Footwear - PHILEXPORT

Transcription

Background
1
Background
The Pearl2 Project, in coordination with the Department of
Trade and Industry (DTI), has been actively assisting the local
footwear industry for the past three years. The manufacture of
Philippine footwear is an established industry in the country
producing varied items for the local and foreign markets. This
study is a continuing effort by Pearl2 to provide updated information
on the status of the footwear sector. It is the third to be released
since 2003.
The present report features a new section on Production
Management in the industry. The section on areas for intervention
has also been modified and replaced with a brief discussion on the
strategic directions of the industry. The market section has also
been expanded and the profile of footwear firms updated. Other
sections of the report remain essentially the same except for some
updated data and changes in format and presentation.
2
State of the Sector Report - Philippine Footwear
Methodology
The information used in this report is based on three years of
research and data from the various Pearl2 programs. The previous
reports in 2003 and 2004 were prepared by external consultants.
The present study builds on the work done by these advisors,
updated with additional information from both primary and
secondary sources. As before, the Project conducted a survey of
the members of the footwear Business Support Organizations (BSO)
covered under the Sectoral Enhancement component of Pearl2,
namely, the Philippine Footwear Federation Inc. (PFFI) and
SikapMo, both based in Marikina, Metro Manila.
Secondary sources of information for this study include reports
from government and the private sector, and online research on
the footwear industry. The value chain section of this report
presents essentially the same findings as in the previous study.
The findings in the present study are augmented by information
pertaining to the production management concerns of the industry.
The report uses the same value chain model developed by Dr.
Michael Porter of the Harvard Business School that was presented
in the previous two studies. (Please see Annex 1 for a background
on the Value Chain Analysis.)
The new section on Production Management is derived from a
study made by a team of industrial engineers engaged by the
Project. The findings and data in this section were obtained from
the survey of footwear companies with particular focus on their
production and manufacturing activities. In addition, the
consultants also conducted plant visits, conferences and workshops
with industry representatives. Work on the production management
assessment of the sector was conducted from the last calendar
quarter of 2004 up to early 2005.
Background
Background
3
Limitations
The respondents to the survey conducted for this report are
limited to members of the PFFI and SikapMo. A total of 61 firms
participated in the survey, which represents about 60% of the total
membership of both organizations (excluding common members).
The major focus of this study is on the manufacturing firms, so
there is very limited information on support industries such as
raw material suppliers and traders.
The value chain used in this report is limited to the primary
and support activities of the footwear producers. It does not cover
the value chain of external entities such as suppliers or buyers.
The value chain analysis consolidates findings from different firms.
It provides an overall view of the industry. However, it does not
cover any financial or cost information on the firms since such
data was difficult to obtain and will be hard to reconcile for an
industry-level evaluation.
Data derived from secondary sources are noted as such and
presented as these were obtained except for some editing and
basic computations made to show trends in the data.
Acknowledgments
The Pearl2 Project acknowledges with thanks the assistance
and support for this report of the following persons:
•
Ms. Ma. Teresita Jocson-Agoncillo, Ms. Rosarito Carrillo
and Ms. Ana Loreto Misa Quigley for researching and
drafting the previous State of the Sector Reports on
Philippine Footwear;
4
• Dr. Rizalito Gregorio, for helping develop the footwear value
chain in the first two reports;
• Mr. Dennis Beng Hui and Ms. Anna Bella Manalang for working
on the Production Management Assessment on Footwear;
• Mr. Ferdinand Canlas of the Bureau of Export Trade Promotions
(BETP), brand manager for wearables,
• Ms. Merlin Diaz of the Bureau of Export Trade Promotions
(BETP), product manager for footwear;
• Mr. Lolito Lopez, President of PFFI;
• Mr. Roger Py, Director General of PFFI;
• Ms. Josielin Go, Executive Director of PFFI;
• Mr. Mercy Santos, President of SikapMo;
• Mr. Frank Bonoan, Executive Director of CITC;
• Mr. Algerico Sanoy, Vice-President of CUFMAI; and
• the other officers and members of PFFI and Sikap Mo Inc. in
providing data useful to the report
Background
5
Executive
Summary
The Philippine footwear industry is composed mostly of smalland medium-size enterprises producing various items including
Leather Footwear, Non-Leather Footwear, Slippers and Sandals,
Sports Footwear, Parts of Footwear and Consigned Footwear
products. These categories cover dress (formal) shoes, sports
shoes and casual footwear made from a variety of materials ranging
from leather, rubber and plastics to textiles, abaca and other
components.
Government (DTI) estimates put the total number of footwear
enterprises in the Philippines at more than 2,100, with total
employment generation of about 25,000. Majority of the
manufacturers (about 43%) are found in the National Capital Region,
where the major production center has been, for decades now,the
city of Marikina. The towns of Pateros and Taguig, known for their
garments trades, are also footwear centers. The other significant
footwear-producing regions are Central Luzon, Southern Tagalog
and Central Visayas, especially Cebu.
6
The larger firms in the industry may be found in the export
processing zones, manufacturing footwear under contract from
foreign brands. Large and medium sized companies that sell
domestically may have their own stores, boutiques or stalls inside
the various malls or department stores. The smaller enterprises
use traders or similar channels to market their products. Some of
these micro and small firms may also be subcontractors of the
larger footwear manufacturers.
World imports of footwear products totaled US$62 billion in
2004. The United States is the larget market for footwear,
accounting for 29% of global demand for the same year. Exports of
footwear worldwide was estimated at US$53 billion in 2004. China
is the biggest supplier, comprising 28% of total world exports for
2004. Other major exporters are Italy and Hong Kong.
Exports of Philippine footwear was estimated at almost US$26
million in 2005. Over the past few years, the industry has
performed dismally in the global market. Since 2001, footwear
exports have declined substantially, dropping to only a third of its
peak levels attained during the start of this decade. Competition
in the form of cheap footwear, mostly from China and Hong Kong,
have continued to erode the market share of the industry.
Japan and the United States are the biggest markets for local
footwear products, accounting for 45% of total industry exports in
2005. Other main export destinations include Mexico and the
Netherlands. Philippine footwear exports are concentrated in only
about two product lines. These are sport shoes and non-leather
footwear. Collectively, these product categories comprised almost
90% of total footwear exports in 2005.
Background
Executive Summary
7
The weak performance of local footwear in the global market
stems from a decline in the price competitiveness of the sector.
Local manufacturers are beset by a host of problems at the various
stages of their production process – from the sourcing of raw
materials to the inadequate manufacturing technologies employed
and the low productivity of their workforce. These factors pushes
up product cost, making footwear products more expensive than
those from the major world suppliers.
A persistent problem for the industry is the quality of leather
from local tanners. The causes of this problem are deeply rooted
within the value chain of the tanning sector. Local animal hides
processed into leather are often of low quality caused by defects
in the slaughtering and flaying methods used. Footwear firms often
have to resort to imported leather to meet their needs. Cost of
imported components and accessories used in footwear are also
increasing, further adding to the final product cost.
In production operations, the industry’s technologies and
processes are basic, mostly manual with some semi-mechanized
processes. Firms usually suffer from low worker productivity caused
by lack of updated skills. At the supervisory and management levels,
personnel lack appropriate skills and expertise in production
planning, monitoring and control. The use of information technology
in helping manage operations is also limited.
Besides losing market share abroad, the footwear sector also
needs to deal with the increasing influx of cheap imported shoes
into the domestic market. Based on data from the DTI, imports of
footwear products totaled more than US$42 million in 2005. This
is significantly more than what the industry exported for the same
year. Given their relatively high cost structure, local footwear firms
can hardly compete with the low prices of shoes from China and
other low cost producers.
8
For the short term, footwear manufacturers need to stop the
decline in their market share, both globally and in the local market.
The sector needs to strengthen their expertise in product design
and innovative use of materials. Investments in time and resources
also need to be done in terms of updated technologies, equipment
and worker training. Some intervention is also needed in making
workers more receptive to further skills development. Some
consolidation may take place in the industry as the highly
competitive market environment favor the more efficient and
innovative manufacturers. However, this may also be an opportunity
to evolve a leaner and more competitive footwear sector over the
medium to long term.
Background
9
Industry
Overview
Product Coverage
Philippine footwear includes the categories of Leather Footwear,
Non-Leather Footwear, Slippers and Sandals, Sports Footwear, Parts
of Footwear and Consigned Footwear made from a diverse range
of materials including leather, rubber and plastics to textiles, abaca
and other components.
Leather footwear typically refers to dress shoes, while nonleather footwear consist of casual shoes — footwear with outer
soles of rubber, plastic, wood, textile or other materials and an
assortment of materials, depending on the trends, for the uppers.
Sandals and slippers are mostly made of plastic or textile and are
used indoors or outdoors.
Sports footwear, the staple export of the Philippine footwear
industry, includes basketball shoes, tennis shoes and shoes used
for other sports. These have outer soles made of rubbers, plastics
and leather and uppers made of leather or textile with leather,
plasticized or rubberized trims.
10
The manufacture of sports shoes entails high standards of
production and in the Philippines, most makers involve direct
foreign investments and are usually based in the export processing
zones. Consigned footwear represents footwear, either for sports
or other use, made from materials consigned from the buyer.
Industry Background
The local footwear industry is dominated by small and medium
scale enterprises. These firms include the subcontractors or
assemblers of the bigger manufacturers that hold the Purchase
Orders of major department stores and retailers nationwide. As
subcontractors or assemblers, these small and medium size firms
put together parts of the shoe such as the uppers, or parts of the
components such as the toe puffs, counters and top lifts.
Footwear manufacture has been in existence for quite some
time. In the 1990s, the Philippine footwear industry was a robust
foreign exchange earner. At that time, six big sportswear
manufacturers were in operation, turning out brands such as
Reebok, Nike, Skechers, LA Gear and Sergio Tanchini and employing
a combined 18,000 workers. At present, however, most of these
firms have left or closed, and total industry exports are only half
of 1999-levels, from US$24 million to US$9 million.
Footwear production in the Philippines is characterized as being
largely manual or semi-automated. The technology levels used are
low, and enterprises have had to contend with bottlenecks in raw
material supplies, particularly leather. In addition, manufacturers
are faced with stiff competition especially from China – whether
for the international or domestic market, to the extent that those
Background
Industry Overview
11
enterprises that used to produce for export have in recent years
ceased their export business altogether. On the home front, the
influx of imported footwear has eroded the manufacturers’ share
to a low of about 20% of the domestic market.
Industry Coverage
The Department of Trade and Industry estimates that there
are more than 2,100 firms producing footwear nationwide, with
over 25,000 workers in their direct employ. Production is
concentrated in the National Capital Region (NCR), where about
43% of manufacturers across the country are based. More than
three-fourths of the local footwear requirements, moreover, are
produced in the NCR. The locus of production here is Marikina City
where the industry is well known and established. Two other common
sites of footwear makers in the region are Pateros and Pasig,
areas known for their brisk garments industries as well.
Other regions with significant footwear production are Central
Luzon, Southern Tagalog and Central Visayas. An emerging center
of footwear is the Carcar area in Cebu province where some two
dozen manufacturers catering solely to the domestic market have
organized themselves into a local association.
In the Metro Manila area, there are two major Business Support
Organizations (BSOs) for the industry: the Philippine Footwear
Federation Inc. (PFFI) and the Sigla ni Kapitan Moy or SikapMo.
PFFI, formerly known as the Marikina Footwear Federation Inc.,
has about 62 members while Sikap Mo, also composed of Marikinabased producers that seek to promote the brand name “Marquina,”
has some 66 members. A third BSO, the Carcar United Footwear
Manufacturers Inc. (CUFMAI), with 26 members, is found in Cebu.
12
Market Segments
Market segmentation for footwear is similar to that of
garments– it is based primarily on income levels and the consumers’
preferences. The high-end market can afford luxury items and
usually lean toward imported shoes retailed at US$75 to US$350.
For this market, the Italian, French and American brands stand
out. The locally made and branded footwear purchased by this
market are usually those made from imported materials and carried
by selected boutiques. The average price points for locally produced
high-end footwear are US$50 to US$75.
For the mid-range, the main concerns of buyers are price and
comfort. The market usually comprises the lower to middle income
groups – the working and professional sets – for whom the most
important consideration is value for money. The average price
points of locally produced leather shoes for this market are US$12
to US$30 a pair.
At the lower end of the market, the main consideration is
price. The average price points for dress or formal shoes would be
US$6 to US$8 a pair, and US$2 for casual footwear.
Background
13
Global
Footwear
Market
Global Market for Footwear
World imports of footwear over the three-year period from
2002 to 2004 rose steadily by a year-on-year average of about 6%.
Global footwear imports registered a total US$62 billion business
in 2004. Chart 1 below indicates the upward movement of world
footwear imports within the period.
Chart 1
Global Footwear Imports, 2002-2004
(in US$ million)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Value
2002
2003
2004
52,354
57,944
62,447
Note: the above data covers only HS code nos. 6401 to 6406 and 6812.
Please see Annex 3 for details on these codes.
Source of basic data: UNSD Comtrade database
14
The United States remains the largest single market for
footwear. In 2004, US footwear imports totaled US$17.4 billion,
representing some 29% of world demand for the year. Besides the
United States, other significant footwear markets include Germany,
Hong Kong, United Kingdom, France, Italy, Japan, Belgium and the
Netherlands. Together with the US, these countries accounted for
more than three-fourths (71%) of global footwear imports in 2004,
as Chart 2 below shows.
Chart 2
Major Importers of Footwear, 2004
(as percentage of total global footwear imports)
Others
24%
USA
29%
Netherlands
2%
Belgium
3%
Japan
5%
Italy
7%
France
7%
United Kingdom
7%
Hong Kong
8%
Germany
8%
Chart 3 on the next page presents the yearly trend in footwear
imports of the major buying countries during the period 2002 to
2004. It should be noted that although the United States remains
by far the single largest market, other countries have exhibited
more robust year-on-year import growth in footwear demand. Italy,
France, the United Kingdom, Belgium and Germany posted double
digit average growth in their yearly footwear imports from 2002
to 2004. Please see also Annex 4 for more details on world footwear
imports from 2002 to 2004.
Background
Global Footwear Market
15
Chart 3
Major Importers of Footwear, 2002-2004
(in US$ million)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
2002
2003
Netherlands
Belgium
Japan
France
United
Kingdom
0
Hong Kong
USA
Germany
2,000
Italy
4,000
2004
Global footwear exports were estimated at US$53.2 billion by
end-2004. Chart 4 below shows the major footwear exporters for
the same year with China as the largest exporter. Please see also
Annex 5.
Chart 4
Major Exporters of Footwear, 2004
(as percentage of global exports)
Others
22%
China
28%
Romania
3%
Portugal
3%
Brazil
4% Belgium
4%
Spain
4% Germany
4%
Italy
17%
Hong Kong
11%
16
China Footwear Exports
From 2002 to 2004, China’s footwear exports grew by an
average of 17% annually to reach US$15.2 billion by 2004. Chart 5
below shows China’s export performance in footwear for the period.
Chart 5
China Footwear Exports, 2002-2004
(in US$ million)
16,000.00
14,000.00
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
Export Value
2002
2003
2004
11,095.33
12,962.06
15,213.00
More than three fourths (78%) of China’s footwear exports
are comprised only of two product categories, those falling under
HS code numbers 6402 and 6403. HS 6402 covers plastic footwear
while HS6403 covers footwear with leather uppers and soles made
from various materials.
Background
17
US Footwear Imports
Footwear imports of the United States reached US$16.5 billion
in 2004. However, as Chart 6 below indicates, over the past five
years, US imports of footwear products have posted minimal
growth, averaging just about 3% a year for the period.
Chart 6
US Footwear Imports, 2000-2004
(in US$ million)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Import Value
2000
2001
2002
2003
2004
14,858
15,240
15,389
15,605
16,508
Source of basic data: Trade Stats Express, OTII, U.S. Dept. of Commerce
China is the single largest supplier of footwear to the United
States. In 2004, the US imported about US$11.3 billion worth of
footwear from China, representing some 68% of its total footwear
imports for the year. Other countries only had minimal shares of
less than 10% each of the U.S. footwear market. Please see Chart
7 on the next page for details. U.S. footwear imports from China
has also grown steadily over the past few years. From 2000 to
2004, the imports of Chinese-made footwear to the U.S. grew at a
slow but sustained rate, averaging about 5% annually. Please see
Chart 8 on the next page.
18
Chart 7
US Footwear Imports in 2004, by Country
(in percentage share to total U.S. footwear imports)
China
68%
Others
11%
Vietnam
3%
Indonesia
3%
Brazil
7%
Italy
8%
Chart 8
US Footwear Imports from China, 2000-2004
(in US$ million)
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
Import Value
2000
2001
2002
2003
2004
9,194.65
9,758.13
10,226.94
10,565.41
11,350.64
Background
19
European Footwear Imports
Imports of footwear by the 25-member European Union (EU25)
totaled almost Euros 23 billion in 2004. However, over the period
2000 to 2004, growth in the EU25’s footwear imports has been
weak and erratic, averaging only about 2.8% yearly as shown in
Chart 9.
Chart 9
EU25 Footwear Imports, 2000-2004
(in Euro million)
25,000
20,000
15,000
10,000
5,000
0
Import Value
2000
2001
2002
2003
2004
20,900.50
22,568.13
23,347.88
22,736.76
23,318.90
Source: Export Help Desk, External Trade, European Commission
The biggest buyers of footwear imports in the European Union
for the year 2004 were Germany, the United Kingdom, France and
Italy which, combined, accounted for more than half of the total
EU25’s import value for the year. Please see Chart 10 on the next
page for details.
Among the major suppliers of footwear to the EU25 are several
of its member countries, with Italy having the largest share of
14% of the market. Only Vietnam and the Christmas Islands are
the non-EU25 countries among the 10 leading suppliers of footwear
to the region. Please see Chart 11 on the next page.
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Chart 10
Major EU25 Footwear Importers, 2004
(in percentage to total EU25 footwear imports)
Denmark
Austria 2%
Others
13%
Germany
18%
4%
Spain
5%
United
Kingdom
16%
Belgium
6%
Netherlands
7%
France
15%
Italy
14%
Chart 11
EU25 Footwear Imports, by Country of Origin, 2004
(in percentage to total EU25 footwear imports)
Italy
14%
Others
31%
Portugal
5%
Spain
5%
Germany
5%
Romania
6%
Belgium
6%
Christmas
Island
12%
Vietnam
9%
Netherlands
7%
Background
21
The fastest growing market for footwear imports in the EU25
is Lithuania, which averaged a growth of about 23% yearly from
2000 to 2004. Other fast growing markets for footwear for the
period include Slovakia, Spain and Latvia. All averaged growth
rates of more than 13% annually from 2000 to 2004 as shown in
Chart 12 below. Annexes 7 and 8 provide more details on the
footwear imports of EU25 member countries.
Chart 12
Fastest Growing Footwear Importers in the EU25, 2000-2004
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Growth Rate
Lithuania
Slovakia
Spain
Latvia
22.90%
17.22%
14.75%
13.95%
Philippine Footwear Exports
Data from the Department of Trade and Industry (DTI) estimate
Philippine footwear exports at around US$26 million in 2005. Over
the past few years, exports by the industry have been going down.
In 2002, exports took a particularly sharp dip – from US$73 million
in the previous year to just over US$47 million in 2002 – or a drop
of almost 36%. Since then, industry exports continued to decline
as seen in Chart 13 on the next page. Overall growth during the
period 2000 to 2005 was a negative 18% yearly.
22
Chart 13
Philippine Footwear Exports, 2000-2005
(in US$ ‘000)
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
2000
Export Value
2001
2002
2003
2004
2005
76,184.3473,398.0947,231.1545,955.6134,451.0425,680.82
Source of basic data: Department of Trade and Industry
Japan and the United States remain the largest market for
Philippine footwear products. In 2005, exports to these two
countries represented about 45% of total footwear exports. Other
significant markets include Mexico and the Netherlands. Please
see Chart 14 below for more details.
Chart 14
Philippine Footwear Exports, by Country, 2005
(in percentage to total footwear exports)
Australia
3%
Great Britain and
Northern Ireland
4%
Netherlands
12%
Denmark
3%
Italy
2%
Argentina
2% Venezuela
1%
Others
12%
Japan
23%
Mexico
16%
USA
22%
Background
23
Only two product lines account for about 90% of footwear
exports in 2005. These are sports footwear which comprise some
51% of local exports of footwear for the year and non-leather
footwear comprising 39% of exports. The other footwear product
categories accounted for the remaining 10% of industry exports in
2005.
More details on Philippine footwear exports are presented in
Annexes 9 and 10.
24
Background
25
Sectoral
Profile
Sixty-one members of the PFFI and SikapMo, representing
about 60% of their combined membership (excluding common
members), responded to the survey conducted by the Pearl2 Project.
The survey was conducted around May to July of 2005.
The following discussion tackles the significant findings from
the survey. Please note that because some questions in the survey
elicited multiple answers, the corresponding totals will, in some
cases, not be equal to 100%. When applicable, references to the
previous year’s survey findings are also included.
Date of Establishment
About a fourth of respondents (26%) are relatively new, having
started operations within the last five years. On the other hand, a
number of firms comprising 21% of the total surveyed are much
older, having been established more than 20 years ago. Close to
half (46%) are between six to fifteen years old.
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Company Set-Up
Footwear companies surveyed are comprised mostly of micro
(48%) and small-scale enterprises (38%). Medium-sized firms
account for 13%. Majority of the businesses (69%) are sole
proprietorships; corporations account for 28%, and the remaining
3% were established as partnerships.
These findings are consistent with those gathered from the
previous year’s survey, where micro and small-scale enterprises
dominated the industry at 39% and 35% respectively. The previous
survey also found that more than half (61%) of respondents operate
as sole proprietorships and about one-third (33%) are corporations.
Ownership and Management
Of the 44 sole proprietors in the survey, most (63%) are male
with females accounting for the balance. More than half of sole
proprietors (61%) are college graduates and an additional 7% also
hold postgraduate degrees. About 18% are college undergraduates
and 11% are high school graduates.
Among corporate respondents, 59% of the chairpersons are
male, 29% are women and the rest gave no response. Majority
(71%) are college graduates with 6% also completing post graduate
education. Female corporate board members slightly outnumber
males at a ratio of 52% vs. 48%.
About 54% of the company Presidents surveyed are male and
39% are female. The rest gave no response. Some 61% of the
Presidents are college graduates; 13% are college undergraduates;
10%, high school graduates, and 8% also hold postgraduate degrees.
Females comprise a slight majority (53%) of the other managerial
positions among respondents.
Background
Sectoral Profile
27
Findings in last year’s survey are similar except among company
Presidents where women had a slight majority (53%) among
respondents.
Product Lines
Product lines of respondents are mainly shoes for men (39% of
total respondents) and ladies (38%). Other major products include
ladies’ step-ins/sandals (21%), men’s sandals (12%), and children’s
shoes (8%). Bags, hats, coin purses, personal accessories, belts
and an assortment of other products account for less than 10% of
respondents. The product lines are similar to the previous year’s
survey.
Facilities
About 44% of the respondent firms have business premises of
more than 250 square meters in area. Some 28% operate in areas
of less than 100 square meters and 25% have premises ranging
from 100 to 250 square meters. More than half of the firms (56%)
are located in residential zones and 38% operate in commercial
areas. A large majority of respondents (79%) own their place of
business. Findings in last year’s report show similar results.
Employment
The total regular employment generated by the 61 firms
surveyed is 3,620. There is an almost equal ratio of male and
female workers. An overwhelming 87% of the workers are in
production with the rest scattered over the other departments.
The work areas dominated by the men are in production supervision
(59%), technical/R&D (69%), marketing (65%) and quality control
(69%). Women form the majority in production rank and file
28
positions (51%) and administrative positions (66%). There is not
much difference in the average wage rates of males (Php5,006.90
monthly or Php193.00 daily) and females (Php4,965.13 monthly or
Php191.00 daily).
Last year’s survey of 49 shoe firms showed a total direct
employment of 2,964. There were slightly more men (52%) last
year in the work force. Most workers (74%) were in production and
ordinary workers were usually given the minimum wage of
Php250.00 per day.
Subcontractors
Most respondents (66%) do not use subcontractors. Only about
34% of the companies contract out work. The businesses that
subcontract assign an average 44% of their work to third-party
contractors. They hire an average of seven subcontractors each,
at an average of 18 workers per subcontractor.
Most subcontractors are sourced within the province (57%) or
region (43%). Some 71% of firms that subcontract work outsource
in the production stage. About 38% outsource their pre-production
work while 10% subcontract in the finishing stage. Close to half of
firms that outsource work always use subcontractors while about
38% only do so as needed.
Footwear manufacturers customarily provide assistance to
their subcontractors. The forms of support extended to
subcontractors, ranked according to the principals’ perceived level
of importance, are: (1) credit/financing, (2) skills training, (3)
product development, and (4) equipment/tools. Despite such
Background
Sectoral Profile
29
support, however, the manufacturers reportedly still encounter
problems among their subcontractors, ranked as follows: (1) poor
work quality, (2) late deliveries, (3) lack of reliability and (4)
unavailability of indigenous materials.
Data from the previous year’s survey showed some 35% of
footwear firms subcontracted work, with most outsourcing jobs in
the production stage. Credit was also the foremost support given
to subcontractors while failure to meet delivery dates was the
major problem reported last year.
Sources of Raw Materials
For the industry, about half of raw materials used are local
while about 41% are imported. Leather comprises about 54% of
materials used by respondents. Other common materials used are
rubber soles, synthetic materials, adhesives, linings and heels.
About 64% of the companies source their materials from the open
market. Some 48% have their own sources and may also get from
the open market. Marikina was reported by 80% of respondents as
their main source of local materials. For imported items, China
was cited by 93% as their main source. Availability was the foremost
problem with raw materials followed by quality and delivery dates.
Last year, most materials were also locally sourced with two
thirds of respondents sourcing from the open market. Price was
the major concern by firms for materials then.
30
Mode of Production and Operation
At the production stage, 67% of operations are semimechanized; 25% are carried out manually while 5% reported being
fully mechanized. Majority of the companies carry out the rest of
the work manually — 62% for materials handling, 84% for packaging
and 75% for quality control.
These findings do not depart from last year’s survey which
also found that most of production was semi-mechanized and the
other work stages were performed manually.
Capacity Utilization
About 28% of the respondent companies operated at full
capacity during the time of the survey. Some 23% have capacity
utilization rates of 80% to 90% while 10% operated at rates from
37% to 60%. The remaining firms gave no answer on their capacity
utilization. The average capacity use among respondents is placed
at about 86%. For companies with underutilized capacities, the
common reasons cited were the lack of raw materials, insufficient
labor, space limitations and lack of equipment.
In last year’s survey, only about 18% of firms surveyed indicated
their capacity utilization which ranged from 60% to 100%. Reasons
cited then for underutilized capacity are the same as in this year’s
report.
Background
Sectoral Profile
31
Quality Control
Almost 60% of the firms surveyed have specifically assigned
personnel for quality control. Some 44% follow standard QC
procedures and 13% use internal resources/equipment. Only one
company indicated using external testing facilities. Problems in
quality control mostly happen at the production stage, as
experienced by 57% of firms. Some 49% reported problems in
controlling the quality of raw materials/supplies.
Last year, most respondents (76%) also relied on specific
personnel for QC work. Problems were encountered equally in both
production and raw materials.
Product Development
Majority of the companies (80%) rely on their internal
capabilities for product development; 39%, on external means.
About 51% of respondents have their internal R&D facilities.
The major sources of information for product development
are publications (56%) and the Internet (51%). The other important
sources are suggestions from buyers (44%), designers (43%), and
trade fairs (41%). A large majority (87%) of the firms design their
products based on buyer’s specifications. A little over half (56%)
of the companies are satisfied with the present information they
have for product development.
Firms surveyed last year showed an almost equal proportion
of those that have in-house R&D facilities (51%) and those that
rely on outside expertise for product design (49%). Major sources
of product development information were the same as in this year’s
report. Half of respondents then were not satisfied with the
information they had on product design.
32
Market Coverage
Majority of the firms (82%) cater exclusively to the local market.
The rest exported some of their products but their level of exports
are generally low in relation to their total sales. For all respondents,
local sales average about 97% of their total revenues. The primary
market for footwear manufacturers are midrange buyers which is
targeted by three fourths of respondents. About 31% also aim at
the high end segment while 23% also sell to the low end. Metro
Manila comprises the largest geographic market for surveyed firms
where about 70% of their sales are made. About 19% of sales are
also made nationwide.
Last year’s survey showed similar results with firms also
catering mainly to the domestic market. Metro Manila also absorbed
a significant proportion of local sales among respondents.
Export Market
On the average, about 30% of exports by surveyed firms are
shipped to the United States. Europe absorbs about 26% of total
export sales. The other major export destinations are the Middle
East (11%), Australia (10%), Japan (10%) and Canada (3%). Only 5%
of respondents said that they exported to a new country during
the year when the survey was made.
The foremost export market last year among surveyed firms
was the Middle East with 33% of the respondents bringing their
products to that region. Other major markets were the United
States, Australia, Canada, Europe and other Asian countries.
Background
Sectoral Profile
33
Market Access
Firms rely mainly on their own contacts and referrals to get
foreign buyers. Other means to develop export customers are
through trade fairs, business missions and the internet. Trade
promotion activities are done through a variety of means. The
most favored method is by attendance to trade fairs as reported
by 46% of firms. Other means are through brochures/catalogues
(31%), internet access (25%) and joining business missions (21%).
The main marketing channel used for exports by respondents is
still through their buyers or importers. Other channels used are
foreign distributors. The use of retail or chain stores abroad is
minimal.
For the domestic market, most firms (72%) employ direct selling
to market their products. Other companies sell their products
through boutiques (38%), department stores (34%) and traders
(18%). A few enterprises (8%) have their own stores.
Sources of buyers and marketing channels utilized by
respondents last year are essentially the same as in this year’s
report.
Competitors
Most firms surveyed or 61% consider China their main
competitor. Other rival countries mentioned include Vietnam, Hong
Kong and Thailand. About 62% of respondents point to the low
price of competing countries as their main concern. Other strengths
of competitors include low labor cost, good product quality, market
access and available raw materials. Firms last year similarly
indicated China as their main competitor due to its low labor cost.
34
Sales
Export sales are low among the few exporters in the survey.
About 72% of the exporting firms said their sales abroad in 2004
were below US$50,000. Some 18% had exports between US$50,000
and US$300,000.
For local sales in 2004, about one-fourth (26%) of firms had
revenues ranging from Php1 million to Php3 million. Some 15% had
sales under Php 1 million; 13% had sales of from Php3 million to
Php5 million. About 30% had domestic sales between Php5 million
to Php20 million while 13% sold between Php20 million and Php50
million.
Please note that these export and local sales levels refer to
the year 2004 since the survey was undertaken around the third
quarter of 2005.
Export revenues of respondents in last year’s survey were also
low with a third declaring exports of under US$50,000 for 2003.
The others had export values ranging from US$50,000 to
US$100,000. Local sales for firms in the previous report varied. A
significant proportion of enterprises had sales as follows: 18%
selling between Php5 million to Php10 million, 12% from Php10
million to Php20 million, another 12% selling under Php 1 million
and 10% between Php1 million and Php3 million.
Background
Sectoral Profile
35
Finance
More than half of the budget (58%) of respondents go to
production. The budget allotments for the other departments are:
office/administrative, 13%; R&D, 7%; marketing, 7%; and others,
3%. About 85% of the firms generate their own funds for
operations. Some 26% have credit lines with the bank and 25%
depend on private lenders.
Findings in last year’s survey show similar results with 81% of
firms relying on their own funds for business operations. The
allocation of respondents’ budgets also showed identical usage as
in this year’s report.
Source of Assistance
Only three of the 61 companies surveyed reported having
received assistance from any donor group and only two said they
received assistance from government agencies. Donor groups that
provide assistance to footwear producers are CIDA-Pearl2 and
cooperatives. The government agencies from which shoe makers
received support were the DTI and the Technical Education and
Skills Development Authority (TESDA).
36
Background
37
Production
Management
Background
Pearl2 conducted a Production Management Assessment of the
footwear sector from October 2004 to March 2005 covering
members of the two footwear Business Support Organizations,
the PFFI and Sikap Mo. Data was gathered through a survey of 30
footwear manufacturers mainly based in Marikina, Metro Manila.
In addition to the survey, Pearl2 consultants also conducted
interviews with representatives of 21 firms from the said BSOs. A
production management conference was also held involving
members of the PFFI and Sikap Mo, as well as plant visits to seven
companies to gather additional data and present preliminary
findings.
This section presents some key findings on the production
management practices of footwear firms. It is not meant to be a
comprehensive report on the production management system of
the footwear industry. The findings serve to provide indications
on the present status of production management in the sector and
38
help identify areas where Pearl2 can provide assistance to the
industry. This section can also be useful in understanding the basic
flow of the manufacturing process for footwear on an industry
level.
Overview of the Footwear Manufacturing Process
The footwear industry covers all companies manufacturing and
producing apparel for the feet including sports shoes (which make
up 10% of industry production), dress and casual shoes (30%), and
sandals and slippers (the remaining 60%). The manufacturing
process for the sector is illustrated in Figure 1 on the next page
and shows the inputs, processes and outputs involved.
Inputs cover all materials used to manufacture footwear
products. The column labeled Input in Figure 1 shows the major
materials used by footwear manufacturers. Adjacent to the input
column is an indication of the source or supplier for the materials,
whether the items are local, imported or can be sourced from
domestic and foreign suppliers.
Processes cover the activities involved in converting the
various raw materials into the finished goods. The footwear
industry employ a generally manual mode of production with some
mechanization using simple machines and tools in parts of the
manufacturing process. The middle section of Figure 1 shows the
major activities covered in footwear manufacture.
Outputs are the finished products from footwear manufacture,
in this case various types of shoes, sandals and related items for
men, women and children.
Figure 1: Footwear Manufacturing Process
Background
Production Management
39
40
Inputs
The major raw material inputs for footwear manufacture are
as follows:
1. Upper (Synthetic Leather, Tanned)
2. Upper Lining (Synthetic Leather, Tanned Leather)
3. Adhesives
4. Threads
5. Buckles
6. Heels
7. Insole (Leather Board)
8. Nails
9. Cotton Tape
10. Welt
11. Foam
12. Outsole
13. Leather Dressing
14. Shoe Laces
15. Shanks
16. Boxes and Labels
17. Chemicals and Adhesives
Majority of the above items are usually imported either directly
by the producers or through dealers. Only some materials such as
tanned leather, foam, outsole, leather dressing, shoelaces, and
boxes and labels are sourced locally. Even then, in the case of
some items such as tanned leather, importation is resorted to
when the quality of local supplies is not sufficient to meet
manufacturers’ needs.
Background
41
Processes and Methods
The manufacturing process for sports shoes and slippers and
sandals is the same. The same is true for dress and casual shoes,
but there is the additional operation of heel attachment.
After the designs have been drafted, a prototype of the
footwear is made by the sample-maker. This sample is then
subjected to wear tests, sometimes even destructive testing. The
next step is to create patterns that will be used in the actual
production of the footwear.
The patterns are then traced onto the leather or alternate
material and then cut either manually or thru machine. The uppers
are then assembled, sometimes with sewing involved.
After the assembly, the uppers are trimmed before passing
these to the insole preparation. The process proceeds to lasting
for the footwear to have a mold or form. The outsole is then
attached to the assembly with adhesives (other footwear are heated
or cooled) and then pressed.
For dress or casual shoes, the heel is attached. The footwear
is then passed to finishing, where quality check is usually performed
before final packaging.
Finished Products
The products of the footwear industry are categorized mainly
into Sports Shoes, Dress or Casual Shoes, and Slippers and Sandals.
Figure 2 on the next page presents the taxonomy of the product
lines of the footwear industry.
42
Figure 2: Taxonomy of Footwear Product Lines
Background
43
Manufacturing System and Practices
Companies in the footwear industry may differ in their
production management practices. The practices reported here
are based on the Pearl2 survey of footwear firms and plant visits,
and might not necessarily be the common practice of all companies
in the industry.
The manufacturing practices in the industry vary according to
the size of the firm. Production in medium-size enterprises, for
instance, is more organized and automated. Small enterprises, on
the other hand, generally have no established system in managing
production.
Production System
The industry’s production is generally made to order, with some
exceptions for certain designs that are in demand, which are
produced during lean months and kept in stock. Subcontracting
activities among firms are minimal. As mentioned previously,
manufacturing is usually manual with some semi-mechanized
stages.
Capacity
Footwear companies surveyed during the production
assessment made by Pearl2 can be classified in three major
categories in terms of volume of output per month. Slightly more
than half (55%) of respondents are considered small or low volume
producers, turning out less than 5,000 pairs per month. About 30%
are medium volume producers with monthly output of between
5,000 to 10,000 pairs. The remaining 15% are categorized as high
volume firms with production exceeding 10,000 pairs a month.
44
During peak months companies may double, if not triple, their
production to meet demand. The increase in production volume of
footwear firms in the industry during peak season can be
summarized as follows:
•
During peak months, the production of small companies
increases from an average of 1,086 units to 1,938 units
per month, an increase of 79% from the output during
lean months.
•
Among medium volume companies, production almost
triples, from 2,375 to 7,063 units per month.
•
Large companies more than double the usual monthly
production volume of 26,250 units to 62,875 units, an
increase of 140% from the lean months.
Production lead times vary across companies, ranging from as
short as two days to as long as four weeks. The two most commonly
mentioned completion durations are two and four weeks.
Seasonality of Demand
The highest production volumes for the footwear industry are
in the months of October and November with a secondary peak
around May. These months may correspond with the Yuletide season
in the last calendar quarter of the year and the school opening
period during the middle of the year. The lowest is experienced in
July. Chart 15 on the next page shows the distribution of companies
based on levels of production throughout the year.
Background
45
Chart 15
Peak Production Months of Respondents
Survey Response
30
25
20
15
10
5
0
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct NovDec
Month
Source: Pearl2 Production Management Assessment of Footwear
Manufacturers
Work Period
Companies usually have 60-hour workweeks during the peak
months, with the workers rendering 10 hours work daily from
Monday to Saturday. During lean months, companies have the
normal eight-hour workday although they vary in having four, five
or six workdays a week. The workers are usually given two 15minute breaks within the day, aside from the lunch period.
Production Planning and Scheduling
Planning is a function of the owner or management, and
sometimes, the supervisors. With production for most footwear
enterprises usually made to order, production plans depend on the
job orders received. Based on these, the owner or production
manager plans a weekly or monthly schedule of production runs.
The production plans are drawn up mainly according to the deadlines
set by the customers. Given this situation, most companies do
not see the need to forecast items to produce.
46
Companies normally check their available production capacity
first before accepting an order. From the placement of an order, a
production schedule is then generated. The items in this production
schedule would include the type of product, volume required, raw
material requirements and estimated completion time. Additional
information that might be found in the production schedule include
worker and machine assignments, design of the product and delivery
date.
Production schedules are generated monthly but are refined
daily and weekly, depending on the orders coming in and the work
accomplished. Prioritization of work varies among firms. The orders
may be filled on a first-come-first-serve basis, sometimes rush
orders or those with the earliest due dates may receive attention
first. When the firms detect that current capacities can not meet
demand, more workers are simply hired.
The schedule of the workers’ tasks is determined together
with the production schedule. Usually one worker is assigned to
only one task – that which they do best. The production manager
assigns the tasks of the specific workers, sometimes using boards
where the assignments are listed. This board is then later consulted
by the workers. Smaller companies just tell what each worker should
do for the day.
The unavailability of raw materials is the most common cause
of the disruption of production schedules, followed by machine
breakdown and unavailable personnel or absenteeism. These factors
constitute almost 60% of the responses received from surveyed
firms on this matter. Other factors have relatively marginal effect
Background
47
on production schedules. These include sudden changes in the
customer’s requirements, rework and low-quality raw materials,
problems in inventory of finished goods, work in process or
utilities.
Delivery
Late deliveries occur among footwear firms. A third of
companies surveyed said that about 20% of orders are delivered
late by a week. About 22% of respondents said they experienced
two weeks late deliveries while a similar proportion said their
delay in deliveries lasted less than a week.
The most common reason for delayed deliveries is the
unavailability of raw materials (93%), followed by defective raw
materials (22%), rework (19%), shipping problems (11%) and rejects
(7%). The other reasons cited for failure to delivery on time are
the lack of capital to buy the raw materials and overloaded
production.
Production Monitoring
Based on a survey of footwear firms, the production monitoring
forms used in the industry include the following:
1. Budgeted Material Consumption
2. Closing Production Report
3. Daily and Weekly Production Plan
4. Daily Work-in-Progress Report
5. Delivery Form
6. Finishing Report
7. Issuance Slip
48
8. Job Order Sheet
9. Job Ticket
10. Monthly and Yearly Inventory Report
11. Raw Material Requisition Slip
12. Receiving Report
A system for the storage and retrieval of raw materials has
yet to be established within the industry. Only internal inventory
forms, unique to each company, are used to manage the storage
of materials. Upper management decides where to store these
and authorizes their retrieval. Larger companies use job tickets
to monitor the raw materials used in production, which in turn are
used in monitoring which items were retrieved. Most of the time,
there are no formal documents recording the items that are
withdrawn, with workers relying solely on the instructions from
their managers.
The enterprises are not too concerned with pilferage or damage
because as a rule, the industry does not stock on raw materials.
The practice of purchasing raw materials exactly as needed serves
as an internal check against any possible pilferage or damage.
Monitoring of workers is usually based on their outputs. Since
most of the production workers are piece-raters, no quota is set.
Therefore, the piece-raters need to increase their speed if they
want to boost their earnings per day. Most of the companies have
line or division supervisors that check the quality of work to ensure
productivity.
Background
49
Worker productivity is ensured by comparing output – the
number of units completed against the number of hours spent.
This is possible by conducting a physical count at each process.
The more productive workers prove to be those that have work
ethics founded on the discipline and standards imposed by the
owners. Production outputs are generally monitored on a weekly
basis and a corresponding production report is generated.
Manufacturing Costs
Raw materials comprise more than half (55%) of the
manufacturing cost structure of footwear firms surveyed. The other
significant cost factor is labor which comprises 22% of total cost.
The other cost items including administrative, supplies, machine
maintenance and overhead account for the balance.
Product costing is dictated by the price the customer is willing
to pay. Manufacturers would often work around the price given by
the customer and then look for materials that would meet what
was dictated, together with labor cost computations.
Of the companies surveyed, 76.7% report having some form
of cost reduction program in place. These measures are usually
initiated by the owner and managers. The three foremost concerns
of footwear company managers on cost reduction are:
1. Raw materials (cost, availability, wastage and quality)
2. Overhead (rent, indirect costs)
3. Labor (productivity, and cost)
Next in ranking are (in sequence) – Waste, Warehousing,
Marketing, Delivery, and Research and Development.
50
Raw Materials
Footwear firms use both local and imported raw materials.
The materials obtained locally are mainly the tanned leather, as
well as the boxes and labels for packaging. (In some cases,
however, the customers provide the packaging.) Leatherette,
synthetic leather, metal parts and footwear accessories are imported
from Hong Kong and China. Other foreign sources of raw materials
are Bangkok, Malaysia and Vietnam.
It should be noted that for the industry, the “imported raw
materials” used such as leatherette, synthetic leather, metal parts
and accessories are usually bought from foreign-owned trading
outfits in the Philippines. Also a common source of the imported
accessories used by the industry is Divisoria in Manila, where most
local and foreign-owned trader-suppliers are found. Only the larger
companies can buy direct from foreign suppliers as this requires
larger capital outlays.
It should also be noted that although some materials were
indicated in the survey as being locally sourced, these could actually
be imported items bought from local traders or dealers. An example
is polyurethane which, although purchased from local dealers,
actually comes from Korea.
The lead time for the delivery of raw material depends on the
source. Local raw materials are delivered one to two weeks from
order placement, even within the same day if these are already
available. The turnaround for imported materials is two to six
weeks. Any delay experienced in the delivery of raw materials
usually occurs with the imported requirements.
Background
51
Ordered materials can be unprocessed, semi-processed
(processed by supplier but still to be processed in-house) or
processed (ready for assembly). Of these, processed materials
constitute 57% of the industry’s requirements; 25% is unprocessed,
and the remaining 18% is semi-processed. The raw materials are
usually packaged in paper or plastic bags when delivered to the
factories, where they are stacked. The larger companies have
warehouses for storage.
The materials are purchased only when an order has been
received by the firm. Upon arrival, these are immediately
distributed to the processing centers. No more than a month’s
supply of the raw materials required is typically kept in stock; in
few instances, a two-month supply is purchased. The industry does
not even maintain buffer stocks as an allowance for waste, reject
or sudden increases in the order size. Companies choose to stagger
the purchase of raw materials also to minimize capital outlays.
Only the large companies stock materials in bulk when the production
run for a particular style is forecast to be continuous for a given
period or season.
The most common problems and concerns with raw materials
are unavailability, high price, late arrival, and poor quality. Raw
materials are said to be unavailable at times which causes work
stoppage.
Packaging Materials
Packaging materials for footwear firms include boxes, labels
and paper linings. Usually these are also purchased only when orders
are received from customers. As mentioned earlier, there are cases
where customers provide the packaging materials to the
manufacturers.
52
Inventory Monitoring
Although most companies have their own inventory forms to
monitor the movement of materials, no formal system for
monitoring raw materials and packaging exists for the industry.
For that matter, not all companies monitor their levels and usage
of materials and instead just conducts visual inspection on their
inventory levels. Inventory monitoring and control for those
companies that keep track usually means the production manager’s
noting the quantity of materials on hand and comparing these to
the original purchase or delivery. Other companies are able to
monitor their inventory of materials by the use of request forms
and return slips.
The quality and quantity of the finished goods are checked by
various means. Physical count is conducted when the items reach
packaging stage. Quantity is also monitored through the daily
production reports, which feed into the weekly and monthly
production reports. There are also inventory forms used to monitor
the quantity of finished goods in storage. The monitoring of
finished goods is usually the owners’ responsibility.
The arrangement of the finished goods while in storage is per
style. The boxes are bundled, then stacked on pallets and tagged
based on job order and customer name. Footwear is protected
from moisture by the use of paper lining and silica gel. Pallets are
used also so that the footwear does not absorb moisture.
Background
53
In the same way that companies have no buffer stock of raw
materials, they also do not produce to stock. The finished goods
delivered are exactly according to the quantity specified in the
job order. These are delivered immediately to customers upon
completion of the order, or within the week. The delivery person
usually takes care of the retrieval of items as approved by the
owner. A delivery report is again completed upon delivery of finished
goods.
Organization and Personnel
The industry has no formal procedure in personnel hiring.
Workers are usually hired through the recommendation of currently
hired workers. There are also walk-in applicants responding to
ads posted by the company outside the factory. This explains why
most of the company’s labor force come from around the immediate
area of the company. However, some companies also source workers
from the provinces.
Majority of the workers in the industry are piece-raters, earning
from Php1,000 to Php3,000 per week. The others are daily wagers
and contractual workers. Production managers and line or division
supervisors are those that receive monthly wages.
The management positions in the production department
typically include a Production Scheduler, Quality Control Supervisor,
Inventory Manager and Warehouse Supervisor. All the companies
surveyed have their Quality Control Supervisors, and majority (25
of 28 respondents) have Production Schedulers. However, not all
have inventory and warehouse personnel, perhaps due to a failure
to delineate or identify the specific functions of each position.
Line or division supervisors, and/or production managers monitor
the shop floor. For small enterprises, the owner also supervises
and acts as production manager.
54
Most of management personnel are within the 30-40 age
bracket. The length of stay of management personnel varies across
companies, ranging from one to 10 years. Key personnel in
production have attended college or are college graduates. It should
be noted though that most of the Quality Control personnel finished
only high school.
Production management staff remains constant over any size
of the workforce, that is, the management could be supervising a
workforce of 20 or a workforce of 200. Only the number of quality
inspectors is proportionally increased to the size of the workforce.
The footwear industry has almost the same number of male
and female regular workers. Majority are in the 30-40 age bracket
and have been working with their respective companies for two to
three years. Most have been through high school education.
It is industry practice to hire piece-raters instead of those
receiving daily wages. Only five out of 28 respondents hire daily
raters, compared with the 18 respondents (64%) that employ pieceraters. Of those hiring daily-raters, the number of workers hired
is the same for peak and lean months. Among those that hire
piece-raters, the number of workers hired varies significantly for
peak and lean months. Peak months would require an average of
40 more piece-rate workers compared to lean months
Subcontractors
Only a minority of the companies surveyed use subcontractors.
Among these firms that outsource work, varied methods are
employed to ensure product quality including plant visits for
inspection, the assessment of processes used by subcontractors,
the screening of the subcontractors’ suppliers, and the provision
of training.
Background
55
Skills Training and Development
Although companies in the footwear industry prefer hiring
production workers that are already skilled or at least knowledgeable
in the tasks of footwear-making, most firms are also willing to
train workers. Companies have apprenticeship programs where
workers are trained in specific tasks. Sometimes workers start
as utility persons and then are upgraded to shoemakers.
The industry has no formal selection procedures in hiring, nor
are there hiring standards or qualifications set. Even in training
new hires, no standard method is employed. Workers are trained
in the particular task that needs to be completed. Continuous
development of workers is ensured by exposing them to different
designs of footwear. Their versatility comes from being able to
shift from one footwear style to another. The average time to
train a worker is two to eight weeks.
Based on interviews with footwear firms, only the supervisory
and management personnel undergo formal training and seminars,
though not regularly. The list of production-related trainings and
seminars (consolidated from survey responses) attended by the
industry’s workers is found below:
1. Advanced Designing and Pattern Making
2. Inventory Warehouse Management
3. Mano-Matic Production
4. Workforce Utilization
5. Materials Costing
6. Pattern making
7. Seminar on Efficiency
8. Shoe Cutting
9. Shoe Production Seminar
10. Upper making Room Organization
56
According to the survey, the workforce of respondents is 70%
skilled. The industry practices task specialization, where workers
are assigned to a specific task and gain expertise in this. By
experience, this proves to be more efficient than teaching one
worker a series of tasks. Conversely, there are also workers – the
highly skilled — who are rotated to different jobs. The transfer of
workers from one task to another occurs when there are
bottlenecks in a particular workstation or line. Additional workers
are then moved to the clogged workstation.
Rejects
Most of the defects among respondents are found at the preproduction raw material stage. Survey results report 22 out of 27
firms surveyed said that defective items are usually found at the
raw material supplies. Rejection rate for raw materials averages
10% among respondents. This indicates that raw materials have
inherent defects.
Fourteen (14) respondents said that defects can also be found
while the material is in-process. Rejects during production average
about 5%. Nine (9) firms responded that defects are also found at
the final inspection stage, averaging 4%. Six respondents said
that product defects reach their customers with product returns
averaging 2% of products sold. Five respondents said that designs
cause the material or the product to be defective.
Quality Control
Raw materials are often inspected upon delivery; at times, a
day after. Incoming inspection is usually done by the owner or
production manager. Ocular inspection is usually done to check
the quality of materials. No formal testing procedures are followed.
Only the physical features of the materials are inspected, not the
Background
57
mechanical and chemical properties. There are also no standards
used in determining rejects from the incoming materials. Instead,
companies employ the owner’s discretion or rely on the inspector’s
“gut feel” in choosing which items are to be returned.
Aside from incoming inspection, other companies require that
each worker check the quality of the raw material before proceeding
with the task. This is one way of controlling quality for work-inprocess items. Owners, supervisors or production managers
constantly walk around to check the work-in-process quality. Quality
control of the finished goods is the responsibility of the worker
assigned at the finishing and packaging section of the factory.
Some companies hire quality inspectors to ensure the overall quality
of the units produced or in production.
All the items produced are checked for quality. The physical
features checked include color, size, tidiness, presence of excess
adhesives, and stains and scratches from handling. Some
companies employ destructive testing to ensure the strength of
the footwear.
Production Process Standards
There are no industry-wide production process standards for
footwear; instead, these are set by each company. There exists,
however, a product size standard across the industry brought about
mainly by the use of shoe lasts. There is also the limited use of
wear test among industry members.
58
Factory Layout and Design
Majority of the companies use process-oriented layouts – a
factory layout where the order goes from one process to the next
in assigned areas of the factory. These layouts are based on the
process flows and on the improvements that can be made at each
stage. The layouts are also dictated by the space available. While
companies may have grown in capacity, most have not expanded
the spaces for their production facilities.
Some of the companies have adopted the layout strategies of
other Asian countries, namely China and Korea. In China, each
worker is given his/her workstation. The workstations are then
lined accordingly. A layout technique employed in Korea that has
been adopted by the industry is the use of separate buildings to
hold different processes. Owners make the decisions in setting
the factory layout.
Footwear firms generally allocate a large portion of their
operating premises for production. Overall, the companies’
allocation of space for their various operations is as follows: 19%
for raw materials storage, 20% for finished goods storage, 41% for
production and 20% for finishing.
Machines and Equipment
Footwear firms utilize manually operated, semi-automated and
automated machines in the production of footwear. Sixty percent
(60%) of the companies surveyed use manually operated machines;
28% use semi-automated machines; and some 12% use automated
machines.
Background
59
Only two machines were reported to be made in-house. About
37% of the machinery used is purchased locally; 49% is imported,
while sourcing of the remaining 14% is unknown. Among the
machinery and equipment suppliers, 32% are from China, 19% from
Germany, 12% from Italy, 9% from Japan, 8% from Taiwan and the
remaining 2% from Korea and the US.
Among the common equipment used in the industry are
machines for sewing, cutting, skiving, lasting, stamping, buffing
and splitting. No regular machine maintenance is carried out by
the firms surveyed. Most of the maintenance that is being done is
corrective instead of preventive, meaning machines are checked
only when they break down.
Some 27% of respondents inspect machines every week, and
another 27% perform equipment inspection every month. There is
almost always no repair person in the factories. Repairs are called
only when a breakdown occurs. Usually they happen two to four (24) times a year, with about two to four (2-4) hours repair each
time.
Machines generally run 5-8 hours a day during lean periods
and 8-12 hours per day during peak time. Machine breakdowns
are the second most mentioned reason (20% of the time) for changes
in production schedules. Maintenance and repairs of the machines
and equipment are more often left unrecorded. Sometimes, an
extra machine or equipment is on-hand to use in place of the one
that broke down.
60
The primary source of information of owners and entrepreneurs
concerning machines and technology are visits to other companies,
followed by trade fairs and exhibits, sales representatives,
endorsements from business organizations, the Internet, and
broadsheet newspapers.
Product Engineering and Development
Among footwear companies, it is usually the owners that create
the product designs. Only a few firms hire designers to develop
new designs or product ideas. The number of product designers in
a company, if there are any, is usually two.
Product development for footwear begins with the style or
design created by the owners or given by the customer. Companies
usually have two sample makers to create a prototype of the
footwear based on the specifications. Customers usually give the
design to the companies as most of the firms are contract
manufacturers.
Company-owned designs of footwear are based on the current
trend. Observation is the first step in designing a particular style.
Research is conducted on the current trends, then the firms try to
innovate on these styles. Designs and material specifications are
revised by a designer.
Another way of coming up with a new item is by copying the
design of foreign-made shoes, predominantly those from Italy.
Changes are then made on the materials used. Design development
is unusual within the industry, despite the lack of professional
designers and design laboratories. On the average, a company
can develop eight new designs within five weeks.
Background
61
Environmental Management
The most common waste generated by the manufacture of
footwear is the trimmings from cut materials. The quantity of
waste generated is generally known by the company. Waste that
can be sold as scrap is collected. Waste disposal is usually through
garbage collection, which is typically collected twice a week. A
utility man, if not the owner, is responsible for waste disposal.
Any scrap material that can be further used is made into footwear
sold in bazaars.
About 50% of the respondents practice waste disposal; 40%
sell their waste; while 17% reuse or recycle. Only 3% of the
respondents reprocess and/or treat their waste.
Worker Health and Safety
Cramped and hot workplaces are common in the footwear
industry. Inappropriate workstations may also cause poor work
postures. Although most of the waste generated from footwear
manufacture is dry and post only minor danger to workers, the
toxic smell from the adhesives poses a serious health hazard.
Companies have tried to implement the use of protective gear but
workers often refuse to use them, allegedly because these items
annoy them. Respondents, however, generally reported minimal
accidents in the work place with companies usually having only
one to five accidents per year.
62
Background
63
Value Chain
Analysis
Structure of the Philippine Footwear Sector
Footwear manufacture is a labor-intensive business,
characterized mainly by manual processes with some mechanization
using simple machines and tools. Most firms in the industry are
small and micro in size. Local shoe production is concentrated in
the city of Marikina in Metro Manila where manufacturing facilities
are set up either by direct or indirect (subcontractor) manufacturers
catering generally to the branded segment of the market. Although
not many companies outsource work, larger firms in the industry
may utilize the services of smaller enterprises as subcontractors
in various phases of manufacturing.
Employment levels vary from one company to another.
Companies usually opt to hire workers on a piece-rate basis for
more flexibility in labor costs in relation to production orders and
requirements. More temporary worker are hired during peak
seasons to accomodate the additional orders. Firms, however, often
maintain a small pool of highly skilled full time personnel who
handle the more important and critical aspects of footwear
manufacture.
64
Footwear manufacture covers various phases that begin with
product design, selection and the purchase of raw materials and
intermediate inputs, processing, marketing, distribution and sales.
Leather is the primary raw material used. The local tanning
industry, however, cannot supply the required quality of leather to
the footwear sector, forcing manufacturers to import a significant
portion of their needs.
Marketing is an important aspect of the footwear product
business. The distribution network of the sector is multi-faceted.
It may include stand-alone boutiques in shopping malls or
concessionaire setups inside major department stores. Major firms
in the industry normally produce their own brands. Direct
manufacturers or traders conduct extensive marketing activities.
These firms have established the necessary network of sales
channels that allow them to contract production, provide finance
and serve their customers on time.
There are two markets for footwear, the local and the export
market. Local market sales cover a varied range of leather and
non-leather footwear products, with sales reaching their peak twice
within the year, shortly before and during Christmas and around
school opening in June. Export activities are mainly managed as
contract manufacturing under foreign brands. Products for export
are usually sports footwear, the production facilities of which are
located in the export processing zones.
Process Flow in the Industry
The suppliers of the footwear industry include leather tanners,
shoe-last manufacturers, shoe-component manufacturers and
accessories manufacturers and suppliers (they are also referred
to as shoe-supplies stores, or shoe supplies importer-traders).
Background
Value Chain Analysis
65
In the production of footwear, the main materials required
are semi-finished and finished leather (procured locally as well as
imported). Leather footwear use either genuine or synthetic leather.
The type of hide and finishing or tanning determines the value of
the leather. Surface skin of an animal has a higher value than the
section taken from the middle of the hide. Other materials required
for production include components and accessories.
Shoe components procured by the industry include insoles and
outsoles made of different materials such as rubber, PVC and PU
plastics. Soles can be purchased in molded sole form (most
commonly used), pre-trim sole (which comes in standard sizes of
small, medium and large), and sheet sole (uncut). Shoe lasts are
obtained from both local suppliers and importers. Majority of the
shoe manufacturers use wooden lasts. Only a small fraction use
plastic shoe lasts due to their higher cost.
Materials such as chemicals, buckles, threads and foam are
sourced from various shoe supply stores. The bulk of the materials
(70% to 80%) are obtained from local suppliers or traders. For
imported materials, orders may be consolidated and placed directly
with foreign suppliers.
Footwear production is usually done either in-house, although
as mentioned earlier, some firms may use subcontractors. The
level of design and product development within the industry varies.
Some manufacturers resort to adopting existing designs with minor
revisions, while a few engage in actual research and development.
Once a design has been finalized, sampling, costing and grading
take place. The sample is then tested for its fit, look, leather
qualities, proportion and other costing aspects. Upon approval of
the sample, production planning and the preparation of materials/
equipment takes place.
66
For companies with large capacities or a production network,
the marketing team (for a cluster of manufacturers producing one
common brand), or in most cases the manufacturer acting alone,
screens the samples to decide the volume for production. Based
on the sales forecast, production orders are then allocated either
within the manufacturer’s facilities or outsourced from its network
of subcontractors. For those with smaller production capacities,
firms conduct direct pre-selling of samples developed for its
customers (i.e., manufacturer/distributor, retail outlets, or
specialty shops) and await confirmation of orders before any
production is done.
Manufacturing operations cover several activities. The
fabrication of shoe uppers generally involves significant manual
work such as pattern making (grading), cutting and sewing of
uppers. When the shoe uppers are completed, these are processed
further, including assembly for lasting, lasting process, heel
attachments, finishing and packing in boxes and documentation
for final costing and delivery. Any or all of these processes can be
done within the factory of the direct manufacturer, or outsourced
to designated manufacturers or subcontractors.
During production, the owner himself/herself, assisted by
production and quality control supervisors, manages the operations.
Complete production of one pair of shoes normally takes two days.
A typical footwear firm using manual production produces an
average of 1,000 pairs per week. This volume can increase to
3,000 to 5,000 pairs per week if production is semi-automated.
Finished shoes are distributed through various distribution channels,
sales agents and retail outlets.
Background
67
The Footwear Value Chain Diagram
The footwear value chain diagram is presented on page 69.
This value chain was developed for the sector as a whole based on
research materials on the industry, as well as interviews with several
companies.
Key Findings
The value chain analysis of the footwear sector gave rise to
certain significant concerns in the sourcing of raw materials,
particularly leather hide, and in the nature of the production
process.
Local leather is still not of the desired quality and price for the
industry. Thus, the sector continues to rely on imported leather.
There are also some manufacturing issues that ultimately affect
the quality of the finished product. These include the widespread
use of the wooden, instead of plastic lasts, the lack of worker
skills and inadequate facilities. The industry also has difficulty
developing a standard sizing system for their products. Shoe sizes
vary, depending on the specifications followed by manufacturers.
There is also a need for training and skills upgrading, specifically
in the area of product development and design, as well as in the
technical and managerial skills to improve production process flow
and quality control systems.
The industry tried to address some of these concerns in
production by establishing a footwear academy. This institution
focuses on skills training to upgrade the level of workers’
capabilities. The Marikina footwear sector has also established a
68
marketing group to promote one common brand or image, called
“Marquina,” for the entire industry. Both are relatively recent
undertakings by the sector and need sustained support. Please
see Annex 2 on more details about “Marquina.”
In marketing, footwear firms face growing competition both
in the global and local markets. Exports have declined sharply these
past years due to continued erosion of market share by
competitors. There is a lack of marketing plan based on reliable
information on the part of the industry which leads to difficulties
in retaining current buyers. Imported footwear are also increasing
their share of the local market. In 2005, Philippine imports of
footwear products totaled some US$42 million, a level about two
thirds more than what the industry exported for the same year
(please see Annex 11 for details on Philippine footwear imports).
More details on the value chain of the sector are presented in
the footwear value chain table that starts on page 70. The value
chain table presents the findings from the survey, together with
the concerns arising from an articulation of these issues and
recommended measures to resolve them.
The FootwearSectorValue ChainDiagram
Background
69
70
The Footwear Sector Value Chain Table
FIRM INFRASTRUCTURE
FINDINGS
CONCERNS
RECOMMENDATIONS
Smuggling of footwear
remains the industry’s
biggest problem.
Need for more intensified
safeguard against
smuggling as local
manufacturers are already
competing with low-priced
goods from China.
Lobby for government
support, and for the
sector’s inclusion and
active participation in the
government’s
anti- Task
DTI Anti-Smuggling
smuggling
Force.
program.
The industry experiences
high cost of importing
materials needed.
High costs of imported
materials lead to higher
product cost.
The private sector should
lobby for the restructuring
of import procedures with
the aim of lower import
entry costs.
Some companies lack
general management skills
such as business planning,
financing, accounting and
bookkeeping.
Need to enhance
knowledge of
manufacturers in operating
business establishments,
and formalize business
develop
procedures to establish
their competence
and
competence
and good
encourage good
organization.
governance.
Identify the core problems
in management of the
micro and small business
set-up among the
shoemakers.
Need to improve the
leadership qualities of
owners in managing their
businesses and problems.
Conduct executive
coaching and management
training for owners and
partners to help small
businesses through the
critical stages.
Most company owners do
not have proper
management training.
Organize a business forum
with a program tailored to
the needs of micro and
small businesses,
specifically shoemakers:
•Making a Business Plan
•Basic Accounting and
Bookkeeping
•Budget Planning and
Financing
Background
71
FIRM INFRASTRUCTURE (con’t)
FINDINGS
CONCERNS
RECOMMENDATIONS
The‘younger generation’
needs to be encouraged to
become more active in the
development of the
sector.
Lack of participation
among the“young” or
“next” generation may
affect future supply of
competent managers.
BSOs to provide a
venue/forum to discuss
industry plans on a regular
basis, creating a
committee for Strategic
Planning with the
participation of young
entrepreneurs in the shoe
business for new ideas and
strategies.
The footwear BSO suffers
from a lack of support
from members.
The BSO may not function
effectively due to lack of
support.
Present a master business
plan for members to
understand the role of BSO
and the importance of
their support to this.
The BSO needs to further
develop the secretariat to
effectively plan, monitor,
implement and assess the
needs and programs of the
association.
The lack of properly
trained secretariat
constrains delivery of
developmental programs
for members.
Provide training to the
secretariat on business
operations and the role of
a BSO in business
development through
promotional and marketing
activities.
Some companies lack skills
in human resource
management (labor
management).
Need to enhance human
resource management
among the manufacturers
for more effective
negotiations with their
workers.
Organize a forum on
human resource
management (orientation
on fair wages,
communicating with
employees, etc.) for
footwear firms.
INBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Human Resource Management
Tanners and shoe
manufacturers lack
sufficient technical
knowledge in materials
and usage planning that
Lack of knowledge of
tanning and leather-shoe
manufacturers results in
low productivity and high
costs.
Assess the sector’s needs
in technical training as
part of an integrated
training program
implemented through
72
INBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Human Resource Management (con’t)
could reduce costs in the
production of shoes from
local leather significantly.
Lack of training skills in
plastic shoe last grading.
Relevant use of plastic
shoe lasts is still a novelty
to small firms and the use
of wooden lasts is still
customary.
Majority of micro and
small enterprises are
limited to traditional
credit or rediscounting
financing provided by
buyers/suppliers in the
local market due to lack of
interest to comply with
basic documentation or
requirements of financing
institutions, informal
business setup and
practices, and hesitation
to disclose income and
cost data.
foreign or local
consultancy to train both
the tanners and shoe
manufacturers on how to
effectively plan, reduce
and control costs in the
production of shoes using
local leather.
Firms lack understanding
of the advantages of
plastic shoe lasts over
wooden lasts that could
improve their final
products.
Include shoe last grading
in the integrated training
program for the sector.
Firms do not take
advantage of financing
facilities offering much
lower interest rates than
those provided through the
discounting of checks.
Conduct an industry-level
seminar/forum on credit
from financing institutions
with actual testimonies on
its advantages and
benefits.
Train micro-, small- and
medium-size firms on the
benefits of plastic lasts as
a cost-effective
alternative to wooden
lasts.
After the seminar, identify
a core group of companies
to be tapped as the initial
group for one-on-one
company consultation
visits to be conducted by
the financing organization.
Background
73
INBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Disagreement in the
standard quality of leather
between tanners and shoe
manufacturers, specifically
in leather hide grading
(local leather tends to
range between Grade B to
C) and measurements.
Lack of a clear standard of
grading and
measurements.
Establish a clearing house
to certify quality and
grade patterns based on
set standards and price.
Consider setting this up at
CITC (which has an
existing measurement
machine).
Most companies conduct
material inventory
management and
monitoring manually.
Need to improve and fasttrack procedures in
managing factory
requirements.
The BSO should conduct a
needs analysis of the
members in terms of
software technology or on
systematic ways of
performing daily tasks and
arrive at recommendations
for accounting, inventory
management and others.
Technology Development
The BSO should either
purchase required
programs or hire a
programmer to develop a
software package for the
sector under a cost-sharing
arrangement among
interested members.
Product standardization
based on international
standards for shoe last is
not compulsory among the
shoe-last manufacturers.
The lack of documentation
on standards results to
technical problems.
Insufficient knowledge of,
and non-compliance with,
international standards by
most suppliers and
manufacturers affect their
product quality and
competitiveness in both
local and foreign market.
Identify shoe last and sole
manufacturers willing to
undertake a joint business
plan with shoe
manufacturers. Then
undertake a suppliermanufacturer program on
international standards
with products to be
purchased by the shoe
manufacturers.
74
INBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Technology Development (con’t)
Link up with local
local or
or
foreign assistance for
foreign consultancy
program in the
development of
international standards for
shoe lasts and other
standards needed by
sector.
Despite last
the passage
of an
Despite
year’s passage
ordinance
by Marikina
of
the Marikina
City
City that mandates
allall
ordinance
mandating
firms to use the FRENCH
sizing system standard,
some companies refrain
from doing so due to the
costs involved. They do
not find the investment to
be worthwhile considering
their small outputs.
Need for increased access
and support on the use of
standardized components
among other
manufacturers.
Lack of industry data and
access to basic information
on the facilities/capacities
of manufacturers and
subcontractors, and on
suppliers’ product range
and prices.
No basic industry
information to assist
manufacturers in planning
for production.
Planning and coordination
among manufacturers on
standardization should
include support for, and
participation of, micro and
small companies.
Provide assistance to
manufacturers restrained
by costs from adopting the
FRENCH standard system
in partnership with largeand medium-size
companies or with a
financing plan from
government institutions.
Conduct an industry survey
and other data
gathering/monitoring
activities to develop a
database on
manufacturers’ and
subcontractors’
production, machinery and
suppliers.
Establish an information
center in the BSO or
through a Website.
The lack of strong tie-ups
with suppliers (backward
linkages) hinders the
growth of the sector as a
whole.
There is a need to develop
strong linkages among
manufacturers and
between manufacturers
and suppliers.
Open membership of the
footwear BSO to suppliers
so they can work together
on common interests.
Background
75
INBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Procurement
High cost of procuring
materials, both local and
imported.
The industry suffers from a
lack of cost-effective
measures in sourcing and
access to wider choice of
raw materials and
accessories that could
maintain its
competitiveness amid the
continued decline in prices
of shoes.
The BSO should consider
the possibilities in bulkbuying of locally sourced
and imported
materials/accessories
(e.g., leather or upper
material, soles and
insoles).
Strengthen linkages with
local suppliers through
joint planning in selection
and purchase of materials,
components and
accessories.
A BSO representative could
visit and establish direct
contacts with foreign
suppliers and arrange for
regular supply of samples
of materials and
accessories.
The BSO could establish a
materials and accessories
center at the BSO or its
Website.
The price structure of
locally sourced hide
remains uncompetitive
against imported hide due
to high cost of production
setup.
Need to improve the
competitiveness of locally
finished leather against
imported leather.
A separate integrated
program geared towards
the development of the
local tanning industry
(concentrated in
Meycauyan, Bulacan)
should be implemented to
address the raw material
needs and requirements.
76
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
There is a lack of training
in quality assurance
procedures and costeffective planning even
among manufacturerowners.
Lack of required
knowledge and technical
know-how affects quality
assurance and, ultimately,
consumer satisfaction.
Conduct training programs
in quality assurance
procedures and costeffective planning for
managers with the needs
of the customers in mind.
The factory workers lack
proper training in
production.
Improved skills and better
production methods lead
to higher productivity and
lower wastage.
The BSO should create a
committee on Dual
Training that will regularly
review and assess the
accomplishments of the
CITC technical school, the
Philippine Footwear
Academy, to effect
changes relevant to the
needs of the sector (e.g.,
training per module,
multi-skills training
program; factory
evaluation).
Human Resource Development
Success stories illustrating
how training improved
productivity and
operations should be
disseminated to
owners and workers
to
manufacturers
to
encourage them to join
the training program.
Workers lack interest in
training due totheir
the
prevailing mindset that
training is unnecessary.
Upgrading of workers’
skills is slow and shop
productivity remains low.
Link up with local
local
governments to
provide/subsidize training
of workers, and set
qualifying standards or
certification to workers.
The PFA could act as a
center for certified skilled
workers, and
manufacturers could
Background
77
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
Human Resource Development (con’t)
eventually source and hire
certified trained workers
from this institution. Such
a hiring practice should
screen
ensure applicants
the values for
of
the
desired
values
workers
during
the and
screening and selection of
attitudes.
applicants.
Conduct human resource
development seminars,
developing work-values
formation among workers.
Workers are concerned
only of their own tasks,
not of the total work
required and their output
as a production team.
Lack of workers’
involvement in the total
production process.
Some local consultants
sent by the footwear
sector for training in India
experienced difficulty in
communicating and
effecting the necessary
changes to the workers
due to the consultants’
young age.
Need to maximize the
training of the consultants
to benefit
the individual
for
the benefit
of the
company
the sector as
sector
as and
a whole.
a whole.
Most workers lack
awareness of the work to
be done and the idea of
accomplishing this as a
team.
Print production schedules
and standards and post
these in all work areas as a
reminder to workers to
perform as a team, not as
individuals. Also conduct
teambuilding activities
among workers.
The BSO should establish
the credibility of the
young consultants through
active support to them,
i.e., constant monitoring
of their development and
output and review of their
work plans. The BSO
should act as conduit
between the owner and
consultant to discuss and
resolve problems
encountered.
Conduct a forum, with the
BSO as organizer and the
consultants as resource
persons, for the sector to
understand and
attend
the role
of the
complete
training
the consultants
in
program.
helping footwear firms.
78
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
Human Resource Development (con’t)
Most companies have no
in-house designer.
Slow process of
product development
in most firms.
Tap and create linkages
with other schools that
offer design courses so
that student designers are
persuaded to complete the
required practicum in
shoemaking companies.
Failure to comply with
such standards
immediately removes the
defiant supplier from the
retailer’s suppliers list.
At the company level,
propose to expand the
“Big Brother-Small
Brother” mentoring
program that some large
retailers have with their
suppliers where the costs
of the training of
subcontractors are
assumed by the main
buyer-supplier of shoes.
Most manufacturers do not
have the discipline,
systems or procedures to
comply with standards
required by buyers in the
footwear design and
production.
Conduct a series of
management seminars in
standards and their
benefits.
benefits among firms.
Some companies lack
training in the preproduction cutting
process.
Lack
of training
leads
Inaccurate
training
to
wastageeventually
and low eat
programs
productivity.
into the manufacturers’
profit margins.
Review the PFA’s training
programs in pattern
making and the grading of
components to assess
current levels of
effectiveness and increase
the participation of
manufacturers in effecting
the necessary changes.
Most companies lack the
basic software
requirements for their
operations.
Operations remain mostly
manual. Measures toward
improved efficiency are
not initiated.
With the assistance of a
consultant, the BSO should
undertake research into
the inexpensive software
systems available for the
production process, and
provide members with the
relevant data.
Background
79
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
xxx
xxx
The BSO could outsource
development of a software
system designed especially
for footwear production
under a cost-sharing
scheme among interested
manufacturers.
Some companies that
invested on mechanized
equipment lack the knowhow to optimize their
machinery, leaving some
equipment underutilized
or wholly unutilized.
Underutilized/unused
equipment and machines
lower productivity and
efficiency.
A technical consultancy
program to develop
procedures and guidelines
in setting up mechanized
production should be
adopted. This activity
could be a tie-up with
technical consultants in
local or foreign
organizations.
A program to review
machinery and usage rates
in a given company should
be developed. A
consultant could guide the
manufacturer-owner on
the functions and features
of specific machines for
the optimized use of
these.
CAD systems in design and
pattern making are not
readily available to most
small- and medium-size
firms.
Manufacturers do not have
access to common service
facilities for system design
and pattern cutting. Such
facilities could minimize
material wastage and save
costs.
Maximize the PFA’s 3DCAD-CAM system,
providing the necessary
technical support (i.e.,
for
technical
to fix
its properstaff
operations.
cutting table).
Institute training in the
features and advantages of
CAD-CAM system for design
and cutting among
manufacturers.
Follow-up the transfer of
the 3D-CAD system from
the Marikina LGU to the
PFA.
80
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
The industry lacks
consistency in product
quality, even for local
brands.
Lack of quality consistency
affects the overall image
of the industry among
buyers.
Implement a“seal of
quality” system for similar
to the Italian initiative,
i.e., the‘Made In Italy’
brand connotes excellent
quality.
Most manufacturers do not
provide the proper hand
tools for workers’ use in
manual production and the
work work
tablestables
or areas
right
or areas
required for semi-finished
goods.
The lack of hand tools and
working tables useful in
different stages of
affectswork
work
production lower
efficiency.
Include in the technical
consultancy program a
study of the manual
production process with
the view of providing
workers the necessary
hand tools and work area
so that output is improved
and the workers’ welfare
is safeguarded.
PFA/CITC still lacks the
necessary equipment to be
able to implement training
in fully mechanized
production.
The potential of the
PFA/CITC to assist the
footwear sector is
hampered by lack of
equipment.
Continue coordination with
TESDA for the equipment
PFA/CITC need for a
mechanized setup.
Initiate planning of
activities and programs,
including technical
training, for the optimized
use of machinery.
Plan for the logistics and
required documentation
when importing
machinery.
Product development
remains a critical need of
manufacturers. Most firms
lack general knowledge of
how to develop designs.
Lack of design capabilities
affects the ability of the
industry to compete,
especially against foreign
brands.
Develop a design center
that will provide common
services facilities for
product development. In
addition, the center could
provide design and
technical consultants for
one-on-one consultations
with manufacturers.
Background
81
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
xxx
Xxx
The center could charge
fees for services rendered
and avail of possible
government subsidies to
be able to adopt pro-rated
costing based on company
assets and size.
Manufacturers’ access to
resources and research
facilities geared to the
development of original,
up-to-date designs is
insufficient, as is the lack
of linkages to
to promote
promote
design collections.
The sector needs to
enhance its strength and
potential in developing
original designs to increase
market appeal.
Through the BSO or its
Website, develop a
program that provides
manufacturers access to
the latest information on
design trends and other
market information.
Manufacturers have
limited or no knowledge of
where and how to register
original designs under the
IPR law.
Need for protection of
original designs to
encourage companies to
work on design/product
development.
Assess the viability of
setting up a design center
within Marikina to which
companies developing
‘original’ designs will
submit drawings and
actual samples. The
manufacturers then
officially register the
specifications and details
of their designs with the
center, which will
then
inform
all other
circulate
these
to all other
shoemakers and
stakeholders in the
industry. The center could
include a showroom of
original designs.
Some companies are
unable to protect
copyright against
unscrupulous
manufacturers that imitate
original designs, i.e.,
adopt the designs with
little or no revisions.
Create a technical
committee under the
design center to handle
any claims of violations of
copyright for immediate
resolution.
82
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
Procurement
Firms lack access to
second-hand machines,
and to spare parts for the
repair of existing ones.
Need to improve
operations through the
purchase of equipment at
lower investment costs.
The BSO should confer
with members on their
equipment requirement,
conduct research and
networking with suppliers,
and provide information to
members on the services
available for their
machines.
OUTBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Workers undergo
unnecessary steps in doing
specific tasks, resulting in
longer activity time.
Facilitate one-on-one visits
by consultants to guide
workers toward a more
efficient work system.
Human Resource Development
Firms lack training in
standards and procedures
in inventory and
distribution management
and monitoring.
Print procedural steps in
all critical areas to
inculcate efficient ways of
doing things among
workers.
Lack of standards in
procedures during
outbound operations.
Outbound operations are
inefficient due to lack of
standards to follow.
Conduct a study and
develop a consultancy
program to address the
need for establishing
standards for outbound
logistics that
manufacturers can adopt.
Most companies handle
distribution, such as
inventory, product
delivery and monitoring,
manually. Accounting,
invoicing and collection of
payments are likewise
manually performed.
Need for improved
administrative procedures
for more up-to-date/realtime data on output,
distribution, monitoring
and reorders.
Facilitate technical
assistance to fast-track
procedures through an
information system that
covers materials handling,
packaging, and
distribution.
Background
83
OUTBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Procurement
Companies source their
requirements such as
boxes and packing
materials separately.
Consolidation or bulk
buying among
manufacturers could
reduce costs.
The BSO should network
with suppliers and arrange
for special rates for
volume purchases as a
cost-saving strategy.
MARKETING AND SALES
FINDINGS
CONCERNS
RECOMMENDATIONS
Manufacturers are too
inward- looking and lack
exposure to developments
in the global market.
Footwear firms may miss
emerging opportunities or
lose to competitors in
their current markets.
Conduct a study mission
upon identifying the
countries the industry
should visit to possibly
forge linkages for
cooperation or
development programs.
Such a program was
initiated in the past
between the city of
Marikina and city of
Permasens (Germany) that
involved the transfer of
technology and know-how.
Lack of funds for
marketing studies.
Market information is not
updated, which impinges
on the industry’s
competitiveness.
Link with local and foreign
organization for assistance
in market studies.
Short- and long-term
marketing activities are
not sustained.
Only the biggest shoe
manufacturers have been
able to develop their
brands. The others lack
training in how to develop
brands for qualified
manufacturers.
Lack of branding reduces
the perceived value of
products, leading to lower
incomes.
Organize fund-raising
within the sector to
support continuous
marketing.
Establish a committee
among the industry leaders
to conduct
seminars/forums on brand
development that are
linked to DTI’s programs.
84
MARKETING AND SALES
FINDINGS
CONCERNS
RECOMMENDATIONS
xxx
Xxx
Enhance the promotion of
the“Marquina” brand and
expand participation
among manufacturers,
whether as direct suppliers
or subcontractors.
Link up with other groups
in the wearables sector,
such as manufacturers of
garments, fashion
accessories and fine
jewelry, leathergoods and
designers, and organize a
fashion trade fair and
show to add value to, and
exposure of brands and
original designs, and
invigorate product/design
development.
The industry lacks a
Website that could be used
to promote industry
developments beyond the
quarterly newsletter,
whose circulation is
limited moreover.
Local and foreign buyers
lack access to basic
industry data, including a
list of manufacturers and
their product lines.
Develop an industry
Website with links to
related
government/private
agencies (e.g., BETP,
CITEM, DTI and
Philexport). The Website
should include company
profile, product and
capacity listings.
Maintain the BSO quarterly
newsletter.
Lack of fast
communication among
members for updates on
marketing and networking
developments.
Members lack
opportunities to network,
and to learn and adapt
appropriate marketing
strategies.
Develop an email-based
communication system
among manufacturers for
information sharing.
Lack of access to the
international community
through available
resources.
Need to forge links with
Philippine commercial
offices abroad for buyers’
lists, as well as market
contacts and information
The communication system
cited above should provide
direct linkages with other
critical sources of
information.
Background
85
MARKETING AND SALES
FINDINGS
CONCERNS
RECOMMENDATIONS
Manufacturers need to
increase their exposure to
foreign markets and
generate interest in
Philippine-made shoes.
Exporters lack data to
define their market niche
and competitive
strategies.
Develop an export
marketing plan that
identifies the objectives,
strategies and timetable
for product development.
Maintain a core group of
exporters committed to a
three- to five-year
program that ensures
presence in an
international trade fair.
“Marquina” group needs
marketing support to
attract high-volume
orders.
The marketing potential of
“Marquina” is not fully
tapped.
Establish links with local
department stores under a
program that promotes
locally made footwear.
Makers need to further
expand promotions as a
group among Filipino
communities abroad.
Need to expand markets
among Filipinos overseas
to compensate for the
current export decline.
Maintain links with PITC of
the DTI
to market to
and
commercial
Filipinos abroad.
attaches
to market local
shoes abroad
Absence of market
intelligence to guide
footwear exporters on the
latest trends abroad
and
directions
leads
to lost
of market
sourcing
across the world.
opportunities.
Purchase market
intelligence reports on
foreign markets.
Lack of common retailing
and marketing spaces such
as a prominently located
store located in a
commercial area.
The lack of permanent
retail and display areas
limits the industry’s
capability to develop the
local market.
Link with other groups
engaged in wearables to
finance a common
permanent showroom and
retail store. Adopt and
promote the concept of a
lifestyle store.
Lack of a business market
plan for the sector.
The industry cannot
effectively compete and
exploit opportunities.
Develop a business market
plan for the sector that
clearly defines the
objectives, strategies and
timetables.
Procurement
Lack of access to market
information on prioritized
markets such as Europe
and the U.S.A.
Lack of information on
other potential markets
such as the Asean or even
Asia as a whole.
Develop an info-base on
potential/alternative
markets in Asia.
86
Background
87
Needs
Assessment
Based on the value chain analysis of the footwear sector and
from other sections of this report, the different needs of the
industry were derived and are presented in this section. The needs
are arranged based on the components of the value chain.
Industry Infrastructure
• The industry needs to organize and advocate for stronger
enforcement of anti-smuggling laws and possibly, the
reduction of tariffs and duties on imported shoe
components and an increase in the tariffs on imported
finished footwear to discourage influx of imports.
•
There is a need to redirect the mindset of the older industry
players so that they become more aware of the global
business environment and changes in the competitive
structure of the industry.
•
Given a change in the mindset of the older generation of
shoe makers, the sector needs to upgrade the strategic
management capabilities of company owners and general
managers.
88
Inbound Logistics
• Stronger backward linkages are needed to ensure the supply
and quality of locally sourced materials. The industry could
venture into an accreditation of suppliers as an assurance
of the standards of quantity, quality and costs.
•
The local tanners should also be organized, systematized
and skills upgraded to resolve the shortage in quality
leather that has been constraining manufacturers in recent
years.
•
The industry needs to reduce the cost of imported raw
materials through consolidation of orders or some other
means of purchasing in bulk.
• Shoe sizes and specifications need to be standardized and
incentives provided to manufacturers to comply with the
set standards.
• The sector needs better warehousing and storage facilities
for raw materials and supplies aided with the use of
information and communications technology.
• Better means of financing raw materials purchases are
needed by firms to replace the traditional practice of check
rediscounting at relatively high interest rates.
•
Firms need better information sources of raw materials
supplies, especially for leather, and the industry should
develop the capability to disseminate such data to
manufacturers.
Operations
• The industry should practice better production planning, as
well as undertake standardization and specialization
among workers, the lack of which has led to inefficiencies
in several phases of the production process.
Background
Needs Assessment
89
• Manufacturers need to put machinery and equipment
maintenance programs in place. The program should also
provide comprehensive training to workers on the
utilization and maintenance procedures required.
• Factory managers and supervisor need to upgrade their
knowledge in human resource management so they can
exericse better control over the development of their
workers.
• Workers need to be subjected to training that will instill
proper work values and attitudes, better appreciation of
their jobs, and improved skills for higher overall
productivity.
• The industry should address a severe problem of low worker
productivity and efficiency by embarking on a methodand-work study of processes involved to reduce
inefficiencies and bring down costs.
• The manufacturing processes of firms should be analyzed
and designed in an efficient layout, then taught to all
employees to sustain gains in cost reduction.
•
The industry should develop a systematic program for
automating, mechanizing or upgrading current levels of
technology that includes recommendations on the
appropriate brand and type of machinery/equipment for
each specific process, together with information on sources
of the necessary machinery and spare parts.
• Manufacturers need to engage in more rigorous product
development, specifically the use of other indigenous
materials that the Philippines is noted for.
• The sector needs a program to protect the intellectual
property rights of the owners of footwear designs.
90
Outbound Logistics
• A training program for workers in quality and finishing
standards and procedures is needed.
• Companies should invest in appropriate software to improve
efficiency in export documentation and local delivery
procedures.
• The industry should develop a common means of procuring
packaging materials to get better terms from suppliers.
Marketing and Sales
• The industry needs to bring individual manufacturers abreast
with current design and market trends through the
development of an appropriate market information
system.
• Promotional efforts should focus on the entire industry and
develop an image based on quality for competing in the
global market.
• Footwear firms need to develop an appropriate strategy
and program to deal with the increasing influx of cheap
imported footwear in the local market.
• Firms with retail stores need to train their sales staff in the
technical aspects of footwear to improve their selling
capabilities.
Service
• Retail store personnel or those dealing directly with buyers
need further training in customer relations to enable them
to respond properly to complaints and on how to handle
product failures.
Background
91
Strategic
Direction
Given the findings and data presented in this report, this
section provides some insight into the strategic direction of the
footwear sector over the next few years.
An urgent concern of footwear manufacturers which need
immediate attention is the rapid loss of market share abroad and
among domestic buyers in recent years. Local footwear products
are losing out in the market due to lower prices offered by
competitors, particularly China. The industry has to adopt a multifaceted approach to dealing with this situation. This entails a
combination of sustained advocacy work to stop the influx of
smuggled footwear, improving worker productivity, reducing product
costs, continuous product development, a repositioning of target
markets and adopting a marketing strategy based on product
differentiation rather than price.
The various elements of the program mentioned above need
to be systematically developed and implemented as soon as possible
given the urgency of the industry’s problems. Advocacy work and
the development of a better marketing strategy and program should
92
be done immediately to help stop the current decline in market
share or at least slow down this negative market growth. Improving
shop productivity and product competitiveness can also be initiated
in the short term but the benefits of these programs will be more
evident in the medium to long term as these activities require
sustained skills training, investment in facilities and optimizing
plant layout and manufacturing practices.
Programs to help turn around the situation in the footwear
industry also need to cover the other key sectors that have crucial
links with shoe manufacturing. These include the leather tanners,
shoe last manufacturers and the producers or traders of the various
components and accessories that go into footwear products. Leather
tanners, in particular, need continued support under a program to
improve the quality of their products for use by footwear firms.
Given below are some specific activities that can be undertaken
to help the footwear sector:
1. Develop and establish industry wide quality standards for
raw materials or components used for footwear products.
This will help suppliers improve their products and services
based on standards set by footwear firms.
2. Assist the tanning sector establish a bulk buying program
for animal hides based on standards set by footwear
manufacturers.
3. Sustain training courses in human resource management,
planning and accounting practices for footwear firms to
provide opportunities for continuous upgrading of skills
among staff and officers.
4. Establish a common business center for footwear firms
which can provide services in research and development,
linkages with suppliers or vendors, management training
courses and related activities for footwear firms.
Background
Strategic Direction
93
5. Establish a facility for conducting regular market research
activities for both the global and domestic markets and
the dissemination of market reports to footwear
manufacturers, traders and dealers via paid subscription.
6. Provide a regular program of providing technical assistance
to footwear companies in the purchase, usage and
maintenance of factory equipment as well as in the
mechanization of manual manufacturing processes.
7. Sustain the operations of the Philippine Footwear Academy
so that it can provide a continuing program of skills
upgrading in the various production processes, procedures,
machine and tool maintenance and related aspects of
footwear manufacture for workers and shop supervisors.
8. Upgrade the current BSO website and use the same as a
marketing tool for promoting local footwear, matching
manufacturers with potential buyers and related market
development work.
9. Undertake a detailed study on alternative financing
mechanisms that is affordable and convenient to use for
footwear firms, especially the micro and small enterprises
as well as the subcontractors.
10. Provide a permanent venue for small footwear
manufacturers to display and market their products to local
buyers. This could be a common store or stall in a
commercial area jointly maintained by a group of firms.
11. Strengthen the industry’s capability to undertake policy
research and advocacy work especially in lobbying the
government to regulate the influx of cheap footwear,
improve raw material importation procedures and the
development of infrastructure needed by the sector.
94
Background
95
Annexes
96
Background
Annexes
97
Annex 1:
The Value Chain Analysis
The Value Chain Concept
Value chain analysis is a method of identifying and understanding
the various activities of an organization that provide value to its
products or services and the linkages among such activities. It is used
to determine which aspects of a firm’s operation can be enhanced,
and where to reduce costs, optimize resource use, or even
reconfigure the entire chain of operations for better performance.
The end result of this effort is increased product or service value,
lower costs of operation, or both.
A value chain covers two sets of activities. The first refers to the
primary activities of a firm and consists of inbound logistics, operations,
outbound logistics, marketing and sales, and service. These are the
activities that organizations engage in to produce a product or service.
The second set covers support activities that indirectly contribute
to the firm’s operations. These include the organization’s
infrastructure, human resource management, technology development
and procurement.
All these activities are interconnected and work in a process
that can be structured into a value chain diagram. A firm’s value chain
can also be linked with external chains such as those of its suppliers
or buyers.
Value Chain Analysis in Sectoral Enhancement
An adaptation of the generic value chain described in Dr. Michael
Porter’s book Competitive Advantage was used to analyze the structure
and performance of industries or sectors covered in Pearl2’s Sectoral
Enhancement program. Originally, the value chain was designed for
company-level evaluation. For the Pearl2 project, however, it is used
to develop a framework for understanding how a particular industry
operates, with the objective of determining the needs of that sector.
On the basis of such a needs assessment, it is possible to identify
areas where appropriate assistance can be provided.
Basically, work with all the sectors covered by the program
included: (i) designing the value chain diagram, (ii) developing a value
chain table, (iii) describing the main components of the value chain,
and (iv) analyzing the flow of the chain to identify issues and problems
and possible courses of action. Such an assessment brings to the
surface the needs of the sector for closer evaluation. The value
98
chain analysis focused primarily on producers which are members of
the Business Support Organization identified for the sector. The
analyses are not by any means comprehensive and do not involve any
cost estimates for the chain or a comparison of the value chain of a
similar industry or with similar features in other countries or regions.
Due to time and resource constraints, no references were made to
external value chains.
Reference: Michael E. Porter, “Chapter 2: The Value Chain and Competitive
Advantage,” Competitive Advantage (NewYork: Simon &
Schuster, 1985), pp. 33-61.
Background
Annexes
99
Annex 2:
Background on the
Footwear Business Support
Organizations
Philippine Footwear Federation, Inc.
The Philippine Footwear Federation Inc. (PFFI) was established in
December 1992. Formerly known as the Marikina Footwear Federation Inc. or MFFI, the federation was founded through the joint efforts of Architect Tereso V. Pasco Sr., the late Mr. Rogelio G. Villareal,
and Mr. Renato A. Florencio after a meeting attended by various NGOs,
civic organizations, cooperatives, trade associations and footwear
manufacturers in Marikina.
The PFFI is composed of footwear manufacturers, retailers, cooperatives and allied industries. At present, the organization has about
81 members. Majority of the members are from Marikina, Laguna,
Bulacan, San Mateo and Cebu. Most of the members are classified as
small and medium enterprises (SMEs) and are often family-owned. A
Director General with two staff members, an Assistant Director General and a clerk/messenger currently staff the PFFI.
The association currently has about 81 members and can be contacted at the following address:
Philippine Footwear Federation, Inc.
No. 20 Russett St., CITC Compound
SSS Village, Marikina City
Tel. No. (632) 9424228
Sikap Mo
The Sigla ni Kapitan Moy or SikapMo, is a joint venture of companies comprising the Marikina shoe industry. The group aims to make
the footwear sector become more competitive and win back the
local market share it has lost to imported shoes. Sikap Mo pools the
resources of its members in order to achieve the following objectives:
• Re-engineer the Marikina shoe industry by introducing more
efficient manufacturing and updated marketing methods.
• Create an exciting collection of comfortable, durable, fashionable and affordable genuine leather shoes.
100
• Build a unified brand name “Marquina” through advertising and
promotions.
• Launch a collective selling effort to retail and wholesale companies nationwide.
Sikap Mo presently has some 82 members. The group also launched
the “Marquina” brand, which aims to create a prestigious image in
the shoe sector’s market. “Marquina” is a brand name being developed by qualified members of Sikap Mo. The manufacturers using the
said brand name underwent a series of training and seminars to build
the foundation of a cluster. The promotion of collective efficiency
by enterprises under “Marquina” focuses on design, product development, and managing different types of production, marketing and
distribution. Sikap Mo can be contacted at the following address:
Sikap Mo, Inc.
No. 289 L. De Guzman St.,
Concepcion, Marikina City
Tel. No. (632) 9488863
Carcar United Footwear Manufacturers Association Inc.
Fifteen shoemakers from Carcar, Cebu decided to come together
in August 2001 and organize themselves into a non-profit, non-stock
association. In October of that year, the Carcar United Footwear
Manufacturers Association Inc. (CUFMAI) was officially registered with
the Securities and Exchange Commission.
The vision of CUFMAI is “to become a dynamic association recognized as a major change agent in making the footwear industry in
Carcar, Cebu, globally competitive by effecting structural changes
and making strategic alliances.” The association seeks to deal with
the rapid changes affecting the footwear industry, including technological innovations, market competition, the flooding of low-priced
shoe products from China and Vietnam in the local market, as well as
the pirating and migration of laborers.
CUFMAI has presently 26 manufacturer members selling exclusively to the local market. The members’ main products are sandals
and slippers, and men’s and women’s shoes made from synthetic leather
or combinations thereof. The manufacturers source and order their
material requirements from Manila traders individually.
Background
Annexes
101
Annex 3:
Footwear Product Classification
(Harmonized System and Philippine
Standard Commodity Classification)
HS CODE
PSCC
6401
64011000
DESCRIPTION
Waterproof footwear with outer soles and
uppers of rubber or of plastics
8511109
6402
Other waterproof footwear with outer soles
& uppers of rubber/plastics
Footwear with outer soles and uppers of
rubber or plastics
64023000
8511300
Footwear w/ outer soles&uppers of rubber/
plastics w/ protective metal toe-cap
64034000
8511500
Footwear w/ outer soles rubber/other &
uppers leather w/ protective metal toe-cap
64019900
8513103
Slippers w/ outer soles & uppers of
rubber/plastics
64019900
8513109
Other footwear, nes, w/ outer soles&uppers
of rubber/plastics
64022000
8513201
Footwear outer soles & uppers rubber/plastic
w/ upper straps/thongs assembly by plugs
64029100
8513202
Footwear w/ outer soles & uppers of rubber/
plastics covering ankle, other than 8510102
64029900
8513203
Slippers wholly of rubber, other than of subitem 8513201
64029900
8513204
Slippers wholly of plastics, other than of subitem 8513201
64029900
8513209
Other footwear w/ outer soles & uppers of
rubber/plastics, nes
102
HS CODE
PSCC
DESCRIPTION
6403
Footwear with outer soles of rubber, plastics,
leather or composition leather and uppers of
leather
64035900 8514802
Slippers w/ outer soles of leather & uppers of
leather
64035900 8514803
Ballet shoes wholly of leather/ composition
leather
64035900 8514809
Other footwear, nes, w/ outer soles of
leather & uppers of leather
64039900 8514909
Other footwear w outer soles of rubber/
plastics & rubbers of leather, nes
6404
Footwear with outer soles of rubber, plastics,
leather or composition leather and uppers of
textile materials
6405
Footwear with outer soles of rubber or
plastics, with uppers other than rubber,
plastics, leather or textile materials
64051000 8514911
Footwear w/ outer soles of wood/cork &
uppers of leather/composition leather
64051000 8514912
Slippers w/ outer soles of wood/cork &
uppers of leather/composition leather
64051000 8514919
Other footwear w/ uppers of leather/compos
leather&outer soles of oth mat'l, nes
6406
Parts of footwear, incl. uppers whether or
not attached to soles other than outer soles
6812
Fabricated asbestos fibres
Note: the above codes cover only those footwear items that are covered
in this report.
Source: Department of Trade and Industry
Background
Annexes
103
Annex 4:
World Footwear Imports by Country
2002-2004
(in US$)
Country
1 USA
2002
2003
2004
16,162,553,365
16,414,947,935
17,405,778,581
2 Germany
4,118,320,496
4,681,186,000
5,190,448,000
3 Hong Kong
5,031,021,407
5,008,547,106
4,959,956,266
3,546,219,057
3,961,443,297
4,570,057,008
5 France
3,352,402,725
4,067,224,534
4,434,177,383
6 Italy
3,067,256,542
3,819,431,976
4,204,716,764
7 Japan
2,943,073,330
3,085,399,979
3,268,778,935
8 Belgium
1,419,798,872
1,606,007,108
1,822,902,046
9 Netherlands
1,307,179,225
1,259,871,593
1,505,320,531
1,065,724,905
1,116,162,229
1,226,239,949
11 Spain
872,442,578
1,228,479,783
1,061,507,458
12
Austria
775,670,492
860,240,069
1,024,591,566
13 Switzerland
696,641,066
790,544,921
856,941,071
14
Australia
562,661,308
598,146,077
706,991,338
15 Denmark
479,562,086
603,138,889
662,159,130
Others
6,953,702,522
8,843,214,123
9,545,999,592
Total
52,354,229,976
57,943,985,619
62,446,565,618
4
United
Kingdom
10 Canada
104
Annex 5:
World Footwear Exports by Country
2002-2004
(in US$)
Country
1 China
2002
2003
2004
11,095,334,595
12,962,060,612
15,212,998,088
2 Italy
7,590,479,138
8,482,623,006
9,076,855,587
3 Hong Kong
5,767,177,507
5,746,692,050
5,698,378,866
4 Germany
1,650,435,429
1,864,090,000
2,340,027,000
5 Spain
2,126,928,319
2,298,575,780
2,018,251,726
6 Belgium
1,855,746,857
1,863,610,379
1,941,474,906
7 Brazil
1,520,023,872
1,624,848,318
1,901,108,550
8 Portugal
1,497,643,657
1,626,085,976
1,651,856,941
9 Romania
1,157,951,000
1,420,704,029
1,512,546,201
1,071,483,348
1,275,712,333
1,465,415,983
11 Netherlands
764,836,478
1,132,358,876
1,326,807,968
12
United
Kingdom
669,223,297
698,326,588
775,645,889
13
Austria
541,818,883
642,767,920
730,419,581
716,394,289
705,970,143
665,019,657
-
763,483,411
629,628,704
Others
4,638,665,903
6,326,236,547
6,268,716,370
Total
42,664,142,572
49,434,145,968
53,215,152,017
10 France
14 USA
15 India
Background
Annexes
105
Annex 6:
U.S. Footwear Imports by Country, 2000
(in US$ million)
Country
Ave.
Yearly
Growth
Rate
(%)
2000
2001
2002
2003
2004
China
9,194.65
9,758.13
10,226.94
10,565.41
11,350.64
5.42%
Italy
1,264.23
1,261.41
1,184.49
1,244.72
1,251.28
-0.18%
Brazil
1,152.26
1,155.18
1,084.91
1,047.09
1,080.85
-1.52%
Indonesia
731.50
725.79
729.14
576.14
492.98
-8.93%
Viet Nam
124.87
132.20
224.83
327.30
475.12
41.67%
Thailand
327.87
314.50
279.80
285.33
287.80
-3.07%
Mexico
351.38
312.15
279.26
275.29
242.42
-8.77%
Spain
325.09
272.75
269.22
235.16
224.61
-8.63%
Dom. Rep.
181.19
193.11
139.75
138.43
137.18
-5.73%
India
112.19
101.61
96.02
109.83
125.43
3.41%
Portugal
98.71
112.64
101.17
95.72
87.40
-2.54%
Hong Kong
68.22
82.45
68.31
63.00
87.20
8.59%
Germany
81.71
75.65
94.74
95.51
81.95
1.11%
Taiwan
91.70
75.52
75.92
74.38
80.68
-2.67%
Canada
77.50
80.03
68.81
64.94
77.41
0.71%
Others
675.23
586.88
465.87
406.51
424.85
-10.48%
14,858.28
15,239.98
15,389.17
5,604.75
16,507.78
2.68%
Total
106
Annex 7:
Major EU25 Footwear Importers, 2000-2
(in Euro million)
Country
2000
2001
2002
2003
2004
Ave.
Yearly
Growth
Rate
(%)
Germany
4,541.11
4,667.41
4,524.98
4,355.23
4,042.81
-2.80%
U.K.
3,275.12
3,634.52
3,817.90
3,451.35
3,603.09
2.70%
France
3,075.67
3,306.40
3,538.22
3,647.64
3,592.31
4.02%
Italy
2,614.28
3,069.68
3,245.97
3,376.92
3,377.64
6.80%
Netherlands
1,561.77
1,617.32
1,607.76
1,460.75
1,546.63
-0.07%
Belgium
1,296.80
1,516.87
1,503.20
1,419.35
1,493.24
3.92%
Spain
694.82
760.30
873.30
1,062.00
1,201.40
14.75%
Austria
828.72
911.28
906.74
901.63
953.51
3.66%
Denmark
469.91
427.82
470.24
496.18
515.05
2.57%
Sweden
420.27
396.86
438.67
410.17
415.10
-0.08%
Greece
319.38
279.26
302.21
385.77
394.83
6.41%
Portugal
365.76
390.79
394.91
381.87
379.77
1.01%
Poland
234.71
270.85
333.54
-
314.91
-
Ireland
273.55
273.08
281.24
267.80
272.42
-0.06%
Czech Rep.
184.82
213.98
233.14
206.36
253.86
9.07%
Others
743.80
831.72
875.85
913.73
962.32
6.69%
20,900.50
22,568.13
23,347.88
22,736.76
23,318.90
2.84%
Total
Background
Annexes
107
Annex 8:
EU25 Footwear Imports by Country, 2000
(in Euro million)
Country
2000
2001
2002
2003
2004
Ave.
Yearly
Growth
Rate
(%)
Italy
3,670.82
3,765.01
3,709.21
3,431.78
3,298.29
-2.57%
Christmas
Island
1,732.99
1,951.57
2,054.51
2,313.86
2,704.38
11.85%
Vietnam
1,731.39
1,956.46
2,109.79
2,122.45
2,195.89
6.22%
Netherlands
1,014.81
1,082.76
1,197.48
1,535.68
1,545.05
11.54%
Belgium
1,261.78
1,575.48
1,843.47
1,279.18
1,421.80
5.60%
Romania
879.07
1,181.72
1,342.59
1,428.78
1,372.85
12.64%
Germany
886.90
944.39
998.75
970.04
1,202.01
8.32%
Spain
1,222.56
1,271.55
1,321.63
1,300.85
1,171.00
-0.90%
Portugal
1,379.36
1,421.16
1,442.03
1,261.74
1,121.11
-4.79%
India
501.85
612.89
604.17
579.48
674.39
8.25%
France
515.78
508.47
528.58
580.45
657.36
6.40%
Indonesia
728.56
753.29
659.15
541.70
522.10
-7.63%
U.K.
437.17
426.42
431.44
397.09
409.51
-1.53%
Austria
362.18
369.57
367.48
372.65
380.23
1.23%
Tunisia
321.25
357.13
371.17
375.10
339.76
1.68%
Others
4,254.01
4,390.28
4,366.43
4,245.92
4,317.01
0.39%
20,900.50
22,568.13
23,347.88
22,736.76
23,332.73
2.86%
Total
Note: the above data covers only HS code nos. 6401 to 6406 and 6812. Please
see Annex 3 for details on these codes. The above are the supplying countries.
108
Annex9: Phil. FootwearExports byCountry, 2000-2005
(inUS$)
Background
Annexes
109
Annex 10:
Phil. Footwear Exports by Product Line,
(in US$)
Product Line
PSCC
Value
Leather
Footwear
8514919, 8514809, 8515209,
347,047
8996901, 8514801, 8514100, 8514803
Non-leather
Footwear
8513209,
8513201,
8517009,
8513109,
Slipppers and
Sandals
8513203, 8513204, 8515902,
8513103, 8514802
8514909,
8511500,
8517001,
8513202,
% Share
1.35%
8515100,
8515909,
10,021,153 39.02%
8511300,
8511109, 8515901
Sports Footwear8512502, 8512300, 8512501,
8512402, 8512200, 8512100,
8512404, 8515201
Parts of
Footwear
8519002, 8519009, 8519003,
8519001, 8519004, 8519007
Consigned
Footwear
9310219, 9310213, 9310211
Total
223,964
0.87%
13,068,590 50.89%
1,445,200
5.63%
574,865
2.24%
25,680,819 100.00%
110
Annex 11:
Phil. Footwear Imports by Product Line,
(in US$)
Product Line
Non-leather footwear
Value
% Share
23,922,310
56.26
Sports footwear
6,915,730
16.26
Leather footwear
3,081,821
7.25
Slippers and sandals
2,688,888
6.32
Consigned footwear
224,952
0.53
5,690,473
13.38
42,524,174
100.0
Footwear parts
Total
Background
Annexes
111
Annex 12:
Summary of Key Findings From 2005
Pearl2 Survey of Footwear Firms
Total
Years in Business
Frequency
Percentage
1-5 Years
16
26.2
6-10 Years
10
16.4
16-20 Years
10
16.4
11-15 Years
8
13.1
21-25 Years
8
13.1
26-30 Years
3
4.9
36-40 Years
1
1.6
More than 45 years
1
1.6
No Response
4
6.6
61
100.0
Total
Company Size
Frequency
Percentage
Micro (assets below Php 3M)
29
47.5
Small (assets from Php 3M to 15M)
23
37.7
Medium (assets from Php 15M to 100M)
8
13.1
Large (assets above Php100M)
0
0.0
No Response
1
1.6
61
100.0
Total
Company Setup
Frequency
Sole Proprietorship
Percentage
42
68.9
Partnership
2
3.3
Corporation
17
27.9
No Response
0
0.0
61
100.0
Total
Owner of Sole Proprietorship
Frequency
Percentage
Male
28
63.6
Female
16
36.4
No Response
Total
0
0.0
44
100.0
112
Total
Education of Sole Prop. Owner
Frequency
College Graduate
Percentage
27
61.4
Some College
8
18.2
High School
5
11.4
Post Graduate
3
6.8
No Response
1
2.3
44
100.0
Total
Chairperson of Corporation, gender
Frequency
Male
Female
No Response
Total
Education of Corp. Chairperson
Percentage
10
58.8
5
29.4
2
11.8
17
100.0
Frequency
College Graduate
Percentage
12
70.6
High School
1
5.9
Some College
1
5.9
Post Graduate
1
5.9
No Response
Total
President of Corporation, gender
2
11.8
17
100.0
Frequency
Percentage
Male
33
54.1
Female
24
39.3
4
6.6
No Response
Total
Education of Corp. President
61
Frequency
College Graduate
100.0
Percentage
37
60.7
Some College
8
13.1
High School
6
9.8
Post Graduate
5
8.2
No Response
5
8.2
Total
Size of Business Premises
61
Frequency
100.0
Percentage
Less than 100 square meters
17
27.9
Between 100 to 250 square meters
15
24.6
More than 250 square meters
27
44.3
Total
61
100.0
Background
Annexes
113
Total
Ownership of Business Premises
Frequency
Percentage
Owned
48
78.7
Rented
8
13.1
Owned and Rented
3
4.9
No Response
2
3.3
61
100.0
Total
Venue of Business Premises
Frequency
Percentage
Residencial
34
55.7
Commercial
23
37.7
No Response
Total
4
6.6
61
100.0
Personnel
Management Employees
Frequency
Percentage
Male
33
56.9
Female
25
43.1
Total
Production Supervisors
58
Frequency
Male
85
Female
Sub-total
Production Workers
Male
100.0
Percentage
59.4
58
40.6
143
100.0
Frequency
Percentage
1463
48.5
Female
1551
51.5
Sub-total
3014
100.0
Technical or R&D Staff
Frequency
Percentage
Male
36
Female
16
30.8
Sub-total
52
100.0
Quality Control Staff
Frequency
Male
Sub-total
Marketing Staff
Percentage
145
Female
69.2
69.4
64
30.6
209
100.0
Frequency
Percentage
Male
47
65.3
Female
25
34.7
Sub-total
72
100.0
114
Total
Office & Administrative Staff
Frequency
Percentage
Male
44
33.8
Female
86
66.2
Sub-total
Total Employees
130
Frequency
100.0
Percentage
Male
1820
Female
1800
49.7
Total
3620
100.0
Average Monthly Wages
50.3
in pesos
Male
5006.80
Female
4965.13
Both Sexes
Subcontracting
4985.97
Frequency
Percentage
Yes
21
34.4
No
40
65.6
Total
61
100.0
Subcontractors
Ave. % of Work Subcontracted
44.4
Ave. Subcon.
7.1
Ave. Workers
17.5
Total Subcon.
149
Total Workers
Subcontractor Location
Within Province/ Premises
367
Frequency
Percentage
12
57.1
Within Region
9
42.9
Nationwide
1
4.8
Subcontractor Support
Ranking
Credit
2.0
Product Devt.
2.3
Tools
2.3
Skills Training
Subcontractor Problems
2.1
Ranking
Delivery Date
1.8
Work Quality
1.5
Reliability
2.5
Background
Annexes
115
Total
Stage of Work Subcontracted
Frequency
Production
Percentage
15
57.7
Pre-Production
8
30.8
Finishing
2
7.7
Others
1
3.8
26
100.0
Total
Raw Materials Source
Frequency
Percentage
100 % Local
6
9.8
100% Imported
0
0.0
54
88.5
Both
No Response
Total
Mode of Production (%)
Matl. H.
1
1.6
61
100.0
Prod.
QC
Pack.
Manual
62.0
25.0
75.0
84.0
Semi-Mechanized
33.0
67.0
21.0
13.0
Fully Mechanized
2.0
5.0
0.0
5.0
Average: Manual
61.5
Average: Semi-Mechanized
33.6
Average: Fully Mechanized
1.6
Capacity Utilization
Total
Average Utilization Rate
86.3
Reasons for Low Utlization Rate
Ranking
Others
2.1
Space Limitations
2.7
Lack of Raw Materials
1.8
Personnel Limitations
2.4
Equipment Limitations
3.2
Quality Control System
Frequency
Percentage
Have specifically assigned personnel
36
59.0
Follow standard procedures
27
44.3
8
13.1
Use internal resources/ equipment
Use outside testing facilities
Quality Control Problems
1
Frequency
1.6
Percentage
Production process
35
57.4
Raw materials/ supplies
30
49.2
2
3.2
Others
116
Total
Product Development
Frequency
Internal Capabilities
External Capabilities
Prod. Dev. Information Source
Percentage
49
80.3
24
Frequency
39.3
Percentage
Buyers
27
44.3
Trade Fairs
25
41.0
Publications
34
55.7
Designers
26
42.6
Internet
31
50.8
Buy new samples
Enough Information for Prod. Dev.
2
Frequency
3.3
Percentage
Yes
34
55.7
No
24
39.3
3
4.9
No Response
Total
Has Internal R&D Capability
61
Frequency
100.0
Percentage
Yes
31
50.8
No
24
39.3
No Response
Total Number of Respondents
Designs Based on Buyer Specifications
6
9.8
61
100.0
Frequency
Percentage
Yes
53
86.9
No
5
8.2
No Response
Source of Sales
3
4.9
61
100.0
Percentage
Export
2.6
Local
97.4
Market Segments Served
Frequency
Percentage
High End
19
31.1
Middle End
46
75.4
Low End
14
23.0
Countries Exported to
Percentage
United States
29.5
Europe
25.7
Middle East
11.0
Australia
10.1
Background
Annexes
117
Total
Countries Exported to (continued)
Percentage
Japan
9.6
Canada
2.7
7.9
3.6
Other Asia
Other Countries
Source of Foreign Buyers
Frequency
Own Contacts
Trade Fairs
Business Mission
Referrals
Website
Means of Trade Promotions
Percentage
10
16.4
7
11.5
6
9.8
10
16.4
2
Frequency
3.3
Percentage
Brochure
19
31.1
Attending Trade Fair
28
45.9
Web Site
15
24.6
Business Missions
13
21.3
Others
Competitor Countries
7
Frequency
China
11.5
Percentage
37
60.7
Vietnam
3
4.9
Hong-Kong
2
3.3
Thailand
2
3.3
Indonesia
1
Exported to New Country
Frequency
1.6
Percentage
Yes
3
4.9
No
45
73.8
No Response
13
21.3
61
100.0
Local Marketing Channels
Frequency
Percentage
Department Stores
21
34.4
Boutiques
23
37.7
Own Store
5
8.2
Traders
11
18.0
Direct Selling
44
72.1
8
13.1
Others
118
Total
Export Marketing Channels
Frequency
Percentage
Importers/Buyers
7
63.6
Distributors
4
36.4
Chain Stores
1
9.1
Other Retailers
1
9.1
Export Sales
Frequency
Percentage
Under US$ 50,000
8
72.7
US$ 50,001 to US$ 100,000
1
9.1
US$ 100,001 to US$ 300,000
1
9.1
US$ 300,001 to 500,000
0
0.0
US$ 500,001 to US$ 1,000,000
0
0.0
US$ 1,000,001 to US$ 3,000,000
0
0.0
No Answer
1
9.1
Total Exporting Companies
Local Sales
Under Php 1M
11
Frequency
100.0
Percentage
9
14.8
More than 1M to Php 3M
16
26.2
8
13.1
6
9.8
6
9.8
6
9.8
3
4.9
1
1.6
4
6.6
0
0.0
0
0.0
No Answer
2
3.3
61
100.0
Total Companies with Domestic Market
Budget Allocation
Administrative
R&D
Percentage
12.7
7.4
Marketing
7.4
Production
58.5
Others
2.6
Background
Annexes
119
Total
Fund Source
Frequency
Percentage
Own Funds
52
85.2
Credit Line with Bank
16
26.2
Private Lenders
15
24.6
3
4.9
Others
Notes:
1. Average Monthly Wages on page 114 refer to the weighted average
monthly salary of workers in the surveyed firms.
2. Ave. No. of Subcontractors and Ave. Workers per Subcontractor on
page 114 refer to the weighted average of total number of
subcontractors and workers among surveyed firms.
3. Subcontractor Problems on page 114 are ranked based on the weighted
average responses of the surveyed firms. The closer a number to 1 is,
the more serious the problem.
4. Stage of Work Subcontracted on page 115 refers to the stage in the
firms’ operations that is outsourced.
5. The reasons for low utilization on page 115 are ranked based on the
weighted average responses from surveyed firms. The closer a number
to 1 is, the more significant the reason.
6. Quality Control Problems on page 115 refer to where in the firms’
operations quality control problems are encountered, in this case, raw
materials or in production.
7. Exported to New Country on page 117 refers to whether a respondent
has exported to a new country during the time of the survey.
8. The total respondents for queries with multiple answers has been
ommitted.
Source: Pearl2 2005 Survey of members of the Philippine Footwear
Federation, Inc. and Sikap Mo.
120
State of the
Sector Report
on Philippine
Footwear 2005
August 2006
Pearl2 Project
Background
121
The State of the Sector Report - Philippine Footwear 2005 is
one of a series of State of the Sector Reports published by the
Pearl2 Project for 2005. This report also updates the one prepared
in 2004.
Pearl2 is a project funded by the Canadian International
Development Agency and managed by Agriteam Canada Consulting
Ltd.
Pearl2 is a five-year initiative (2002-2007) designed to support
the development of small and medium enterprises throughout the
Philippines. It aims to help create meaningful jobs for both men
and women through the strengthening of Business Support
Organizations (BSOs) and Investment Promotion Centers (IPCs).
This report uses the definition provided by the Department of
Trade and Industry (DTI) for micro, small and medium enterprises.
Micro firms are companies with assets totaling below Php3 million.
Small enterprises are those with total assets of over Php3 million
to Php15 million, while medium enterprises have assets ranging
from over Php15 million to Php100 million.
The Field Office of the Pearl2 Project is located at:
Suite 2103, Antel 2000 Corporate Center
121 Valero Street, Salcedo Village
Makati City, Metro Manila
Philippines
Tel: +63 2 751 5912
Fax: +63 2 884 1544
Email: [email protected]
Website: www.pearl2.net
122
Pearl2 Project
Technical Paper #6 (2006 series): “State of the Sector Report –
Philippine Footwear 2005”
August 2006
All rights reserved. No part of this document may be reproduced, stored in a
retrieval system, transmitted in any form or by any means, or otherwise
circulated in any form, binding or cover, other than the form, binding and
cover in which it was published, without prior written permission of Agriteam
Canada Consulting Ltd., on behalf of the Canadian International Development
Agency.
Agriteam Canada Consulting Ltd.
Suite 200
14707 Bannister Road S.E.
Calgary, Alberta
T2X 1Z2
Canada
http://www/agriteam.ca
Disclaimer
This report was based on information and materials gathered and prepared
by contracted advisors to the Pearl2 Project. The judgments expressed do
not necessarily reflect the views of the Pearl2 Canadian Executing Agency
(Agriteam Canada Consulting Ltd.), the funding agency, the Canadian
International Development Agency or the Project’s Philippine partner the
Department of Trade and Industry.
While every effort has been made to ensure accuracy of the information
contained in this technical paper, this is not guaranteed. Accordingly, neither
the Canadian Executing Agency, the Canadian International Development
Agency nor the Department of Trade and Industry accepts any liability for
actions taken based on this material.
Project Team
Mr. Ed Sutherland, Project Director
Mr. John Manzanas, National Program Manager and Editor
Ms. Marie Michelle Leonardo - Program Associate
Mr. Leigh-y Von Cruz - Research Assistant
Printed by: Ample Printing Press, Paco, Manila City, Philippines
Front Cover Design – pITstop, Legaspi Village, Makati City, Philippines
The Pearl2 Project gratefully acknowledges the assistance from the Philippine
Footwear Federation, Inc. and Sikap Mo and their members in the preparation
of this report.
Background
Contents
1. Background.................................................................1
Methodology........................................................2
Limitations...........................................................3
Acknowledgments..................................................3
2. Executive Summary........................................................5
3. Industry Overview..........................................................9
Product Coverage..................................................9
Industry Background.............................................10
Industry Coverage................................................11
Market Segments.................................................12
4. Global Footwear Market................................................13
Global Market for Footwear....................................13
Chart 1: Global Footwear Imports, 2002-2004
Chart 2: Major Importers of Footwear, 2004
Chart 3: Major Importers of Footwear, 2003-2004
Chart 4: Major Exporters of Footwear, 2004
China Footwear Exports.........................................16
Chart 5: China Footwear Exports, 2002-2004
US Footwear Imports............................................17
Chart 6: US Footwear Imports, 2000-2004
Chart 7: US Footwear Imports in 2004, by Country
Chart 8: US Footwear Imports from China, 2000-2004
European Footwear Imports....................................19
Chart 9: EU25 Footwear Imports, 2000-2004
Chart 10: Major EU25 Footwear Importers, 2004
Chart 11: EU25 Footwear Imports by Major Countries,
2004
Chart 12: EU25 Footwear Imports from China, 2001-2004
Chart 13: Fastest-Growing Importers in EU25, 2000-2004
Philippine Footwear Exports....................................22
Chart 14: Philippine Footwear Exports, 2000-2005
Chart 15: Philippine Footwear Exports by Country, 2005
5. Sectoral Profile...........................................................25
Date of Establishment, Company Set-Up, Ownership and
Management, Product Lines, Facilities, Employment,
Subcontractors, Sources of Raw Materials, Mode of
Production and Operation, Capacity Utilization, Quality
123
124
Strategic
Direction
Control, Product Development, Market Coverage, Market
Access, Export Market, Competitors, Sales, Finance,
Sources of Assistance
6. Production Management...............................................37
Background........................................................37
Overview of the Footwear Industry...........................37
Figure 1: Footwear Manufacturing Process
Inputs...............................................................40
Process and Methods............................................41
Finished Products................................................41
Figure 2: Taxonomy of Footwear Product Line
Manufacturing System and Practices.........................43
Production System, Capacity, Seasonality of Demand,
Work Period, Production Planning and Scheduling, Delivery, Production Monitoring, Manufacturing Costs, Raw
Materials, Packaging Materials, Inventory Monitoring,
Organizing and Personnel, Subcontractors, Skills Training and Development, Rejects, Quality Control, Production Process Standards, Facility Layout and Design, Machines and Equipments, Production Engineering and
Development, Environmental Management, Worker
Health and Safety
Chart 16: Peak Production Months of Respondents
7. Value Chain Analysis......................................................63
Structure of the Philippine Footwear Sector...............63
Process Flow in the Industry...................................64
The Footwear Value Chain Diagram...........................67
The Footwear Sector Value Chain Diagram..................69
Key Findings.......................................................87
8. Needs Assessment........................................................87
Industry Infrastructure..........................................87
Inbound Logistics.................................................88
Operations.........................................................88
Outbound Logistics..............................................90
Marketing and Sales.............................................90
Service.............................................................90
9. Strategic Direction......................................................91
Annexes.......................................................................95
Background
125
Acronyms
BETP
BSO
CIDA
Bureau of Export Trade Promotions
Business Support Organization(s)
Canadian International Development Agency
CITC
CITEM
CUFMAI
Cottage Industry Technology Center
Center for International Trade Expositions and
Missions
Carcar United Footwear Manufacturer
DTI
EU
PFA
Association Inc.
Department of Trade and Industry
European Union
Philippine Footwear Academy
IPR
NCR
NSO
OTII
Intellectual Property Rights
National Capital Region
National Statistics Office
Office of Trade and Industry Information
PFA
PFFI
Philexport
PITC
Philippine
Philippine
Philippine
Philippine
R&D
SikapMo
SME
TESDA
Research and Development
Sigla ni Kapitan Moy
Small and Medium-sized Enterprises
Technical Education and Skills Development
UNSD
Authority
United Nations Statistics Division
Footwear Academy
Footwear Federation Inc.
Exporters Confederation, Inc.
International Trading Corporation

Footwear - PHILEXPORT

Transcription

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