Business Essentials: We're an outfit out of 'Coronation St'. But should we set up shop in China?

Salonwear Direct wonders if it can continue to prosper without manufacturing abroad. Kate Hilpern reports
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The Independent Online

If you can't beat them, join them. It's a philosophy that Ilan Sherman is taking increasingly seriously. As marketing manager of Salonwear Direct, which manufactures professional workwear, he has noticed that more and more of his most successful competitors have started importing from the Far East.

If you can't beat them, join them. It's a philosophy that Ilan Sherman is taking increasingly seriously. As marketing manager of Salonwear Direct, which manufactures professional workwear, he has noticed that more and more of his most successful competitors have started importing from the Far East.

"A lot of companies similar to us seem to have gone bust," he says. "And we keep getting told the reason is that manufacturing in the UK has no real future and that we simply can't compete with companies that are importing from China.

"As a small family business trying to keep up with the modern world, we want to know if we should be looking to do it too, and how we would go about such a mammoth task."

Mr Sherman likens Salonwear Direct, which is based in Leeds, to Mike Baldwin's factory in Coronation Street.

"There's 14 of us altogether. Three of us are office-based, but the majority are the girls on the machines," he explains.

The business, which has a turnover of £450,000, was formed 35 years ago as a small mail-order company. As it started to expand, it set up its own manufacturing arm.

Although the company now makes anything from hospital to catering clothing for entire departments, by far the biggest part of the business involves selling professional health and beauty clothing directly to individuals.

Even if Salonwear Direct does decide to import from overseas, Mr Sherman believes it should still keep the UK factory. "My hunch is that it would be foolish to put all our eggs in one basket," he explains.

"I think we would need a combination of small orders - like the ones we currently get - churning us along throughout the year. And then we could allow the large orders, for which we'd look to import, to make the bigger financial impact."

It would be nice, he admits, to be able to compete with similar companies that can take much larger orders.

"At the moment we have built up a great reputation as a niche company with a dedicated personal service, spending time on clients' individual needs. But we now want to move on to the next stage."

Mr Sherman has done a lot of groundwork to find out more about importing from China. "But at times it can seem overwhelming for a company like ours, with three people in the office, to know where to start. All the jargon - talk of things like 'containers' and 'letters of credit' - doesn't help. What we really need is tailored guidance on whether this is something we should be considering and how we'd get through the process.

"Beyond that, it would also be useful to know how we'd control factories thousands of miles away. I know of one competitor who switched exclusively to huge orders by manufacturing abroad, and he took on more than he could control and the business went under."

www.salonweardirect.co.uk

WHAT THE EXPERTS SAY

Stewart Masterton, business adviser, Business Link for London

"At Salonwear Direct's current stage of growth, it is important to ask what the vision is and where it wants to be.

"The company has gained much success in its niche market, and if it wants to gain economies by importing, it will need to forecast where its larger orders will come from and understand the true costings for fulfilling these.

"One resource for businesses needing specific, practical advice on importing is Business Link's website: www.businesslink.gov.uk. The 'International Trade Basics' section has a guide to importing - including licensing, sourcing suppliers and logistics. Mr Sherman can find events and workshops on the subject of importing and sign up for training in supply-chain management.

"Through the Business Link network, an adviser with expertise in supply chains and procurement will offer tailored advice to the company.

"I would strongly encourage Salonwear Direct not to jeopardise its great reputation for customer service.

"Once the large-order accounts have been identified and sourced, recruiting a dedicated account manager, with international trading experience, will enable Salonwear Direct to maintain and grow business from these important customers."

Stephen Pegge, head of communi- cations, Lloyds TSB Business Banking

"A key question has to be how Mr Sherman wants to position his business in the market. If the 'Made in Britain' tag is central to his customer proposition and supports a premium price, then higher manufacturing costs may be justified.

"Even for bulk orders, rather than competing on price, he may be able to use his reputation for bespoke personal tailoring.

"Focusing on lower- volume/higher-margin business is less risky, but the option to control costs for bigger orders by importing partially made garments (adopting a 'cut, make and trim' approach using his own designs) looks attractive.

"Options to consider are: visiting potential suppliers or using an agent to source them; setting up a joint venture with an overseas company; and using an import/export agent. Agents charge, but can save a lot of time. Quality control can be monitored through regular visits, or through using a third- party inspection agency."

Bas Morris, assistant general secretary, Community (trade union)

"Salonwear Direct has to decide what type of company it wishes to be. In the UK textile industry, it is small businesses - making high-value-added products in niche areas - that are successful and have the best future.

"Niche players require a highly trained workforce to give them the flexibility necessary to operate in a multi-tasking environment. Working in partnership with a trade union will not only ensure good industrial relations, but open up access to funding for training, which will improve the company's competitiveness.

"Outsourcing manufacturing can be risky for production and quality assurance. It can lead to customer service problems and, in the worst cases, cause companies to collapse.

"If Salonwear Direct wishes to remain and grow in the UK, it will find that plenty of support is available from the Regional Development Agency in its area, Skillfast and other agencies. Many small British textile companies are currently benefiting from this advice and are manufacturing profitably here."

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