A shoe factory in a small town in interior Tamil Nadu doesn’t seem a likely follower of Japanese management techniques. Yet, for the past seven years or so, at Ambur, 200 km from Chennai, over 4,000 employees gather across 11 sites once during every eight-hour shift to pledge allegiance to the 5S method of workplace organisation. After promising in Tamil to Sort, Straighten, Shine, Standardise and Sustain, they segue into an exercise routine, customised by physiotherapists to relieve the strain of assembly-line work. “A very dear friend, C Narasimhan [former president, Sundaram-Clayton], introduced us to this concept. Since then, we have followed the 5S practices with great results,” smiles Mecca Rafeeque Ahmed, chairman of the Farida Group, one of India’s leading leather and leather footwear exporters.
The leather processing industry at Ambur dates back several decades. Indeed, Ambur and its nearby towns were already part of an established leather hub back in 1957, when Ahmed’s father, Haji Mecca Abdul Majid Sahib, started the Farida Prime Tannery, named after the youngest of his nine daughters, with ₹15 lakh from his savings and bank loans.
Today, the Farida Group has eight companies; processes some 80,000 sq ft of hide and manufactures close to 23,000 pairs of shoes, 3,500 pairs of shoe uppers and 13,100 pairs of shoe parts every day; employs nearly 9,000 people; and has a turnover of around ₹1,100 crore. Its customers include some of the best-known footwear brands such as Clarks, Florsheim, Rockport and Timberland. Farida Group companies are among the biggest in Ambur and its employees are easily identifiable by their distinctive blue uniforms. The colour is also repeated on the three-wheeler vans that zip around the town across Farida Group’s 11 factories — so much so that, in Ambur, that shade is called ‘Farida blue’.
Leather that weathers
In the early days, the tannery exported semi-finished leather primarily to the UK, from where it was further auctioned to the end users. Ahmed joined the family business in 1963, straight out of school, and was responsible for the decision to move to finished leathers. “The dependence on the British commodity market was limiting our scope to break into the European market. Besides, the government was discouraging the export of semi-finished leather,” says 65-year-old Ahmed, who took over the management of the company following his father’s death in 1965 and became chairman of the group in 1996.
The switch wasn’t easy, though. Unlike semi-tanned leather, which takes three days to process, finished leather takes 100 days to process, is more complicated and, therefore, also more expensive. Then, the finish is driven solely by client specifications, so it can’t be made ahead of time or passed on to other customers. Still, by 1973, when the government banned export of raw and pickled hides and skins, Farida Prime Tannery had already switched completely to full chrome and semi-chrome leathers and was selling directly to buyers in Italy and Germany. “The buyers liked our quality and came back for more. It was difficult initially but our decision to stick it out proved to be the turning point for Farida Group,” says Ahmed.
That meant moving up the value chain. In 1976, Ahmed set up Farida Shoes to manufacture shoe uppers, taking technical assistance from his European buyers and bringing Italian technicians on board to run the operations and train the workforce. During their two-month stay at Ambur, food would be brought for the Italians from hotels in Chennai. Now, the Farida Group guesthouse is the nearest thing to a five-star experience you will get in Ambur — the chefs can whip up any sort of meal, there’s a fully functional gym and even horses if you want to ride around the countryside.
The factory had an initial capacity of turning out 500-1,000 pairs of men’s shoe uppers a day (now, it churns out 10,000 pairs of finished shoes a day), and exported mainly to Europe and the erstwhile-USSR. The move into the big league came when it bagged an order in the early 1980s to supply to the now-defunct Freeman Shoes. Points out Ahmed, “The US market gave us big numbers and their prices were good.”
That success inspired Farida’s foray into total shoe assembly for American companies such as Freeman and Florsheim — who supplied the components — and later, into manufacturing shoe components. Group firm Farida Leatherwear was set up in 2000 to manufacture leather soles. Farida was at the right place at the right time: rising labour costs in the West meant that manufacturers and importers were looking at low-cost options and the group was able to offer end-to-end services to international customers. Subsidiary plants located close to the shoe-manufacturing units helped the group follow just-in-time inventory management, which kept overheads low. “In the beginning, our clients were mainly shoe importers. But our quality and prices meant we were soon getting enquiries from global brands as well,” says Ahmed. “The decision to invest in supporting industries such as components and uppers has paid off, as has the decision to hire a knowledge base.”
Farida Shoes is now a full shoe factory that makes over 10,000 finished men’s dress shoes and boots and has the capacity to manufacture another 14,000 pairs. The plant is one of the largest in South India and specialises in making cemented and moccasin-construction shoes for leading global brands such as Clarks, Rockport, Zara, Florsheim, Marks & Spencer and Deitman. Other group companies such as Farida Classic Shoes and Indian Shoes also make men’s shoes, while Delta Shoes, which was set up to manufacture women’s shoes for supply to Germany, the UK and Korea, has now shifted focus to make women’s footwear uppers. Exports to Europe account for 47% of the group’s sales, while Asia Pacific and North America account for about 26% each.
The Farida Shoes factory at Ambur is huge, brightly lit and well ventilated with high ceilings. It’s buzzing with activity: several hundred men and women, many of them wearing gloves, masks and protective head gear, are busy at the assembly line, sticking the soles, sending shoes meant for Japan through a special x-ray machine and stacking boxes and boxes of finished footwear. It’s spotless and — surprising for a leather factory — fresh-smelling. There’s no odour of hides here; instead, the smell of air freshener lingers.
Standardisation and quality is ensured through systems-driven processes — everything on the shop floor is clearly labelled and modern machines ensure workflows from one shift to another without a hitch. At Farida Classic Shoes, marketing manager Siddique Ahmed (no relation to the founder) points out that the automated stitching machine has reduced manpower costs by 10-15% and improved productivity. “The excess manpower has been shifted to shoe production,” he adds. Software for time study of production and season-based planning helps group companies stay on top of the production process at all times. “We have a clear view of the supply chain delivery mechanism and do not have to wait for the monthly meetings to find out if there is a glitch,” he adds.
“Several processes were manually driven earlier,” says Shujath Ali K, general manager at Mercury Shoes, who has been with the group for over 30 years. “Now, most of it is computerised, reducing the margin of error and speeding up the process.” Outside technical assistance is no longer required — the factory has an ISO 9001:2000 certification and Ali says the group’s technology is as good as, if not better than, what is available in Italy.
Other steps taken by Ahmed relating to the environment and child labour have also helped build the group’s reputation with international customers, all of which give it an edge when it comes to bagging orders. While the group’s tannery was among the first to set up an in-house effluent treatment plant, Ahmed, who has been president of the All India Hides and Skins Tanners and Merchants Association as well as chairman of the Council for Leather Exports, was also instrumental in setting up a common effluent treatment plant in the district in collaboration with the state government.
Not all his measures have been whole-heartedly welcomed, though. While the group does not employ child labour at any of its factories, its move to enrol women workers met severe resistance. “I was told by locals it would destroy families and even the Italian technicians believed women would not be able to operate machinery,” Ahmed recalls. “But I was adamant and soon everyone realised their fears were unfounded.” Now a staggering 90% of the group’s workforce is women (see: Matching steps).
Ahmed’s willingness to experiment and take risks has worked in his favour so far, including during the 2008-09 global slowdown. He plays down the impact of the recession, saying the leather industry wasn’t affected much, given its small share in the global market (just 5% for shoes and 3.5% in leather). But FY09 and FY10 weren’t good years for the industry. While Indian exports of leather and leather products grew just 1.4% in FY09 to $3.6 billion, the figure dropped 5.4% the following year. The recovery was swift, though, and the following two years saw growth of 16.6% and 22.7%, respectively. Total exports in FY12, the latest year for which figures are available, stood at $4.9 billion.
At Farida, too, revenue in FY10 dropped 10% compared with the previous year. But Ahmed acted swiftly. He slashed prices by 10-15% and upped marketing efforts, ensuring his teams visited clients repeatedly to stay top-of-mind. No one was laid off, but fresh recruitments were not made either, till the recovery in FY11. “In retrospect, our decision to not lay off workers paid off. Today, it is difficult to get skilled labour and most factories in Ambur are grappling with attrition,” says Muzaffar Pasha C, general manager, Farida Shoes.
A new style
Having been a supplier to some of the world’s best-known brands, Ahmed is now keen on creating a footwear label of his own. “It is time to go solo,” he says. D Chandramouli, who retired recently as the head of economics research at the Central Leather Research Institute, agrees with the sentiment. “With rising competition from other low-cost clusters such as Vietnam, Bangladesh and Indonesia, it is necessary for companies such as Farida to move from cost-oriented operations to value-based operations to stay ahead.” That can happen, he says, by creating a design base, since there is scope to create a premium brand in the mid and upper markets.
Ahmed has already made a start. Between 2007 and 2008, Farida Group bought an American plant manufacturing Goodyear welted shoes (a specialised type of shoe construction), and transported it to Ambur to set up Kenmore Shoes. “The factory was closing and the owner was about to junk the machinery. When I expressed interest in the plant, he was so happy that I only had to pay for transporting the machinery to India,” smiles Ahmed.
Kenmore hired footwear designers from Italy to develop a collection for the brand and Gordon & Bros had a low-key but successful launch in Germany as a brand of dress shoes for men. Mecca Irshad Ahmed, Ahmed’s son and the managing director of Farida Shoes, is handling the marketing department of the brand. Also on the anvil are plans to develop and market another brand in the domestic market in the next three years. A design and development studio has already been set up in Chennai for this.
A deeply religious man, Ahmed credits his success to the Almighty — and sees evidence of this in everyday events. A few years ago, the group dispatched two containers of shoes to the US with the wrong soles. “It happened due to a mix-up in communication,” he says. While he was worrying about recouping the inevitable losses when the consignment would be rejected, Ahmed was informed that the containers had been lost at sea. “We recovered 110% of the cost in insurance and were saved from a major blow to our reputation,” he says. “If He wants us to thrive, we will thrive.”