Benchmarking in the tanning industry

28 May 2008

Benchmarking is how companies compare themselves with others to see how they are measuring up. Despite the general acceptance of the concept, Jakov Buljan, Unido consultant, said that many tanners do not like to admit that they do not know what benchmarking is.

Speaking at the 16th Leather Panel meeting held in Brazil in May 2007, Buljan said that reputable institutes and a host of consulting companies offer their specialist services in benchmarking to companies keen to keep abreast of latest management trends. Bench-marking has already penetrated bilateral and multilateral assistance to developing countries, including the leather industry on the African continent. Unido is part of the trend and offers benchmarking software to interested parties. He described his own preferred definition of the concept as:

  • a process by which a business systematically measures itself against a better performing business and then adopts and adapts any functions or procedures shown to be more effective.
This paper discusses the main issues in order to assist those who are not embarrassed to admit they are not quite sure what it is all about and how it could be applied in the tanning industry. Background Not so long ago it was argued in various international fora and leather magazines that a combination of excessive incentives had almost closed local raw material and leather and leather products markets. Together with the absence of environmental protection in developing countries, this has resulted in a rapid shrinking of the tanning industry in the north and west.  Thus, if the local labour costs are low, manual or low output machine operations will necessarily prevail over high automation. Expensive imported (speciality) chemicals, machines and spare parts and/or expensive energy may discourage production of fully finished leathers. Non-availability of cheap carbon dioxide reduces the scope for introducing cleaner, environmentally friendly deliming. Indeed, a lack of proper enforcement of environmental protection measures can be crucial in overall profitability of tanning operations: costs of high-on-energy biological treatment or disposal of hazardous wastes and sludges can make all the difference. In any case, meeting generally accepted environmental and occupational safety and health at work (OSH) norms is a condition sine qua non for any tannery to be seen as a reputable and honest competitor. There are also claims that price and profitability are the best and, as some put it, the only relevant comparison parameters. Is it at all possible and does it make sense to benchmark activities such as marketing, public relations and corporate social responsibility (CSR) which are so important for the general perception and image of the company? Since the tanners are very familiar with traditional profitability parameters such as yield, effects of grading, labour costs etc, this paper deals in more detail with other components of leather manufacture important for tannery performance, such as occupational safety and health at work (OSH) and waste treatment. To many it is somewhat surprising that one important common denominator for tanneries is effluent discharge norms: all over the world the pollutant limits are nearly the same, the main differences being in monitoring and enforcement. It is hoped that this paper might give the initial impulse to those contemplating developing or rather upgrading their own internal auditing and benchmarking activities.   Factors which should be considered include tannery location and infrastructure, production parameters, clean tanning technologies, energy, quality assurance, product development, occupational health and environmental concerns such as waste treatment. Production cost structure Tanning is a capital and material inputs (raw hides, chemicals) but not labour intensive industry. Yet, the typical production cost structure of 50-70% raw hides, chemicals about 10%, labour 7-15%, energy 3%, environmental protection 2-5%, does not justify neglect of the scope for savings from optimisation of chemicals or energy and, in particular, from undue pollution treatment costs. After all, processing one tonne of raw hides on average requires nearly half a tonne of chemicals.  However, if we add the amount of salt used in the traditional preservation technique, the weight ratio hides vs chemicals is almost 1:1. Poorly performed mechanical operations such as splitting, sammying and shaving, downgrade the quality, decrease the yield and ultimately the profitability. The usually somewhat ‘hidden' costs of reworks - reprocessing of batches not meeting internal standards or customer's requirements augment the avoidable losses. The ability to maximize the utilization of the raw material (eg by applying good finishing techniques and producing a fashionable item from lower grades) often makes the crucial difference in success and profitability of tanneries operating under similar conditions. Investment in occupational safety and health at work (OSH), maintenance, continuous training and social welfare pays off. Recommendations Benchmarking carried out in the tanning industry to date is reduced either to generic type (the company compare themselves with themselves, ie with either their own performance during a certain earlier period or with certain, predominantly financial targets) or to questionnaire and self-assessment based benchmarking (the company compare their performance with questionnaire-based parameters obtained from a number of producers of rather different profiles and operating under rather different conditions). A more comprehensive approach would be to have a generic benchmarking system offered by specialized companies amended to incorporate specific parameters for tanning operations and tailored to specific tannery requirements. For that purpose, it is strongly suggested to any tannery aspiring to compete successfully in the international market to:
  • Conduct regular financial and thorough technical audits, including a detailed material balance of all inputs and outputs. Preferably, the audit should be carried out by an external, competent but fully independent party.
  • If viable, compare your own parameters with those of a successful (competing) tannery operating under very similar conditions, ie converting the same raw material into a similar product range.
  • Alternatively, compare certain stages (eg drying, liquid and solid waste management) and work environment and management of human resources (safety at work, training) with the internationally recognised best performers.
  • Identify the scope for and set ambitious and yet achievable targets with clearly defined performance indicators (figures) within a realistic time frame.
  • Regularly monitor all key parameters; adjust and fine-tune targets and implement deadlines as required.
  • A good manager conducts internal benchmarking regularly. After some time-lapse (ie even in the absence of any crisis), revisit, update and refresh the whole issue in light of local and/or global technical, marketing or legal developments and changes of the company's strategies.
Ideally, have a tailor made system developed to supplement the usual generic system with your own, specific performance indicators/parameters, including steady critical evaluation and improvement methodology. Outline of a ‘model tannery' Some criteria for a tannery processing raw bovine hides into shoe upper leather. In view of the number and complexity of factors influencing tannery performance it is very difficult to accurately define criteria to make it successful. The overview in the table on the next page, attempts to provide a very general outline of a modern tannery with some vital parameters, fully recognizing limitations and arguments that can be raised.  Effluent treatment plants and landfills Break-down of investment and operation costs, area required, chemicals consumption, power, specific efficiency, attainable purification levels for key pollutants after primary and secondary treatment as well as typical water consumption, pollution loads and purification levels are given for nearly all sizes of plants in the tanning industry, ie treating from 100, 500, 1,000, 5,000 to  20,000 m3/day including detailed investment and operational cost estimates (again for developing countries) for a landfill required to accommodate the sludge produced for each size category. Conclusions Benchmarking is the process of continuously comparing and measuring your processes against other organisations worldwide to gain information on their practices, processes or methodologies that will help your organisation take action to improve its performance. Benchmarking is the practice of being humble enough to learn to be as good as/or even better than them. The Unido panel consensus was that benchmarking should not be looked upon as a cure-all but a tool which should be used carefully and appropriately. It also is a tool in preparing for the pressure which is coming back up the chain to operate socially and responsibly. This paper provides a guideline which can and must be developed and Dr Christiane Hauber (LGR) called for greater openness, stating that tanners in Germany for example don't welcome visits to tanneries or treatment plants.    For the full article, please see Leather International March 2008 edition

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