Mail & Guardian online
14 September 2006 08:05
Parking space outside the Eddels shoe factory in Pietermaritzburg is, like half-size-too-small pumps bought at an irresistible mark-down, inevitably tight.
Which, for Richard Starmer, the company’s men’s merchandise director, is cause to grin: “At the time [of the 2001 management buy-out], one of our goals was that all the workers would one day have cars and we seem to be reaching that. Now the workers are complaining that we don’t have enough parking,” he laughs.
The R25-million buy-out, which saw 5% of the shares moved into a worker’s trust and the introduction of weekly incentive schemes (with the worker’s taking a 20% cut in wages) has, together with a streamlining of operations, yielded increased productivity, and profit — at a time when the footwear sector in the country is hobbling along after years of factory closures and downsizing.
MD Deena Moodley, says Eddels, which makes shoes under its own brand names (John Drake, QC and Ricardo) as well as house brands for Edgars and Woolworths, was no different from many of the other manufacturers around the country that closed down: “We were feeling the effects of cheap imports, mainly from China, as much as everybody else. In 1996 we had 1 700 workers and by 2001 we were down to about 450. There were tremendous retrenchments about two or three times a year,” he says.
In 2000 Eddels was selling shoes at an average price of R149,50 per pair, the company had a turnover of R139-million, but made a loss of R6,1-million. Last year Eddels had a turnover of R102-million, the average selling price per pair had dropped to R129,50, but the company made a R5,9-million profit.
“We can’t compete with the Chinese in terms of range of styles or price, but where we can beat them is in our quick turn-around time,” says production manager Mark Veness.
“We now have production throughput of three days to a week on orders, whereas in the past it took that long just to process the order and five to six weeks for production,” he adds. Essentially a worker at Eddels is producing, on average, 20 more pairs per day compared to 2000, and retailers are able to replenish their shelves with popular brands almost as quickly as they are being sold.
The restructuring of the production line in the cutting room from a linear model to a goal-orientated, self-directed cellular model, which encourages multi-tasking (and alleviates a degree of boredom), has, according to Veness, been instrumental in the company’s increased production. Workers know how many shoes they need to make a day to break even and are also assured of more money at the end of the week if they exceed their daily targets. They also participated in life orientation programmes and were trained in group dynamics so that “they could understand each other”.
“The production line was so sectionalised and functional that there was no teamwork. There were imbalances in workloads and a lot of unfairness because the good machinists worked harder,” says Veness.
In the finishing room — where shoes are stitched together, soles glued on and the shoes prepped and boxed — production is still linear, but in one corner a cell model (catchily named Cell C), which Veness believes will cut down on time even further, is being perfected. Starmer says they plan to issue another 5% share stake to workers once the cellular model is implemented in the finishing room.
While the streamlining of operations has made Eddels leaner and more competitive, CEO John Comely believes none of it would have been possible without buy-in from the workers on the factory floor: “This must be a story about the workers, without these hardworking people there wouldn’t be a factory here,” he claims, boisterously guiding a gaggle of businesspeople around the factory.
Eddels’s success has meant an increasing number of visits by stakeholders from various industries, from platinum mining to the sugar industry, to see how things are run, to the extent that Starmer quips “our jobs now are more as tour guides than anything else”.
Comely’s words may sound like big baas rah-rah spin, but on the factory floor they do have a certain resonance: The workers are focused and activity is frenetic. Nobody seems to be skiving off, there are no fahfee schools or overlords feeling up female workers in alleys. The absenteeism rate is at 1% compared to the industry norm of 9%. There is also a palpable sense of fraternity between management and workers and a sense a combined vision for the future.
‘The new system is fantastic, lahnee [boss],” says shop steward Mickey Soobramoney (37). “It was a long process and a mind changing thing, but we gave birth to the process and we have put it in place to make it work.”
Soobramoney says that most of the workers were concerned at the time of the buy-out because “we had retrenchments, and then we had more retrenchments. When you are a family man, you worry about it.” He now says with the incentive scheme his weekly wage averages about R1 300 while the industry norm for cutters is around R550 per week.
Since the fast pace of trade liberalisation after 1994 led to an increase in clothing, textile and footwear imports, the recent success of the 102-year-old Eddels shoe company is the exception rather than the norm.
According to the South African Footwear and Leather Industries Association, the footwear sector, which was traditionally protected during apartheid, employed 15 742 workers in 2000 compared to 24 878 in 1995. In KwaZulu-Natal alone, where Pietermaritzburg was nicknamed “Shoe City” because of the proliferation of shoe manufacturers, there was a 62% decrease in employment in the sector between 1989 (16 454 workers) and 1999 (6 238 workers).
Production has also plummeted, from 61,7-million pairs of shoes being made in the country in 1989 to 25,8-million pairs in 1999.
Moodley, estimates that 18-million pairs of shoes were made in South Africa last year, of which about 10-million were supplied to the armed forces, the public health sector and other government divisions.
Eddels was owned by South African Breweries through its holding company, Conshu, which sold it to value investor Claus Daun as the sector became progressively less protected after the end of apartheid. At the time of the buy-out Comely, who was MD during the Daun reign, together with then financial director, Moodley, and Starmer ended up with a 28% share each in the company with 5% going into an employee trust and the rest tied up in funding.
Moodley admits that the buy-out was a huge gamble: “All of us here are passionate about the company and the people who work here. The length of service here, on average, is about 15 to 20 years, so we didn’t want to see all of this disappear. But we were worried, we had a year to pay back the R25-million in full.”
The new owners quickly raised R12-million by cutting down on production, selling off excess plant machinery, moving existing stock and collecting on the book. But when the Retail Apparel Group went under, they were hit with R4-million worth of bad debt.
“We thought getting a bank account would be easy, because we knew all the managers in the area, but they would come in, listen to us and we would never see them again,” says Moodley.
“There was a lot of nervousness around shoe manufacturing at the time,” adds Starmer. With their deadline four months away, a bank finally came in with a financial plan and Eddels future seems more secure now.
When one speaks to Moodley, Starmer, Veness or human resources manager, Jai Deepnarain, planning for that future means continuous evolution and innovation.
Starmer talks about visiting Chinese factories and picking up simple and cost-effective ways of doing things, such as covering up the inevitable line of glue between the sole and the leather of a shoe using a syringe.