In the early 90s, tanneries were strictly specialised. Tanners had no practical worries about sales of their finished products – the government distributed all their leather to the shoe factories. The economic crisis in the country at the beginning of the 90s negatively affected the work of industrial plants.
A sharp rise in energy prices cost many enterprises dear and their production slackened. Shoe factories were practically brought to a standstill because they had no financial resources. Living standards and purchasing capacity were reduced and also huge quantities of shoes were imported into the Ukraine.
The tanning industry in the Ukraine lost their traditional customers. Together with the transition to a market economy, enterprises began searching for new customers and buyers and plants faced the question of expanding their product ranges, the need for a quick response to fashion demands and rebuilding technological processes for production of competitive products.
This was beyond the capabilities of some and many tanneries were obliged to reduce their production of finished products and to switch to production of semi-finished products. Some even stopped production entirely.
In 1995, in comparison with 1990, leather production had dropped to 71% of earlier throughput which, in its turn, affected the production of finished products (see Table 1). This drop in volumes was caused by a sharp reduction in the amount of circulating assets of tanners as a result of hyperinflation, reduction of livestock (see Table 2), decrease in demand for finished leather by their main consumers – the shoe sector and by the mass export of cattle hides which hit local tanneries (see Table 3).
Today, production in this sector reaches only 23.7% of former capacity. In the opinion of the head of the leather, shoe and fur department of Minprompolitics, Roman Krupa, leather factories can only work profitably if their capacity does not drop below 30%.
Out of 13 enterprises in the past, last year there were only six companies which were considered to be working well:
* JSC ‘Vozco’ (Voznesensk, Nikolaev region)
* OCE (opened corporate enterprise) tanning company Svitanok (Lvov)
* JSC ‘Chinbar’ (Kiev)
* JSC ‘Shkirianik’ (Bolehov, Ivano-Frankovsk region)
* OCE Plai (Ivano-Frankovsk)
* JSC Bolshevik (Kharkov)
These factories are equipped with comparatively modern equipment and technology. As a result they are able to overcome the difficult economic conditions and constantly changing demand on the part of consumers of leather and footwear. 95% of all leather items produced in Ukraine originate with these six companies.
From 1990 to 2000, the Ukrainian shoe industry – the basic domestic consumer of finished leather – reduced its production by nearly 15 times. According to official statistics, in 1990 the domestic factories produced 196,466 thousand pairs of shoes while by the year 2000 this had dropped to13,464 thousand pairs.
It has only become apparent in the past six months or so that demand from domestic enterprises has shown a slight increase. One of the essential reasons for this is the result of delivery of these goods to Ukrainian shoemakers under contracts for processing goods on commission for overseas companies. Experts estimate the leather requirement to be one million sq m at a value of $20-25 million annually.
JSC Vozco
Today, JSC Vozco are one of the best equipped enterprises in the Ukraine, and are considered by some to be the leading domestic manufacturer of leather. Vozco say they account for more than 50% of aggregate output. Production output makes up 10% of the total volume of production by light industry in the Ukraine.
Due to their motto ‘quality at a reasonable price’, Vozco export 50% of their production to many countries in the CIS, Europe, America and say they expand their output annually.
Vozco have been in production since 1978. Originally, the main part of the installed equipment was designed for heavy cattle hides (25-30kg) for mainly chrome shoe upper leathers. In 1994/95, the factory changed the technology over in order to manufacture leathers of different weights. Today, planned production capacity is 22,380 tons of processed raw material annually.
Vozco are now completely equipped with up-to-date Italian machinery. The range of finished products has expanded to include: thicker leathers for the production of shoes without lining, thin leathers for dress shoes, garment leather, fancy leather, lining and upholstery leather, coated suede splits for shoe uppers and lining.
When the demand for semi-finished products increased, they began to sell wet-blue splits. Vozco have been geared up for the production of 60,000 sq m of upholstery leather per month since January 1, 2002. To realise this task, the factory purchased wide throughfeed machines and began batch production of upholstery leather.
Now, annual output of natural leather amounts to 1.6-1.8 million sq m and to fulfil this programme, Vozco use 4,500 pieces of cattle hide per day. The bulk of their raw material is bought through intermediaries, including suppliers which were organised with the participation of Vozco. Only an insignificant amount of raw material comes for processing under commission contracts.
Vozco say that the quality of the raw material gets constantly worse: the proportion of raw material in the heavier weights is reduced, flaying standards are poor and preservation of hides faulty. However, the selection of raw material purchased by the enterprise remains stable; the first grade prevails.
In order to make a detailed assessment of the quality of the raw, determine the best final use and ascertain the influence of region of procurement and seasonality, they have developed a system of marking the hides with a punch. In this way, they can identify the hide right through to the end of production and the data can be read, if required, at different stages of production.
Despite the deterioration of the quality of the raw material, the enterprise manages to remain competitive by constantly upgrading technology and using high-quality chemicals from such companies as: TFL, BASF, ICAP Leatherchem, Clariant, Sarchem, Biokimica, and Zschimmer & Schwarz. The plant has a licensed warehouse and a net of their own warehouses, which can store chemicals in appropriate conditions for up to 3 or 4 months.
To ensure high quality production at maximum efficiency, qualified staff are recruited. Vozco also operate a special programme to prepare workers and grant personnel certification and qualifications according to the appropriate skill level. In addition, 62 employees of the company study in institutions of higher education on a full or part-time basis.
In order to react flexibly to market demands and to maintain quality at international standards, a programme to conform with ISO 9002 was developed and successfully implemented. In August 2000, independent certification Office Bureau Veritas issued the certificate of conformity on the system of quality to JSC Vozco .They say they were the first to be accredited with ISO 9002, not only in the Ukraine but in the CIS. In 1999, Vozco produced 1,287,000 sq m of leather and 7,281,000 sq m of semi-finished. In 2000, the figures were 1,580,570 sq m and 7,900,000 respectively.
Currently, in order to sell their production, Ukrainian tanners use warehouses for finished leather which are situated near to the factories. Vozco say they are the only tannery in the Ukraine which has a wide network of warehouses in regional centres both in the Ukraine and abroad. This system means that the client is able to order one or two leathers or a full lot accordingly, and also to purchase auxiliary materials for shoemakers such as adhesives.
Despite all the difficulties, Ukrainian tanners realise the need for investment into new technologies in order to develop and improve the quality of production.