Quarter 4. 2014

About the Cape Clothing and Textile Cluster

The Cape Clothing and Textile Cluster (hereafter the CCTC) was launched in 2005 in response to the considerable pressure the industry was facing as a result of trade liberalization and increased global competition. The aim of the Cluster is to assist clothing and textile firms to bolster their competitiveness.

The Cluster operates as a Not-for-profit Company (NPC), governed by an ex-ecutive committee and numerous Technical Steering Committees (TSCs). The service provider of the cluster is Benchmarking and Manufacturing Analysts (BMA), who are responsible for the management and facilitation of the cluster. BMA is also the service provider to the CCTC’s sister cluster, the KwaZulu-Na-tal Clothing and Textile Cluster (KZN CTC). The activities of these clusters are synergised and therefore enable a national development strategy to be executed for enhanced competitiveness of the clothing and textile industry in South Africa. With support from five of South Africa’s largest retailers, the Cluster has been able to establish and entrench programmes designed to assist local firms’ development by accumulating economies of scale through group activities and shared resources.

• The benefits of clustering include:• The generation of a critical mass of resources• Shared learning• The rapid diffusion of ideas• Collective action and risk sharing• Reduced costs• Enhanced ability to compete on a global platform

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Contents

About the Cape Clothing and Textile Cluster 2Powered by B&M Analysts 3Announcements and Recent Events 5Feature Article : The CCTC Boost Development programme 7Upcoming Events 13Industry News 14

Announcements and Recent Events

Benchmarks and the New Online System

The CCTC has completed process benchmarks for Beaches, Farbe, New-coe, Prestige, Waltex, Falke and ACM in the last two months. The benchmarking data collection format has changed- we have gone online! The new system al-lows firms to easily access their data and review and revise previous years’ inputs as well. A new format of the report has been generated and enjoyed by half of the Cluster members already. Soon the CCTC will be sending around detailed requests to create log-in information for those firms that have not been exposed to the new system as yet. All firms will be requested to complete upfront customer data far in advance of their benchmark for ease of processing reports.

A New Member: Keedo

The CCTC is proud to announce the addi-tion of Keedo as a member. The compa-ny is vertically integrated, manufacturing childrenswear for their retail stores. Wel-come Keedo, we look forward to having you at our Cluster interventions.

Strategic HR

On 16 September Dr Linda Ronnie con-ducted a workshop at The Granger Bay Hotel entitled “Managing Change – a practical approach”. The workshop fo-cussed on understanding the genera-tional shift and the stages of change. Dr Ronnie’s background in the clothing and textile industry made for exciting dialogue with the participants and she was able to provide practical methods for firms to deal with the challenges being faced in the industry.

B-BBEE Workshop

Dr Robin Woolley of Transcend Corpo-rate Advisors, conducted an information workshop on the new B-BBEE codes. The workshop was well received by CCTC members as it shed light on strate-gic methods to raise B-BBEE levels in the light of stricter B-BBEE evaluations being enforced by April 2015.

Sector Function

On 23 October all Western Cape Govern-ments Special Purpose Vehicles (SPVs) were invited to the Annual Sector Func-tion. Guest speakers included Premier Helen Zille, MEC Alan Winde and Solly Fourie (Head DEDAT). The function high-lighted the importance of the SPVs for the Western Cape’s economy and skills upgrading at large. Prof Justin Barnes represented the CCTC and gave an overview of the Cluster’s progress in the past 3 years, stressing the importance of Quick Response in the local market and Export Market access for the future of the Cluster.

Feature Article

The CCTC Boost Development programme

The CCTC Boost Programme of 2014

2014 has seen the commencement of an exciting learning curve for 7 SME clothing firms in Cape Town. During March, small clothing firms were recruited to the CCTC Boost Development Programme, and were paced through rapid benchmarks, which allowed for a better understanding of their core practices and common chal-lenges. The participating firms were:• Blue Flag Manufacturers• Embroidery Care• GL Fashions• JJS Clothing• Jordi-B• Kishugu Clothing• Quality Swimwear

As a starting block, a strategy session was conducted with each firm to discuss their offerings, a SWOT analysis, goals and an action plan which was formulated into a business plan.

From March till December 2014, four core themes were focused on during the programme:• Measuring Performance• Lean Manufacturing• Financial Management and Planning• Marketing Strategies

Each theme was addressed at group workshops named Innovation Circles. Whenever possible, these Innovation Cir-cles were arranged together with a facto-ry tour of a best practice facility.

As is usual, with each identified topic, there was a certain amount of resistance to change. Below, we explore some of the points raised by the Boost CMTs against implementing the interventions and the counter arguments as to why they should pay attention to these core topics in their firms.

Measuring PerformanceCMT owners, “I don’t have time to mea-sure and I can’t afford to lose time”The first Innovation Circle took place at K-Way where firms took particular notice of the host firm’s measurement methods and frequency. Each CMT received mea-surement boards that required consistent recording of machine breakdowns, ab-senteeism, rework rates and output effi-ciency.

Once implemented, many firms explained that they had better control of their pro-duction as the measurement practices allowed them to gather more information on their production capabilities. By allow-ing each operator to measure their indi-vidual performance, and at the same time record an end of line garment per hour score, the production lines felt a sense of urgency and ownership of the production targets.

This was particularly noticed at JJS Cloth-ing, a CMT owned by Jean Ryan who has many years of experience in the clothing industry until opening her own business a few years ago.

Introduction to Lean Manufacturing

CMT Owner “I know all about this lean, I just don’t have time to keep it up we are too busy!”

The second innovation circle focused on up-skilling the CMTs on basic lean prac-tices. 5-S and elimination of the 8 wastes were the primary areas of focus*.

In order to showcase the benefits of im-plementing these practices, a few produc-tion simulation games were played. The common fallacy is that lean philosophies are too cumbersome to upkeep when large order deadlines are approaching. However, even though it may be tricky to keep lean philosophies in mind once your supervisor is stressed, the resulting pro-duction stability from implementing lean standards can only support the needs of

the factory more by allowing for better flow and control in a time of chaos. The Boost members had the pleasure of tour-ing Prestige Clothing, Maitland and were able to view the firm’s pull line and inno-vative modular lines- which were set up to reduce wastes and increase flow.*Please note that other CCTC members can learn more about these and other Lean practices during our WCM training sessions in 2015.

Each Boost firm further received a ba-sic Value Stream Mapping session which mapped the journey of a product from the placement of an order until delivery, in-dicating the value-adding and non-value adding activities during this journey. The startling result for most is the realisation of how much time a garment “spends” in their factory just “waiting” to be worked on. From this, firms are encouraged to re-duce bundle sizes, to even out their pro-duction lines, balance work and be more aware of the amount of Work-In-Progress on their lines.

A few visible improvements:

Financial Management and Costing

CMT owner, “Why should we cost the garment, we will never get that price

anyway!”

One of the biggest struggles for CMT’s tends to be the multiple roles that all staff play. In larger firms one would tend to have a designated costing department, a planning department and an accounting department. In small CMT’s, these roles are largely owned by the manager/owner of the firms. This results in a stressful en-vironment and often proper management and costing methods are unknown or ig-nored. We have refreshed the practice of management accounting and garment costing at the Boost CMT’s with the as-sistance of Shamil Isaacs of the Technol-ogy Station: Clothing and Textiles based at CPUT.

Costing is not purely about the garment’s SMV (Standard Minute Value: the amount of standard time rating given to common processes on a garment) - and that too we find has often been ignored by the CMTs - but rather it should include man-ufacturing and non-manufacturing over-

heads. The person in charge of costing a garment must be aware of the facto-ry’s efficiency levels, the skills of the staff available and the capacity of the factory at large. These all contribute to the la-bour component in costing and can be easily factored in once firms begin to use a standard template and develop the rou-tine of costing once again. Often the for-gotten components are overtime wages, non-manufacturing overheads and a ba-sic profit margin.

Most CMT owners scoff at costing gar-ments in detail, however we encourage the awareness of the cost of producing the garment to ensure factories run at break-even sales and have better control of their finances. To tie up this element well, a Line Balancing workshop was conducted for the Boost firms by CPUT, where firms learnt the method of calcu-lating ideal line balancing based on their production capacity and the SMV of a garment.

Marketing Sessions

CMT owners, “All our customers want the same things, just some pay a higher

price”.

Of all the identified challenges at CMT’s, marketing appeared to be the last to cap-ture the interest and engagement of the firms. Firms that were interested received a marketing session, whereby their tar-get market, market positioning and their marketing mix was established. All cus-tomers of a CMT may appear to want the same end service, however the nature of the customer and the product is different.

Order sizes demanded, the importance of business-to-business relationships, quality standards, lead times and prices all alter per a customer type. It is to the CMT’s benefit to identify their target mar-ket in order to structure their operations for the ideal target market.

CMT firms are often in business through long-standing relationships with cus-tomers or gain business through word of mouth. Interestingly, the CCTC office receives many phone calls from firms and designers seeking professional CMT

services, and thus it comes to mind that CMT firms are not sufficiently marketing their capabilities. Over 50% of the Boost members do not have a website or online presence of any form.

In the past, buyers and designers would have access to a database of skills where-by they would determine where to place work. In today’s world however, people lean towards the internet as a database. In this regard we encourage all our CMTs to register their business on online por-tals to increase their market access. As the CCTC, we have a database of Boost members that we are happy to distribute should your business require CMT ser-vices.

Upcoming Events

To better prepare Cluster firms for 2015, we provide a provisional list of workshops to be hosted in 2015 and hope that it will assist in structuring your workplace plans

Please note that this is a provisional workshop list and dates as well as topics are subject to changes decided at TSCs.

Mr Price: First-half profit rises 23% to

R921m

MR PRICE Group’s first-half profit in-creased 23 percent as the clothing and homeware retailer’s focus on cash sales helped offset weaker consumer spend-ing in South Africa, it said yesterday. The company said net income was R921 mil-lion in the six months to September, com-pared with R747m a year earlier. Sales increased 15 percent to R8.3 billion.

The company raised the half-year divi-dend 26 percent to 211.5 cents. South Af-rican retailers have struggled this year as strikes and unemployment of more than 25 percent constrain consumer spend-ing. Companies that make sales on credit have taken the bulk of the strain, as cus-tomers on lower to mid incomes fail to re-pay loans. Mr Price cash sales gained 18 percent in the period, and made up 81 percent of the total. “Although consumer confidence in-creased slightly in the third quarter of

Industry News

2014, retail trading conditions are expect-ed to remain challenging in the medium term,” Mr Price said.

The stock has jumped 50 percent this year, the best performer on the FTSE/JSE Africa General Retailers index. Shares fell 0.94 percent to close at R242.20 yes-terday. – Bloomberg

Date: 18 November 2014Source: IOLWritten By: Bloomberg

Truworths names foreigner as new CEO

TRUWORTHS on Thursday joined the growing list of South African retailers with foreign CEOs when it named Jean-Chris-tophe Garbino to the top position.Mr Garbino is at present head of cheap ’n chic French retailer Kiabi.

The appointment comes amid an influx of global brands — such as Zara‚ H&M and Topshop — into the local market, which their proprietors see as a gateway into other African markets. It also comes after Truworths’ share price dive of more than 10% on a poor trading update.

Consumers in the mass middle market, who have come to rely heavily on store credit, are struggling to pay accounts. This has caused a rise in bad debts at credit retailers that are also struggling to grow sales as spending gets curbed by the escalating cost of living and a debt overhang caused by the glut of unse-cured credit.

Truworths sells more than 70% of its merchandise through store credit. The appointment of Mr Garbino as CEO from

March next year comes as Michael Mark’s 23-year tenure at the company ends.Mr Garbino has been CEO of Kiabi from 2007, after serving as GM for Spain, and since then the retail group has grown from 200 stores in three countries to more than 450 stores in eight countries across Europe and Russia.

“Of all the local apparel retailers, I think Truworths is the most vulnerable to the entry of Cotton On, H&M, Zara (and oth-ers),” said senior retail analyst at Sasfin Alec Abraham. “Yet, they appear to have done the least to protect their market.“It’s not the running of Truworths that’s the issue. Their operating metrics are just as good, if not better than international guys — it is their position in the market and how they are reacting or actually not reacting to the changing dynamic of the market place,” said Mr Abraham.

Other foreign CEOs of local retailers in-clude Ian Moir at Woolworths, Jürgen Schreiber at Edcon and Richard Brasher at Pick n Pay.

Truworths said sales in the 18 weeks ended November 2 rose 4.7% to R3.7bn. Analysts were expecting growth of about 6%.

At the group’s annual general meeting in Cape Town on Thursday, CEO Micheal Mark said it had been a really tough peri-od for the company. “We think our expo-sure in the credit environment is making us particularly vulnerable at the moment.”Cash sales rose 5.4% and credit sales growth advanced 4.5%.

“The credit cycle, as the name implies, goes through cycles, we are in a tough space at the moment so you would ex-pect Truworths to suffer… their update was very light,” equity analyst at 36ONE Asset Management, Daniel Isaacs said. “Unless they have some significant pro-motions going into Christmas, they will probably be more subdued than the rest of the guys because they are showing the worst cash sales growth out of (their) peer group.

“It’s become very difficult to grow the credit sales side of the business and we’re seeing this across the board.

Date: 07 NovemberSource: Business Day LiveWritten by: Zeenat Moorad

Would you buy flat-pack clothing from Ikea?

Business expert predicts future where shoppers pick out clothes

from the Swedish store to build at home.

Swede Stefan Engeseth predicts ready-to-assemble clothing is the future Customers could choose from different colours, buttons and sleeve lengthHe thinks Ikea has the perfect business structure to kick-start the trend

Flat pack furniture - three words that drum fear into the hearts of any women and men across the world who have ever walked the aisles of Ikea.But brace yourselves, because we could soon be buying flat-pack clothing from the Swedish furniture giant too. Fortune 500 business consultant Ste-fan Engeseth has predicted a new way of clothes shopping that works perfectly with Ikea’s business model, where cus-tomers buy ready-to-assemble furniture.

Swedish business consultant Stefan En-geseth predicts ready-to-assemble cloth-

ing is the future. He thinks Ikea has the perfect business structure to kick-start the trendHe believes that the company could sell both fully-made items of hard-wearing clothing and separate parts that people could take home and make themselves. The idea would mean that people could create clothing tailored to individual tastes by piecing together separate parts, with only basic sewing needed - the same lev-el of skills necessary to build a bedside cabinet.On a grand scale, this would allow cus-tomers to choose from a wide range of style changes, including colour, button shape, sleeve length, pocket shape and trouser length and shape. Stefan told Lucire magazine in New Zea-land: ‘Emotionally, this connects people to how life was in the beginning - cus-tomers can personalise and “hack” the designs.’Customers would be able to choose from different colours, buttons and sleeve length and take the separate pieces home to constructHe believes the new way of buying cloth-ing could be such a huge success that it might even be applied to shopping for wedding dresses - a notoriously difficult procedure because of the detailed wish-

es that brides have.He also thinks that Ikea could become a go-to place for hard-wearing garments, similar to the reputation it has built around furniture.He said: ‘We’re already seeing some shoppers go to outdoor and living stores to buy longer-lasting clothing.’

Customer would need only basic sewing to make the garments - the same level of skills necessary to build a bedside cabi-net

He continued: ‘Ikea already sells reus-able Kr 4 bags that are good and cheap; their clothes could be equally practical, as strong as work clothes.’ Ikea has said that it has no current plans to start a clothing line, but if they did de-cide to, they would be wise into account Stefan’s ideas for the project.He has even come up with an extensive loyalty scheme, which would include dis-counts for furniture customers who are wearing the company’s clothing, to make people feel as though they are part of a worldwide community.

Date: 16 November 2014Source: Mail OnlineWritten By: Caroline Mcquire

Truworths eyes kid’s brand Naartjie

TRUWORTHS is in talks to acquire chil-dren’s clothing brand Naartjie for an un-disclosed sum, the fashion retailer said on Thursday.This is the second buyout in as many months for cash-rich Truworths under de-parting CEO Michael Mark.With a R1.6bn cash pile, Truworths said last month it would buy Earthchild Cloth-ing, which sells children’s and women’s clothing made from natural, organic fab-rics.

With about 71% of sales on credit, the company has come under pressure as escalating living costs and a debt over-hang caused by the glut of unsecured credit have curbed spending, with cus-tomers struggling to pay store accounts.The expansion of international players such as Cotton On, as well as moves by slicker rivals such as Woolworths and Mr Price to turn out new styles and fashion more quickly, has also turned up the heat.Naartjie, which was founded in Cape Town in 1989 and was sold to US inves-tors in 2001, is undergoing bankruptcy

proceedings.

There are 26 Naartjie stores in SA. Ac-cording to US press reports, the com-pany sought bankruptcy protection in mid-September, and “going-out-of-busi-ness sales” at its 55 US stores were ex-pected to run until mid-January.

According to court filings, Naartjie’s fi-nancial troubles were worsened by an ex-pansion between 2008 and 2010, during which the brand opened more than 10 new stores a year.

Mr Mark — whose 23-year tenure at Tru-worths ends in March next year, when Jean-Christophe Garbino, head of cheap ’n chic French retailer Kiabi takes over — said Naartjie would add scale to Tru-worths’ children’s wear offering.

“I believe Naartjie has excellent growth potential after an initial consolidation phase and will reinforce our growth pros-pects in the kidswear market. Earthchild and Naartjie, together with our highly successful L.T.D Kids range, enhance the Truworths children’s emporium brand appeal,” Mr Mark said.

Syd Vianello, an independent retail ana-lyst, questioned the fit of both buys with the Truworths stable.“These are two small businesses, bought in quick succession, which I’m not entire-ly sure can fit into the group. Truworths is sitting with this cash, they have to do something to protect their share price and so they’ve just gone out and bought anything willy-nilly….”

“They could have paid a special dividend and given it back to shareholders … it’s not a lot … including the dividend tax it would be like R3 a share.”

Truworths will provide the financial and other resources needed to place the Naartjie business on a sustainable foot-ing and thereafter increase the number of outlets, introduce a credit facility for cus-tomers in due course, and possibly ex-pand the operations beyond SA, it said.

“They are probably paying R100m for Naartjie, which is all stock … there is ab-solutely no goodwill … all they’re doing is protecting jobs and buying retail space,” Mr Vianello said. “Do they really all of a sudden want to be in kiddies clothing?“I don’t know why Michael Mark wants

to go buy anything and everything with a few months to go when he should hand it over to the new guy to handle … it really doesn’t make sense to me.”

Another analyst, who could not be named in line with company policy, said with Tru-worths most “vulnerable” to the entry of international players, it would have done better to use the cash to bolster the sup-ply chain and merchandising of its brand.“They haven’t been getting the fashion-ability quite right,” he said.Truworths shares closed at R75.52, gain-ing 3.25% on Thursday.

Date: 28 November 2014Source: BD LiveWritten By: Zeenat Moorad

for more information on the CCTC visit: www.capeclothingcluster.org.za