Author: Yukari Umemoto
In February this year, the last shipment of T-shirts made in Ethiopia, departed for Japan. There were a total of 300,000 T-shirts made for a Japanese brand. That was a moment of great relief for the production and quality control teams that had been in Ethiopia for several months.
This would mark the first time that knitted garments "Made in Ethiopia" would be sold in the Japanese market with severe consumers. For Japanese companies that are familiar to Asian's large production area, it is not usual to manufacture products for export to Japan in Africa and more so in Ethiopia.
Clothing with the tag "Made in Ethiopia" on sale in the apparel shop of earth music & ecology in Japan
Stripe International Inc. (the former Cross Company Co., Ltd.) is one of Japan's leading SPA apparel companies. Their consolidated sales in FY 2014 totaled 110.3 billion JPY, the number of group stores, (including overseas stores), increased to 1,357 by the end of March 2016.
In terms of company size and overseas expansion, it is in a position of following to Fast Retailing (the third largest apparel company in the world, known as UNIQLO brand).
T-shirts made in a partner factory in Ethiopia were sold this spring by earth music & ecology, a major brand for young women well known through TV adverts of a famous actress in Japan.
Selling the made in Ethiopian T-shirts through the name of the representative brand of Stripe International means neither poor quality was allowed because it was made in Africa nor the T-shirts is sold as a donation for the poor people in Africa. The T-shirts are currently displayed on the most prominence shelves in the middle of the shops.
As I mentioned in an article in 2014, Products of H&M, GE and even Samsung are "Made in Ethiopia", in recent years in Ethiopia, foreign companies are investing into labor-intensive and export-oriented manufacturing industries, including the garment industry attracted the abundant, young labor force and unusually low labor costs in Africa. Global apparel brands such as H&M and PVH (which owns Calvin Klein, Tommy Hilfiger, and other brands), are working on establishing factories in Ethiopia.
"What would be profitability of manufacturing in Africa?"
It has been a long journey in realizing the sale of clothing made in Ethiopia. Stripe International and our Africa Business Partners began studying the production of clothing in Ethiopia nearly two and a half years ago in January 2014. That was two and a half years before sales begins.
I can still recall the first meeting that we had. There was a lot of skepticism from the people in the room as I began to explain the possibilities of production in Africa. Questions such as "What would be the profitability of manufacturing in Africa?" " Isn't the possibility of long away future compared to Asia?"
In fact, the manufacturing sector in Africa is challenging. The minimum wage in African countries is well over $100 per month, except for Ethiopia; worker productivity and skill level is still not high; infrastructures, such as power, ports, and roads, are not well developed, and customs, foreign currency procurement, and licensing rules are not clear
The reason Stripe International ultimately decided to start production in Ethiopia from a view of future global expansion. Clothing is one of the products that Africa could enter as a producing or manufacturing area in the global supply chain after automobile production. Cotton is exported from West Africa and made into fabrics in capital-intensive textile factories in China and India. After which, the fabrics become clothing in labor-intensive plants in Africa for sale in the United States and Europe.
The competition has begun
Although the United States and the European Union have preferential tariff system for Africa, not only Ethiopia, but Lesotho, Kenya, and Mauritius export clothing to the European and US markets. This is an opportunity to get into these markets for the Japanese apparel industry since their sales are weak in Western countries. Only companies that can make relationship with good factories are able to enter into this global market.
The game of musical chairs began long before the productivity and business environment were ready established. The competition that has been experienced in China and Bangladesh is also going to take place in Africa.
There were many difficulties in completing the production system. Local partner factories used to focus mainly on European customers. The quality control methods and the required standards used in European and Japanese markets are different. Japanese market only requests of inspections of all products by needle detector.
There was conflict in implementation systems between the Japanese team who wanted to bring a new inspection process with a needle detector at the factory and the the partner factory who were proud of their inspection system that had never experienced any problems with their products. We discussed together on numerous occasions so as to get a better understanding which, eventually led to the improvement in the quality of the products.
A local worker checking the pocket size of the T-shirts just sewn (factory in Ethiopia, photography by ABP)
Though overworking and poor working conditions in garment factories in China and Bangladesh is published, in Ethiopia, there is a tendency among workers to work just enough or within the stipulated work hours and a such it is difficult for them to work overtime, even with incentive payment. The Ethiopian calendar is quite different from others everyone goes back to their hometowns for holidays based on the unique calendar.
Achievement of mass-shipping from Ethiopia earlier than H&M
Logistics was one of the major challenges. The procedure of export operation from the landlocked Ethiopia was unclear, and the expected arrival time in Japan unreliable. It is critical to the apparel industry. Our forwarder visited Ethiopia several times prior to the shipment driving from the neighboring Djibouti Port, where the T-shirts would be shipped from, to Addis Ababa to confirm the logistical route.
T-shirt completed with the tag (factory in Ethiopia, photography by ABP)
H&M announced the start of production in Ethiopia ahead but are currently facing challenges. In the apparel industry, the Key success factors are the management of productivity and quality and subsequently the building of a supply chain to guarantee delivery times.
This is normally based on experience and thus requires a long time. H&M have been unable to stabilize production, and are currently in a trial and error process while attempting to establish a relationship with a trusted, local factory.
When the T-shirts were all shipped and had arrived safely in Japan and I was notified of the same, I was quite relieved. The Japanese team members involved in this production were all professionals in apparel production but had never been to Ethiopia, except for myself. The Japanese company's experience built up and experienced in developing countries was fully utilized while in Africa.
It was significant for us to be able to achieve mass production earlier than H&M. Stripe International's clothing exports from Ethiopia this year will be larger quantity than H&M's. Currently in Japan, many apparel companies are considering production in Ethiopia following Stripe International's success.
(The article was published at Nikkei Business Online in Japanese on May 20th, 2016)