Owned and built from the ground up by footwear manufacturer the Stella Group, Simona Tanning began operations in 2006 in a facility covering more than 55,000 square-metres just outside the city of Huizhou in southern China, and now employs 750 people there. High levels of service and top-quality leathers have helped it build up a strong reputation among some of the biggest footwear brands in the world.

Working from wet blue, Simona focuses only on shoe upper leather, with 85% of what it produces destined for the men’s footwear market, principally boots and shoes for the high-end outdoor leisure segment.

Keith Hill, chief operating officer (COO), arrived in Huizhou five years ago from Shanghai Richina, attracted by the opportunity to design and equip a new tannery and build up a new team with the assistance of Eric Chao, CEO of Simona Tanning, and Stella HQ engineering. Quiet-spoken and serious, he still makes it clear that he’s proud of the way the company’s original vision has translated into reality. “The business has grown by 9% in 2009, year to date,” he says. “We’ve achieved growth in a very challenging environment.”

He downplays the idea that being owned by one of the biggest footwear manufacturing groups in the world, the Stella Group, gives Simona an undue advantage and says that the tannery’s success is built upon its own reputation in combination with that of the Stella Group with the important footwear brands that they regard as customers (the list includes Timberland, Rockport, Nike, Adidas, Merrell, Clarks, Deckers, Cole Haan, Ariat, Columbia and many more). It is the brands which choose Simona’s leather and specify it to their outsource manufacturing partners. It’s the brands’s choice. He continues: “We don’t sell to Stella. We sell to the brands and if they specify our leather we deliver it to wherever they want. We are brand-centric, not Stella-centric. If we only supplied Stella we wouldn’t be a true partner.”
In practice, about 50% of the 22.5 million square-feet of leather that the Simona tannery will produce this year at the moment goes to Stella factories, with the other 50% going to other outsource footwear manufacturing firms in China, India and Vietnam. They are rivals of Stella’s, but, Mr Hill insists, receive the same level of service and the same quality of leather—at the same price—as the tannery’s parent company. 

He explains: “I thought very hard before coming here about the pros and cons of being part of a large footwear group. But the reality is that we are not tied to the footwear factory; they don’t get the best material and they don’t get a discount. We have operational integrity, and it’s transparent. That’s so important because that’s how you develop trust. Yes, there is internal pressure sometimes, and of course there are some people who expect special treatment, but you can’t just give a high level of service to only your own factories. The brands we supply leather to expect the selection, the price and the service to be the same for everyone.”

He says that one of the challenging aspects of the relationship is that the Stella Group is tougher on Simona Tanning than on other suppliers in terms of quality expectations, delivery times and so on. But in his opinion, a very positive aspect of the relationship is the alignment between the tannery and its parent group. Better alignment translates into better financial and operational support, he points out, because the level of understanding will be greater. He says there is a high level of expertise and knowledge at the Stella Group, and that this is why the group has “a terrific reputation” in the wider footwear industry. “The tannery is aligned 100% with Stella’s goals,” he continues. “We think about the customer in the same way, how to supply the greatest value to our branded customers that differentiates them and by association, the Stella Group in the market place.”

How to stand out from the crowd

There is plenty of variation in the leather Simona Tanning produces, but its signature articles seek to combine classic US qualities of a heavyweight material with oily and waxy properties; a US feel combined with European looks is how Keith Hill describes it. The way to achieve this, he feels strongly, is not to use tricks at the retanning or roll-coating stages, but to “tan the guts into the leather in the first place”. That means working hard at the wet end to stuff the leather with fatliquoring products before attempting to emulate the look of European leathers later in the process. “This is a difficult path to tread,” he admits, “but that’s how we differentiate ourselves. We think a lot about what would make us different from other tanners to give ourselves a competitive advantage, so we’re doing these big, bulky, beefy pieces of leather—up to 3.2 millimetres in thickness—that we think no one else in Asia is doing. It’s very difficult to do it well.”
Another of the ways in which this tannery seeks to stand out is in responding as best it can to brands’ demands to make lead times shorter. It’s far from a new phenomenon, but the pressure to make and shift leather quickly is increasing all the time. Footwear brands want shorter delivery times and are exerting pressure all the way back along the shoe supply chain to achieve this objective.

At the same time, average orders are becoming smaller and the number of options tanners have to be able to offer is increasing fast. In August this year Simona made 2.2 million square-feet of leather, but its average order was only 1,100 square-feet. The COO confirms: “Our complexity has sky-rocketed. When you have the kind of lead-time expectation we face today, and limited or no forecast from the brands (to give advance warning of what they are likely to look for), and with orders shrinking all the time, this is a very challenging time for our business. And I don’t think things will ever go back to the way they were.”

The genie is out of the bottle, in other words. Footwear brands and the retail partners they work with are finding now that they can replenish stocks of a model of shoe that proves popular with consumers in the course of the same season; they can have that shoe back on the shelves after it sells out, thanks to the shorter lead times their supply chain partners—not least top-class tanneries they work with— are helping them achieve. “It’s differentiation again,” Mr Hill says. “There is a new paradigm in the footwear business and I’d say we’re able to take advantage of it while other tanneries may not be. You have to have the right mindset to make consistently beautiful leather more quickly than ever.”

New build

Perhaps working in a new tannery, built from scratch to the team’s own design is a help. Mr Hill says he’s proud of the way the Simona facility works and likes it when visitors say, as they frequently do, that it’s the most pleasant tannery they’ve ever been in, with its long, clear lines of sight, its high ceilings and natural light. “But the minute you stop making good leather, none of that matters,” he insists. “We looked at the brands’ needs, thought about the leathers we would need to produce to meet them and designed the tannery around that. The tendency tends to be to build the tannery, put the machines in and only then figure out what kind of leather you can make. We’ve looked at that in reverse. That’s the difference.”

Although the Stella Group has no plans to do so at the moment, he says that it would consider building other tanneries in the future, perhaps close to other footwear factories it runs in Asia. Five years on from his initial work on the Huizhou facility, he says that they would change little about the design and layout in any new tannery, but says they would try to engineer in greater flexibility by “doing the size and scale” of the drums a little bit differently, making it possible to have load sizes of between 500 and 4,000 square-feet in one vessel and still achieve consistency. He would also go from the 3.4 metre lines they have in finishing at the moment to 1.8 metre lines to be able to manage more easily orders of smaller quantities. This, he feels, would make the task of putting popular, sold-out shoes back on the shelves during the same season more achievable.

Helping hand

He observes that the numbers of people in footwear brands who have expert knowledge of patterns, the nuts and bolts of construction, lasts, moulds, components, design, innovation and (of course) leather are diminishing, making it essential for those companies to put ever more trust in their partners upstream in the supply chain. A key question, however, is the right way to go about this is. It’s not about the Stella Group calling the shots, but providing the expertise needed to help the brands execute what they want to do.

Domestic challenges

Increasingly, the top end of the Chinese domestic market is part of the new concept. The Stella Group itself offers a good example. As well as having 72,000 people across 12 (soon to be 13) factories—one of which opened next door to the tannery last year—making shoes for the export market, it is also developing its own brand in the Asian market place. It already has more than 100 own-brand stores, which include the Stella Luna and What For Brands and is intent on making this part of its business bigger and stronger.

Tanneries who feel they are able to meet difficult demands, such as guaranteeing ever-shorter lead times, also have to be able do the job right first time with a high degree of consistency. Simona’s COO explains that if a customer orders 1,500 square-feet of a particular article, the tannery has to get within 1% either way of making the correct amount to the right standard. Make too much and the customer organisation is unlikely to take shipment of the surplus (and almost certainly won’t pay for it if it does). Make too little and you can face real difficulties if the customer rejects even a small number of hides.

On the logistics side, because Huizhou has its own container port, the flow of hides coming in is straightforward. The management  is happy with how this part of the operation is working. For outbound distribution of the finished leather, they have their own fleet of trucks (“it’s more secure and helps us keep better control”), delivering product to the internal market. Around 65% of all Simona’s leather goes into outsource footwear manufacturing plants around  Guangdong Province.

Chemical reaction

Simona Tanning has significant challenges and expectations of its chemical supply chain partners. It believes its key suppliers should understand clearly the major problems it has and be able to offer solutions – (although it accepts that asking chemical companies to address the age-old problem of veins in hides would be to give them an impossible task), and how to mask defects in hides, for example. “Hide quality at raw or wet blue is getting worse instead of better,” Keith Hill insists. “I’m not sure if it’s because we’ve had worse winters in recent years, but there is a need to wash cattle which the ranchers are reluctant to do due to cost. So we’re left looking for ways to mask defects, not only with retannage, but in relation to dyes. Chemical suppliers think they have the products to do it, but they don’t work. We’re looking for solutions, uniform dyeing that does not highlight defects.”

He feels that too many different people from chemical companies call, making it necessary for tanners to start building a new relationship every six months or so. He wonders out loud if chemical companies are devoting enough research and development budget to leather, but accepts that tanners have to shoulder some of the blame for not giving these suppliers clear enough goals or enough feedback. He says: “It has not, historically, been a productive relationship. There is a great fear in the tanning business that people will see your formulations and tell others about them, so they keep the door closed.”

On the machinery side, he rates manufacturers on how they service the machines, including how quickly they can supply parts when a piece of equipment breaks down. Half of the providers visit China twice a year and make recommendations on how the tannery can get more life out of the equipment. He likes this. Providers whose interest vanishes the instant they make a sale impress him less.

Labour relations

China’s manufacturing boom owes much to the huge numbers of migrant workers who have left their homes in rural areas to work in the main centres of production, such as Guangdong Province. This applies just as much to the leather industry as to any other, and to Simona just as much as to any other tanning company.

As a relative China veteran—he has been working in the country’s tanning sector since the end of the 1990s, having begun his career at the former Pfister & Vogel tannery in Milwaukee in his native US—Keith Hill was well placed to observe the changes that have occurred. He explains that a large percentage of the migrant workers they employ are women who often choose to live as cheaply as possible by sleeping in a dormitory and eating in a canteen subsidised by the company. In many cases, these women are sole breadwinners for their extended families, sending as much money back home as they can to support parents and grandparents.

Increased prosperity is, naturally, pushing up the quality of life in places like Huizhou, a relatively new city that has grown up astonishingly quickly at the confluence of the Dong and Xi rivers. There are beautiful, newly built buildings and bridges everywhere that light up at night like Christmas trees. There are parks and shopping malls and, in increasing numbers, the people who have come from the country’s interior to earn money to send home are marrying here, settling down and staying.

Social life

Simona Tanning has what it calls a social contract with its Chinese employees. It provides food, housing and transportation, as well as health insurance and pension benefits. There are also plenty of social events, including an annual internal basketball tournament, dinners for western and Chinese New Year holidays and monthly dinners to celebrate employees’ birthdays. In the wider community, the company also distributes food, drink and cooking ingredients before three of the major Chinese festivals.

Many of the members of the senior management team are from outside China, including Taiwan, India, Europe and Brazil. Keith Hill insists that people at this level have to be genuinely passionate about leather, and must have the intention of spending their whole working lives in the industry. But they must also accept Chinese culture and become part of it, rather than be frustrated ex-pats who can’t wait to leave.

He believes that the key to making a success of life in Huizhou, and in China in general, is to apply 50% patience and 50% persistence. Too much of one or the other and you will become frustrated and leave, he says. “You have to be patient and put up with things you’d never put up with anywhere else,” he explains. “But you have to be persistent too, and keep coaching the people you have to coach until you get what you need.”

For some time, industry observers have speculated about where the footwear industry—with tanneries following later—will move to after China. Last year, in the province of Guangdong alone, 2,331 footwear manufacturing companies closed down during the first five months. Keith Hill supports the argument that these were smaller factories, focusing on the lower end of the market, and that consolidation among such firms was inevitable. He says that China has continued to be able to give confidence to the world’s biggest footwear brands.

“If we were looking at a new powerhouse emerging, it would be more obvious by now,” he explains. “Some countries have come to prominence, but they are not as good as China, and I don’t see that changing in the next five years or so. Everything, all of the supply base, all the expertise, is set up full time in China now and it would take time to move the whole supply base to a new place. I can’t see it happening in the next five years.”

In his view, China will remain at the heart of the global footwear industry for some time to come, suggesting that tanneries in today’s China which are working hard to produce high-quality leather from high-level operations are in the right place at the right time.

Share this story: