Costume Jewelry

Transcription

Costume Jewelry

Background
105
State of the
Sector Report
on Philippine
Costume
Jewelry 2005
May 2006
Pearl2 Project
106
State of the Sector Report - Philippine Costume Jewelry
Background
107
The State of the Sector Report - Philippine Costume Jewelry 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
108
Pearl2 Project
Technical Paper #4 (2006 series): “State of the Sector Report –
Philippine Costume Jewelry 2005”
May 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 Cebu
Fashion Accessories Manufacturers and Exporters Foundation of the
Philippines and its 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 ................................................ 10
Market Segments ................................................. 12
4. Global Costume Jewelry Market ...................................... 13
World Imports of Costume Jewelry ............................ 13
Chart 1: World Imports of Costume Jewelry, by
Country, 2002-2004
Chart 2: Major Importers of Costume Jewelry, 2004
Chart 3: Costume Jewelry Imports of Major Buying
Countries, 2002-2004
World Exports of Costume Jewelry ............................ 16
Chart 4: Major Exporters of Costume Jewelry, 2004
Hong Kong and China Costume Jewelry Exports ............ 17
Chart 5: Hong Kong Exports of Costume Jewelry, 20002004
Chart 6: China Exports of Costume Jewelry, 2000-2004
U.S. Costume Jewelry Imports ................................. 19
Chart 7: U.S. Imports of Costume Jewelry, 2000-2004
Chart 8: U.S. Imports of Costume Jewelry in 2004, by
Country
Chart 9: U.S. Imports of Costume Jewelry from China,
2000-2004
European Union Costume Jewelry Imports .................. 21
Chart 10: EU25 Costume Jewelry Imports, 2000-2004
Chart 11: Major EU25 Costume Jewelry Importing
Countries, 2004
Chart 12: Average Growth Rates of Major EU25 Costume
Jewelry Importing Countries, 2000-2004
Chart 13: EU25 Costume Jewelry Imports, by Country of
Origin, 2004
109
110
Chart 14: EU25 Costume Jewelry Imports from China,
2000-2004
Philippine Costume Jewelry Exports .......................... 25
Chart 15: Philippine Costume Jewelry Exports, 2000-2005
Chart 16: Philippine Costume Jewelry Exports, by
Country, 2005
Table 1: U.S. Imports of Costume Jewelry from Selected
Asian Countries, 2004
Table 2: EU25 Imports of Costume Jewelry from Selected
Asian Countries, 2004
5. Sectoral Profile ........................................................... 31
Date Established, Company Set-up, Ownership and
Management, Product Lines, Facilities, Employment,
Subcontractors, Sources of Raw Materials, Mode of
Production and Operations, Capacity Utilization,
Quality Control, Product Development, Market
Coverage, Export Market, Market Access, Competitors,
Sales, Finance, Source of Assistance
6. Production Management ............................................... 43
Overview of the Costume Jewelry Manufacturing Process 44
Figure 1: Costume Jewelry Manufacturing Process
Inputs ............................................................... 46
Processes and Methods ......................................... 47
Finished Products ................................................ 48
Manufacturing System and Practices ......................... 48
Production System, Capacity, Seasonality of Demand,
Working Period, Scheduling, Deliveries, Production
Monitoring, Manufacturing Cost, Raw Materials,
Packaging Materials, Inventory Monitoring,
Organization and Personnel, Subcontractors, Skills
Training and Development, Rejects and Raw Materials
Yield, Production Process Standards, Facility Layout and Design, Machines and Tools, Product
Engineering and Development, Environmental
Management, Worker Health and SafetyWorker Health
and Safety
7. Value Chain Analysis ......................................................
Structure of the Sector ........................................
Process Flow in the Industry ...................................
The Costume Jewelry Sector Value Chain Diagram .........
Key Findings .......................................................
The Costume Jewelry Sector Value Chain Table ............
59
59
61
62
64
66
Background
8. Needs Assessment ........................................................
Inbound Logistics .................................................
Operations .........................................................
Outbound Logistics ..............................................
Marketing and Sales .............................................
Service .............................................................
111
77
77
78
79
80
80
9. Strategic Direction ...................................................... 81
Annexes ....................................................................... 85
Annex 1: The Value Chain Analysis ............................. 87
Annex 2: Costume Jewelry Product Classification .......... 89
Annex 3: A Background on Cebu FAME ....................... 90
Annex 4: World Costume Jewelry Imports by Country, 20022004 ............................................................ 91
Annex 5: World Costume Jewelry Exports by Country, 20022004 ............................................................ 92
Annex 6: U.S. Costume Jewelry Imports by Country ...... 93
Annex 7: EU25 Costume Jewelry Imports by Country, 20002004 ............................................................ 94
Annex 8: Philippine Costume Jewelry Exports by Country,
2000-2005 ..................................................... 95
Annex 9: Summary of Key Findings from 2005 Pearl2 Survey
of Costume Jewelry Firms ................................. 96
Acronyms
AAMEP
BSO
Cebu FAME
CIDA
CITEM
DA
DENR
DOST
DTI
FIDA
FOB
ICT
IPC
LCL
MOP
Philexport
PO
PTRI
PTTC
QC
R&D
SME
UNSD
Association of Accessories Manufacturers and
Exporters of the Philippines (AAMEP)
Business Support Organizations
Cebu Fashion Accessories Manufacturers and
Exporters Foundation of the Philippines
Canadian International Development Agency
Center for International Trade Expositions and
Missions
Department of Agriculture
Department of Environment and Natural Resources
Department of Science and Technology
Department of Trade and Industry
Fiber Industry Development Authority
Free On Board
Information and Communication Technologies
Investment Promotion Center
Least Container Load
Mother of Pearl
Philippine Exporters Foundation
Purchase Orders
Philippine Textile Research Institute
Philippine Trade Training Center
Quality Control
Research and Development
Small and Medium-sized Enterprises
United Nations Statistics Division
Background
Background
The Pearl2 Project, in coordination with the Department of
Trade and Industry, has been actively assisting the local costume
jewelry industry for the past three years. The manufacture of
fashion accessories is a high value added sector since it makes
heavy use of indigenous materials and employs a significant number
of people. This study is a continuing effort by Pearl2 to provide
updated information on the status of the costume jewelry sector.
It is the third to be released since 2003.
The present report features a new section on Production
Management in the costume jewelry industry. The section on areas
for intervention has also been modified and replaced with a brief
discussion on the strategic direction of the industry. The market
section has also been expanded and the profile of costume jewelry
firms updated. Other sections of the report remain essentially the
same except for some updated data and changes in format and
presentation.
1
2
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 costume jewelry Business Support Organization
(BSO) covered under the Sectoral Enhancement component of
Pearl2, namely, the Cebu Fashion Accessories Manufacturers and
Exporters Foundation of the Philippines (Cebu FAME).
Secondary sources of information include reports from
government and the private sector, and online research on the
costume jewelry 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
a survey of costume jewelry 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 Cebu FAME. A total of 33 firms
participated in the survey. This sample represents about 37% of
the total membership of Cebu FAME. The major focus of this study
is on exporting and would-be exporting 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 exporters and would-be exporters. It does
not cover the value chains 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 D. Carrillo,
Ms. Ana Jover and Ms. Ana Loreto Misa Quigley for
researching and drafting the previous State of the Sector
Reports on Philippine Costume Jewelry;
4
• Dr. Rizalito Gregorio, for helping develop the costume jewelry
value chain in the first two reports;
• Mr. Dennis Beng Hui for working on the Production
Management Assessment on Costume Jewelry;
• Mr. Ferdinand Canlas of the Bureau of Export Trade Promotions
(BETP), brand manager for wearables,
• Ms. Maricor de Guzman of the Bureau of Export Trade
Promotions (BETP), product manager for costume jewelry;
• Ms. Janet Chua, President of Cebu FAME;
• Ms. Noemi Avancena, Executive Director of Cebu FAME;
• other Cebu FAME officers and members for providing data
for this report.
Background
5
Executive
Summary
The manufacture of costume jewelry is one driven by fashion
and trend forecasts. Product life cycles are short, sometimes lasting
only six months or so, and designs are varied. Major product lines
include men and women’s fashion accessories such as hair
ornaments, tie clips, necklaces, bracelets, bangles and various
novelty items. These are made from a a variety of mostly local
and indigenous materials including natural fibers, sea shells,
coconut shell, non-precious metals and plastic parts.
The local costume jewelry industry is dominated by micro,
small and medium sized enterprises. Most, if not all, of firms in
the industry are situated in Cebu province. As per DTI estimates,
there are about 140 manufacturers in the industry at present,
employing about 10,000 workers. The industry relies heavily on
subcontracted work with most exporters outsourcing work to a
number of smaller firms.
6
Global demand for costume jewelry reached about US$6.3billion
in 2004 based on data from the United Nations Statistics Division
(UNSD). The largest market is the United States which accounted
for some 22% of world imports of costume jewelry in 2004. Imports
by the 25 member European Union amounted to Euro 2 billion in
the same year. On the supply side, Hong Kong and China are the
largest global exporters, accounting for a combined 37% of world
exports of costume jewelry for 2004.
Local exports of costume jewelry experienced a surge in 2005,
reaching US$63 million, an increase of 46% over the previous year’s
level. This is the highest export value attained since the year
2000. The United States remains the largest buyer of the industry,
accounting for about a third of costume jewelry exports in 2005.
Other major markets include Great Britain, France, Spain, Japan
and Italy.
Despite the good export performance of the industry recently,
there are a number of concerns which need to be addressed for
the sector to sustain its growth. In the inbound logistics part of
the costume jewelry value chain, the gatherers and suppliers of
materials lack proper organization, skills and resources to ensure
quality of supplies and efficient operations. There is still substantial
wastage and materials rejects among suppliers which consequently
increase materials cost. R & D on materials used by the industry is
also lacking which limits the types of materials manipulation and
pre-processing that could done.
Costume jewelry manufacturers can usually come up with a
wide variety of designs. However, there is a need to be more
focused in their product development. At present, companies have
a low ratio of sales to actual designs made. Firms needs to improve
their design forecast based on fashion trends and colors.
Background
Executive Summary
Production operations are predominantly manual, with
occasional use of semi-automated systems and relies heavily on
subcontracted work. This situation raises issues on quality control
and reliability of subcontractors. There are no industry wide
standards which could be used in quality control systems. Firms
normally rely on visual inspection to ensure quality.
Although most operations are conducted manually, workers
lack skills and access to better tools which limit their productivity.
In addition, manufacturers also need to improve their plant layout
and facilities design to increase efficiency.
In marketing, the industry needs to expand current market
development efforts in order to take advantage of the good demand
for its products. This will require updated market information and
the development of a coherent industry wide marketing program.
Attending trade fairs are a good source of buyers but entail
significant cost. The sector has to find other marketing activities
to complement and support their efforts in the trade fairs.
The challenge for the local costume jewelry sector in the next
few years is to sustain its growth in the global market. Besides
expanding market development efforts, the sector also has to
institute improvements in the early stages of its value chain to
increase productivity and remain competitive.
7
8
Background
9
Industry
Overview
Product Coverage
The costume jewelry industry produces ornaments made from
materials other than fine metals and precious stones. Its main
products include men’s and women’s fashion accessory items.
These cover such items as hair ornaments, earrings, men’s tie
clips and cufflinks, pendants, rings, button covers, necklaces,
bracelets, bangles, brooches, lockets, armlets, anklets, and novelty
items like key holders, various character goods, and other charms
and trinkets made of inexpensive metals, non-precious stones,
plastics, and textiles. Natural materials like shells, coconut, wood,
plant, fibers, carabao horn and bones are also used. These products
are worn to accentuate clothing and are sometimes referred to as
fashion accessories. For more details on the costume jewelry
product classification, please see Annex 2.
Product trends in the costume jewelry business change
frequently and the fashion cycle is brief. The sector is characterized
by rapid design changes and product innovations. Firms generally
create a substantial number of designs or patterns in the course
of a year.
10
Industry Background
The local costume jewelry sector is based primarily in Cebu
province in Central Visayas, where it has been existing for several
decades. The industry started out making shellcrafts, as Cebu
was abundant in sea shells during the 1960s. The shells were
manufactured and assembled into various kinds of products lines,
including fashion accessories. In the mid-‘70s, “puka” shells were
such a hit in Europe and the US market that Philippine costume
jewelry became more marketable globally. From puka shells, the
industry began to offer other simple-stringed accessories using
shells, wood and other natural materials.
By the mid-80’s to the late ‘90s, the industry innovated items
with other indigenous materials like wood, horn, coconut shell,
and fibers like abaca, maguey, raffia, buri and pandan. From
necklaces and bracelets, major players in the industry started
expanding their product lines to include bags, hair accessories,
earrings, rings and brooches as well as small gift items.
Of the Philippines’ total exports of costume jewelry, almost
90% come from Cebu province. Around 70% of the items are shipped
and exported directly from Cebu, while the remaining 20% indirectly
pass through Metro Manila and other exit points in the Philippines.
Industry Coverage
It is estimated that the local costume jewelry industry has at
present about 140 manufacturers/exporters employing about
10,000 direct workers.1 Each exporter has an average of around
15 regular subcontractors to whom it outsources some production
1
Source: http://www.philembassy.au.com/download/tde-jewelry.pdf.
Background
Industry Overview
activities. A subcontractor has about 30 to 50 workers who work
on the individual components. Other subcontractors are usually
stringers, assemblers, painters, cutters or shell gatherers,
employing an average of five to 10 workers.
There is no exact figure on the total number of subcontractors
for the industry. However, a previous study conducted on the sector
by Ms. Joyce Yang,2 estimates a number of about 1,000 to 2,000
subcontractors. As profiled in the study, subcontractor units are
mostly composed of low-income groups with minimal formal
schooling. They operate on low and unstable capital, usually sourced
from unregistered lending groups. Some receive financial
assistance from the exporters subcontracting their work. Their
biggest asset is the low-cost manual labor provided by their
workers, and their operation systems comprise basic and nonmechanized tools and equipment.
Firms involved in costume jewelry production are organized
into two major groups:
•
Fashion Accessories Manufacturers and Exporters
Association (FAME), Foundation Inc., and
•
Association of Accessories Manufacturers Association of
the Philippines (AAMEP).
Of these two groups, the Cebu FAME is the leading business
support organization identified for costume jewelry under the
Sectoral Enhancement component of Pearl2. (Annex 3 gives a brief
background on Cebu FAME.)
2
Industry Analysis of the Fashion Industry (2001) by Ms. Joyce Yang.
11
12
Market Segments
The costume jewelry sector caters to the low-end, mid-range
and high-end markets. The high-end segment consumes products
made from expensive materials, which are often semi-precious
metals; thus, designs are adapted to resemble fine jewelry.
The mid-range buyers favor reasonably priced but very trendy
items. These items are versatile, allowing consumers to
experiment in wearing them for casual, semi-formal and formal
occasions. Low-priced products are styled according to the latest
fashion craze, and the trendy low-priced items are worn on casual
occasions. Materials used are inexpensive, as these are usually
widely available. Due to fast-changing trends in the low-end market,
however, shelf-life of products is short.
Background
13
Global
Costume
Jewelry
Market
World Imports of Costume Jewelry
World imports of costume jewelry amounted to $6.3 billion in
2004. Over the past several years, global demand for costume
jewelry has been erratic, with a peak in total imports in 2003
followed by a small decline the following year. Chart 1 on the next
page tracks the movement of world costume jewelry imports for
2002 to 2004 based on the data from UNSD Comtrade database.
Please note that the figures for costume jewelry covered in
this section (except for Philippine exports) refer only to items
under product codes 7018 (glass beads and imitation of pearls and
precious stones), 7117 (imitation jewelry), 9606 (buttons, pressfasteners, snap fasteners and press studs, button moulds and
button blanks) and 9615 (combs and hairslides).
14
Chart 1
World Imports of Costume Jewelry 2002-2004
(in US$ million)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Import Value
2002
2003
2004
4,937
5,813
6,326
Note: the above data covers only HS nos. 7117, 7018, 9606, and 9615.
Please see Annex 2 for details on these codes.
Source: UNSD Comtrade Database
The largest market for costume jewelry is the United States.
In 2004, the total US costume jewelry imports amounted to almost
$1.5 billion which represents about 22% of the total global imports
for that year. Aside for the U.S., Hong Kong is the only other notable
importer of fashion accessories with a market share of 16% in
2004. Other importing countries such as Germany, the United
Kingdom, France, Japan and Italy have relatively smaller portions
of the global market. Chart 2 on the next page shows the major
costume jewelry importers in 2004.
Background
Global Costume Jewelry Market
15
Chart 2
Major Importers of Costume Jewelry, 2004
(in percentage to total global imports of costume jewelry)
France
6%
Japan
6%
Italy
5%
China
4%
Austria
Canada
3%
3%
Others
22%
UK
6%
Germany
7%
Hong Kong
16%
USA
22%
Chart 3 on the next page presents the growth in costume
jewelry imports among the major buying countries from 2002 to
2004. All of the major importing countries exhibited consistent
postive growth during the period. The U.S. market grew by an
average of 9% yearly while Hong Kong imports of fashion
accessories grew by almost 20% annually during the same time
frame.
Growth in the other major markets were more substantial,
with the largest increases noted in France, Italy and Austria.
Average yearly growth in costume jewelry imports among these
three countries exceeded 30% from 2002 to 2004. Please see also
Annex 4 for details on the world costume jewelry imports.
16
Chart 3
Costume Jewelry Imports of Major Buying Countries 20022004
(in US$ million)
1,600
1,400
1,200
1,000
800
600
400
2002
2003
Canada
Austria
China
Italy
Japan
France
UK
Germany
Hong Kong
0
USA
200
2004
World Exports of Costume Jewelry
Global exports of costume jewelry were estimated at almost
$6 billion in 2004. For the period 2002 to 2004, world exports of
costume jewelry fluctuated, rising by 19% in 2003 and then dropping
by 13% the following year. Hong Kong is the largest exporter of
fashion accessories accounting for about 22% of total exports in
2004. Other major exporters are China (15% of world exports) and
Austria (12%). Chart 4 on the next page shows the major costume
jewelry exporters in 2004. Annex 5 provides details on the global
exports for costume jewelry.
Background
17
Chart 4
Major Exporters of Costume Jewelry, 2004
(in percentage to total global exports of costume jewelry)
Italy
6%
France
6%
USA
5%
UK
3%
Others
11%
Hong Kong
22%
Rep. of Korea
6%
Germany
7%
Czech Rep.
7%
Austria
12%
China
15%
Hong Kong and China Costume Jewelry Exports
Hong Kong and China represent the two largest exporters of
costume jewelry worldwide. Exports of fashion accessories from
both countries exhibited substantial growth from 2000 to 2004.
During the period, exports of Hong Kong costume jewelry grew by
an average of 9% yearly, reaching almost US$1.3 billion in 2004.
Costume Jewelry exports from China amounted to US$919 million
in the same year. Since the year 2000, there has been a surge in
the amount of jewelry being exported from China, achieving an
average growth of 18% yearly up to 2004. That year was particularly
good for Chinese made fashion accessories when exports increased
by 27.43% compared to 2003. Please see Charts 5 and 6 on the
next page for details.
18
Chart 5
Hong Kong Exports of Costume Jewelry, 2000-2004
(in US$ million)
1,400
1,200
1,000
800
600
400
200
0
Export Value
2000
2001
2002
2003
2004
1,030
984
1,019
1,071
1,283
Chart 6
China Exports of Costume Jewelry, 2000-2004
(in US$ million)
1,000
800
600
400
200
0
Export Value
2000
2001
2002
2003
2004
476
517
608
721
919
Background
19
U.S. Costume Jewelry Imports
Imports of costume jewelry products by the United States
amounted to almost US$1.4 billion in 2004. Since the year 2001,
U.S. costume jewelry imports have been rising consistently with a
substantial increase noted in 2004. Average yearly growth from
2000 to 2004 is estimated at 6%. Chart 7 shows the US importation
data for costume jewelry for the period.
Chart 7
U.S. Imports of Costume Jewelry, 2000-2004
(in US$ million)
1,400
1,200
1,000
800
600
400
200
0
Import Value
2000
2001
2002
2003
2004
1,081
1,078
1,154
1,209
1,380
China dominates the supply of costume jewelry to the United
States. In 2004, China accounted for almost two thirds of U.S.
imports of fashion accessories and related items. This is equivalent
to some US$885 million in value. Other countries comprise only
modest shares of the U.S. market. Please see Chart 8 on the next
page for details.
20
Chart 8
U.S. Imports of Costume Jewelry in 2004, by Country
(in percentage share to total U.S. costume jewelry imports)
India
2%
South Korea
5%
Taiwan
3%
HK
2%
Czech
Rep.
2%
Thailand
2%
Italy
2%
Japan
2%
Others
8%
Austria
7%
China
65%
Growth in U.S. imports of costume jewelry from China has
been robust during the past years. From 2000 to 2004, imports of
fashion accessories and similar products by the U.S. from China
increased by an average of some 15% annually. From US$505 million
in the year 2000, costume jewelry imports from China reached
about US$885 million in 2004. Please see Chart 9 on the next page
for details. Annex 6 also provides additional data on U.S. imports
of costume jewelry.
Background
21
Chart 9
U.S. Imports of Costume Jewelry from China, 2000-2004
(in US$ million)
1,000
800
600
400
200
0
Import Value
2000
2001
2002
2003
2004
506
549
662
729
885
European Union Costume Jewelry Imports
Imports of costume jewelry by the 25 member countries of
the European Union totalled Euro 2 billion in 2004. Since the year
2000, imports of fashion accessories by the EU has been growing
with a particularly substantial rise in 2004, when imports increased
by 17%. Overall growth for the period averaged about 6% yearly.
Please see Chart 10 on the next page for details.
Among the EU25 nations, Austria is the largest importer of
costume jewelry. In 2004, Austria’s imports of fashion accessories
and related items amounted to Euro 262 million, representing some
27% of total EU25 imports of costume jewelry for the year. Other
major importing countries in 2004 include Germany with a 20%
share of total costume jewelry imports and Italy with a 14% share.
Please see Chart 11 on the next page.
22
Chart 10
EU25 Costume Jewelry Imports, 2000-2004
(in Euro million)
2,500
2,000
1,500
1,000
500
0
Import Value
2000
2001
2002
2003
2004
1,592
1,653
1,670
1,724
2,018
Source: Export Help Desk, External Trade, European Commission
Chart 11
Major EU25 Costume Jewelry Importing Countries, 2004
(in percentage to total EU25 costume jewelry imports)
Czech Republic
4%
Netherlands
3%
Others
8%
Austria
27%
Spain
4%
Belgium
5%
UK
6%
France
9%
Germany
20%
Italy
14%
Background
23
Among the major importers of costume jewelry in the EU25,
most exhibited positive growth trends from 2000 to 2004. Growth
was significant in Italy and Spain whose average yearly increases
during the period exceeded 10% each. Only the Netherlands posted
a negative average yearly growth among the major EU25 importers
of fashion accessories. Please see Chart 12 below.
Chart 12
Average Growth Rates of Major EU25 Costume Jewelry
Importing Countries, 2000-2004
16.00%
14.00%
12.00%
10.00%
Ave. Growth Rate %
+
8.00%
-
-2.00%
6.00%
4.00%
2.00%
0.00%
-4.00%
Grow th Rate
Austria
Germany
Italy
France
United
Kingdom
Belgium
Spain
Czech
Republic
Netherlands
9.95%
1.35%
14.35%
5.68%
8.45%
7.72%
13.15%
6.46%
-2.30%
Please see Annex 2 for details on these codes. Average growth rate refer
to the annual average growth for the period.
Aside from Italy and Spain, there were also a few other countries
in the EU25 which exhibited good growth patterns in costume
jewelry imports from 2000 to 2004. These include Slovenia, Greece,
Latvia and Luxembourg. Among these countries, Slovenia had the
highest yearly average growth of 24% in costume jewelry imports
for the period. The rest had growth rates averaging between 11%
24
and 20% annually for the same period. The value of costume jewelry
imports of these countires, however, are still quite low, ranging
from Euro 146,000 for Slovenia in 2004 to Euro 6 million for Greece
for the same year.
China is the biggest supplier of costume jewelry to the EU25.In
2004, the EU countries imported about 28% or Euro 568 million of
their fashion accessories from China. Other notable suppliers are
a mix of European and Asian countries including Austria, Germany,
Italy, Thailand, France, Hong Kong, Republic of Korea and the United
Kingdom. Please see Chart 13 below and Annex 7 for details.
Chart 13
EU25 Costume Jewelry Imports, by Country of Origin, 2004
(in percentage of total EU25 costume jewelry imports)
Germany
10%
Italy
7%
Thailand
4%
Rep. of Korea
France Hong Kong
4%
4%
4%
UK
USA
3%
3%
Austria
13%
Others
21%
China
27%
Imports of costume jewelry from China by the EU25 countries
have been growing consistently since the year 2000. Growth during
this period averaged 16% yearly with a significant increase noted
in 2004. Please see Chart 14 on the next page for details.
Background
25
Chart 14
EU25 Costume Jewelry Imports from China, 2000-2004
(in Euro million)
600
500
400
300
200
100
0
Import Value
2000
2001
2002
2003
2004
315
356
393
432
569
Philippine Costume Jewelry Exports
Exports of locally made costume jewelry reached US$63 million
in 2005. This figure represents a remarkable 46% increase from
export levels in the previous year and was the highest export value
achieved by the industry since the year 2000. After several years
of fluctuating growth, the sector made a significant push forward
in 2004. Please see Chart 15 on the next page.
Almost all or 96% of costume jewelry exported by local
manufacturers in 2005 consist of imitation jewelry without precious
metals. The remaining 4% is made up of cuff links, buttons of
various materials, combs and imitation jewelry with precious metal.
26
Chart 15
Philippine Costume Jewelry Exports, 2000-2005
(in US$ million)
70
60
50
40
30
20
10
Export Value
2000
2001
2002
2003
2004
2005
31
26
38
45
43
63
Source of basic data: Department of Trade and Industry
The United States remains the largest market for Philippine
costume jewelry. In 2005, close to a third (32%) of industry exports
went to the U.S. market. The other notable buyer beside the U.S.
is Great Britain which absorbed 10% of local exports of fashion
accessories for the same year. Other export destinations include
France, Spain, Japan and Italy. Please see Chart 16 on the next
page for details.
Growth in the major markets for the local costume jewelry
industry showed significant increases in 2005. Exports to the U.S.,
Great Britain and France more than doubled during the year
compared to 2004. Overall, exports to almost all of the major
buying countries except for Japan and Germany increased
substantially during the period. Please see Annex 8 for details on
Philippine costume jewelry exports.
Background
27
Chart 16
Philippine Costume Jewelry Exports, by Country, 2005
(in percentage of total costume jewelry exports)
U.S.A.
32%
Others
19%
Canada
2%
Germany
4%
Hawaii
4%
Australia
5%
Italy
5%
Japan
6%
Spain
6%
France
7%
G. Britain
10%
Source of basic data: Department of Trade and Industry
Although exports of Philippine costume jewelry showed
significant growth lately, the country is still behind several Asian
competitors in supplying major buying countries abroad. In the
U.S., local fashion accessories comprise less than 1 percent of
U.S. imports for these types of products in 2004. China dominates
the U.S. market and the Philippines ranks behind Taiwan, Hong
Kong, Thailand and Japan. Please see Table 1 on the next page for
details.
In Europe, the Philippines share of the region’s costume jewelry
imports is also less than 1% in 2004. China, Thailand, Hong Kong
and Taiwan are the Asian countries leading the Philippines in
supplying costume jewelry to the EU25. Please see Table 2 on the
next two pages.
28
Table 1
U.S. Imports of Costume Jewelry from Selected Asian
Countries, 2004
(in US$ ‘000)
C o untry
Value o f U.S. Co s tum e
Jew elry Imports
China
% o f To tal U.S. Co s tum e
Jew elry Imports
884,887
64.14%
Taiw an
42,065
3.05%
Hong Kong
34,270
2.48%
India
33,469
2.43%
Thailand
28,574
2.07%
Japan
23,414
1.70%
Philippines
11,720
0.85%
Vietnam
3,468
0.25%
Indonesia
2,951
0.21%
Background
29
Table 2
EU25 Imports of Costume Jewelry from Selected Asian
Countries, 2004
(in Euro ‘000)
Value of EU25 Costume
Jew elry Impo rts
% of Total EU25 Costume
Jewelry Imports
568,510
28.17%
Thailand
89,476
4.43%
Hong Kong
74,159
3.67%
India
47,585
2.36%
Taiw an
21,476
1.06%
Philippines
18,180
0.90%
Japan
11,992
0.59%
Indonesia
6,162
0.31%
Vietnam
3,902
0.19%
Country
China
30
Background
31
Sectoral
Profile
As in the previous reports, Pearl2 conducted a survey of
costume jewelry firms to gather data on the status of the industry.
A total of 33 respondents participated in the survey conducted in
2005. These companies are members of the Cebu Fashion
Accessories Manufacturers and Exporters Foundation of the
Philippines (Cebu FAME). The number of respondents represent
about 37% of the total members of the association. Most of the
respondents are located in the Cebu area.
The key findings of the survey are presented in this section.
Please note that some survey questions have elicited multiple
responses from respondents so that in these cases, the total
responses may not add up to 100%. Also, where appropriate and
where data is available, references to the 2004 survey results are
made.
32
Date Established
More than half (58%) of the companies surveyed have been in
the business for over 10 years. A fourth are five years old or less
while 15% are from 6 to 10 years old. One company gave no response
to this query.
Company Set-up
A majority or 61% of respondents are small-scale enterprises.
Some 36% are shared equally by micro and medium sized firms.
There were no large firms noted in the survey. More than half
(58%) of the companies are set up as corporations. About 39% are
under sole proprietorship. The remaining 3% operates as a
partnership.
Last year, two thirds of respondents were small-scale companies
while medium-scale firms accounted for 7%. Another 7% of
respondents were registered as micro enterprises. There were
two firms classified as large enterprises. Almost half (48%) of firms
were established as corporations while about 45% were sole
proprietorships.
Ownership and Management
About 57% of sole proprietorships are owned by women. A large
proportion (86%) of the sole proprietors are college graduates,
with one respondent also having a post graduate degree. Among
corporations, slightly more than half (53%) of Chairpersons are
female. About 37% are males while the rest gave no response. A
majority or 68% of Chairpersons are college graduates while those
who hold postgraduate degrees account for 16%.
Background
Sectoral Profile
More than half (58%) of the corporate Presidents are female.
Majority (76%) of these hold college degrees, and another 12%
also have completed postgraduate education. Board members are
almost evenly split between male and female members. There are
slightly more females (58%) in other management positions among
respondents.
In last year’s survey, there were more male sole proprietors
(64%) among respondents. All of the sole proprietors had college
degrees and one even completed post graduate studies. Females
were the majority (64%) among corporate Chairpersons. Most
Chairpersons (64%) were college educated. Company Presidents in
last year’s study were almost equally male and female and most
also had a college education. Women were the majority (69%) in
other management positions last year.
Product Lines
Among the surveyed firms, 85% are engaged in producing
fashion accessories/earrings/bracelets, 52% manufacture costume
jewelries like bangles and necklace and 42% are into bags and
belts. Other products manufactured include home accessories,
slippers/sandals, gift items, handicraft, plaques, trophies and toys.
Product lines mentioned in last year’s survey are essentially
the same, although the proportion of respondents making the
different product lines varied somewhat. Last year, 21% of the
respondents produce costume jewelry. 48% manufacture other
fashion accessories and some 30% also manufacture and export
houseware, novelties, toys, industrial tiles and footwear items.
33
34
Facilities
Majority of the firms (79%) have business premises of over
250 square meters. Some 9% have premises ranging from 100 to
250 square meters. About 55% of the companies are located in
commercial areas. Almost half of firms (49%) own their business
space while 42% rented their facilities.
Findings in last year’s survey show similar results except that
only about 38% of respondents were located in commercial areas.
Employment
The 33 firms surveyed have some 1,660 direct employees.
Female employees predominate comprising 70% of the work force.
Almost three fourths ( 73%) of employees are in production. About
7% are in R&D/Technical, 6% in quality control and another 6% in
administrative positions, 4% in production supervisory and another
4% in marketing. Women employees are the majority in all
departments with the proportion of females ranging from 64%
among production supervisors to 91% in quality control.
Wage rates among men and women workers do not vary much.
Male employees get an average of Php5,875 monthly or Php226
daily while female workers average a monthly wage of Php5,917 or
Php228 daily.
Last year’s survey covered 29 respondents with a total of 1,152
direct hires. Most or 64% of workers were female and 36% male.
About 62% of workers were in production. Women outnumber men
in all work categories. Direct hires last year received an average
daily wage ranging from Php150 to Php250.
Background
Sectoral Profile
Subcontractors
Almost all (30 out 33) of the companies surveyed are engaged
in subcontracting with an average of 69% of their workload
outsourced to other parties. Close to three fourths (73%) of the
30 firms always subcontract work. Most the respondents (73%)
subcontract work in the production stage. About half outsource
pre-production work and 37% subcontract their finishing activities
Eighty percent (80%) of the companies who subcontract work source
out their subcontractors within the same province of their business
operations. Another 27% get their subcontractors from within the
region.
Firms surveyed employ an average of 30 subcontractors each
with an average of 233 workers per subcontractor. Majority or 80%
of subcontractors were reported to be women. Please note the
subcontractors are non-exclusive which means that firms may
sometimes be using the same subcontractor. The major support
given to subcontractors, in order of significance, are (1) credit
and financing, (2) equipment/tools, (3) product development and
(4) skills training. In spite of this assistance, however, problems
still arise with subcontractors. Common difficulties encountered
are mainly on date of work delivery, quality of work, reliability and
access of subcontractors to raw materials.
In last year’s survey, almost all respondents (93%) subcontract
work with most job outsourced in the production stage. The
respondents engaged around 10 to 50 subcontractors yearly.
Subcontractors usually hire an average of 25 workers.
Subcontractors in last year’s report were mostly women (55%) and
most (45%) were located in Cebu, while 10% are in the Visayas
region. The type of support given to and problems encountered
with subcontractors are the same as in this year’s survey.
35
36
Sources of Raw Materials
Most or 75% of the raw materials utilized by costume jewelry
firms are locally sourced. The remaining 25% is imported. The
materials commonly used are shells/sea shells/sea grass. These
account for 88% of total materials used. Other materials consumed
include natural wood (70%), coco beads/shells and wood (55%),
metal castings (33%) and resin (24%). In terms of sourcing of raw
materials, about 70% of respondents have their own sources while
those who resort to buying in the open market account for 49%.
Most materials (81%) are sourced from within Cebu. The major
problems encountered with regards to raw materials are ranked
as follows: (1) availability, (2) price, (3) date of delivery and (4)
quality.
Findings in last year’s survey indicate the same heavy usage
of local raw materials with about 86% of the firms sourcing their
materials locally. Major sources of materials are mainly Cebu,
Manila or neighboring provinces like Samar, Leyte, Bohol, and Panay
Islands. Some 52% of the respondents procure raw materials from
the open market; the rest have their own direct sources. Firms
last year cited the following problems in buying their materials:
availability, price, quality and delivery time.
Mode of Production and Operations
Majority of the firms surveyed do their production, materials
handling, packaging and quality control manually. The proportion
of respondents doing manual work for their various work activities
are as follows: materials handling (67%), packaging (97%),
Background
Sectoral Profile
production (61%) and quality control (91%). About 30% of the firms
are engaged in semi-mechanized operation in materials handling
and 42% for production operations. Only one respondent reported
having a fully mechanized packaging operation.
Last year’s survey findings also showed firms employing a
mainly manual operations in their work.
Capacity Utilization
About 30% of the firms operated at full capacity at the time of
the survey. Some 18% had utilization levels of 90% to 97% while
12% operated at 80% capacity. Another 12% of firms had utilization
rates ranging from 50% to 73%. Nine respondents (27%) had zero
utlization rate. The average utilization rate for the firms is placed
at 88%. The reasons for underutilization are ranked as follows: (1)
limitation of equipment, (2) personnel limitation, (3) lack of raw
materials and (4) space limitation.
Last year, only a few companies reported their capacity
utilization rates with 21% operating below their maximum capacity
and 3% working at full capacity during the time of the survey.
Reasons cited for under-capacity are the same as in this year’s
survey.
Quality Control
About 70% of respondents have specifically assigned personnel
to do quality control work. A third follow standard procedure, 21%
use internal resources/equipment and 6% use outside testing
facilities. Quality control in production processes is a problem for
slightly more than half (55%) of the firms. Another 52% encountered
quality control problems in raw materials/supplies.
37
38
Last year, more than two-thirds of the surveyed firms had
specifically assigned personnel for QC while 14% use in-house
equipment and other resources. Some 10% use standard processes
and 3% relied on outside testing facilities.
Product Development
In product development, most or 79% of the firms rely on their
internal capabilities. Some 42% depend on external means. The
major sources of information for product development are buyers
(76%), designers (73%) and publications (70%). A third of
respondents use the internet to gather information and leads on
product design.
Design concepts are based primarily on buyer's specifications
as stated by 94% of the firms. Ninety-one percent of the companies
have their own internal R&D facilities. Significantly, about 63% of
the firms are satisfied with the present information they have for
product development.
Findings in last year’s survey show similar results. About 76%
of respondents said they had internal R&D facilities for product
development. Major sources of product development information
then were buyers (90%), trade fairs (79%) and designers (72%).
About 52% of firms surveyed last year said they were satisfied
with the present information they had for product development
while 45% were not.
Background
Sectoral Profile
Market Coverage
The local costume jewelry sector is heavily exported oriented
with export sales of respondents averaging 92% of their total
revenues. Only 8% of sales are local. Close to three fourths (73%)
of the firms cater exclusively to the export market while 27% serve
both domestic and export clients. Majority or 76% of respondents
target the mid-range market segment. About 36% sell to the highend market while those who serve the low-end market account for
27%. For local sales, an average of about 58% go to the Metro
Manila region while 41% are made in other places of the country.
Last year, all respondents exported their products with slightly
more than a third (35%) also selling locally. About 73% of domestic
sales were concentrated in Metro Manila, 35% in Cebu and other
provinces in the Visayas. Most respondents (48%) last year targeted
the middle market segment, 28% catered also to the high end and
10% targetted the low end market.
Export Market
Producers of costume jewelries export their products mainly
to Europe where an average of about 41% of the respondents’
exports are sent. Other countries exported to include: US (24% of
exports), Japan (16%), Australia (4%), Middle East (4%), Canada
(1%) and other countries (9%). About half (52%) of surveyed
companies said that they exported to a new country last year.
Among the new countries exported to were Russia (cited by 24% of
firms), Croatia (18%), Hong Kong (12%) and France (12%).
39
40
In last year’s survey, major export markets were Europe and
the US and Europe which accounted for 86% and 83% respectively
of the respondents’ exports sales. Japan ranked third as an export
market with about 66% of sales. Other export destinations last
year include Australia (52%), the Middle East (34%) and other Asian
countries (31%).
Market Access
A large majority (88%) of respondents continue to source their
foreign buyers through trade fairs. Other means of getting foreing
clients are through own contacts (55%), referrals (45%), business
missions (24%) and use of websites (9%). About 91% of companies
usually attend trade fairs to promote their products. Others promote
through websites/internet access (55%), brochures/catalogues
(39%) and through business missions (18%).
In the local market, the major marketing channels for surveyed
enterprises include traders (cited by 18% of firms), botiques (9%),
direct selling (9%), own stores (6%) and department stores (3%).
Respondents last year also relied heavily on trade fairs to get
buyers and used the same means of market promotions as
mentioned above. Variations, however, were noted in their
domestic market channels. Surveyed firms last year relied on the
following channels; own stores (31%), direct selling (20%), traders
(14%), department stores (14%), and boutiques (10%).
Background
Sectoral Profile
Competitors
Costume jewelry manufacturers consider China as their main
competitor. Other rival countries are India, Indonesia and Korea.
The edges of foreign competitors versus local producers are in
their low price offerings due to lower labor cost/materials and
their ability to mass-produce items. Results last year show similar
competitor countries.
Sales
About 25% of the firms generated annual export sales under
US$50,000. Some 21% had sales ranging from US$100,001 to
US$300,000, 15% sold from US$1,000,001 to US$3,000,000 and
12% sold from US%50,001 to US$100,000.
About 9% of respondents were able to generate sales with a
range of US$300,001 to US$500,000. The same proportion sold
products from US$500,001 to US$1,000,000. Only 6% was able to
sell a relatively high level of US$3,000,001 to US$5,000,000 for
the year.
Only a fourth of respondents gave any information on their
domestic sales. About 12% have sales under Php1 million. Six
percent was able to generate sales from Php1 million to Php3 million.
The same percentage sold from Php3 million to Php5 million. Please
note that the sales figures indicated refer to the year 2004.
41
42
Last year, majority or 62% of respondents had exports of less
than US$500,000. About 21% exported between US$100,000 to
US$300,000, 17% sold from US$300,000 to US$500,000, 14%
exported under US$50,000 and 10% sold from US$50,000 to
US$100,000.Some 14% of firms sold from US$500,000 to US$1
million and 10% exported from US$1 million to US$3 million. Only
3% had export orders of over US$3 million up to US$5 million.
As in this year’s survey, only few firms gave any local sales
data. Most companies or 21% sold less than Php1 million
domestically. About 14% sold from Php1 million to Php3 million
while only 3% sold from Php3 million to Php5 million.
Finance
Half of the respondents' budget are allocated to production.
Other budget allocations per department are as follows:
administrative (17%), marketing (15%), R&D (13%) and others (2%).
About 73% of the firms use their own funds for their operations.
Some 21% avail of credit line with banks and 6% opted to borrow
from private lenders.
Findings on funds allocation last year show similar results.
Most firms then (59%) also used their own funds for operations.
About 48% avail themselves of bank credits and 14% go to private
lenders.
Source of Assistance
About 11 respondents (33%) said they received financial aid
from a donor group while 58% said they did not. Ten out of these
eleven firms indicated CIDA through Pearl2 as the donor agency
that assisted them. On the other hand, only 3 firms (9%) confirmed
to have received assistance from the government, mainly the DTI.
Background
43
Production
Management
Pearl2 conducted a Production Management Assessment of the
costume jewelry sector from October 2004 to March 2005 covering
members of Cebu FAME. Data was gathered through a survey of
32 costume jewelry manufacturers mainly based in Cebu. In
addition to the survey, Pearl2 consultants also conducted interviews
with representatives of 17 firms from the said BSO. A production
management conference was also held involving members of Cebu
FAME, as well as plant visits to eleven companies to gather
additional data and present preliminary findings.
This section presents some key findings on the production
management practices of costume jewelry firms. It is not meant
to be a comprehensive report on the production management
system of the costume jewelry industry. The findings serve to
provide indications on the present status of production
management in the sector and 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 costume jewelry on an industry level.
44
Overview of the Costume Jewelry Manufacturing Process
Costume jewelry is described in the Philippine Product Standard
Classification Code as articles of glass beads, imitation pearls,
precious/semi-precious stones, and similar glassware. It also
includes imitation jewelry of base metal and other non-precious
materials; buttons of plastics or metals not covered with textile
material, and buttons of shells and other materials. Combs, hair
slides and the likes of hard rubber, plastics, or of other materials
also belong in the costume jewelry product line.
Figure 1 on the next page illustrates an overview of the general
manufacturing process of the costume jewelry industry. The diagram
is divided into the following three parts: inputs, processes and
outputs.
Inputs may be defined as the tangible materials that undergo
a transformation process to generate finished goods that satisfy
customers. The first column in Figure 1 enumerates the common
and particular inputs used by the costume jewelry industry.
Processes, on the other hand, are the consecutive steps
performed to change basic materials into different costume jewelry
items. This is covered in the middle column of Figure 1. Outputs
include necklaces, bracelets, bangles and other adornments and
accessories that are sold to domestic and international markets.
The last column of the diagram on the next page provides more
details and was derived from the production study conducted by
Pearl2.
It must be noted that there is a close relationship between
inputs, outputs and processes. The type of material inputs can
determine the necessary processes that will be undertaken. Similarly,
the type of output can also determine the required tasks.
Production Management
45
Figure 1: Costume Jewelry Manufacturing Process
INPUTS
PROCESSES
OUTPUTS
Mother of Pearl
Shells (black lip, brown lip,
green), hammer shells, capiz
shells
1. Raw materials
acquisition
2. Quality Check
3. Raw material
preparation
4. Quality Check
5. Assembly
6. Quality Check
Abalone Shells
Animal Bones
Chains
Necklaces
Glass Beads
Bracelets and bangles
Metal Parts
Earrings
Leather Strips
Bags
Synthetic Cords
Souvenir Items and keychains
Resin
Paint
7. Finishing
8. Quality Check
10. Quality Check
12. Delivery and
shipment
Wood, fiber, rope, clay,
stones, basket
Packaging materials
9. Packing
46
Inputs
The Philippine costume jewelry industry has made great use
of indigenous materials to add value to its products. These include
seashells, coconut shells, wood, bamboo, rattan, fossilized stones,
corals, abaca or sinamay, animal bones/horns/nails/skins/
feathers/claws, nuts and seeds, and ambers. Other materials used
are papier-mâché, ceramics, stainless steel, and semi-precious
stones. While most exporters use different types and combinations
of materials, there are some who specialize on certain indigenous
materials only.
Besides local materials, imported items are also used as
components of the final product. Imported materials include
sequins, glass and ceramic beads, chemical products like adhesives,
paints and dyes, and specific shells that cannot be found in the
country. Most metal components are imported, as well as some
chains and glass beads of good quality.
Raw materials are also further classified in three categories:
unprocessed, semi-processed, and processed forms. Unprocessed
materials are the materials obtained directly from nature such as
shells, wood, bones, and stones, in their raw forms. Bones of
dead animals are boiled first to remove animal oils that could
make it difficult to process. Shells used include Mother of Pearls
(MOP), black lip shells, brown lip, green shells, hammer shell,
abalone and capiz shells, which are later baked and thinned to
become sturdier.
Semi-processed materials, on the other hand, are materials
that were processed by the supplier but still needs to be treated
in-house. These are materials which still have to be glued, painted,
dyed or sanded, like cut shells, shaped wood and resins.
Background
Lastly, processed materials are those that are ready for
assembly. This includes glass beads, chains, paint, metal parts,
synthetic cords, leather strips, and packaging materials. Packaging
materials include boxes, plastics, and printing materials, which
are all locally sourced.
The costume jewelry industry acquires raw materials in its
various forms in the following proportions: 54% processed, 22%
semi-processed, and 24% unprocessed.
Processes and Methods
The receipt of raw materials marks the beginning of the costume
jewelry manufacturing process. As a common practice, all materials
undergo inspection upon acquisition and before the preparation
stage.
The preparation stage is the first formal step in the
manufacturing process. Here, unprocessed raw materials are usually
washed and treated before being made to go through machines,
where the materials are cut, shaped, and sanded. The preparation
of materials may be done in-house or through the subcontractors,
after which the materials are collected for assembly through
stringing, gluing, or sewing. These tasks may be given to
subcontractors, piece-raters, or in-house workers.
After assembly, quality control personnel inspect the assembled
costume jewelry items and return any defective items to the
workers for rework. In the finishing process, some items are hand
painted, sprayed, laminated or dyed. Final inspection is performed
before the products are packed and delivered.
47
48
Finished Products
As mentioned earlier, the output of the costume jewelry
manufacturing process are a variety of items in different sizes,
shapes and arrangements including necklaces, bracelets, trinkets
and related items worn to enhance fashion and style. Sometimes,
part of the outputs would include small houseware items which
share common materials and processes with the production of
costume jewelry. Small fashion accessories may also be used to
adorn bags and similar wearable items.
Manufacturing System and Practices
Companies in the costume jewelry industry may differ in their
production management practices. The practices reported here
are based on the Pearl2 survey of costume jewelry firms and plant
visits, and might not necessarily be the common practice of all
companies in the industry.
Production System
The production system of the costume jewelry industry is
predominantly made to order. Most of the manufacturing processes
are outsourced to subcontractors. In-house production usually only
includes, but is not limited to, product sample making, assembly,
finishing, quality checking, and packing. The production cycle time
is comprised mostly of in-house quality control activities and raw
materials acquisition.
Background
Capacity
About 50% of the exporters surveyed produce less than 25,000
units each month (low volume), while about one-fourth turn out
between 25,000 to 75,000 units within the same time frame
(medium volume). Another fourth of respondents produce greater
than 75,000 units per month (large and very large volume).
Production capacity of costume jewelry firms is very flexible due
to subcontracting, and volume of output may increase up to an
average of 172% more during peak seasons compared to their lean
periods.
Seasonality of Demand
Production lead time for each order is usually 4 to 6 weeks,
and the subcontractor production period is between 1 and 2 weeks.
Survey results indicate that the peak season for the costume jewelry
industry normally begins at October and consistently rises until
December. About 25% of exporters experience a peak twice a year,
during spring-summer seasons and during winter-fall seasons. It
was noted that the industry is strong during the spring-summer
seasons due to the type of materials that are available in the
Philippines. Production is at its lowest during the months of July to
September.
It should be noted that there are many firms that venture into
other products whose raw materials are similar to costume jewelry
to sustain production. This includes as houseware products, bags,
and souvenir items.
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50
Working Period
During lean months, regular workers usually work only 6 days
a week, for 6 hours each day. On peak months, workers work 8
hours per day, 7 days a week. Average overtime is 4 hours. A 30minute break is given for each working day plus a 1-hour lunch
period.
For piece rate workers, the working period is flexible. There
is no limit as to how long they work and what time they report, for
as long as there are plenty of orders to fill, workers are motivated
to work faster and longer.
Scheduling
Basically, a first-in-first-out (FIFO) or first-come-first-served
priority scheme is followed when processing orders among costume
jewelry manufacturers. Orders with down payment are scheduled
right away and materials (unprocessed and/or processed) are
ordered. However, orders from regular clients are sometimes
prioritized as rush orders.
For confirmed orders that have no down payments yet, the
Purchase Orders (PO) and supplier identification are processed to
lessen delays. This procedure can shorten the waiting time of the
client by as much as one week.
For work that are subcontracted, assignment of jobs to
subcontractors is based on subcontractor's capacity, loyalty, and
performance. The exporters also balance the load assignments to
the different subcontractors to avoid any conflict and envy among
the subcontractors.
Background
A work assignment may be given to a single person if the job
only involves a few pieces. However, for orders with hundreds of
pieces, the work is done via a transfer-assembly line process.
When there are repairs, one worker would be assigned to complete
the job or do reworks so that the production line will not be
disrupted.
In cases where the work is divided among several
subcontractors, the scheduling becomes a bit more tedious and
detailed because the work is split up into separate and different
processes, each handled by a different party. This is usually resorted
to in order to protect the design from being copied. The transport
of materials from one subcontractor to another leads to
unnecessary handling, which may result in damages. This setup
leads to difficulty or complication in monitoring the production
because if one subcontractor experiences delays, the scheduler
has to change the schedules with other subcontractors or pressure
them to deliver in a shorter time so that the exporters would be
able to meet the delivery date.
Deliveries
Survey results indicate that medium volume producers deliver
orders late about 67% of the time, while very large volume
manufacturers have fewer delays at 31% of the time. Unavailable
raw materials, shipping difficulties and rejects are the main reasons
identified for late deliveries. Nevertheless, exporters are able to
maintain good client relationships through constant communication,
constant introduction of new designs, and notification of delivery
delays ahead of time
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52
Production Monitoring
Among costume jewelry firms surveyed, simple production
forms are used to record the quantity and quality of orders. These
are also the forms used to monitor the progress of orders as they
move from one process to another. In most firms, it is difficult to
track the actual state of completion of the components and finished
items done by subcontractors. Tracking of work is done centrally
by the exporters, who hire supervisors to personally oversee the
quality and status of the subcontractors' work.
Manufacturing Cost
Raw materials comprise the largest component (63%) of
manufacturing cost. Labor follows at a distant second with a 24%
share. Administrative costs make up 6% of total manufacturing
cost while cost of supplies account for 3%. Overhead and research
and development expenses combined to make up the remaining
4%.
Raw Materials
As was indicated earlier, costume jewelry firms procure most
(53%) of their raw materials in processed form. Some 23% are
semi-processed, and 24% are unprocessed. There are two practices
in the procurement of unprocessed materials: ordering the
materials as needed and ordering the materials for stock.
Usually, ordering for stock is only practiced by exporters who
are into both costume jewelry and houseware. Semi-processed
materials are ordered only when needed, while processed materials
are acquired for stock because they are commonly used. Imported
materials such as the glass beads and chains are stocked since the
minimum order quantity required by suppliers is usually big.
Background
Some subcontractors are also permitted to source their own
materials. They are even provided by their contractors with a list
of trusted suppliers and capital to begin with. Other subcontractors,
on the other hand, are only provided with raw materials. However,
some subcontractors who are provided with good materials may
substitute the materials with substandard ones and sell the
materials for extra cash. This situation results in later re-sourcing
and rework leading to additional cost for the manufacturer.
Packaging Materials
Costume jewelry items are packed individually or by fixed
quantities depending on the requirements of the buyer. Some
clients provide the packaging material. Polybags are usually used
to pack items per dozen and then packed in boxes. Some exporters
cut their own boxes. This is true especially for those exporters
who also belong in the houseware industry. Houseware products
sometimes cannot be packed using boxes of the conventional size
because of the size of the items. This forces the manufacturers to
make their own boxes.
Inventory Monitoring
Most costume jewelry companies do not store raw materials
and order only what is needed. Firms also do not usually track
inventory usage and status, especially for small items, as it requires
a lot of paperwork and personnel.
Semi-processed materials are counted and packed for assembly
by subcontractors. Unprocessed materials requirements are
typically estimated by the exporter or the subcontractors. Usually,
subcontractors are given an allowance of 10%-15% more for the
raw materials they work with. Any savings in materials within this
allowance become the property of subcontractors.
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54
Organization and Personnel
For a small and medium-sized exporter of costume jewelry,
the company organization is usually made up of the owner/s, the
office assistants, quality control personnel, and production
supervisors. Most firms also have their own in-house sample
makers, usually numbering from around 4-10 persons. All decisionmaking activities are made by the owner, who also gives the final
word on work quality and acceptability.
Survey results indicate that in the management level, some
28% of the staff are high school graduates, 35% are college
undergraduates, and 37% completed college. The average age of
managerial staff is 25-35 years, and the personnel have been in
the company for some 4-6 years. Most of the regular workers, on
the other hand, have been with the company for 2 to 5 years.
Some 8% of these workers have finished elementary, 72% finished
high school, and 20% are college undergraduates.
Subcontractors
More than 90% of surveyed firms in the industry subcontract
work in their operations. Subcontractor operators are usually former
employees of the exporters, who employ workers that generally
belong to the low-income class, have no permanent employment,
and are mostly homemakers. Most subcontractors are formed
around barangays and families, and are considered non-formal
business organizations. The subcontractors perform the majority
of the value-adding processes in costume jewelry making.
Background
There are various ways typically used to select and evaluate a
subcontractor. The first is by asking them to make a sample and
assessing the output quality. Other firms check the subcontractors'
factories for the right personnel and machine capability (for those
items requiring machining processes). Most exporters base the
choosing of subcontractors on the quality of work and capacity,
while some base it on accessibility of the subcontractor.
Skills Training and Development
Availability of labor is not considered a problem in the costume
jewelry industry. Skills are said to be readily available, and are
considered as a "natural talent". The basic skills required in the
assembly of costume jewelry items are actually quite simple and
may be easily learned. About 74% of respondents in the survey
report that new workers can be trained and ready to join the
workforce within one week. The longest apprenticeship period is
4 weeks for a new worker, as reported by about 9% of exporters.
Rejects and Raw Materials Yield
Exporters aim to ensure that no defective products are shipped.
Hence, there may be several reworks during the manufacturing
process, but also minimal or no client returns. There are no
complete rejects of costume jewelry, as every product can be
reworked or repaired until it is deemed acceptable.
Most of the defects in costume jewelry manufacture are found
in the raw materials (unprocessed, semi-processed, and processed
forms). Materials defects are reported at an average of 9% among
respondents with a peak of 30% for some firms. Low to medium
volume exporters tend to have more raw material rejects,
compared to the high-volume exporters. The average rejection
rate for firms upon final product inspection is 4%, with a high of
20%.
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56
Among firm surveyed, there seems to be no clear standards
of quality. Approval depends on the owner, and is based primarily
on visual and aesthetic impact. Samples serve as the quality
standards. However, since the materials are all natural, it is
inherent on them to have variations. This makes it difficult to
assess product and materials quality.
Production Process Standards
Product standards are set by the clients and by the company.
Sometimes, the exporters have to educate the buyer on the nature
of the materials used as some buyers look for uniformity in
materials. Exporters have to assert to their customers that natural
materials have variations and that this contributes to the appeal
of the design.
Facility Layout and Design
Most companies visited follow a process-based layout in
production. Same or similar processes are allocated a common
area within the factory floor, and work orders go from one station
to another in progression. In general, the layout is designed to
ensure continuous flow of the processes, taking into consideration
the needed versus the available space.
Among costume jewelry firms, space for production is given
the biggest allocation in their business premises, averaging 38%
of total work space. The remaining work area is allocated as follows:
finishing area (26%), raw materials storage (19%), and finished
goods storage (16%). Exporters may also use a showroom to
showcase their designs and entertain clients.
Background
Machines and Tools
The costume jewelry industry does not utilize any advanced or
mechanized processes. Majority of the items produced are
handmade. The only major equipment used are the polishing and
sewing machines. There are also dust collectors situated near the
polishing machines.
Product Engineering and Development
About half of survey respondents indicate that they have two
designers at most. The owner's vision and direction typically
influence design ideas, and owners usually hire designers who agree
with their tastes. The industry has a set of about 800 to 1,000
designs created per year, but most are simply variations on the
same thematic scheme. Development time takes only about 1 week
to 1 month, while prototyping can take from 1 day to 2 weeks
depending on the availability of raw materials and personnel.
However, of the several hundred designs brought to the shows,
only a few are actually converted into sales. The effectiveness of
the design output therefore is observed to be low.
Environmental Management
In the costume jewelry industry, waste generated in production
usually only takes the form of either scrap materials or dust. Scraps
are usually kept and collected, to be reused later for other designs
or as input to houseware products. Dust particles are accumulated
and disposed. Waste from raw material input is placed at 5% to
10%, but is only considered an estimate because firms do not really
measure and monitor waste. Other methods used in waste
management are reprocessing, selling and treatment.
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58
Most exporters also comply with environmental laws that
restrict the use of endangered species, such as corals. According
to them, they only use pre-approved materials in the Philippines.
The most commonly used is the Mother of Pearl (MOP), obtained
from pearl farms. The pearl is injected with a substance that builds
up the saliva that forms the pearl. In order that the MOP can be
used several times, the one obtaining the pearl has to know the
correct way of opening the MOP up and obtaining the pearl. Before,
the meat of the MOP can be eaten and is said to be very expensive.
Now, the meat is thrown away and the shells are used.
Worker Health and Safety Worker Health and Safety
Survey respondents report minimal work related injuries with
the highest accumulated accidents in a firm reported at five in a
year. However, the primary concern in the work place is the health
hazard posed by the continuous generation of dust and fumes from
the various production processes such as sanding, polishing, cutting
and spraying. Although workers are issued masks and other
protective gear, these are not used regularly. Workers sometimes
complain that using masks adds to the heat they experience. There
is a need to further educate personnel on the benefits of using
protective gear and their use should be more strictly enforced.
Aside from this, firms should also consider redesigning their work
areas to minimize cramped spaces for workers. Chairs, tables and
other facilities should also be more ergonomically designed to
alleviate the strain on workers who use these items for long periods
Background
59
Value Chain
Analysis
Structure of the Sector
The supply chain for the costume jewelry industry starts with
the raw materials gatherers. These gatherers are the farmers,
fisherfolk and divers. Farmers normally raise the plants from which
fibers are obtained for processing into the materials used in fashion
accessories. Fishermen and divers collects or dives for seashells
and other marine-related stones from coral reefs. Both groups of
gatherers often belong to the marginalized sector of the economy.
In between the gatherers and the exporting firms are the socalled agents, normally referred to as the “sourcing agents.” These
entities are the traders who facilitate the flow of materials from
the source to the users. When materials cannot be sourced from
one locality; these agents go around to nearby areas to gather the
total volume required by the exporters. Manufacturers of costume
jewelry utilize mostly local materials found in the country. They
use unique base materials such as natural fiber hemp including
abaca, banana, raffia and maguey.
60
In terms of production structure, the Philippine costume jewelry
industry consists mainly of exporters, assemblers, manufacturers
and subcontractors. Subcontracting is prevalent with a large
proportion of the work being outsourced by the exporters. This is
an effective business strategy for exporters to cut administrative
overhead since the market may be unpredictable and the product
cycles are quite short. Most exporters rely on their subcontractors
for their components fabrication or in assembling these
components. Their contract load conforms to the seasonality of
fashion demands for the products. Hence, subcontractors are
busiest in the spring and summer months of the international
market since products are usually geared for this season.
Most firms in the industry are small scale enterprises. They
are normally formed with minimal capitalization. Manufacturing
processes are usually manual. Most firms also cannot invest much
in tools and equipment to upgrade production facilities and increase
production efficiency. Companies may use specialized fabricated
tools, often hand-made to fit the peculiar production process. Firms
rely on small machine shops nearby to fabricate tools if more than
10 units of the tools are required.
The processed components manufactured by the subcontractors
are handed over to assemblers, who piece the components together
into semi-finished or finished parts. Assemblers are likewise
informal groups. Since the procedure of assembling the processed
parts does not entail as much intensive skill as transforming raw
materials into processed components, assemblers are mostly
homemakers. A coordinator commissioned by exporters handles
their activities and outputs.
Background
Value Chain Analysis
Exporters transact directly with foreign buyers. As the direct
sellers of the finished products of the manufacturers and
assemblers, exporters rely heavily on sales, marketing, and R&D
for their operations. Most of the exporters have their own
manufacturing and assembly systems, but these serve more as
back-up and reinforcement systems to those provided by
manufacturers and assemblers. The primary manufacturer or
exporters in the industry get orders from foreign buyers and assume
all marketing functions.
Process Flow in the Industry
In the costume jewelry sector, production follows global trends
and forecasts on apparel and fashion. The colors and silhouette
(preferred shape or style) for a given season dictate the general
trend for costume jewelry. From these design aspects, firms work
on the available materials and turn these into items to create a
collection. One complete collection typically includes a pair of
earrings, necklace, bracelets, ring and brooch. A collection
prototype is then rendered; in the prototyping stage, colors and
finishing techniques are normally applied as part of research and
product development by the firm to get a distinctive look.
Product costing is calculated based on the cost of the last
prototype made with quotations normally in FOB US dollars. While
doing the prototype and costing, the firms tap possible
subcontractors. Intermittently, firms book orders from either the
gatherers or the sourcing agents for materials needed. For
components normally sourced abroad, firms book the volume
required from importers. The work is passed on to a select group
of subcontractors, each with their own set of workers. Work can
be distributed to more than one subcontractor depending on the
volume of the order.
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62
The sector use mostly natural materials such as wood, shells
and fibers. These normally compose 80% of the total material
component. The related components, such as findings, chains,
metals and plastics, are imported from neighboring countries such
as Hongkong, China and Taiwan.
As stated earlier, the Philippines is typically a supplier of springsummer merchandise. Export marketing and sales are geared
toward joining international trade fairs with most firms sourcing
their buyers from Europe and the United States.
Costume jewelry has a very limited life span in the global
market. Thus, exporters contend with short turnaround lead times
upon signing purchase orders. Delivery schedules are from 30 to
45 working days. Packaging and labeling are based on buyers’
specifications. Goods are loaded on sea vessels under an LCL
arrangement. At times, on buyer’s request, goods are shipped by
air. Payments are normally by letters of credit or telegraphic
transfer.
The Costume Jewelry Sector Value Chain Diagram
The value chain diagram for costume jewelry is shown on the
next page. The diagram represents the sector as a whole, based
on industry research and interviews with several companies.
63
The Costume Jewelry Sector Value Chain Diagram
General Management: Planning, Financing, Accounting,
Labor, Quality, Buyer and Government Affairss
S
I N
R G
M A
FIRM
INFRASTRUCTURE
• Reliance on subcontractors
• Training in production skills,
business development and
product development and design
• Common service facility
• Technical/skills training in
packaging as an added-value
component
• Training in quality
inspection
• Training in market
intelligence
reports/database
• Training in sales
• Training in customer
services
• Component preparation
• Common service facility
• Testing procedures/QC/Waste
management
• Clustering of subcontractors
• Information systems
development - monitoring
production of subcontractors
development
• Monitoring of shipment,
invoices and documentation
of order
• Market/product research
through the common
service facility
development
• Buyers' data
• Assessment of damaged
product/charge-back
scheme
TECHNOLOGY
DEVELOPMENT
• Information systems on
suppliers
• Procurement
• Inventory
• Accounting system
• Inspection and sorting of
components
• Technological innovations
in natural-material
transformation
PROCUREMENT
• Reliability of sourcing base,
both on natural components
sourced locally and imported
materials
• Process criterion on
inspection of raw materials
• Informal structure in sourcing
materials - "vale" system of
payment
• Transportation service o
Computer
programs
Computer
software
• LCL mode of shipment
• Inter-island shipping
services
• Trade
Consolidated
bulk-buying
fair participation
program
services
• Courier
Trade fair
participation
data
• Buyers’
Courier services
• Printing
On-line marketing
services systems
• Information systems to
assess complaint/product
inspection
• Processing and finishing of
semi-processed components
• Distribution and monitoring of
production to subcontractors
• Preparation of worksheets and
materials
• Delivery and pick-up of
materials
• QC/inspection
• Assembly
• Reworking
• Packing of products
• Inspection of finished
goods
• Export/delivery
documentation
• Delivery to domestic and
foreign buyer's
representative
• Scheduling of shipment to
final destination/buyers
• Advertising
• Promotional activities
• Sales personnel
• Pricing
• Acceptance of returned
items that may have been
damaged in transit
• Return of payments of
damaged items
• Initial gathering of raw
materials from marginal
sector (farmers, fishers)
• Reliance on sourcing agents
to handle consolidated
procurement
• Inspection
• Pick-up/delivery of
materials
• Inventory of materials
INBOUND
INBOUND
LOGISTICS
training
.
OPERATIONS
OUTBOUND LOGISTICS
MARKETING & SALES
SERVICE
M A
R
G
I N
S
• Training in processing
(cutting, drying, dyeing,
etc.) of natural materials into
components
• Harvesting of fibers,
gathering of shells
.
HUMAN
RESOURCE
MANAGEMENT
64
Key Findings
Much of the issues and concerns of the costume jewelry sector
pertain to the inbound logistics and operations part of their value
chain. As mentioned previously, manufacturers rely on the gatherers
and sourcing agents for their raw material needs. Most gatherers,
however, operate informally and usually lack sufficient skills and
knowledge in proper processing and storage of the materials they
handle. Quality control systems are crude and inconsistently applied.
This setup makes firms vulnerable to problems of quality, supply,
and delivery time of raw materials.
There is a also a lack of R&D activities on raw materials which
affect the capability of exporters to constantly update materials
and designs, a critical factor in their market envrironment where
product life cycles are short and fast changing. Sourcing agents
also suffer from delivery problems caused by a variety of factors
(poor infrastructure, lack of resources, etc.) which further add
cost to the manufacturers.
Concerns about the effect of continuous materials gathering
on the environment is an emerging concern of the sector. There is
a need to ensure the sustainability of the current sources of raw
materials and that proper methods are used in gathering to protect
the environment.
Given the heavy reliance of the sector on subcontractors for
much of the work, variations persist in the quality of outsourced
work. Micro enterprises that do subcontracting work usually lack
the needed capabilities, standards and systems to ensure reliable
quality of output. This often leads to rework which adds costs and
time affecting the rest of the value chain.
Background
Firms also continue to rely on manual means of production
with limited use of machines and equipment. Quality control is
done mainly by assigned personnel who do the needed inspection.
Worker productivity, however, is still low and has to be improved
on the shop floor. Together with raising workers’ skills, there is
also a need for improved production planning and process flow.
However, lack of funds and the short life cycle of costume jewelry
products inhibit the needed investments in facilities.
The fast changes in product cycles also demand continuous
and sustained product design and development efforts. Designers,
however, have to be familiar with raw material properties and
need further training in forecasting trends. The sector has to
expand its current sources of information for design besides the
usual trade fairs and buyers feedback.
In packaging, producers have not yet innovated materials or
designs to create add-on value to the merchandise. There is also
a need to improve coordination among the various outbound
activities such as inventory and shipping and production operations.
Firms rely considerably on trade fair participation for getting
export orders. However, these activities entail significant cost
and there is a need to support trade fair attendance with the
proper market collaterals and promotional materials. Exporters
also have to increase their use of ICT in marketing to further
sustain their market presence.
More details on the costume jewelry’s value chain are presented
in the value chain table in the next few pages.
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66
The Costume Jewelry Sector Value Chain Table
INBOUND LOGISTICS
Human Resource Management
FINDINGS
CONCERNS
RECOMMENDATIONS
Marginalized workers
(including farmers and
fishers) lack skills in
harvesting natural
materials such as fibers
and shells.
The non-replacement of
natural habitats, such as
coral reefs and shell
formations, harms the
whole ecosystem.
Improper
harvesting
Thus, baseline
supply
methods
shrinks. may damage the
materials gathered and
the supply base for
materials may be
reduced.
Considering the
availability of local
resources, manufacturers
are limited to suppliers’
traditional ways of
processing materials. Such
ways cause inconsistencies
in quality and delivery.
Suppliers need to enhance
their knowledge on
processing raw materials.
Implement a technical
assistance program,
including training on the
processing of natural
materials into components
(i.e., cutting, drying,
dyeing, etc.).
Prompt delivery depends
on the reliability of
sourcing agents. These
people who consolidate
raw materials from the
base sources (fishers and
farmers) lack management
skills.
For sourcing agents, a
structured system is
needed to prevent delays.
Implement an
accreditation system for
these agents. This can be
jointly undertaken by the
trade association with
DTI’s regional offices.
With the DA, the industry
should initiate technical
assistance programs on
planting and harvesting
fibers and shells,
specifically in Regions 7, 8
and 11.
With the DENR, conduct
seminars or workshops on
the grassroots level; teach
fisherfolk and gatherers
the appropriate ways to
collect material
components.
Background
67
INBOUND LOGISTICS
Technology Development
FINDINGS
CONCERNS
RECOMMENDATIONS
In encoding, procurement,
and inventory of
materials, the technical
systems are insufficient.
Other processes at the
front-end are still done
manually.
In procuring materials,
manufacturers need
software systems that can
speed up or ensure ontime delivery.
Integrate a specialized
software attuned to the
peculiarities of the
industry’s front-end
supply network. This may
be implemented under a
technical assistance
program providing training
on the use of such
software.
The industry heavily relies
on new or innovative
materials and
components. There is no
comprehensive reference
data on the sources of
natural or imported
materials/components by
form and location.
A structured sourcing
database of possible
suppliers, both local and
foreign, can enhance the
sourcing capability of
firms and the industry in
general.
Establish and install an
exporters’ e-map of
subcontractors and
suppliers.
Firms need technical skills
in transforming natural
materials into innovative
forms. These include
flattening of shells
(particularly brown and
black lips).
Product diversification
and adaptability are
limited.
With the help of DOST, set
up a technical assistance
program on raw-material
innovation.
There is insufficient
applicable technology for
harvesting, extracting,
drying and weaving
natural fibers.
To improve cost
efficiency, firms need the
technological know-how to
use common natural
fibers, such as abaca,
raffia, maguey and
banana, and transform
them into various forms,
textures and weaves.
DA and other agencies
involved such as PTRI and
FIDA should enhance
existing fiber development
programs, especially for
exports.
The trade association may
initiate this by collecting
data from its members
and their lists of
suppliers. From the initial
list, the industry can set
benchmarks to build a
comprehensive database.
68
INBOUND LOGISTICS
Technology Development (con’t)
FINDINGS
CONCERNS
RECOMMENDATIONS
The process and criteria in
quality inspection of raw
materials are substandard.
Inspection of components
and materials is done
manually and visually.
Quality standards at
the front-end, including
procurement of raw
materials, should be
improved. to reduce
improved
rejects.
Develop and institute
quality standards for raw
materials and
components. Sourcing
agents and gatherers
(fishers, farmers) should
be trained on adopting
such standards and
procedures. This could be
done through microbusiness entrepreneurship
programs initiated at the
barangay level.
While it is more costeffective to import metal
plastic components such
as buckles, straps and
chains, exporters
experience delay in
receiving imported
components due to
current import
bureaucracy in the
government. An example:
a locally produced chain
would cost Php2050/meter, but this would
sell for the equivalent of
Php3-10/meter in
Hongkong.
Delays in production
turnaround can happen, as
the country’s import
mechanism is not exportfriendly.
The
should
Cebuindustry
FA ME plans
to
consider
consolidating
raw
implement
a “Bulkmaterials
importations
Buying/Consolidated
Raw
Material Program,”
especially
in basic in
which the association
components.
In addition,
imports
basic
components,
the
sector
should
also beef
adhesives
and findings
in
up
its advocacy
capability
bulk lobby
and sells
and
for these
betterdirect
import
to industry members.
procedures
from
Cebu FA ME and Philexport
government.
can jointly undertake this
program as an incomegenerating activity.
Firms have difficulty
sourcing local natural
materials such as carabao
horns, fibers and shells in
volume due to short
supplies.
Material shortages hamper
the sector’s growth.
DA and DTI’s concurrent
programs should focus on
proper planting,
cultivation and harvesting
techniques to ensure a
wider base of material
sources.
Firms rely on
subcontractors, which may
not be managed properly.
Thus, subcontractors’
quality of work remains a
problem.
Subcontractors need to
improve production
standards.
The industry should start a
program to set production
standards among its
an
accredited pool of
subcontractors.
Background
69
INBOUND LOGISTICS
FINDINGS
CONCERNS
xxx xxx
RECOMMENDATIONS
A joint program by DTI’s
regional offices and
funding agencies such as
CIDA
may initiate
may initiate
the the
framework of this
program.
Firms lack applicable
knowledge on standards in
gathering raw materials
from their natural habitat,
impeding the sector’s
supply chain.
Lack of knowledge
Materials
such as shells
among
gatherers
may
and
fibers
are normally
sourced
lead to at
envrironmental
the grassroots
level,
issues from
and the
subsequent
marginalized
sectors of
supply problems.
the economy.
The industry, with DTI’s
regional offices, may want
to explore setting up
cooperatives of farmers
and fishers to systematize
the sourcing structure of
natural components.
The “vale” system in
paying gatherers of
natural components such
as fibers and shells does
not assure the exporter
that raw materials will be
delivered on time.
Considering the lack of
structured entrepreneurial
skills among the gatherers
(farmers, fishers), there is
a trend to provide the
material to the highestbidding export firm. This
affects the regular cashflow of export firms.
The cooperative program
stated above addresses
these concerns.
Procurement
FINDINGS
The industry relies on
imported findings or
components, adhesives
and other metal
components that are not
readily available in the
country. Sourcing these
components is done
individually by firms.
A consolidated bulkbuying program by the
trade association can be
undertaken. The industry
owns a training center,
which can be used as a
facility for this
consolidated buying
scheme.
CONCERNS
RECOMMENDATIONS
Bulk-buying components
that are generally used by
the industry can reduce
the firms’ costs.
Most exporters use the
same kinds of strings,
chains, snaps and
adhesives. Importing these
as individual firms can be
more expensive than
buying these from one
major consolidator source.
The industry may organize
a sourcing mission timed
with the firms’ regular
participation at a trade
fair. A so urcing mission
specifically in China,
which has one-stop
sourcing cities, can be
done in
early
thenext
short
year
term.
(2005).
The industry association in
coordination with a
foreign technical
assistance program may
initiate a feasibility study
on consolidated bulkbuying.
70
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
The
training
and programs
Current
training
development
programs of
for costume jewelry
the
existing
workers
areCostume
not
Jewelry
Center are not
maximized.
maximized. Currently, a
short-term (2004-2005)
program on metal plating
is being conducted by a
German consultant, who
has initiated “pocket”
design development
programs out of goodwill;
these programs are not
within the original scope
of her job.
The industry
not
Among
industryissectors,
taking advantage
costume
jewelry hasofthe
the opportunity
forsuch
advantage
of owning
worker
acontinued
Center. Firms
must fully
use
this facility
holding
training
which by
can
focused
integrated
help expand
the pool
training
seminars
on
of qualified
personnel.
production, design and
human resource
development. Such
activities can help build a
regular pool of skilled
workers.
Cebu-FAME
needs
to
The
industry
should
redirect the
continue
to Center’s
expand the
current
programs.
It
use
of the
Costume
should draw
up ainfive-year
Jewelry
Center
developmental
curriculum
training
workers.
It
of training
programs
to
should
ensure
training
meet the
sector’sneeds.
needs.
match
industry
The Center, through
the
Subcontracting
most
Cebu-FAME
secretariat,
parts
of production
should conduct
causes
conflictstraining
amongon
personnel development
registered
exporters due
and
business ethics
to
to instances
of copying
of
promoteand
professionalism
designs
moulds.
among firms, which often
copy designs and moulds
or casts.
Conflicts among
firms
Subcontracting
most
parts
causes
delaystoand
adds
of
production
microbusiness
units
causes
cost, not
to mention,
conflicts
among registered
the disturbance
in
exporters.
It can
delaythe
relationships
within
manufacturing
and
industry.
consequently delivery.
Integrate value
orientation on responsible
practices and ethics into
all of the Center’s training
programs.
The Center should
conduct training on
personnel development
and business ethics.
The industry needs an
integrated product design
development program that
will promote the use of
alternative higher-end
materials and raise
products to the mid-range
and high-end.
Product design
development is a major
source of profitability. If a
firm does not have a good
product development
team, cost efficiencies
and profitability are not
maximized.
The Center should offer
more product and design
training programs to help
firms shift global market
goals from low-end to
mid-range and high-end.
Training programs on basic
production processes,
such as cutting, sample
making, drying and
assembly of components,
are not readily in place.
Worker productivity and
efficiency in such
processes can greatly
improve the firm’s cost
competitiveness.
The sector needs to beef
up basic training courses
on these processes to
reduce production time
and wastage of materials.
Background
71
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
Tr aditionally, only 10%15% of production process
is in-house; the rest is
subcontracted. The sector
needs to re-engineer
production processes by
meeting global standards:
i.e., at least 30% of the
process must be in-house
to have sufficient control
over critical stages of
production.
The sector remains
complacent in upgrading
production, which
requires buying capital
equipment and tools.
Financing re-engineering
is not a priority for most
firms.
With government
financing institutions, the
sector may want to
initiate a special
guarantee fund, which
allows small firms to avail
of capital equipment
financing programs at very
minimal interest.
Productivity remains
substandard. Most firms
do not implement
industrial engineering
processes in production,
so most of these are done
on a need-to-do basis.
Low
Firms’productivity
productivity on
the
shop floor
leads
standards
ensure
smooth
to
wastage
and added
flow
of processes
and
cost.
Profitability
raise profitability.
is affected.
Implement productivitybased programs conducted
by foreign consultants,
who provide technical
assistance on aspects of
production such as
cutting, processing natural
materials, assembly of
components,
electroplating, dying,
painting and finishing.
Monitoring of production
activities done by the
subcontractors is lax and
unstable. Mostly by
telephone follow-ups or
minimal on-site visits,
this is done usually twice
during the entire
production process.
Lack of proper
Monitoring,
including
monitoringinleads
to
movement
production,
higher incidence
of
material
consumption,
rejects
and quality
and
inventory
of
issues. must be
materials,
improved.
The development of such
a monitoring system may
be included in the
integrated online
information systems that
would cover preparation
of worksheets and
materials as well as
monitoring
subcontractors’
production. This way it
would be easier for the
firms to check both
production and material
consumption.
QC is normally a standalone system. This often
starts off with one control
sample; when this is
approved, subcontractors
produce the total volume
requirement.
Thus, the incidence of
rejected material
components is relatively
high.
A technical consultant is
recommended to draw up
the quality assurance
program and conduct
training in coordination
with the Costume Jewelry
Center.
72
OPERATIONS
FINDINGS
CONCERNS
RECOMMENDATIONS
There is a need for
continuous R&D on the
different applications and
treatments of natural
materials for possible use
in developing products for
the coming season.
The sector needs
innovative applications of
natural materials. It has
to upgrade techniques in
finishing raw materials to
conform to a new look or
design.
The Center or common
service facility can
continuously undertake
R&D on processing,
finishing and application
of natural materials,
which remain the
industry’s competitive
edge.
The
a low ratio
Partsector
of the has
objective
of
of
thedesigns
Centersold
is totoprovide
total a
commonmade.
serviceFirms
facility
designs
for metal
casting
and
usually
come
up with
electroplating.
Currently,
numerous
designs,
of
the ground
of theare
which
only afloor
fraction
Center isconverted
set up for this
actually
into
service and the
sales.
association absorbs the
direct overhead cost of
the electroplating and
casting facility.
Companies
will cost
be more
The overhead
raises
efficient
the administrative
if they canbudget
focus
of particular
the trade association
on
market driven
(Cebu-FA
ME).
This product
trends
from
which
prevents
thebeassociation
designs
can
derived.
from optimizing other
income-generating
services and from
delivering quality services
to its members
specifically in sourcing,
marketing and
networking.
The
industryneeds
association
CEBU-FAME
to hire
a consultant
tolead
helpin
should
take the
develop programs
and set
expanding
the current
up systems
on how toand
run
sources,
publications
a common
serviceon
facility
other
information
effectively.
fashion
trends in key
market areas. These
Cebu-FA ME
should
look
materials
and
data should
intomade
delegating
the to
be
accessible
administrative
function of
exporters
on a self
running thebasis.
electroplating
sustaining
and casting facility to a
private group, so that it
could redirect its financial
resources to other
activities.
OUTBOUND LOGISTICS
FINDINGS
CONCERNS
There is inadequate
technical knowledge on
proper packing
techniques. This is crucial
because the items consist
of small components.
The work force and
management are not
exposed to innovative
packaging techniques.
This deficiency often
results in “charge back”
or cancelled orders.
Packaging can be the
firm’s value-added service
to the buyer. This area is
not maximized.
RECOMMENDATIONS
Hire a foreign expert to
conduct specialized
packaging training.
Through design-packaging
seminar-workshops, firms
can learn more ways to
use natural raw materials
as part of packaging
design.
Background
73
OUTBOUND LOGISTICS
FINDINGS
CONCERNS
RECOMMENDATIONS
Most firms adopt standalone systems and are not
guided on the proper use
of technology to
streamline the process.
outbound process.
Streamlined systems can
improve efficiency and
reduce costs.
The industry should adopt
applicable logistics
software structured
according to firm size,
production capacity and
marketing network.
Finishing techniques are
normally stand-alone
systems. Manufacturers
tend to be lax in
standards, as imposed by
buyers.
As a result, there are
rejects on final orders and
profitability is hindered.
In collaboration with
DOST, the industry should
initiate sub-programs on
dyeing, painting and
finishing techniques
applicable to natural
materials (fibers, shells)
used.
Procurement
FINDINGS
CONCERNS
RECOMMENDATIONS
Firms rely on consolidated
shipment service. LCL
cargo charges remain
uncompetitive in the
country.
Longer delivery schedules
can be a buyer’s reason to
cancel orders, considering
that the merchandise are
fashion-related items. At
times, orders reach the
country after the target
season.
With the government,
initiate advocacy on
shipping policy procedures
to make freight costs
competitive and improve
shipment schedules.
Inter-island shipping and
local transportation
system are still inept to
ensure delivery of raw
materials sourced all over
the archipelago.
Delays in loading cargo
using inter-island shipping
to the Manila port
hampers productivity and
cost efficiencies.
Policy advocacy is needed
on inter-island shipping
and (with the help of the
local government) the
development of basic
infrastructure such as
roads and bridges.
MARKETING AND SALES
FINDINGS
CONCERNS
Most firms lack knowledge
in analyzing market
intelligence reports,
specifically market trends
and buying patterns of
major buyers.
Such forecasting trends
and buying patterns can
boost the industry’s global
competitiveness.
RECOMMENDATIONS
DTI can help initiate
programs to hone marketintelligence and research
skills.
74
MARKETING AND SALES
Human Resource Management (con’t)
FINDINGS
Firms need to train
marketing staff on
handling export sales, a
function that owners
currently do.
CONCERNS
A multi-skilled work force
can improve productivity
and profitability.
RECOMMENDATIONS
Train sales personnel
through an export
merchandiser’s course.
There are existing
programs implemented by
the DTI through its
attached agencies such as
PTTC and CITEM.
FINDINGS
CONCERNS
RECOMMENDATIONS
The industry does not
have a comprehensive
database of buyers to
assist firms in drawing up
comprehensive marketing
plans.
Analyzing volume
requirements vis-à-vis
value of buyers’ purchases
can aid the industry in
drawing up its own
integrated marketing
plan. The export database
culled from previous
years’ performance
identifies markets or
countries buying from the
Philippines.
The industry should
embark on a marketing
research program, which
would analyze the exports
and imports of the sector
for the past five years and
store information in a
database.
The services and facility
of the existing library of
the common service
facility/Center are
underutilized.
Access to updated
information on trends and
forecasts is a key factor
specifically for designand trend- oriented
merchandise. The industry
tends to loose a foothold
on the export market if
this system is not in place.
The industry, through its
Jewelry Center, needs to
update its information
technology, including its
website. The sector may
also want to subscribe to
on-line services on trend
and design forecasting.
On-line (buyer-supplier)
market-matching
programs are not in place.
A market-matching
network saves time and
other resources
specifically for new
entrants in the export
business.
The sector should
implement an on-line
buyer-supplier matching
program.
Background
75
MARKETING AND SALES
FINDINGS
CONCERNS
The industry needs to
adopt cross-sectional
trade promotional
activities to address the
various marketing needs
of its members. This could
be done by forming twotiered groups of
exporters: (a) those firms
ready for niche marketing,
and (b) traditional low-tomiddle- end supplier
exporters.
Marketing efforts can be
more focused if the sector
separates the new
entrants from the “oldtimers.”
The second-tiered
marketing group,
composed of established
firms discussed above, has
the potential to develop
and be promoted through
a Brand Development
Program.
A handful of firms are
already supplying shoe
components and belts to
famous Italian shoe and
handbag producers.
Harnessing the skills of
these exporters is
advantageous to the
growth of the industry.
The industry lacks a
marketing plan to define
short-term strategies for
export development.
Lack
of atogood
It needs
develop a
marketing
plan hampers
program/marketing
plan
the
ability
of the
for this
development.
industry to effectively
compete in the global
market.
RECOMMENDATIONS
The
New industry
exportersassociation
can
participate
in these
trade
should
develop
a
fairs:
marketing
program
• Manila
MErelative
Gifts and
based
on FA
the
Houseware Market
Week
capabilities
of their
(April/October)
members
in export
• HongkongThis
Jewelry
marketing.
will and
Watch Fairthe resources
optimize
• MACEF,
I taly
used
for market
A separate group
of firms,
development
including
those
withof
a ready
the
types
trade fairs
collection
of fashion
to
be attended
by
accessories
members. and bags, can
be launched at the
Fashion Access Fair also in
Hongkong. DTI through
CITEM can set parameters
(e.g., by firm size and
capacity) on participation
in fairs.
A strategic workshop on
brand merchandising can
help the sector better
appreciate the market
requirements for branded
products.
A core group approach
can be undertaken under
a DTI-initiated Brand
Development program.
This can form part of the
Brand Development Core
Group Program.
Hire a marketing
consultant, preferably a
foreigner, with extensive
experience and knowledge
of the international
market. The consultant
should draw up a mediumterm marketing plan for
the sector.
76
MARKETING AND SALES
FINDINGS
CONCERNS
RECOMMENDATIONS
The global market niche
of the industry is not
defined. For the past 20
years, the country has
been supplying low-tomedium-end merchandise.
In recent years, China and
India have dominated the
low-end market.
Analyzing the Philippines’
competitive edge can
assist the sector in
drawing up its position
and value in the global
market. A well-defined
marketing strategy can aid
export growth.
The integrated marketing
plan recommended above
earlier
should identify the market
segment/country
appropriate for the
industry’s products and
production capabilities.
FINDINGS
CONCERNS
RECOMMENDATIONS
Most firms do not maintain
quality promotional
collaterals and related
marketing tools.
Presentation of such
collaterals is an add-on
sales tool for exporters.
Most firms miss out on
sales opportunities due to
lack of promotional inhouse materials.
To save on cost, the trade
association can produce
an institutional CD-ROM or
brochure for all its
members. Partial
financing can be
requested from funding
agencies, such as
Philexport and CIDAdonor
groups.
Pearl2.
Procurement
SERVICES
Technological Development
FINDINGS
CONCERNS
RECOMMENDATIONS
There seems to be a need
to provide a structure for
buyers’ after-sales claims
and to provide a
customer- satisfaction or
service- warranty seal.
In a competitive export
market, suppliers
providing value-added
service at the front-end,
including export and retail
sales, can sustain buyer
relationship.
DTI in coordination with
the trade association may
set up a committee
addressing such needs of
major select buyers. This
committee can be
composed of
representatives from both
private and public sectors.
It can also set rules and
regulations to ensure
buyers’ satisfaction.
Background
77
Needs
Assessment
Based on the value chain analysis of the costume jewelry sector,
several concerns were identified. These are presented in this
section.
Inbound Logistics
• The sector together with the government needs to put a
formal structure at the front-end of the costume jewelry
supply chain covering the gatherers and sourcing agents.
Standards for quality have to be set and met by suppliers
and makers of components.
•
Gatherers of materials from their natural habitat need a
program to train them in the proper compliance with
environmental policies and in better waste management.
•
There is a need for a formal system in cultivating and
harvesting fiber-based materials in order to improve the
base source and help stabilize prices.
•
Firms need a system to consolidate orders, especially for
imported materials, in order to reduce cost and ensure
adequate supply when needed.
78
•
Technology needs to be developed so firms can innovatively
transform some base materials such as shells (flattening,
curving) and fibers (extracting, weaving and dyeing
techniques) into items with new, distinct features.
•
Firms should be updated on information technology relevant
to procurement, material inventory and other phases of
pre-production work.
•
A comprehensive database is needed on raw material and
component suppliers’ as well as supply and subcontracting
network systems.
Operations
•
The sector needs a cohesive integrated product design
development program. A systematic framework on defining
product design based on market trends will provide
direction in creating a global market niche.
•
Together with the previous need on product development,
the industry also needs regular access to materials and
publications which show trends in fashion, colors and
related information which could be interpreted into product
designs.
•
Training programs are required for workers focusing on
both basic and complicated production processes (such as
cutting, sampling, assembly and drying techniques) and
on communication technology. The program should target
personnel at both the exporter and subcontractor levels.
•
Subcontractors need to upgrade skills and techniques in
assembly and finishing so they can add value to the
components that they produce for the exporters. The work
ethics of both subcontractors and in-house workers must
also be improved.
Background
Needs Assessment
•
The industry needs an integrated system to monitor the
production work flow, including subcontractor activities,
material consumption and inventory, of manufacturers.
•
Worker productivity must be significantly improved. Firms
need consistent production standards and productivityenhancing programs. Shop design, layout and process flow
need to be re-engineered to increase efficiency.
•
More effective QC systems have to be instituted with clear
objective standards and using the right tools. Firms must
adhere to set policies and procedures.
•
The industry needs to sustain an R&D program on the use
and treatment of materials. This will ensure continuous
innovation on the use and design of materials and
components.
• A funding mechanism is needed to assist manufacturers
in procuring better tools, invest in more equipment and
re-engineer their plant layouts.
Outbound Logistics
•
There is a need to innovate packaging materials as an
added-value service to buyers, using the same base
materials as those of the costume jewelry products.
•
The firms’ stand-alone systems at the finishing stage need
to be upgraded using ICT for better coordination of work.
•
Policy advocacy must be initiated on issues such as shipping
rates, procedures of inter-island shipping and the regular
freight-forwarding business.
79
80
Marketing and Sales
•
The industry requires a concrete marketing plan to realize
its global potential. In addition, firms also need to acquire
the proper skills in market planning.
•
The industry needs a good source of market information,
especially on key buying countries and competitors, which
will provide the needed data for the marketing plan
mentioned previously.
•
The industry needs to upgrade its export position and
develop a market niche amid the increasing presence of
cheaper alternative suppliers such as China, Indonesia and
Thailand.
•
The costume jewelry trade association needs to determine
how its members can compete in the world market based
on their competencies and experience so as to optimize
their market development efforts.
•
There is a need to train managerial staff of firms on export
marketing and sales activities, such as preparation of sales
kits and promotional tools, costing and pricing, preparation
of line collection during trade fair participations.
•
A direct buyer-supplier matching program needs to be
developed to sustain market development for the industry.
•
A sustained presence in international trade fairs is needed
most especially in Italy (MACEF) and in Hong Kong.
•
Most firms, specifically the smaller ones, need to be
oriented on the benefits of developing promotional
brochures and related marketing tools.
Service
• The trade association together with the government needs
to develop an industry-structured after-sales service
program to assure buyers of the products’ high quality.
Background
81
Strategic
Direction
Given the market conditions for costume jewelry and the
findings in the value chain analysis, production management and
other parts of this report, this section presents a strategic direction
for the industry over the next few years.
Given the good market performance of costume jewelry exports
recently, the industry should consolidate its market position and
focus on sustaining the growth in exports over the coming years.
Local manufacturers should target on increasing their share of
their traditional key markets abroad, the United States and Europe,
as well as further opening up emerging buying countries such as
those in the MIddle East and Australia.
To have a more solid basis for their marketing initiatives, the
industry needs to quickly put in place a reliable and sustainable
system for keeping abreast of global fashion and design trends
and the means for interpreting these upcoming trends in their
product development. Given the short life cycle of costume jewelry
items, the sector should develop the capability to make proper
trends forecast several cycles ahead. This will also give producers
better focus on their product designs and improve the current
ratio of products that sell relative to the total number of designs
made in a season.
82
To further strengthen their product development efforts, the
industry should also seek support from government or other parties
in enhancing the present state of research and development on
indigenous materials used in costume jewelry. Better materials
gathering, processing, treatment and manipulation can provide
increased flexibility in design, create innovative products, reduce
materials cost and can be used to outflank competitors from other
countries. Materials gatherers can also be organized, better trained
and motivated leading to reduced wastage during the gathering or
cultivation phase with positive effects on the environment.
Further along the costume jewelry value chain, manufacturers
should undertake sustainable and continued programs for
productivity improvement. Workers at both the exporter and
subcontractor levels should be trained in better techniques and
production processes. In line with this, firms should also explore
redesigns in their plant or factory layouts following sound
engineering principles. The quality of basic tools presently used
should be improved. Investments in needed machinery should be
considered as production volume starts to rise. The sector’s
production capabilities should provide the needed support in terms
of manufacturing efficiency, capacity and R & D to the thrust of
the industry in expanding its current global market position.
Given below are some recommended programs and activities
for the costume jewelry sector over the next few years.
1. Organize the materials gatherers and informal trading
agents into cooperatives in order to place some order and
structure in these activities.
2. Provide an integrated developmental program for the
various cooperatives of materials suppliers and gatherers
including continuous training, R & D and values formation.
Background
Strategic Direction
3. Institute regular programs to upgrade skills of workers
and management personnel among costume jewelry
producers including pre-production and production
processes, quality control, marketing, costing and
packaging.
4. Set up basic standards for production and quality control
among subcontractors to reduce rejects, waste and
improve delivery times.
5. Set up a program on e-mapping the raw materials sources
(gatherers, subcontractors) within the various regions
where such sources are concentrated.
6. Explore a consolidated-buying scheme for imported
components and materials.
7. Institute accreditation programs for subcontractors and
sourcing agents with an appropriate rating system agreed
upon by manufacturers and exporters.
8. Set up a central base for gathering materials and
information on world fashion and design trends and
institute a system for sustainable access of these materials
and data by costume jewelry manufacturers and designers.
9. Develop a cohesive five-year global marketing plan for
the industry based on an assessment of traditonal and
emerging markets and the present design and production
capabilities of the sector.
10. Set the parameters of a brand development program for
the industry for use as a basis for marketing and promoting
the sector as a whole.
11. Provide regular training and orientation programs for firms
participating in international trade fairs covering
development of appropriate marketing collaterals, pricing,
negotiations and related skills.
83
84
12. Establish a program to expand the use of ICT in business
operations of manufacturers including access to
appropriate software, training and technical support.
13. Undertake a program for strengthening the industry’s
capability to do research on key policy issues and lobby
for changes in relevant policies and regulations.
Annexes
86
Background
87
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
88
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
89
Annex 2:
Costume Jewelry Product Classification
(Harmonized System and Philippine
Standard Commodity Classification)
HS CODE
PSCC
DESCRIPTION
7018.10.00
665.93-01
Glass beads, imitation pearls,
precious/semi-precious stones and similar
glassware
7117.19.90
897.21-09
Imitation jewelry, of base metal, whether
or not plated with precious metal, n.e.s.
7117.90.90
897.29-09
Imitation jewelry, of other non-precious
materials, n.e.s.
7117.90.10
897.29-11
Parts, n.e.s., of sub-items 897.29-01 and
897.29-09
9606.21.00
899.83-03
Buttons, of plastics, not covered with
textile material
9606.22.00
899.83-04
Buttons, of base metal, not covered with
textile material
9606.29.00
899.83-05
Buttons of shells
9606.29.00
899.83-09
Buttons of other materials
9606.30.00
899.84-02
Button blanks and other parts of buttons
9615.11.00
899.89-01
Combs, hair-slides and the like, of hard
rubber/plastics
9615.19.00
899.89-04
Combs, hair-slides and the like, of other
material
9615.19.00
899-89-09
Combs, hair-slides and other materials
Source: Department of Trade and Industry
90
Annex 3:
A Background on Cebu FAME
The Cebu Fashion Accessories Manufacturers and Exporters Association (FAME) Foundation Incorporated was established in 1987
with an initial membership of 15 exporters. Since then, membership
has increased to more than 80 and the organization has been converted into a foundation. The membership represents a majority of
the costume jewelry exporters in the country. The Cebu FAME Foundation holds office at the Costume Jewelry Center, a facility established with the support of the Export Development Council, the Department of Trade and Industry, and the Department of Science and
Technology. The organization provides information to its members
and organizes training activities such as seminars and workshops. It
promotes and markets its members’ products by participating in international trade fairs and organizing selling missions.
The foundation aims to help members achieve international recognition as world-class exporters and manufacturers. It also endeavors to develop design capability and promote the image of Filipino
artistry.
The mission statement of the Cebu FAME Foundation specifies
the following goals:
• to uplift the costume jewelry and fashion accessories industry
of the
• Philippines;
• to have strong representation with various individuals and institutions to support our
• industry development projects;
• to promote and upgrade the standards of manufacturing in
order to produce quality products that meet market demands;
and
• to provide our members access to the global market.
Background
Annexes
91
Annex 4:
World Costume Jewelry Imports by
Country, 2002-2004
(in US$)
Country
1 USA
2002
2003
2004
1,236,031,612
1,294,608,320
1,474,433,028
2 Hong Kong
717,513,280
830,502,191
1,029,605,743
3 Germany
284,714,960
332,000,000
413,376,000
4 UK
256,334,116
317,996,042
393,476,736
5 France
206,212,192
258,722,962
361,312,726
6 Japan
272,580,182
310,458,652
356,004,740
7 Italy
183,533,642
234,677,111
321,689,177
8 China
147,647,694
177,686,336
228,817,228
Austria
97,685,707
125,115,556
169,203,983
10 Canada
121,490,139
139,566,153
162,208,882
11 Rep. of Korea
150,899,024
141,614,558
157,149,713
12 Switzerland
71,757,941
82,090,770
108,344,763
13
Australia
53,796,191
68,572,008
101,008,580
14
Turkey
45,760,820
61,219,599
86,902,137
47,857,588
51,347,654
71,640,582
Others
1,042,907,777
1,387,269,714
890,683,543
Total
4,936,722,865
5,813,447,626
6,325,857,561
9
15 Singapore
92
Annex 5:
World Costume Jewelry Exports by
Country, 2002-2004
(in US$)
Country
1 Hong Kong
2002
2003
2004
1,019,111,300
1,071,139,949
1,283,039,121
2 China
608,432,680
721,030,624
918,815,171
3
Austria
494,554,260
614,239,773
715,851,179
4 Czech Rep.
301,462,000
354,053,335
429,405,507
5 Germany
284,344,758
342,212,000
399,393,000
6 Rep. of Korea
385,410,152
355,622,632
382,267,075
7 Italy
267,363,708
287,974,493
335,773,537
8 France
223,115,388
293,867,888
334,502,146
9 USA
288,306,638
282,537,264
317,392,637
10 UK
124,719,683
154,773,451
195,086,467
11 Japan
141,395,714
155,379,180
188,045,810
12 Belgium
41,621,700
52,013,785
64,050,517
13 Switzerland
32,446,033
35,934,078
56,370,153
14 Singapore
32,496,338
35,237,778
44,120,486
15 Canada
27,665,884
29,410,124
31,131,274
Others
1,491,671,054
2,080,108,040
262,437,897
Total
5,764,117,290
6,865,534,394
5,957,681,977
Background
Annexes
93
Annex 6:
U.S. Costume Jewelry Imports by
Country
2000-2004 (in US$ million)
Country
China
2000
2001
2002
2003
2004
Ave.
Yearly
Growth
Rate (%)
505.7
549.4
662.5
729.4
884.9
15.16
81.7
88.2
67.4
74.1
96.0
5.99
159.5
127.9
100.4
78.2
68.8
-18.86
Taiwan
52.1
44.8
34.5
33.2
42.1
-3.53
Hong Kong
31.8
27.5
30.0
34.0
34.3
2.41
India
36.2
27.6
44.8
40.5
33.5
2.85
Czech Rep.
36.8
37.3
31.9
33.2
32.9
-2.46
Thailand
21.8
25.9
32.1
28.9
28.6
7.96
Italy
17.2
17.6
19.9
22.4
24.2
8.93
Japan
20.7
14.3
13.4
18.0
23.4
6.73
France
16.6
16.0
15.1
17.7
17.8
2.20
Mexico
26.8
31.1
21.5
20.8
15.2
-11.14
Canada
16.2
16.8
15.6
12.6
14.1
-2.73
Philippines
9.4
8.6
12.6
13.9
11.7
8.12
Germany
7.6
7.1
9.4
9.6
8.3
3.43
40.3
38.1
42.9
41.9
43.8
2.38
1,080.5
1,078.2
1,153.8
1,208.5
1,379.6
6.42
Austria
South Korea
Others
Total
94
Annex 7:
EU25 Costume Jewelry Imports by
Country, 2000-2004 (in Euro million)
Country
2000
2001
2002
2003
2004
Ave.
Yearly
Growth
Rate (%)
China
315.1
355.8
393.5
432.0
568.5
16.22
Austria
177.0
186.5
180.8
204.4
262.3
10.93
Germany
159.2
171.4
168.9
166.3
196.3
5.68
Italy
128.4
137.5
131.3
125.8
132.5
0.94
Thailand
50.0
58.7
61.1
67.9
89.5
16.10
France
83.9
78.9
85.2
79.9
88.8
1.72
Hong Kong
51.6
54.1
56.7
55.1
74.2
10.38
South Korea
92.3
91.3
81.8
73.6
71.6
-6.05
UK
55.9
55.8
55.6
55.3
60.2
1.93
USA
70.4
61.4
48.9
51.6
51.1
-7.13
Belgium
34.9
38.2
43.1
42.9
47.9
8.36
India
45.0
40.6
52.8
57.2
47.6
2.96
Spain
29.8
29.8
29.4
32.9
41.7
9.31
Czech Rep.
53.4
55.2
51.3
52.8
39.0
-6.69
Netherlands
37.3
30.3
32.3
26.7
33.7
-0.81
208.1
207.5
197.3
199.5
213.0
0.67
1,592.2
1,653.1
1,670.1
1,723.9
2,018.0
6.28
Others
Total
Background
Annexes
95
Annex 8:
Phil. Costume Jewelry Exports by
Country, 2000-2005, (in US$ million)
Country
Ave.
Yearly
Growth
Rate (%)
2000
2001
2002
2003
2004
2005
U.S.A. (Excl.
Hawaii & Alaska)
9.9
8.1
12.8
12.6
9.9
20.2
24.20
G. Britain & N.
Ireland
1.6
1.2
2.5
2.8
3.0
6.4
44.28
France
1.9
1.4
2.1
2.3
2.0
4.6
30.06
Spain
2.0
1.7
2.0
3.6
3.3
4.1
19.82
Japan
4.6
2.8
3.3
3.6
3.2
3.9
-0.58
Italy
1.4
1.5
2.4
3.7
3.2
3.3
22.59
Australia
0.4
0.6
1.4
1.4
2.0
2.9
52.61
Hawaii
1.4
1.3
1.1
0.9
1.3
2.4
18.13
Germany
2.1
1.8
2.0
2.3
2.5
2.3
3.16
Canada
0.8
0.6
0.7
0.6
1.1
1.3
17.14
Greece
0.5
0.4
0.8
2.7
2.1
1.2
54.35
Netherlands
1.2
0.8
0.9
1.0
0.7
1.2
7.20
Portugal
0.1
0.2
0.5
1.0
1.1
1.2
79.14
Hong Kong.
0.2
0.2
0.5
0.7
1.0
1.0
50.59
0.9
0.5
0.7
0.5
0.5
0.9
9.05
2.2
2.6
4.0
5.2
6.2
6.4
24.22
31.1
25.8
37.6
44.9
43.2
63.4
18.26
Turkey
Others
Total
Source: Department of Trade and Industry
96
Annex 9:
Summary of Key Findings From 2005
Pearl2 Survey of Costume Jewelry
Firms
Years in Business
Frequency
Percentage
1-5 Years
8
24.2
6-10 Years
5
15.2
11-15 Years
8
24.2
16-20 Years
7
21.2
21-25 Years
4
12.1
No Response
Total
Company Size
1
3.0
33
100.0
Frequency
Micro (assets below Php 3M)
Percentage
6
18.2
20
60.6
Medium (assets from Php 15M to 100M)
6
18.2
Large (assets above Php100M)
0
0.0
Small (assets from Php 3M to 15M)
No Response
Total
Company Setup
1
3.0
33
100.0
Frequency
Sole Proprietorship
Percentage
13
Partnership
39.4
1
3.0
Corporation
19
57.6
No Response
0
0.0
Total
Owner of Sole Proprietorship
33
Frequency
100.0
Percentage
Male
6
Female
8
57.1
14
100.0
Total
Education of Sole Prop. Owner
Frequency
42.9
Percentage
College Grad.
12
85.7
Post Graduate
1
7.1
No Response
1
7.1
14
100.0
Total
Background
Annexes
Chairperson of Corporation
97
Frequency
Male
Female
No Response
Total
Education of Corp. Chairperson
7
36.8
10
52.6
2
10.5
19
100.0
Frequency
College Graduate
Post Graduate
No Response
Total
President of Corporation
Percentage
Percentage
13
68.4
3
15.8
3
15.8
19
100.0
Frequency
Percentage
Male
12
36.4
Female
19
57.6
No Response
Total
Education of Corp. President
Post Graduate
No Response
Total
100.0
Percentage
25
75.8
4
12.1
4
12.1
33
100.0
Frequency
Less than 100 square meters
Percentage
1
Between 100 to 250 square meters
More than 250 square meters
No Response
Total
Ownership of Business Premises
6.1
33
Frequency
College Graduate
Size of Business Premises
2
3.0
3
9.1
26
78.8
3
9.1
33
Frequency
100.0
Percentage
Owned
16
48.5
Rented
14
42.4
Owned and rented
1
3.0
No Response
2
6.1
33
100.0
Total
Venue of Business Premises
Frequency
Percentage
Residencial
13
39.4
Commercial
18
54.5
No Response
2
6.1
33
100.0
Total
98
Personnel
Management Employees
Frequency
Percentage
Male
42
41.6
Female
59
58.4
Total
Production Supervisors
101
Frequency
100.0
Percentage
Male
26
35.6
Female
47
64.4
Sub-total
Production Workers
73
Frequency
100.0
Percentage
Male
395
Female
816
67.4
1211
100.0
Sub-total
Technical or R&D Staff
Frequency
32.6
Percentage
Male
35
Female
80
69.6
115
100.0
Sub-total
Quality Control Staff
Frequency
Male
Female
Sub-total
Marketing Staff
30.4
Percentage
9
8.6
96
91.4
105
Frequency
100.0
Percentage
Male
12
20.0
Female
48
80.0
Sub-total
Office & Administrative Staff
60
Frequency
100.0
Percentage
Male
21
Female
75
78.1
Sub-total
96
100.0
Total Employees
Male
Frequency
21.9
Percentage
540
30.7
Female
1221
69.3
Total
1761
100.0
Background
Annexes
99
Average Monthly Wages
in pesos
Male
5875.42
Female
5917.48
Both Sexes
5906.61
Subcontracting
Frequency
Percentage
Yes
30
No
3
9.1
No Response
0
0.00
33
100.0
Total
90.9
Subcontractors
Ave. % of Work Subcontracted
68.9
Ave. Number of Subcontractors
30.3
Ave. No. of Workers/Subcontractor
Subcontractor Location
232.6
Frequency
Percentage
Within Region
8
Within Island Group
2
6.7
24
80.0
Within Province
Subcontractor Support
26.7
Ranking
Credit
1.4
Tools
2.4
Product Development
2.8
Skills Training
3.0
Subcontractor Problems
Ranking
Delivery Date
1.3
Quality of Work
2.0
Others
2.0
Reliability
2.5
Stage of Work Subcontracted
Frequency
Percentage
Production
22
73.3
Pre-Production
15
50.0
Finishing
Raw Materials Source
100 % Local
100% Imported
Local and Imported
No Response
Total
11
Frequency
36.7
Percentage
10
30.3
0
0.00
22
66.7
1
3.0
33
100.0
100
Mode of Production (%)
Matl. H.
Prod.
QC
Manual
66.7
60.6
Pack.
90.90
97.0
Semi-Mechanized
30.3
42.4
6.1
0.0
Fully Mechanized
0.0
0.0
0.0
3.0
No Response
0.0
0.0
0.0
0.0
Average: Manual
78.8
Average: Semi-Mechanized
19.7
Average: Fully Mechanized
0.8
Capacity Utilization
Average Utilization Rate
87.9
Reasons for Low Utlization
Ranking
Others
1.7
Equipment Limitations
2.3
Personnel Limitations
2.4
Lack of Raw Materials
2.4
Space Limitations
Quality Control System
3.2
Frequency
Percentage
Use outside facilities
2
6.1
Use internal resources
7
21.2
Have specific personnel
23
69.7
Follow standard procedures
11
33.3
Quality Control Problems
Frequency
Percentage
Production Process
18
54.5
Raw Materials
17
51.5
3
9.0
Others
Product Development
Frequency
Percentage
Use Internal Capabilities
26
Use External Capabilities
14
42.4
Total
33
100.0
Product Dev. Information Source
Frequency
78.8
Percentage
Buyers
25
75.8
Publications
23
69.7
Designers
24
72.7
Internet
11
33.3
Total
33
100.0
Background
Annexes
Enough Information for Prod. Dev.
101
Frequency
Percentage
Yes
21
63.6
No
11
33.3
No Response
Total
Has Internal R&D Capability
1
3.0
33
100.0
Frequency
Percentage
Yes
30
90.9
No
2
6.1
No Response
Total
Designs Based on Buyer Specifications
1
3.0
33
100.0
Frequency
Percentage
Yes
31
93.9
No
1
3.0
No Response
1
3.0
33
100.0
Total
Source of Sales
Percentage
Export
92.0
Local
Market Segments Served
8.0
Frequency
Percentage
High End
12
36.4
Middle End
25
75.8
Low End
Total
Countries Exported to
9
27.3
33
100.0
Percentage
Europe
41.0
US
24.3
Japan
15.8
Australia
4.4
Middle East
4.2
Canada
1.3
Other Asia
3.8
Others
5.3
102
Source of Foreign Buyers
Frequency
Percentage
Own Contacts
18
54.5
Trade Fairs
29
87.9
Business Missions
Referrals
Others
Means of Trade Promotions
8
24.2
15
45.5
3
9.1
Frequency
Percentage
Brochures/Catalogues
13
39.4
Attending Trade Fairs
30
90.9
Internet
18
54.5
Business Missions
6
18.2
Others
1
3.0
Competitor Countries
Frequency
Percentage
China
28
84.8
India
6
18.2
Indonesia
4
12.1
Korea
3
9.1
France
2
6.1
Italy
2
6.1
Thailand
2
6.1
Exported to New Country
Frequency
Percentage
Yes
17
51.5
No
14
42.4
No Response
Total
Local Marketing Channel
2
6.1
33
100.00
Frequency
Percentage
Department Stores
1
3.0
Boutiques
3
9.1
Own Stores
2
6.1
Traders
6
18.2
Direct Selling
3
9.1
Others
Export Marketing Channel
1
Frequency
3.0
Percentage
Importers/Buyers
27
81.8
Distributors
11
33.3
Chain of Stores
13
39.4
Others Retailers
8
24.2
Background
Annexes
Export Sales
103
Frequency
Percentage
Under US$ 50,000
8
US$ 50,001 to US$ 100,000
4
12.1
US$ 100,001 to US$ 300,000
7
21.2
US$ 300,001 to 500,000
3
9.1
US$ 500,001 to US$ 1,000,000
3
9.1
US$ 1,000,001 to US$ 3,000,000
5
15.2
US$ 3,000,001 to US$ 5,000,000
2
6.1
No Response
1
3.0
Total
Local Sales
24.2
33
Frequency
100.0
Percentage
Under Php 1M
4
12.1
More than 1M to Php 3M
2
6.1
More than 3M to Php 5M
2
6.1
25
75.8
33
100.0
No Response
Total
Budget Allocation
Percentage
Administrative
17.2
R&D
13.4
Marketing
14.7
Production
52.5
Others
Fund Source
2.2
Frequency
Percentage
Own Funds
24
72.7
Bank Credit
7
21.2
Private Lenders
2
6.1
Others
2
6.0
Notes:
1. Average Monthly Wages on page 99 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 99 refer to the weighted average of total number of
subcontractors and workers among surveyed firms.
3. Subcontractor Problems on page 99 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 99 refers to the stage in the
firms’ operations that is outsourced.
104
5. The reasons for low utilization on page 100 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 100 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 102 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 Cebu Fashion Accessories
Manufacturers and Exporters Foundation of the Philippines.

Costume Jewelry

Transcription

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