image of nature's perfect material would get across to the consumer and we should be able to justify that underlying feeling of confidence that exists in the trade.

Mike Redwood

31st August 2016

mike@internationalleathermaker.com

Follow Mike Redwood on twitter:†@michaelredwood

Publication and Copyright of "Redwood Comment" remains with the publishers of International Leather Maker. The articles cannot be reproduced in any way without the express permission of the publisher.

Thorsten Lahnstein, GST AutoLeather
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