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Supply chains in the leather industry are complicated. While we start with the location of the consumer to offer a fast and responsive service, even a casual glance shows this is far from a simple matter.
Modern tanning, unlike footwear or garment manufacture, is not labour intensive, but it does involve some sizeable machinery and installations. Add in a complex effluent treatment system, and it is easy to see why so many Italian tanners decided to stay put in Italy while volume shoemakers and others chased cheap labour elsewhere. On top of that, leather manufacture is very raw material dependent. For two thirds of our production, bovine hides are required and for most major bovine tanners U.S., EU or Brazilian hides are required. All are different in some way, but wherever the consumers are, the hides have to reach them across the world, stopping off at one or more tanneries on their way to the factories, which will turn them into finished product and then on to the consumer.
Sheep, goat and pigskin – the other volume material – are even more convoluted, and the whole mix is further stirred by the end market being served and the process being used. The hides may be required as wet-blue or raw, skins with wool-on or as pickled pelts, or everything as crust, or the tanners might be working with or without chromium or producing a traditional vegetable tanned leather. When a tanner used local raw material to service local needs, with a certain proportion of imported raw material occasionally fed in, understanding the supply chain was much simpler, but, as the world of trade expanded and as countries such as China and India evolve into major consumer nations, complexity has become inherent and will be difficult to remove.
It is no surprise that in 1937 Hoover kicked off the scientific approach to Economic Geography with his seminal study of Location Theory in the New England Shoe and Leather Industry, while the idea of specialisation in leather and footwear is well documented in large cities 3000 years ago. Hides, skins and leather have been traded from the earliest times, and the specialist leathers associated with particular locations were our fist sign of branded product. Long distant shipping of goods has been part and parcel of the leather industry for millennia.
Quality control and the desire for knowledge has meant that most tanners have first-hand knowledge of all that happens in every part of the supply chain, from the pasture to the consumer purchase, but as business pressures and distances have increased, visits are harder and more depends on trust. Yet, modern consumer demands require awareness of every part of the chain right through to the final disposal of the product, with guarantees required for each stage.
Recent textile industry examples serve as a perfect warning of what we must look out for. In China we have had a sudden reaction as brands and all sorts of organisations realised that they were buying cotton, yarn and finished products from what are reported as factories using forced Uighur labour. Many of the brands named are familiar, and highly respected, in the leather industry sphere.
Such problems are not only found at long distance but even under our nose. The online retailer Boohoo, famous for its low prices and agile model, had an approach it explained as not “taking life, or fashion, too seriously”. Nevertheless, many of the expert companies who advise investors of the best companies in the CSR space have something to say about that. Labour issues are very serious. They had Boohoo in their top grouping, despite it being clear for at least two years that unscrupulous factories in the English town of Leicester were paying staff less than half of the legally required minimum wage.
It is not possible to survive on a check box system and a clerk
Third party verification and the respected ratings from companies like MSCI, who gave Boohoo an AA rating (its second highest) in June, are increasingly important. Yet, both these events clearly demonstrate that total reliance on audits and paper trails (and sometimes even trust) is not enough for the company that is determined to be faithful to its mission statements. In both cases corruption or subcontracting to associated factories that evade inspection might be part of the problem, although both these scenarios have been well known for nearly 20 years and should be no surprise.
It does emphasise that while using audits, such as the excellent ones we have in the leather industry, no company should use it as a replacement for their own in-house knowledge. Anyone who remembers some of the formidable buyers amongst brands and retailers in past decades would know that they could sniff a problem out quickly from a look at the pricing, the quality, the finish and the make-up of any article. They could then make an early visit and examine the on the ground reality with a knowing eye. We could do with them back.
There is no escaping the need for well-trained staff at every level of the supply chain. Staff that understand the product and the industry are the ones that are best placed to access the reality of what is going on; it is not possible to survive on a check box system and a clerk.
July 29, 2020
Follow Dr Mike Redwood on twitter: @michaelredwood
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