The Bermúdez family has been creating jobs and promoting exports in the city of Santiago in the Dominican Republic for nearly 160 years. The family has been in the leather business since 1940 and now focuses exclusively on the export market, making finished leather for big-name footwear and automotive clients.

Artículos de Piel, with its brand B’Leather is part of a wider industrial group owned by the Bermúdez family (the source of the B in the brand’s name). The family arrived in the Dominican Republic from Venezuela in 1848 and set up a distillery to make rum, using a natural resource, the sugar cane that abounds on the island the country shares with Haiti, to make a high-class product that is desired all over the world. The grandfather of current company president, Aquiles Bermúdez, decided in 1940 that he too could use a natural resource, cattle hides and goatskins, to make another desirable product and a tannery was born.

Self-sufficiency drove the citizens of Santiago to build and run their own airport; it is still a private concern. It also drove widespread support for free zones, in which industrial operators can devote themselves to exports without worrying about duties, either on any material they bring in or on anything they produce for customers overseas. There are free zones in many parts of the country, enough for them to have their own business association (it has 572 members; Aquiles Bermúdez is its president).

Just as with the airport, a consortium of manufacturers in free zones around Santiago is currently engaged in developing a new container port at a place called Manzanillo, close to the border with Haiti. The capacity of the existing port in the area, at Puerto Plata, is limited and large loads often have to sail all the way round to the capital, Santo Domingo, which is several hours away from the tannery by road.

Manzanillo makes sense, particularly because Artículos de Piel now brings all its raw material in from outside the Dominican Republic, mostly from the United States. Local hides offer less quality because cattle are smaller, are slaughtered young, are subjected to harsh heat and humidity when out in the fields and often suffer scarring from ticks or barbed wire. In recent years, hides have come in as wet blue rather than raw. The tannery has its own beamhouse, but wet blue imports suit its production demands at the moment. A carefully planned and executed maintenance programme has kept the Artículos de Piel beamhouse in good working order and the company will be able to switch back to processing hides from the raw any time it likes. The focus of its finished leather is still strongly on footwear, although a more recent move into automotive leather continues—a partnership with GST AutoLeather that the companies set up in 2004, with Artículos de Piel supplying crust hides to specialist finishing and cutting plants in Mexico.

Around 70% of the tannery’s output goes into footwear, with the other 30% aimed at the automotive market. Aquiles Bermúdez talks about the two markets as having “totally different economic cycles”. Footwear is part of the non-durable goods world, while cars are durable goods. From 2004, when the joint-venture with GST AutoLeather, began until 2008 the automotive market was very stable, then the downturn hit it “like a hurricane”, in the assessment of the company president. He believes the automotive market is now growing again. Footwear, meanwhile, is more stable and more dependent on individual consumers.

Big names

Clients are mostly big-name brown shoe brands based in the US: Rocky Brands, Timberland, Wolverine World Wide, Sperry, San Antonio Shoe, Allen-Edmonds and Sebago are all on the list. More recently, the company has begun to export its leather to European shoemakers, too, especially in Italy, where multi-brand manufacturer Zeis Excelsa has become an important customer. There are clients in the Dominican Republic, but they are the outsource manufacturing partners of some of these footwear companies and they, too, operate in free zones. Deliveries from the tannery to these factories, from one free zone to another, incur no duty, but careful scrutiny makes sure that exactly what customs officials record as leaving one duty-free facility arrive intact at the other.

Prominent US footwear brands began to bring part of their production to the Dominican Republic in the 1980s. There was a programme to promote industrial activity in the Caribbean Basin, with Puerto Rico at the heart of the initiative. Part of the work on footwear went to the Dominican Republic quite quickly. There was a shoe industry there already, serving only the domestic market, but making a skilled workforce available at much lower labour rates than in the US. Further training increased the availability of labour.

“Speed to market is a major attraction to the US brands,” says Artículos de Piel Los Favoritos director Manuel Mena. “It takes one-and-a-half days for a container ship to get from here to Miami. New Jersey is three or four days away and Houston five days.” He insists that if it’s true that these US companies first came to the Dominican Republic to gain tax advantages, they have stayed because they receive good products at good prices from good suppliers who offer a substantial geographical advantage compared to competitors in Asia.

A million square-feet a week

The tannery has the capacity to produce one million square-feet of finished leather and crust every week. Numbers have been down slightly because the automotive side of the business has been affected by the blows the Japanese economy has suffered in 2011. The Bermúdez Group is confident this part of the business will come back very strongly. The workforce currently numbers around 300.

As mentioned, raw material coming into the tannery is all wet blue at the moment, with the company sourcing hides from the US and South America. Its preference is for bull hides, although it buys cow hides, too, although never calf. At the moment it is bringing in around 16,000 hides a week on average.

Market adjustments

“I would say we haven’t had a problem with our suppliers of hides, chemicals or machinery,” Mr Mena says. “On the price of hides, the price is volatile, but we work with our suppliers to secure material. When we need to protect them we do, and they protect us when we need it. The market is the market, and it adjusts itself. Sometimes it doesn’t adjust as quickly as we would like, but we are here for the long term; we are consistent buyers and we are not jumping around from supplier to supplier. Our view is that you have to be loyal and you have to be fair to your suppliers.”

With regard to chemicals and machinery, the principal attribute that sets apart the good suppliers for Mr Mena is a commitment to research and development. Some invest heavily in this area, he says, while others appear to him to offer less innovation in their product range. “We want to use less water, less energy and for the tanning process to take less time,” he says, “and we would like research and development efforts to concentrate on making that possible. Our industry as a whole has faced criticism because it generates a lot of waste. Tanners are looking for an answer to that.”
The basics of the machines in use at Artículos de Piel are the same, he insists, whether the equipment comes from the most expensive suppliers (the European, principally Italian ones) or from less expensive competitors from Asia or South America. “We have mainly Italian machines in our tannery, and I think they will last longer, but long enough to justify the difference in price? This is a question we are asking ourselves at the moment.”

Aquiles Bermúdez explains that it’s not just price that matters. He says: “A splitting machine will split hides, but what technology is in there to give you the quality you need? Technology and reliability and performance matter too.” He explains that until the 1970s, the company was able to buy most of its machinery from the US. The next generation came from Europe. “I would say we don’t have a feel for the market in Asia yet,” he says. “I want to do some homework on it and maybe let that market mature a little before trying it. After all, we don’t buy machinery every day. We are a regional tannery working for customers in the Americas and Europe, so we have less contact with Asia, but we do have competitors there and the capital expenditure is clearly less for them.” He points out that machines depreciate over time, and what tanners have to keep an eye on is the yield. If they get the yields, they will feel they don’t need to change their machines. “But it’s important to keep looking,” Mr Bermúdez adds. “Machinery from Europe is very expensive and the euro has gone up steeply. Last year, when the euro was lower, we did buy some new machines. But the world is changing and these are difficult times for Italian companies. There have been mergers and acquisitions, leaving customers wondering what will happen with spare parts or with research and development. So we will find out more about Asia.

Lean principles

The people at Artículos de Piel love the material they make, but they also love numbers, according to Mr Mena, and measure everything they can. He explains: “We are big advocates of lean manufacturing and of just-in-time. Everything we make is made to order. Nothing is made for stock, and that means we have to offer service, quality and speed. Like other tanneries, we buy our raw material, wet blue, by weight but we sell our finished leather by the square-foot, so everything is a transfer of yields.” Accreditation under the Leather Working Group programme (silver level) and the ISO 9001:2008 guidelines have given the company confidence that it is achieving a good balance between quality and service. Artículos de Piel speaks highly of the Leather Working Group and of the help the programme has given it in its efforts to produce leather using less energy and less water, and of the cost savings that can result from this.

All products are handled with kanban cards and a detailed barcode scanning system; these help the workforce match hides to orders as they flow through the tannery. Scanning the barcode on an operator’s identity tag also provides data on the efficiency of each person. But as well as working efficiently, the company encourages its workers to develop their knowledge and love of leather. A phrase Mr Mena uses when talking to new team-members is that they have to learn “to listen to the leather”; the leather will talk to them, and if they learn to listen, they will do well.”

Demand cycles

According to company president, Aquiles Bermúdez, customers are talking about increasing their production. The shoes the tannery’s footwear clients make are more brown than white, in other words their product ranges are being less affected by the trend in athletic footwear of using increasing amounts of synthetic substitutes for leather in their material mixes. Sales of cars at the high end of the market, with leather upholstery, are increasing. There is much to say about leather’s natural qualities, he believes. Its breathability, its ability to take the shape of a person’s foot in a shoe, its sustainability (a story the synthetics cannot match, try as they might).

Competition among tanneries across the world continues, of course, but changes in the situation in China are adding to Mr Bermúdez’s optimism. “The Chinese government has developed the infrastructure across the country and is now beginning to motivate the consumption of goods there,” he says. “And the reality is that consumption is going on. Chinese consumers are buying more and more, at every price-point, including luxury. I’ve seen it and I’ve been impressed. There are now more LVMH stores in Shanghai than there are in New York City. But there is an increase in manufacturing costs there, and we are levelling the difference and our proximity to the Americas and Europe gives us an opportunity to keep growing.”

Social concerns

When the Bermúdez family set up its rum venture in 1852, the distillery was outside the city of Santiago. For practical, as well as what we have come to call corporate social responsibility reasons, the family built homes near the site for its workers. Because the idea was a success, it did the same thing for the first workers in the tannery in 1940. Many of the tannery houses are still there, although few Artículos de Piel Los Favoritos employees live in them now and the city has swallowed the area up during a series of expansions that have taken place, but it is still known as the Ensanche Bermúdez, or the Bermúdez district, a testimony to the level of care the company has shown for its workers.

Aquiles Bermúdez describes the Dominican Republic as “a mature country”, one with clear labour laws. “We try to do our job within the law,” he explains. “We don’t want to put our customers, the company or the investment we have made in it at risk by cutting any corners. We have been in the leather industry for three generations and we have workers who have been with us for 40 years. We believe in investing in our workers’ capabilities. There is a formal training programme and we make sure they have medical health insurance.”

He talks briefly about efforts the company has gone to in aid of people beyond the boundaries of the tannery. “We’ve been helping people who came from the countryside to the city and ended up living in shacks beside the river,” he says. “There were areas that needed careful maintenance for environmental reasons so we’ve been buying land and promoting the transfer of these families to safer lands, places where there are proper utilities and no risk of flooding. We give them the title for the new land so that they can then enter the financial system; they have the right to sell that property and this enables them to raise capital.”

He relates this modestly and in a matter-of-fact way and neglects to point out a plaque on the wall, which was presented to Mr Bermúdez in March 2009 by an organisation called The Office for Community Development. It recognises Aquiles Bermúdez for what it calls “his contribution to the development of communities in Santiago” and goes on to refer to him as “a tireless fighter in the defence of the most needy”.

What he does admit to being proud of is the length of time his family has been in the city of Santiago and the amount of good it has done for the local people through the generations. “We are an industrial family,” he says. “We are creating jobs and helping the country develop. Personally, I am proud of that. We believe in what we’re doing. We take the design of new leather and the adoption of new technology very seriously. We have to be creative and innovative and to have very good controls and metrics. This industry is complicated. The raw material changes with the seasons and is affected by the weather, but we have to try to control all these variables in our processes while, at the same time, making the processes more environmentally friendly.”

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