EU4Business helps Ukrainian garment companies transform production during COVID-19 pandemic

How the Ukrainian light industry enterprises protect their employees from risks and take care of the health of their compatriots.

Jointly with the Delegation of the European Union to Ukraine, we are continuing our special project on the opportunities provided by the EU under the EU4Business initiative for small and medium-sized enterprises to overcome the consequences of COVID-19.

The second material of the cycle tells about light industry enterprises, which using the experience of cooperation with the EU change in the current situation and readjust their production.

Santa-Ukraine is one of the largest Ukrainian light industry enterprises, which produces blouses, skirts, shirts. The enterprise is located in Pervomaisk of Mykolaiv Oblast and has a 75-year history.

The enterprise has already faced a serious crisis. In the mid-’90s the factory was threatened with real bankruptcy. However, we managed to stay afloat, and in the 2000s we began to increase production volumes, buy new equipment from well-known manufacturers, such as Marengo, Brother, Strobel. At the same time, the factory began sewing clothes for Steilmann, Quelle, Otto.

The company’s prosperity is closely connected with its director Yevhen Dyrdin. Yevhen Mykhailovych became the General Director of PJSC “Santa-Ukraine” in 1997 and to this day is the person who initiates changes and is not afraid of risks.

Two years ago, the EBRD supported Santa-Ukraine in the form of consultancies from the European experts. As a result, it has become easier for companies to make patterns for their apparel using the software.

And just as the process began, and in the best possible way, the world faced a challenge called COVID-19.

General Director Yevhen Dyrdin

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During the day we managed to reconfigure our production to make protective masks.

Using modern CAD technology, we can quickly change production.

Of course, we continue to sew apparel, as we did before because there are customers and contracts, however, we have added a new range.

The sewers began to stay after work. And this was also their contribution to the fight against coronavirus. The first protective masks were provided free of charge to medical workers, the elderly, the poor, and the families of Santa-Ukraine employees.

And then we began to sell masks in bulk to local businesses and government agencies. The price was formed based on the cost, the margin was not added and thus we managed to keep an affordable price without trading markups.

Over 70,000 masks – high quality and inexpensive – have already been made for medical and private use. And the demand is still high.

The example of Santa-Ukraine is not single. Textile industry enterprises were one of the first to reorient their production in response to current needs.

A very bright example in this sense is the cluster of textile and sewing enterprises in the Western Ukraine, which united due to the project “Support for cluster initiatives in the textile industry” with the assistance of the EBRD and the EU initiative EU4Business during 2016-2019.

A little background. Due to the high density of light industry enterprises and competition in the west of the country, it was quite difficult for each of them to develop. In particular, because of the final cost of production.

European experience in such cases advises to create economic clusters: producers of similar goods and related services combine their resources within the region. Thus, you can get more orders, rationally use the capacity, unify risks, spend less money on training and professional exhibitions. But the most important thing that accelerates movement forward is joint training and development.

Women apparel manufacturers in Khmelnytskyi have merged into the Podillya Women Apparel Cluster and wedding dress manufacturers – into the Podillya Wedding Group. Lviv residents have created the Western Ukrainian Fashion Industry Cluster, which brings together 40 companies in the region. To understand the scope: these clusters produced thousands of dresses – from wedding to casual – per day.

For example, the Podillya Women Apparel Cluster has become one of the most influential among women apparel manufacturers of Ukraine in just two years. And this is in the conditions of high competition.

With the support of the EBRD and EU4Business, the clusters elaborated websites, began to visit not only national, but also international exhibitions, and received a lot of useful advices from the European experts on building the processes and communications.

For reference: The Podillya Wedding Group was created in late 2018.

Representatives of the group began to work on the participation of seven manufacturers of wedding apparel and lingerie (TM Victoria Soprano, TM Pollardi, TM Armonia, TM Anna Sposa, TM Queen, TM AJOUR and TM Suzie) in the exhibition Expo Wedding Fashion Ukraine 2019.

And thanks to the project for support of the development of cluster initiatives in the garment industry of Khmelnytskyi region, the aforementioned companies received funding for participation in this exhibition.

The group members also initiated analytical research of the wedding apparel market in Japan, which will be ready and presented in 2020.

The Podillya Women Apparel Cluster was established in early 2019 as part of the project “Support for the development of cluster initiatives in the garment industry of Khmelnytskyi region” and included 14 companies – Family by Stolyarchuk, Bessa, Mbocharova, Olmod, Goya Rosa, Bretelle, Sana, Luxik, Vianna, Sadova, Vida Winter, VieOla, Arty and Vatex Ltd.

During the year, more than 100 meetings were held with local women apparel manufacturers, at which they planned to participate in the educational projects, implement joint projects, discussed conditions for participation in exhibitions, etc.

Representatives of the cluster also had an opportunity to participate in working trips. For example, to warehouses of fabrics in the Italian city of Pratto.

Thanks to cooperation of cluster participants, a joint website has been created and pages in social networks have been launched; for the first time in the history of Kyiv Fashion exhibition the cluster was the participant, and for the first time the garment industry was identified as one of the priorities in Khmelnytskyi region and included in the Strategy of the development of Khmelnytskyi region for 2021-2023.

The trust between the companies has also increased; it became possible to exchange opinions and address issues relevant to the industry.

The Western Ukrainian Fashion Industry Cluster was established in June 2018 in Lviv. It united representatives of light industry, production and apparel design.

These are people who want to benefit from working together. They share common values and the desire to create a strong global brand “Made in Ukraine”.

An important component of the cluster’s activity is international cooperation. The cluster has an opportunity to be heard outside the country and to act as an ambassador of Ukrainian enterprises by involving foreign partners in the cooperation.

One of the main tasks of the cluster is the development of domestic market and encouraging consumers to buy Ukrainian goods.

Exhibitions, presentations, fairs and forums which are an integral part of the cluster’s activities help to change perceptions and increase the consumption of high-quality goods from Ukrainian manufacturers.

The current crisis could easily destroy what has been gained, force entrepreneurs to lose valuable production staff.

Fortunately, flexibility and appropriate managerial decisions have made it possible to reorient enterprises from these clusters to sew protective masks and special suits for doctors. And this allowed to retain 100 percent of jobs.

And also to sew 1 million masks and 12 thousand special suits for doctors.

The enterprises of the Western Ukrainian Fashion Industry Cluster, jointly with business representatives and local governments, organized the production of protective suits and masks to quickly provide doctors with protective equipment, maintain the viability of enterprises and provide jobs to local population.

Yurii Samets, the Chairman of the Supervisory Board of the Western Ukrainian Fashion Industry Cluster, says:

44We had a choice: to stop work and let people go or to find new ideas on how we could be useful during the quarantine period.

Together we chose the second option. Jointly with Lviv entrepreneurs and local governments, we provided hospitals with masks and special suits.

This was our chance to keep jobs for employees. 5 companies from our cluster completely reoriented their production to sewing masks. In total, they sewed more than 180,000 pieces.

Afterwards, we fulfilled the order to sew special protective suits for doctors. In two weeks, 9 of our factories produced 9,000 suits.

The enterprises of the Podillya Wedding Group, which had contracts with China, from the beginning of the pandemic faced the customers asking to send protective masks together with… apparel.

We understood what was waiting for us when we looked at our partners from China, says Kateryna Markovska, the Group Manager and owner of Victoria Soprano, being member of the Group. – We started sewing masks for Khmelnytskyi hospitals.

And there were more and more orders. We have now sewn 300,000 masks and 3,000 suits for doctors.

And we keep working in this direction.

Because demand is unlikely to fall in the coming months.

My Victoria Soprano company provides additional 200-300 masks free of charge for every thousand of masks ordered by the hospitals.

The same example is given by Dmytro Vasylenko, a representative of the Podillya Women Apparel Cluster:

45The companies in the cluster also had to partially reorient.

Half of the companies have partially or completely suspended the profile production.

The demand for clothing has declined, and quite significantly. Therefore, the cluster members had to reorient. In the conditions of business crisis, it is especially important to retain both customers and staff.

Of course, highly professional sewers are not so interested in performing simple operations. But they have a job and a salary.

Moreover, we all understand that we are doing important and necessary work to protect people – doctors, the elderly, children – and ourselves as a result.

In our cluster, half of the companies started sewing masks. Typically, a company of 10 employees produced at least 10,000 masks a day.

The demand from businesses, local governments, and medical institutions was high. To date, the cluster has produced 700,000 protective face masks.

So far, 70 companies have created three powerful clusters during two years of cooperation with the EBRD under the EU4Business project. And in two months of quarantine they managed to reorient their production in such a way that they provided one million citizens of Ukraine with protective masks, and 12,000 medical workers with special protective suits.

In addition, at the beginning of April, 10,000 express tests for COVID-19 were delivered to three oblasts – Vinnytsia, Ternopil and Khmelnytskyi.

This became possible thanks to entrepreneurs. Six small businesses that are part of the Podillya Wedding Group were able to arrange the whole process – from finding tests to their delivery.

In just one day, entrepreneurs managed to raise USD 40,000.

And due to international cooperation, they were able to turn to partners in China, who in their turn helped to find a reliable supplier of COVID-19 tests, which also supplied tests to the factory in Germany.

The average price of tests at that time was at least 10 dollars. The partners helped to find tests costing 4 dollars that could detect both virus carriers and those who had the virus in the previous 30 days.

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The whole complex process – finding tests, fundraising, negotiations, orders, payments, delivery of goods – lasted three weeks. If the purchase of tests took place according to standard bureaucratic procedure, the tests would not have been delivered till now.

Unfortunately, there is still some “red tape” with such procurements, even though the Law No. 530-IX exempts the imported medical goods from VAT. 10,000 tests purchased by entrepreneurs were released by the customs service only upon payment of additional 23% of the value.

But what’s next? What awaits this business segment at a time when the pandemic and the quarantine have made quite severe adjustments not only in the activities but also in the life itself?

Yurii Samets, the owner of the men’s shirt sewing company Sambay LLC (TM Samets), says:

We now see a great interest of the European countries in medical products. And we work on this.

We sent the proposals to our international counteragents and gained the first responses.

We still receive orders for protective masks and suits, but another range of products, in particular shirts and blouses, is being gradually restored.

The demand for our products will increase – Europe is looking for closer markets with quality products and optimal prices, and we meet such requirements.

It is difficult, of course, to predict, but what awaits small and medium-sized businesses in the near future? I ask Yurii.

I think the service companies will have the hardest time. With state or donor assistance, it will be easier to cope, but their way will definitely be difficult.

We survived the quarantine period due to participation in the cluster, rapid reorientation and the availability of orders for medical products.

Now, when receiving orders, we continue to cooperate with many companies, including from the center and east of our country.

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Oleh Demchuk, coordinator of the training course “Sewing LEAN online” says that right now the companies of the cluster are being trained in lean production:

48At least 7 PWA Cluster companies are interested in such training.

Because it meets the global demand for sustainable development, environmental friendliness, emission reduction. As you know, the garment industry is one that causes a lot of emissions.

Therefore, the trend of maximum quality at minimum cost is relevant and in demand on the market.

Industry representatives understand this quite well.

Because of production costs, we lose out to Chinese or Indian companies and cannot compete with them.

Therefore, it was decided to dedicate May, a time of forced pause, to training at the course “Sewing LEAN Online”, organized by NGO “New Economic Policy” and “Business People Club Ukraine” on the online platform Open University of Maidan. The world has been using lean technology since the 1960s.

Such approaches to quality management and governance provide resource savings and increase production without significant investment. And for our production, such approaches are now more relevant than ever.

Kateryna Markovska, the owner of Victoria Soprano, emphasizes that her business, namely the production of wedding apparel, in which the company is specialized, does not depend entirely on Ukraine:

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Fortunately or unfortunately, but it is so. We have orders from Europe, and not only from there, but we are not used to work without long-term planning and to live for today. And they understand that they can count on the support of the state in case of such difficult situations as the one that arose in the conditions of the quarantine.

Brides will always be, people will get married. Not today, but tomorrow.

Of course, wedding budgets are cut, but every bride wants to see herself in a beautiful dress.

Our customers understand this, so it’s a little easier for us here. Of course, we feel a decrease in volumes, the desire for more budget options. But in our field, there are no such problems as, for example, in manufacturing of children’s or women’s clothing.

I talked to colleagues: some of them have stopped completely and they do not know and do not understand what awaits them in the future.

Yevhen Dyrdin, the General Director of Santa-Ukraine, says that he is not going to reduce the staff:

We are looking for new markets. Although we understand that overseas markets are also shrinking.

But at the same time we keep working with those of our partners with whom we worked before.

They support us and remain our customers. We will develop further, in any case without falling into anabiosis.

When the world faced an unprecedented scale of the pandemic, many firms, companies, industries – from small to powerful – quickly made necessary managerial decisions and began to act.

Relying on own resources and experience. Realizing that it is also important to retain qualified staff and salaries. Predicting that, it will never be as it was before.

Management and employees once again understood the importance of training and the need for solidarity.

To combine efforts and to support each other in situations like this. To get out of the crisis with the least losses and continue to build their businesses, make money and grow.

This history of Ukrainian enterprises is typical and exceptional at the same time. We continue to tell stories of small and medium-sized enterprises that find new opportunities for their business even in difficult times caused by the coronavirus.

For more useful information on how to act in the conditions of the quarantine, see the special sections on the state Portal for Entrepreneurs and on the Map of Opportunities for SME from the EU, in particular in the section “Information support for businesses during Covid-19”.

The section contains news about business support programs, changes in legislation, useful online tools.

Author: Zoya Kazanzhy

Source: EPravda